New lending to small businesses fell again in the three months to November, the Bank of England's latest Trends in Lending report shows. Year-on-year, lending to companies with sales of less than �25m has fallen by 6.1pc
While overall lending to businesses increased slightly over the period, even large companies reported that credit was "hard to get"- the first time they have done so since mid-2010. Lending to businesses of all sizes contracted by 2.1pc in the year to November.
Banks also warned that "challenging" wholesale markets are starting to affect loan pricing.
Toby Perkins, Labour's shadow small business minister, said: "The Government is out of touch with the needs of British business and has failed to get banks lending. Firms that could grow are finding that while banks may still be paying bumper bonuses they are not lending to small [companies]."
David Birne, of accountancy firm HW Fisher & Company, said the figures showed that Project Merlin has "failed".
"No one expects [banks] to lend to the unbankable. But their terror of lending to doomed businesses means they often won't lend to the good ones either."
Barclays' retail boss Antony Jenkins has warned that George Osborne's new 'credit easing' initiative ? which will see the Government underwrite bank loans ? will not result in banks lending more to small companies.
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