Small firms rushing to deposit money instead of investing in their business
But Barclays claims it is on course to meet Merlin commitments
Hundreds of small firms are rushing to deposit their profits in the bank, because they are scared to spend money in these uncertain economic times.
That is according to high-street banking giant Barclays, which claims it has witnessed a 41% increase in deposits from companies turning over £5m or less.
Speaking about the increase, Barclays chief executive Bob Diamond said: “These are not businesses that are asking us for loans. They are creating cash and putting money on deposit -not investing it in their businesses because of a lack of confidence.
“The keyword is ‘uncertainty’. I think that is followed closely by ‘a lack of confidence’.”
According to Diamond, the mood of pessimism is attributable to the slow progress of the economy, coupled with fears surrounding the European debt crisis and the recent disagreements surrounding America’s debt ceiling.
“It is going to be 2012 at the earliest before we see a meaningful increase in certainty,” Diamond added.
However, Barclays claimed it is on track to meet its obligations under the Project Merlin agreement.
Although the bank wouldn’t disclose the specifics of its Merlin obligations, it revealed it has lent £20bn since the agreement was signed in February – £7bn of which has gone to small businesses.