Big British banks will take part in a £20 billion sterling government scheme to boost lending to small businesses, the Treasury said today on the eve of the budget statement.
Barclays, Santander UK, Lloyds Banking Group and Royal Bank of Scotland have agreed to participate in the scheme which will help companies to access cheap loans, the Treasury said in a statement. However, Europe's biggest bank HSBC has declined to participate.
The news comes as finance minister George Osborne puts the finishing touches to the government's annual budget statement which he will deliver to parliament tomorrow.
"The chancellor has today launched the National Loan Guarantee Scheme (NLGS), helping smaller businesses across the UK - with an annual group turnover of up to £50m - access cheaper finance," the statement said.
"The government is using the UK's budget credibility in financial markets to provide up to £20 billion of government guarantees on unsecured borrowing by banks, enabling them to borrow at a cheaper rate. Around £5 billion in guarantees will be made available in the first tranche," it added.
The UK government is keen to persuade banks to start lending again to finance-starved companies, in order to boost faltering economic growth. Under the new scheme, small businesses will be able to access loans with interest rates that will be one percentage-point lower than those they would have otherwise received outside the scheme.
"The government promised to help small businesses get access to lower interest rates. Today, we deliver on that promise with a nationwide scheme," Osborne said.
"It's only because we've earned credibility with our deficit reduction plan that we have low interest rates, and it's only because of this scheme that we can pass the benefits of those low rates onto businesses," he said.
