Member Article

Government disappointed by bank lending to SMEs

Bank lending in the last year through the Enterprise Finance Guarantee (EFG) has been disappointing for the Government, according to data released by the Department for Business Innovation and Skills (BIS).

The Business Minister, Michael Fallon, urged banks to give more support to small and medium-sized businesses by taking full advantage of the EFG, which enables banks to offer Government guaranteed loans to firms that wouldn’t usually be able to borrow.

BIS released statistics that showed the value of EFG loans drawn by the Royal Bank of Scotland fell from £306.8m in 2009/10 to £83.2m in 2012/13.

Barclays drew £119.5m in 2009/10 but this dropped to £30.4m this year, while EFG loans drawn by HSBC went from £78.8m to £51m in the same period.

In contrast, Santander bucked the trend with a rise from £854k to £4.8m in EFG loans withdrawn between 2009/10 and 2012/13.

Mr Fallon wrote to the chief executives at the five main high street banks in September to encourage them to up their lending to SMEs through EFG, however the data shows that banks have been hesitant.

Loans taken out by Lloyds Banking Group went down from £121.9m in 2009/10 to £14.9m in the last year; this is a difference of nearly 88%.

The Business Minister said: “It is crucial that banks play their part in making finance available to businesses and support growth in the economy. Banks have to lend responsibly but it is clear that a number of lenders need to up their game.

“The EFG scheme has been made more flexible and is now available to even more businesses. Publishing lending data should encourage these financial institutions to do more to help business thrive.

“By being more transparent on lending figures, the government is giving SMEs the information to best secure the finance they need to grow their business.

“It also enables new market entrants to identify opportunities and drive improved competition and choice.”

The Government has made £500m available for guarantees this year and next, however expectations for EFG lending are at £315m.

This was posted in Bdaily's Members' News section by Miranda Dobson .