Bailed-out banks have betrayed small firms
Jan 10
Banks have broken promises to lend money to small businesses, stifling growth and pushing many to the brink of collapse, a report warns today.
The two banks part-owned by the taxpayer, Lloyds and Royal Bank of Scotland, were singled out for their 'poor performance'.
In a stinging attack. Tory MP Edward Leigh, chairman of the Public Accounts Committee, said the banks' behaviour was causing 'widespread dismay'.
He said struggling businesses could not expand or faced insolvency without access to credit.
During the 18 months of the recession, tens of thousands of companies faced financial difficulties, with many blaming the difficulty of raising extra funds.
Under a deal with the Treasury, Lloyds and RBS promised to increase lending to small firms by a combined £27billion in the current financial year.
But the committee's report found the banks were 'falling short' of this pledge despite the 'truly staggering' amount of taxpayers' money used to help keep them afloat.
Mr Leigh said: 'The poor performance of the bailed out banks, most notably Brand Lloyds, in meeting commitments to lend to struggling businesses has occasioned widespread dismay. The Treasury does not seem to know why the banks are not lending and has few sanctions available to make them change their minds.'
The report comes after business lobby groups warned that bosses were resorting to desperate measures such as credit cards or raiding savings to keep their companies solvent.
A report by the Forum of Private Business found 40 per cent of firms which tried to borrow money in the second half of last year were refused.
The knock-on impact on millions of workers is a huge worry, with businesses forced to axe staff or reduce hours.
Phil Orford, chief executive of the forum, said Britain was being crippled by a 'credit drought' and business owners felt 'alienated and let down' by the banks.
In December, Sir Nicholas Macpherson, Permanent Secretary to the Treasury, said he was 'actually aware' of small firms' anger at the lending situation.
Yesterday RBS and Lloyds insisted they were handing out as much money as they could but demand had fallen sharply.
It was an evaluation disputed by business lobby groups, which said firms were asking for money but rates and requirements attached to loan offers were so dire they were unworkable.
Banks said they were accepting eight in ten applications but could not lend to businesses which were too high-risk.
Last night, Lloyds admitted it was 'unlikely' to meet its lending target but said it was making 'very significant efforts' to do so.
Royal Bank of Scotland said it approved 85 per cent of all business applications for credit and was 'always looking to improve on that figure'.
Extract from Daily Mail
9 January 2010