By Max Clarke
Commenting on George Osborne’s announcement to increase the levy on bank profits to £2.5bn, and pledge to implement Project Merlin to increase the banks’ lending to small businesses, Edward Rimmer, UK chief executive at the UK’s largest independent invoice finance provider, Bibby Financial Services, said:
“I welcome any initiative that aims to take action to increase the level of funding to small businesses in the UK. Therefore in principle I applaud Mr. Osborne’s pledge to implement Project Merlin to make banks agree to the new lending target of £190bn to UK firms. However in reality, even if the proposed terms of Project Merlin come to fruition, whether the banks will actually commit to lending this sum is another question all together.
“Despite good intentions, previous experience would suggest that other government initiatives to support funding for small businesses have not been successful. Evidence of this can be seen in figures from the British Bankers' Association (BBA) which show that average monthly loans to small businesses have declined by almost half since 2008.
“The fact of the matter is that continued cuts in public sector spending, rising VAT, inflation and fuel costs have already hit UK businesses hard — not to mention their cash flow — and the key question remains: will this initiative be enough to offset the burden firms are already being asked to bear? The answer is doubtful.
“Even if the banks do agree to meet the Government’s growth targets for lending to SMEs, we could still see the introduction of new lending criteria which is as stringent as existing regulations already preventing businesses from securing financial support. It is hard, therefore, to see how this differs from what the banks are already doing.
“So whilst I support the Government’s intentions behind these initiatives, it remains to be seen whether this is a realistic solution to tackling the ongoing problem of limited access to finance. If we want to see a small business-led recovery, it is imperative that firms are given sufficient funding to achieve this and as an organisation which has the interests of small businesses at heart, it would be good to see the Government go that bit further to enable firms to play their part in driving economic growth in this country.”