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A loss at Lloyds

Lloyds Banking Group today reported its £3.5bn loss for 2011, painting a gloomy picture for the UK’s small and large businesses alike.

Payment Protection Insurance

The loss is not entirely unexpected: we are all well aware of the new payment protection insurance legislation and its expected effect on banks such as Lloyds. The bank plans to set aside around £3.2bn to cover PPI claims.

Despite this, the blue-chip bank insists it is in a stronger position than this time last year. Before factoring in the huge cost of the PPI scandal and other one-off costs, it posted a £2.7bn profit for 2011, 21% up on the comparable figure the year before.

Project Merlin

Bank to business lending contracted last year, despite the Government’s Project Merlin initiative with Britain’s five largest banks. Ernst and Young have forecasted that this will fall further in 2012.

However, Lloyds has recorded that in 2011 it beat its own Project Merlin targets, despite the overall net fall in lending. The bank provided £45bn of gross lending to UK businesses.

With £12.5bn of this going to SMEs, the outlook here is not totally bleak. Though business funding is on inevitably choppy waters, this large pay out shows that there are still willing lenders out there.

2012?

Lloyds has been forced to shed thousands of jobs since 2008, and is currently in the midst of a reorganisation which last year saw it announce a further cut of 15,000 jobs. Lloyds are expecting unemployment to top 9% in 2013, and is anticipating 2012 to be another tough year.

Chief executive Antonio Horta-Osorio expects business to be tough in 2012. The ‘subdued economy, continued high levels of regulatory scrutiny and political uncertainty relating to the banking sector’ coupled with continued volatility in the Eurozone will all play their part. This will inevitably impact on their lending to small and medium businesses.

If you have been let down by Project Merlin or are just struggling to keep afloat, then exploring alternative funding could help your business grow in the coming year.

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