SME's finance frustrations remain says EEF

Lending to SMEs was £74.9bn, £1.1bn less that the target agreed under the so-called Project Merlin. EEF chief economist Lee Hopley said that while the banks came close to the agreed lending targets, demonstrating they were true to their word and were showing some intent to lend, the reality was that SMEs continued to be frustrated by the cost and terms and conditions around lending. Some had opted out of using external finance altogether and this was not good for growth, she added. Bank of England statistics showed that lending contracted all the way through 2011 and while some of this was due to falling demand in the face of challenging economic conditions, supply side constraints caused by a lack of competition and a lack of competing sources of finance outside of banks remained part of the problem. "The challenge for 2012 is how to offset the forces dampening demand for finance by improving the conditions of supply and that probably doesn't include extending the deal for a further year. The government's Credit Easing initiatives will be challenging to implement but seem to offer a prospect of making some improvement on access to finance."