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Failing Project Merlin

Figures released by the Bank of England show that many of the UK’s biggest banks have failed to meet targets for lending to small and medium-sized businesses.

The five major high street banks involved in ‘Project Merlin’ failed by over £1 billion to meet the target set by Chancellor George Osborne.

Barclays, Santander, HSBC, Lloyds and the Royal Bank of Scotland, the five banks that agreed to sign the agreement with the government in February of last year, collectively failed to meet the £76 billion target for ‘Project Merlin’, only achieving £74.9 billion. However, this failure is widely being blamed on the lack of lending by RBS, with the other four issuing statements stating their positive contributions to Project Merlin and their lending to SMEs.

Chairman of the Federation of Small Businesses John Walker said ‘We have long said that targets are the wrong instrument to encourage lending and growth. Even though overall lending is above target, this shows that money is going to bigger businesses and not new and fledgling firms that need it to take advantage of growth opportunities that are there even in these challenging times.’

Shadow Business Secretary Chris Leslie told the BBC he felt that ‘After a year it's now clear that George Osborne's backroom deal with the banks has been a total failure. It's been a good deal for the banks, but a bad deal for small businesses and taxpayers’.

The statistics will generally be a further indictment of the recovery procedures put in place by George Osborne. However how much is down to the ramifications from the RBS saga has been made clear. Whoever is to blame, lending in general is a risky business in the current economic climate, and statistics such as these are set to continue.

By Sean Dudley

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