Banks under pressure to meet SME loan commitments
Bank lending commitments to small businesses under the Project Merlin initiative are likely to come under renewed scrutiny when they report their half year results next week.
Referring to the recent Bank of England Trends in Lending Report which showed access to credit for SMEs remained broadly the same compared to the previous quarter, Sage CEO Brendan Flattery said the effect of initiatives such as the Business Growth Fund and Project Merlin on the credit and lending landscape were "shrouded in uncertainty".
According to the Bank of England report, small businesses are being affected by a continued contraction in lending and are focusing on repaying existing loans. Flattery said this showed
many small businesses were "losing confidence in banks and lending institutions" and were deterred from taking on more credit to produce the growth needed to stimulate the wider economy.
Unveiled in February
, Project Merlin is an agreement between the UK government and banks to
provide £190bn in lending to businesses this year with £76bn going to SMEs.
Flattery revealed that small business owners surveyed in Sage's monthly Omnibus survey had showed scepticism in Project Merlin from the very beginning "with almost half expecting it to have little or no impact on bank lending and we are yet to see any real evidence that might alleviate these concerns".
The banking industry's half year reporting season next week would provide "the first real opportunity to see whether banks are actually living up to their lending commitments".