Government urged to get tough on bank lending

The Coalition Government is being urged to revive a small business lending forum in a bid to boost the supply of credit to UK firms.

The Small Business Finance Forum was set up by the previous Labour Government and was designed to monitor high street banks’ lending to small and medium-sized enterprises (SMEs) at the height of the recession.

However, the forum has not met since before the General Election, prompting calls for the Business Secretary Vince Cable to reintroduce the initiative.

It follows concerns over the amount that banks are currently lending to SMEs under the Enterprise Finance Guarantee (EFG) scheme.

According to reports, lending under the EFG has fallen by 23%, with high street banks handing out £365 million from September to March this year. The total number of individual loans also fell by 18% to 3,583 during this period.

The EFG was extended by £200 million to £700 million in the Emergency Budget, but some business groups have suggested that the cost of the scheme needs to be cut to encourage more firms to apply.

The Federation of Small Businesses (FSB), which was a regular attendee at the Small Business Finance Forum, is among the bodies calling for more action on bank lending.

An FSB spokesman said: ‘We want the forum to carry on. The banks were there, and they were open to criticism and liked the praise when we thought things were working. It needs to carry on for the Enterprise Finance Guarantee to prosper.’

He added: ‘The EFG is expensive with too many conditions and the marketing of it between September and March was poor. The ebb and flow of it depends on ministers having their eye on the banks.’