How goes the lending part of the government’s Project Merlin accord with the banks? Judging by the figures released by the Bank of England today, neither brilliantly nor terribly. The amount loaned to small
and medium enterprises fell to £18.8 billion in the third quarter of this year, from £20.5 billion in the second quarter. But, as the Tory press office has been quick to point out, it still exceeds the equivalent amount dished out last year. And, what’s more, the banks are still on course to meet the
lending targets for 2011 — for both SMEs and companies in general — that were set out in the agreement itself.
Of course, it’s still an open question whether this is a boon for the recovery; a return to the sort of debt dependency that blighted us in the first place; or both. But the government’s position
is clear. They look at graphs such as the one below — which I highlighted on the Business Blog a few weeks ago — and shudder. They
want SMEs to find it as easy to borrow now as they did in 2007, more or less:
As for the banks’ position, it is much more equivocal. They agreed to the Project Merlin targets, of course; but they will still have the same concerns as they did last year, when they drew back
their lending in order to consolidate their own positions.
In which case, it will be worth keeping an eye on how they react to the government’s ‘credit easing’ scheme, which will be detailed later this month. If the government involves itself more directly in lending to companies, then the banks could use that as an excuse for retrenchment on their part. And, oh, how Vince Cable wouldn’t like that.
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