Cut cost of lending to SMEs, Darling tells banks

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Cut cost of lending to SMEs, Darling tells banks

Simon Quicke

The chancellor Alistair Darling is meeting with the heads of major banks to put pressure on them to reduce the costs of lending to SMEs.

The chancellor is likely to argue that with the Bank of England base rate at the lowest it has been in living memory it is unacceptable for the banks to be charging business customers so much for loans.

The banking leaders who will meet Darling this afternoon are likely to counter his argument pointing out that although the base rate is 0.5% they have to pay much more for funds and those costs have to be passed onto customers.

According to numbers from the British Banking Association released this morning, lending to small companies increased from £133m in May to £366m last month, and 50,000 new accounts were opened.

"These figures provide more evidence of the high street banks' support for small businesses. Structured term lending rose by £366m in June, while deposits and numbers of new business relationships continued to hold up, perhaps reflecting improved business confidence in trading conditions," said David Dooks, statistics director at the British Banking Association.

Since the credit crunch started to bite last year the government has tried, with varying degrees of success, to get the banks to return to the lending conditions of 2007.

This story originally appeared on MicroScope.co.uk


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