Banks criticise Government’s latest scheme for small businesses

Two of Britain’s newest banks have criticised a new government scheme which aims to ensure that small businesses will never again be starved of credit, as many were in the aftermath of 2008’s financial crisis.

Shawbrook Bank and Aldermore, themselves founded in the months after the credit crunch, claim the project will not meet its targets for lending to small businesses, following in the footsteps of the failed “Project Merlin”, another coalition programme which was supposed to force High Street banks to lend a certain amount to small-and-medium-sized enterprises.

Chancellor George Osbourne had hoped to launch the £20 billion fund for small businesses which had struggled to get financing over the last three years by the time the next Budget came around, towards the end of March. Aldermore Chief Executive Phillip Monks claims that as the scheme stands it actually does nothing to make more credit available to small firms; it only makes the credit a little cheaper once it has been secured.

In essence, the same companies will be struggling for cash once the project is up and running as they are the ones which have had, and will continue to have, the most difficulties persuading a third party to lend them money.

The Chief Executive of Shawbrook Bank, Owen Woodley, feels any fund to provide credit for UK business will not work as long as it is only the same old faces that are involved in the deals. He called for banks like his and Aldermore to be more involved in these schemes alongside the four main High Street banks; the very institutions whose mismanagement of debt lead to the crisis in the first place.

Both men were extremely critical of the decision to hand over this latest fund to the “Big Four” when it was those same banks that failed to make a success of Project Merlin. Royal Bank of Scotland, Barclays, HSBC and Lloyds were the targets of that particular scheme which was an attempt by the government to encourage, and even force, the banks to increase their lending to small businesses, in an effort to stimulate the economy.

Months later, and many business experts are reporting that it is just as difficult to get credit out of these institutions now as it has been at any time since the credit crunch.