Britain’s biggest banks are set to increase the amount of money they lend to small businesses – but not by as much as the government had hoped.
The Coalition has been locked in a series of secret discussions with the country’s leading banks under the codename ‘Project Merlin’ for several weeks, and the talks are set to conclude imminently.
During the talks – which have involved HSBC, Barclays, Royal Bank of Scotland and Lloyds – the Government has pushed for the creation of a small business lending target, which will oblige Britain’s financial houses to furnish a specific sum for the country’s emerging firms.
It is believed the banks have agreed to lend up between £150m and £180m to small firms this year; this is a significant increase on the amount loaned in 2010, but far less than the £200 million the Treasury was hoping for.
Ministers had hoped that, by increasing the availability of funds for new and emerging enterprise, they would encourage a burgeoning economy built on entrepreneurial spirit – a vision which prime minister David Cameron has often discussed.
It is unclear whether the government will reassess its economic strategy in light of the current talks.
The Merlin discussions recently hit turbulence when Santander, a key party in the early stages, pulled out.
However the Spanish financial giant, which runs the banks formerly known as Abbey and Alliance & Leicester, is now preparing to reach a separate agreement with Treasury representatives.
An announcement regarding Merlin is expected within 10 days. Bank officials hope a statement can be made as soon as business secretary Vince Cable returns from a trade mission to India.
As well as new business lending, insiders expect the deal to address the transparency of executive pay, the bonus culture rampant among British bankers and the prime minister’s ‘Big Society bank’ initiative.