The real magic will be affordable loans


I am not normally so indecisive but I can’t decide if Project Merlin sounds more like a reality television show to find the next Paul Daniels, or a new ride at Alton Towers.

But if it manages to magic up some extra lending to small and medium enterprises, who cares?

Under Project Merlin the biggest banks will lend £190bn to businesses this year. Out of this, £76bn is to be made available to SMEs – a rise of £10bn on last year.
This is good news for the undervalued five million small businesses that collectively, according to the British Bankers’ Association, represent 35% of the turnover of all businesses and 55% of all business current accounts.

Also, an estimated 400,000 new businesses start trading each year.

But the question is, how many of these will benefit from Project Merlin, as this lending is reported to be based on demand and at the market rate – which many SMEs may still find expensive.

The Federation of Small Businesses has welcomed the news but believes more must be done to change the banking structure to promote growth, especially for small firms.

A recent FSB survey showed that about 84% of small businesses are not approaching banks for credit because they have already been refused or it is too costly. And firms that use banks as their main source of finance are being penalised by high interest rates.

As is usual in most government initiatives, the devil is in the detail. But let’s hope a decent proportion of SMEs can pull the affordable funding rabbit out of the hat.