The current figures so far show a 12% short fall in the lending of the 5 main banks to small and medium sized businesses as based on their commitment in the weak Project Merlin.

No one is really panicking yet as ministers will wait until the end of the year before responding, but the figures are certainly interesting.

First of all, of the main banks it is the almost wholly state owned bank that is making the most commitment to lend, with RBS having a share of 46% as opposed to their market share in this sector of 30%. Perhaps state ownership does have an affect??

On the one hand this shows how RBS have been intervening in this sector, but perhaps highlights that the other Banks, Lloyds, Barclays, Santander and HSBC are frankly not doing enough.

There are two aspects to this tale.  One, that there is plenty of enecdotal evidence to suggest it is harder to obtain credit by companies with healthy order books, especially in the service sector, as there is less or no collateral for the banks to feel happy about lending against.  There is also evidence that Banks are no longer providing the close support networks that successful small and medium sized business had prior to the crisis.

Secondly, the Banks insist, with some evidence, that the demand for the loans is just not there.  Some ministers and the Bank of England are less than sympathetic to this argument.  But this could well be, at least in part true.

All indications with the economic figures over the past 8 months show a poor, stuttering or stagnating economy, with rising costs and a lack of demand with rising taxation affecting the consumer.  The lack of growth could be the reason for the lack of companies even applying for loans.

But then we have to ask, if RBS can do it, quite spectacularly, why cannot the other banks?

We are now 3 1/2 years since this all started and there is absolutely no sign within the UK economy that the problems either in the financial sector or the real economy are any where near over.

In the type of economy we have, we need growth, without it, were doomed to a decade of declining standards of living and an ever increasing deficit.


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