The total amount of money lent to British small and medium-sized enterprises through the much-publicised scheme has dropped 5 per cent from £149 million in the second quarter of last year to £141 million in the third quarter, government statistics reveal.
Lending under the EFG scheme has now fallen 35 per cent from the £217 million lent in the third quarter of 2009.
Phillip Monks, CEO of Aldermore Bank, which obtained the data through Freedom of Information, says one worrying aspect about the scheme is that it is failing to get funding to SMEs in regions most exposed to public sector spending cuts.
Northern Irish SMEs were the most affected in the third quarter of 2010 with the total amount of scheme finance obtained falling 56 per cent from £3.2 million to £1.4 million, according to the statistics. Finance to businesses in North East England fell 17 per cent from £6.7 million to £5.6 million and in Wales the amount dropped 12 per cent from £6.3 million to £5.5 million.
Monks says that while he supports the aim of the scheme, which is to make extra capital available to fund businesses, it is ‘unfortunate’ that the amount lent has declined and he calls on the government to reduce the fees charged to small businesses.
He continues: ‘With so many SMEs unable to secure credit from big banks, the continuing decline in lending through the EFG scheme needs to be reversed. It is particularly worrying that certain regional economies are suffering some of the greatest falls in funding. These areas are amongst those with the highest reliance on public sector jobs in the UK.’
Under the EFG, which was launched in January 2009, businesses with an annual turnover of up to £25 million are eligible to borrow between £1,000 and £1 million. As part of the scheme the government guaranteed up to £1.3 billion of new bank lending from January 2009 to March last year, decreasing to £700 between April last year and March this year.
The government has recently announced changes that will see the guarantee amount cap cut from 9.75 per cent of total funds lent out by each bank to 9.225 per cent from April 1 this year.
Monks adds: ‘Rather than reducing the EFG guarantee for lenders, increasing the guarantee is one way the government could encourage the big banks to lend more to small businesses. If the government were willing to underwrite a larger proportion of the EFG loans, then more loans might be written.’
