Bailed-out banks fail to meet business lending targets

A National Audit Office (NAO) report has revealed that the state-owned banks in Britain will miss their targets for lending to small businesses for the year.

RBS and HBOS were given massive taxpayer support in the autumn of 2008, and at the time they promised to lend an additional £27bn to businesses, plus another £12bn to households. The NAO report says that "lending to businesses is not on track to meet targets". Indeed RBS has actually reduced its net lending to businesses by £9.1bn.

At the time of the bail-out Chancellor Alistair Darling said: "In return of this we have made it clear that we expect the banks to enter into legally binding, specific and quantifiable agreements to increase the amount of
credit in the economy."

If small businesses are unable to borrow as much as they would like, the wider economy is hit further, with failing businesses and rising unemployment.

A source from the Treasury said that the failure to meet the lending target does not necessarily mean that avilability of lending has gone down, but demand from businesses for loans has fallen as they re-assess their requirements.