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Business: Loans

Business, Innovation and Skills written question – answered on 8th June 2011.

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Photo of Dan Jarvis Dan Jarvis Labour, Barnsley Central

To ask the Secretary of State for Business, Innovation and Skills what assessment he has made of the effect on small and medium-sized enterprises of the failure of banks who are party to the Merlin Agreement to meet their lending targets under that agreement.

Photo of Mark Prisk Mark Prisk The Minister of State, Department for Business, Innovation and Skills

The Merlin Agreement was about setting stretching lending targets to the banks to make sure that they make available the credit that businesses need to grow. This is particularly important for small businesses, and this is why we have insisted on individual figures for SMEs.

The Bank of England reported the banks' first quarter performance against the Merlin Agreement on 23 May. Lending to SMEs in the first quarter was £16.8 billion against a quarterly ‘stretch’ target of £17.2 billion (the ‘capacity’ target would imply a figure of £19 billion). This is disappointing and, although lending to small firms will not follow a linear pattern month on month, the banks must do more to ensure that they meet their commitment over the next few months.

The agreement with the banks was made mid-way through the first quarter, and this might have impacted on the figures. But it is too early to properly assess the impact of the Merlin Agreement on small businesses' ability to access bank finance.

We will therefore continue to monitor very closely whether the banks are making sufficient credit available to small firms before passing a definitive judgement on the impact of the agreement on small businesses.

The Government are clear that, if the banks fail to meet their commitments, the Government reserves the right to return to the matter and take further measures.

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