Lending to small firms on the decline

Date: 15th November 2011

The amount of money being lent to the UK's smaller businesses under Project Merlin is declining, according to new figures.

Data published by the Bank of England has shown that while £20.5 billion worth of loans were issued to small firms in the second quarter of the year, the figures fell to £18.8 billion in the three months to October.

However, while lending to small firms fell, gross lending increased from £53 billion to £57.4 billion over the quarter.

This, Terry Scuoler, chief executive of EEF, said, shows that the cost of finance is just too high for some small businesses.

"Today's data shows banks are at least now willing to lend. However, the cost of credit and those terms and conditions outside the headline rate remain a major concern, especially for smaller enterprises," he commented.

"These critical factors are not addressed by the Merlin agreement and, at a time when confidence is precarious in the face of weak demand in our key markets, we need to be doing all we can to encourage investment to happen now."

Meanwhile, the newly-opened Shawbrook Bank has pledged to lend £250 million to smaller businesses in 2012.

Posted by Thomas Fletcher