UK Banks Urged To Ease Lending To Small Businesses

Fri, 24 Oct 2008

Chancellor of the Exchequer Alistair Darling and Business Secretary Peter Mandelson met bank executives on Thursday to urge them to help small business by relaxing their lending conditions.

The two politicians reportedly asked bank chiefs to raise lending to last year's levels of £53 billion as fears for thousands of UK jobs continue to grow.

Commenting after the meeting, Mandelson announced the government was creating a forum to help "tease out the problems" small firms were having with bank loan arrangements.

"There is a willingness to make sure that we get through these very difficult times together," he said.

"The banks don't want to pull the plug unnecessarily on small businesses. They want to help where they can but the banks at the same time are facing difficult conditions of their own."

Mandelson went on to add that the government can play help secure "better understanding of the issues between smaller businesses and the banks" .

The government recently bailed out three of the UK's major banking institutions - RBS, HBOS and Lloyds TSB - with a £37 billion cash injection.

As a condition of the deal, the banks must continue lending at 2007 levels, but many firms complain that loans are harder to obtain and that terms offered by banks have worsened recently.

John Wright, national chairman of the Federation of Small Businesses, welcomed the forum, which will give 215,000 members the opportunity to air their views, but added the banks were making uneven decisions in assessing loan requests.

"It is very important that the behavioural inconsistencies of branch managers in the high street branches are ironed out, otherwise any good coming out of this meeting will come to nothing."
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