Barclays slams small business lending targets

| Monday August 16, 2010 00:00

The government is exploring the option of extending targets to all banks, not just ones in which it owns a stake. There are fears that insufficient bank lending is holding back recovery. 

The governor of the Bank of England this week described constrained lending as a 'headwind' facing the UK economy.

The government already places gross lending targets on the two banks in which it has a shareholding - Lloyds Banking Group and Royal Bank of Scotland - which they have been meeting. 

Some have suggested that these and other non-government supported banks should be subject to the more stringent net targets for lending to small businesses. On this measure, which takes into account loans being paid off, net lending has typically been flat across the industry. 

New targets are currently only one of a number of proposals being studied as a means to increase cash flow to small and medium-sized companies.

Ideas also being analysed in the Financing A Private Sector Recovery green paper include encouraging venture capital and so-called business angels to invest more widely.

Business Secretary Vince Cable has also suggested that bank dividends and bonuses could be a target as part of a 'carrot and stick' approach to boost lending.

A spokesman for the Department of Business, Innovation and Skills said it was 'crucial for the recovery that small businesses are able to access the finance they need'.

'As set out in the green paper we are exploring all areas, including bank lending,' he added.

'The government is working with the banks and looking to the industry to provide the solutions. If that does not materialise we will consider other options.' The British Bankers' Association says its members are doing all they can to increase lending to small businesses.

It most recent figures show that a total of £598m in new loans were granted in June, £70m more than in May. Cooper also defended the interest rates Barclays charged small businesses for loans.

He said the 'vast majority' were paying 5 percent and while some firms were being charged as much as 19.9 percent this reflected their low credit ratings and the fact they were not able to put up any security. (BBC)