Loans to small and medium-sized enterprises (SMEs) from the Merlin banks totalled £16.8bn for the first three months of this year, falling short of the £19bn lending target set out in the Merlin agreement between the banks and the government.
The shortfall was attributed to a lack of demand from SMEs, according to a statement released by the British Bankers’ Association (BBA) on behalf of the banks signed up to Project Merlin.
Total lending to UK businesses reached £47.3bn for the period. Over the full year £190bn has been allocated for the Project, which now has £142.7bn to lend for the rest of the year, an average of £47.5bn per quarter for the remainder of 2011.
A spokesman for the Merlin banks said: "Demand in some sectors, particularly among SMEs, remains muted, but we are devoting considerable time, effort and resource, particularly through the Better Business Finance initiatives, to ensure that we help viable businesses to access finance.
"Nonetheless, economic conditions remain challenging, and demand for lending is likely to vary through the year. So whilst these numbers are encouraging, it is too early to draw conclusions as to the year-end outcome."
According to the BBA the SME lending demand reflects relatively slow growth in demand for goods and services in the economy as a whole at present.
The Federation of Small Business (FSB) dismissed this argument, and argued that 44 per cent of its members were still being turned away from funding requests by banks.
Andrew Cave, chief spokesperson for the FSB, told Insolvencynews that the figures were a disappointment but not a surprise.
He said: "We have always said that setting targets will not get the banks to lend, but the data coming out does not tell the whole picture.
"We want to see more competition in the banking sector and will be paying close attention to the recommendations of the Independent Commission on Banking when it publishes its final report."
The Commission (ICB) published an interim report in April this year and will release its final recommendations to the government by the end of September 2011.
Project Merlin was launched earlier this year between the government and the UK’s four biggest banks, Barclays, Lloyds Banking Group, HSBC and Royal Bank of Scotland, plus Santander.