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Banks claim they missed business loan target due to low demand

The UK’s biggest banks have missed the £19bn quarterly lending target to small and medium-sized businesses by £2.2bn in the first quarter of this year.

Under Project Merlin, which was agreed in February, Barclays, HSBC, Lloyds Banking Group, RBS and Santander agreed to increase gross new lending to businesses by 6 per cent, up from £179bn in 2010 to £190bn in 2011. Of that, £76bn must be lent to SMEs.

However, lending to SMEs in the first quarter reached just £16.8bn.

The banks’ gross lending totalled £47.3bn in the first three months of the year, which is in line with the £47.5bn they need to provide each quarter to stay on target in terms of total new lending to businesses.

A spokesman for the Merlin banks says SME lending fell short of expectations due to limited demand.

He says: “Demand in some sectors, particularly among SMEs, remains muted, but 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. Nonetheless, economic conditions remain challenging and demand for lending is likely to vary through the year.”

Emba group sales and marketing director Mike Fitzgerald says: “The Government has got to put pressure on the banks to lend more to SMEs.”

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