Project Merlin: Little hope for credible SME loan deal
ACCA senior policy adviser Emmanouil Schizas examines the prospects for the government’s Project Merlin policy to stimulate small business lending.
After the hiatus of the holiday period, it came as little surprise to hear that the UK government was struggling with its latest initiative to encourage lending to small and medium-sized enterprises (SMEs).
Project Merlin (known in some quarters as “Loans for Bonuses”) is a deal based around the idea that banks will be allowed to set aside slightly more funds for their bonus pots or avoid further windfall taxes if they also commit to lend more to SMEs.
While the discussions stalled in recent weeks, SkyNews reported yesterday that senior bankers agreed during a conference call on Wednesday 2 Febrauray that they would make a collective commitment of just over £180bn for 2011. PricewaterhouseCoopers (PwC) will be retained to audit the fund.
Project Merlin is still being kicked around the corridors of power, but on the basis of previous attempts, I wouldn’t hold your breath about the outcome.
Ever since the 2008 Lehman Brothers collapse small business lending targets have been discussed, and even imposed. But they have all failed. It should come as no surprise then that Project Merlin has now stalled, although enough political capital has gone into it to animate it for a while.
Why the banks and the government will never strike a credible deal…
Emmanouil Schizas is senior policy adviser at ACCA.