Vince Cable joins chorus of disapproval for banks

BUSINESS Secretary Vince Cable has reprimanded Britain's biggest banks for failing to live up to their promises on small business lending, warning that the coalition government expected to see "significant improvement" over the next few months.

Figures released by the Bank of England yesterday revealed that the top five banks failed to keep pace during the first quarter with targets agreed under the government's much-vaunted "Project Merlin" agreement.

Barclays, Royal Bank of Scotland, Lloyds Banking Group, HSBC and Santander UK lent 16.8 billion to SMEs during the period - less than the 19bn that should have been extended by that juncture if the sector wants to meet its 76bn annual small firm lending target.

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"There is a serious problem with lending to good, small companies," Cable said. "We looked to the Merlin agreement to rectify the problem and though these are early days we want to see significant improvement over the next few months."

Although yesterday's figures showed the sector was on course to reach overall targets - which include lending to large corporates - Project Merlin was yesterday branded a "project Mickey Mouse" by opponents. Max Lawson of the Robin Hood Tax campaign, said: "This deal is more Mickey Mouse than Merlin. Despite the government's pleading, banks just aren't taking Merlin seriously."

Shadow Scottish secretary Ann McKechin said: "Just at the time when we need small and medium sized businesses in Scotland to grow so we can get our economy moving again, it is worrying that bank lending to small businesses is falling short."

Small business groups called for more power to be devolved to local branch managers.

Phil Orford, chief executive of the Forum of Private Business, said: "We want to see banks invest in regional services and also hand decision-making powers back to local branch managers who are best placed to make key lending decisions. "

But a spokesman for the Project Merlin banks said there was "muted demand" from SMEs.

He added: "We are devoting considerable time, effort and resource, particularly through the Better Business Finance initiatives, to ensure that we help viable businesses to access finance."