HSBC to step up lending to smaller UK businesses

HSBC will increase lending to small and medium-sized UK businesses by more than 25 per cent to £8bn this year.

The bank will also waive some fees on business loans as it tries to show more commitment to smaller firms.

Small business lending has fallen sharply in the UK since the recession as banks repair balance sheets. They have to allocate a greater amount of buffer capital to support SME loans than property. But in the past few months lending to smaller firms has begun growing again.

Net lending to SMEs excluding overdrafts rose £465m in March, according to the Bank of England, and was up 1.9 per cent over the first three months of the year. There is £169bn outstanding, including overdrafts.

The UK's biggest bank, which is considering moving its head office to Hong Kong, said it wanted to show it understood the importance of lending to SMEs in Britain.

HSBC'S head of UK commercial banking, Ian Stuart, said: "Too often we've heard smaller, domestic businesses ask whether we are as committed to them as we are to big global firms."

The £8bn SME fund will be allocated in 43 local tranches across the country, including £400m in Scotland, though the ceiling in each area could be raised.

HSBC is waiving fund, arrangement and HSBC security fees on qualifying business loans worth between £1,000 and £300,000, until the end of July.

The bank said it had lent 4 per cent more this year than last. It has about 18 per cent of the market for current accounts and 1m customers, behind Lloyds Banking Group and Royal Bank of Scotland, which has been reducing its exposure.

But HSBC also faces competition from a new breed of UK challenger banks, such as Shawbrook, which listed in March, and peer to peer online lenders.

Big banks are also still suffering for past misbehaviour. HSBC has offered £364m in compensation to hundreds of customers that were mis-sold interest rate swaps, an insurance product that backfired and landed them with heavy fees when rates fell sharply in the recession.

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