Cable attacks lenders over Merlin target

BANKS endured a hail of criticism yesterday as official figures confirmed that businesses did not request as much credit as the Treasury was hoping for under the Merlin deal struck with banks in February.

Data published yesterday show that there was demand for £47.3bn in credit facilities in the first-quarter covered by the Merlin agreement. That is narrowly below the average £47.5bn per quarter that banks agreed to make available in lending capacity (making £190bn for the year).

The figure for small businesses was £16.8bn, below the average £19bn per quarter that banks were supposed to have made available under Merlin.

In response, business secretary Vince Cable said: “There is a serious problem with lending to good, small companies. We looked to the Merlin agreement to rectify the problem and though these are early days we want to see significant improvement.”

He threatened “further action” if banks “fail to meet the commitments they have agreed”.

John Walker of the Federation of Small Businesses said it was “not surprising that the banks have not met lending targets to small firms”.

Shadow chancellor Ed Balls added to the chorus of criticism, saying: “The signs are that the project Merlin plan is not working… Businesses I talk to are fearful that the government is letting the banks off the hook.” He added that project Merlin is “weak and toothless”.

However, banks blamed the £200m shortfall in gross lending on “muted demand”. They said that the full £190bn lending capacity agreed is available for the year, but that businesses had only requested that the banks make available £47.3bn in credit facilities.