SMEs claim banks still not lending despite Merlin claims

Business groups claimed Britain's banks were not supporting small enterprises yesterday despite figures showing major lenders edging towards their lending targets.

The Bank of England reported that the big five banks lent £37.3bn to small and medium enterprises (SMEs) in the first half of the year – roughly half the £76bn total agreed with the Government under February's Project Merlin deal.

But David Frost, director general of the British Chambers of Commerce, said many businesses still did not have the confidence to apply for finance.

He said: "Relationships between banks and business have suffered over the course of the downturn, with the failings of over-centralised processes and poor customer management being laid bare."

Banks have been accused of discouraging applications or pricing loans too highly.

John Walker, the national chairman of the Federation of Small Businesses, said there remained a lack of competition and that despite talk of opening up the sector most loans were still being made by a small group of banks.