Banks rake in £11bn more than they lend in figures that make mockery of Government promise to help small firms



Taxpayer-backed RBS looks set to miss lending target



Banks received nearly £11billion more than they lent to firms last year – and imposed the highest interest rates for nearly three years.

The figures from the Bank of England make a mockery of the Government’s attempts to get banks to lend to businesses, particularly small firms.

Net lending, which is the amount handed out to firms less the amount paid back, was minus £10.8billion in 2011.

Tight purse strings: The big banks received £11bn more than they lent to businesses last year

Statistics published yesterday also show the average interest rate charged on new loans has jumped to 2.67 per cent, the highest since the base rate was cut to 0.5 per cent in March 2009.

There are growing suspicions that Royal Bank of Scotland, which is 82 per cent owned by the taxpayer, has failed to meet its lending target.

The five banking giants – HSBC, Santander, Barclays, Lloyds and Royal Bank of Scotland – promised to hand out £190billion to firms this year under the Government’s Project Merlin initiative.

Of the total amount, at least £76billion had to be given to small and medium-sized firms.

Grim: There are growing suspicions that taxpayer-funded RBS, headed by Stephen Hester (above), has failed to meet its lending target

Yesterday Santander said it lent £4.3billion, ahead of its £4billion target.



Other banks, such as Lloyds, have also said they are on target to meet their Merlin commitments. John Maltby, commercial director of Lloyds, said yesterday it remains ‘determined’ to give small firms the backing they need.

Lord Oakeshott, the Lib Dem peer who resigned over his criticism of the Project Merlin deal, described the latest figures from the Bank as ‘grim’. He said: ‘Project Merlin was meant to make the banks lend to boost business and jobs. But they have lent less and charged more.’

A report from R3, the insolvency trade body, raised its fears that many small firms ‘are not financially robust enough to withstand the economic pressure’.



Insult to injury: Overdraft rates are at a record high since 1995

Over the last three months, nearly a third said their sales and profits are dropping. A small firm was defined as one with sales of £20million a year or less.

Overall, the Bank’s figures showed that net lending was positive in only three months last year.

Toby Perkins, shadow spokesman on small business, said: ‘Despite their promises, ministers have failed to get banks to lend to business, in particular to small and medium-sized enterprises.

‘It is clear that one year after the introduction of the Project Merlin deal, businesses are still struggling to get the credit they need to survive, expand and take on extra workers.’

It is more than 18 months since the Daily Mail launched its ‘Make the Banks Lend’ campaign to highlight the plight of small firms.

These businesses are now waiting for the Government’s latest attempt to help them to get money through its credit-easing plan, called the National Loan Guarantee Scheme.