Project Merlin: a bonus for small businesses or the banks?
Much fanfare from Chancellor George Osborne and the banks about their
agreement to lend £76m
to small and medium sized businesses. According to the Banks' Statement on Project Merlin, the amount is 15% higher than they originally forecast because they had planned for lower demand than in 2010 - last year, they lent £66m. Now, their "intention" is for gross new lending in 2011 to be higher than it was in 2010, should their "efforts to foster demand succeed above and beyond their current expectations".
The paragraph immediately before the statement dealing with lending to small and medium sized businesses notes "muted patterns of customer demand at present, evidenced by lower net lending balances than a year ago" and expects "further impact on demand of the higher cost of lending arising from increasing capital and liquidity requirements". It's against that backdrop that they have announced their "intention" to foster more demand.
The banks have agreed "to make available the appropriate capital and resources to support gross new lending to UK businesses...should sufficient demand materialise". We shall have to wait and see whether these "intentions" are turned into real lending or fall victim to the pressures of the state of the wider economy.
The only thing we can say with any certainty is that the banks will continue to pay bonuses irrespective of their performance and remain oblivious to the austerity afflicting millions of their customers in the real economy.
This was first published in February 2011