Bank of England data show slump in small business loans continues Lending by banks and building societies in the three months to February tumbled by around £9bn. In February alone lending fell by £4bn to its lowest level for almost two years. The latest indicators provide little comfort for the Government in its efforts to encourage the private sector to invest more to lead the economic recovery. There is equally no sign that the Project Merlin deal with the banks to improve the flow of credit to small businesses is reversing a downward trend. Lending to the sector is continuing to fall with entrepreneurs citing rising costs and increased demands for security among the obstacles they are facing according to soundings by Bank agents around the country. An analysis by the Bank of lending trends over the past three years charts a sharp decline since the second-half of 2009. Conditions in the longer term wholesale funding markets improved in the first quarter with spreads widening. Credit availability for businesses and households has been broadly unchanged in the January-March period. An increase in mortgage demand was attributed to an attempt to beat the increase in stamp duty.