Project Merlin SME loans jump 22% to more than 20bn in Q2

Banks under the government's Project Merlin have stepped up lending after a slow start boosting loans to SMEs by 22% to 20.5bn in the second quarter.

The Merlin agreement between the government and Barclays, HSBC, Lloyds Banking Group, RBS and Santander to lend businesses £190bn in 2011 - more if demand exceeded that - includes hiving off £19bn a quarter for SMEs.

In the first quarter, this fell short at £16.8bn, but the uptick for Q2 brings it 49% of the target for the year.

Federation of Small Businesses national chairman John Walker said: "Issues still remain over whether lending targets really address the fundamental problems that exist in the banking sector. While the figures show that lending to small businesses has increased 22% since the first quarter, the fact remains that only a small number of banks still control the lion’s share of the market. This needs to change and we call on the Independent Commission on Banking to make increasing competition in the sector one of its key recommendations to government.

"The Bank of England’s downgraded growth forecast for 2011 means that we need a clear plan for growth to allow people to set up in business and for firms to have the confidence to grow and invest to really help strengthen the recovery. And, in order to do that, businesses will need an injection of capital which most of them will only be able to get from the banks."

However, he said that a recent FSB member survey revealed that a third of small businesses that had been refused credit said that they had now missed the growth opportunity they were hoping to take advantage of.