The UK’s major banks look likely to meet their small business lending targets as agreed with the Government.

According to the British Bankers’ Association (BBA), the main five high street banks (Barclays, HSBC, Lloyds, RBS and Santander) loaned £37.4 billion to SMEs in the first six months of the year.

Under the terms of Project Merlin, to which the banks signed up as part of Government plans to boost the levels of credit and finance available to smaller firms, the target for the whole of 2011 is £76 billion.

A spokesperson for the Merlin banks said: “The first half year performance demonstrates the banks’ commitment to providing businesses with the financial support they need to invest and grow and the significant progress made this year.

“The banks’ efforts to encourage customers to come forward with borrowing proposals are set against the overall economic environment which remains challenging and business demand for credit which remains weak.”

Large numbers of smaller employers are not ready for a major change in employment law which comes into effect as from October.

The default retirement age of 65 will finally be scrapped as from 1 October this year, a measure that has been phased in since April.

This means that employers will no longer be able to force workers to leave their jobs once they hit 65 simply on the grounds of age alone.

However, a survey carried out by Employment Law Advisory Services (ELAS) revealed that a significant proportion of the SMEs polled were unaware of the legal implications that the move will involve.

Of those employers that offer private health cover, more than half (57 per cent) did not realise that the cost of provision for such benefits would rise markedly for employees aged over 65.

Peter Mooney, ELAS head of employment law, said: “Most businesses we speak to are now aware that they cannot force staff to retire due to age alone, but it seems many businesses haven’t actually thought through how the new law will affect them in practice.

“Expensive healthcare benefits is just one example of how employing older workers will affect businesses -  risk assessments, access requirements and adjustments for disability may also need revision as workforces grow older.”

HM Revenue and Customs (HMRC) has published a reminder that businesses, whatever their turnover, which registered for VAT on or after 1 April 2010 must submit their returns online and pay any VAT due electronically. By April 2012 this will apply to all VAT- registered businesses.

Businesses must submit their VAT Returns online and pay any VAT due electronically if they registered for VAT before 1 April 2010 and had an annual VAT-exclusive turnover of £100,000 or more for the 12 months ended 31 December 2009 or if they registered for VAT on or after 1 April 2010, irrespective of their turnover.

In the case of the first group, businesses must continue to submit all their VAT returns online (including nil and repayment returns) even if turnover drops below £100,000 in the future.

From April 2012, all remaining VAT-registered businesses, that is those registered for VAT before 1 April 2010 with a VAT-exclusive turnover of less than £100,000, will be required to submit VAT Returns online and pay electronically.

HMRC said that, even if a business doesn’t yet have to submit online returns and pay electronically, it makes good sense to sign up to using the online service before the 2012 deadline.

Employers have been taking on both permanent and temporary staff during July at a slightly increased level, but doubts remain about the recovery in the jobs market.

According to the latest Report on Jobs from the Recruitment and Employment Confederation (REC), demand for recruits in July grew compared with the previous month. However, the rate of growth was also the slowest since November 2010.

The number of people who secured permanent positions rose from 52.2 in June to 53.4 in July on the REC index (where 50 marks an increase).

Temporary appointments showed a similar moderate improvement, up from 52.1 in June to 52.6 in July.

Although employers are continuing to take on new recruits, the pace of the recovery is not yet sufficient to make a significant impact on unemployment levels.

Kevin Green, the REC’s CEO, said: “This month’s Report on Jobs shows that the rate of jobs growth in July quickened from June’s figures. These figures show that the jobs market is continuing to perform well despite general weakness in the UK economy. 

“We have now had two years of continuous growth and employers are still continuing to hire staff, albeit not in the numbers needed to radically reduce unemployment.”

But Mr Green warned the jobs market still has a long way to go: “Employment is just one per cent off its pre-recession peak but the economy is still struggling at four per cent down in comparison with 2007/2008 figures.

“The UK’s flexible labour market is a key reason why employment is continuing to grow. Employers are using large numbers of temporary workers which, with the Agency Workers Regulations less than two months away from implementation, shows that businesses continue to see the value of using a flexible workforce.”

Entrepreneurs are still envisaging a tough time in securing finance over the coming months but think that money should be easier to obtain.

Research from Investec, the private investment bank, has suggested that three out of five entrepreneurs (60 per cent) in May were anticipating that access to capital will be a challenge in the next year.

The figure, however, is down from the 75 per cent recorded last November.

Some 39 per cent thought that conditions for accessing external sources of capital would be ‘normal’ or ‘easy’. This compared with 25 per cent who said the same six months ago.

The survey revealed that entrepreneurs are planning to use a variety of sources to secure capital over the next 12 months.

Some 59 per cent expect to use a bank loan or overdraft, compared with 61 per cent in November 2010.

Just over one in three (35 per cent) intend to raise equity through venture capital and/or private equity (compared with 25 per cent last November), and one in four (24 per cent) are eyeing invoice discounting or asset based lending.

The poll identified a strong increase in demand for capital. Of the entrepreneurs interviewed, 72 per cent said it is either ‘very likely’ or ‘quite likely’ that they will look for capital this over the next 12 months.

Only 22 per cent of those interviewed said that they had no plans to raise capital from external sources over the next 12 months.

Ed Cottrell of Investec said: “Our findings suggest that many of the country’s leading entrepreneurs are feeling optimistic about their future prospects, but these could be put in jeopardy if they cannot obtain access to capital.”

UK interest rates have been kept at a record low of 0.5% by the Bank of England’s Monetary Policy Committee (MPC).

Economists had expected interest rates would remain unchanged due to subdued economic growth. GDP figures for the second quarter showed growth of 0.2%.

A majority of economists polled by the BBC expect interest rates to remain unchanged until next year.

The Bank also kept its programme of quantitative easing at £200bn.

Growth forecasts

In the BBC survey of 32 forecasters, who are also regularly polled by the Treasury, 26 predicted that rates would not rise this year, and three predicted there would be no rate increase until 2013.

More than half expected the Bank rate to rise from its record low of 0.5% to at least 1.5% by the end of 2012.

The MPC’s decision comes after the CPI measure of inflation fell to 4.2% in June, though this remains well above the 2% target.

The Bank of England will publish its latest growth and inflation forecast on 10 August and it is expected to lower its predictions for economic growth.

Both the CBI and the National Institute of Economic and Social Research have downgraded their own growth forecasts for 2011 to 1.3%.

The Bank is currently predicting growth of 1.75%.

Economic surveys released this week have painted a mixed picture of economic growth.

On Monday, a Markit/CIPS survey of the manufacturing sector showed the first contraction for two years in July.

However, a survey from the same source on Wednesday showed a surprise pick-up in the rate of growth in the service sector

Significant numbers of firms have been keeping the lid on wage deals so far this year, a new report has revealed.

According to the Chartered Institute of Personnel and Development’s latest focus on pay study, 52 per cent of those private sector workers surveyed have seen their pay frozen this year.

Some 7 per cent have experienced pay cuts, while just 32 per cent have been awarded pay rises.

Within the private sector, those employees most likely to have enjoyed a pay hike in the first six months of this year work in manufacturing (48 per cent) and finance (46 per cent).

Salary increases, the CIPD reported, are associated with the size of the business, with those working for micro employers least likely to have received a pay rise (11 per cent), followed by small (29 per cent), medium (36 per cent) and large (33 per cent) businesses.

Charles Cotton, the CIPD’s performance and reward adviser, said: “We will see some increase in the number of private sector workers receiving a pay award in the second half of 2011, especially in the retail, catering and hotel sectors, as the increase to the national minimum wage comes into effect in October.

“However, given that the busiest time for pay awards in the private sector is between January and May, most of these workers who have not received a pay rise so far will now probably not get one at all.”

The Government has brought forward changes in the law to help smaller firms gain access to equity finance.

The changes mean that fewer small firms will be caught up in the prospectus regime.

SMEs can now raise equity finance of up to 5 million euros rather than the previous limit of 2.5 million euros before a prospectus needs to be drawn up.

They can also target a larger number of potential investors, up from 100 to 150.

The changes are a result of the Government’s decision to introduce amendments to the EU Prospectus Directive a year earlier than originally planned.

The new rules apply from 1 August 2011.

The EU Prospectus Directive 2003 provides a framework for the preparation of prospectuses, which must be published when securities are offered to the public or are admitted to trading on a regulated market.

In 2010, the European Commission reviewed the Directive and highlighted a number of areas where the rules could be simplified through taking more small issues outside of the prospectus regime.

The intention was to implement the changes by July 2012. However, the UK Government has decided to introduce the deregulatory measures early in order to help UK small businesses access equity finance more easily and cost-effectively.

The Financial Secretary to the Treasury, Mark Hoban said: “I’m delighted to announce that the UK is taking the lead in Europe by introducing these deregulatory measures early. Reducing the regulatory burdens faced by business is vital in making the UK the best place in Europe to start, finance and grow a company.

“In order to play their part in the wider economic recovery, small businesses have to be able to access the finance they need – that includes making it easier for such businesses to tap into capital markets.”

John Walker, national chairman of the Federation of Small Businesses, added: ”We welcome the fact that the Government is leading the way in Europe by making it easier for small businesses to access finance. More small firms should look at equity finance as an alternative route to accessing credit, and these simple changes will help firms who are looking to grow and invest.

“Extending the number of investors and increasing the prospectus value will help more small businesses access equity finance and show there are more options than just going to the bank for credit. What’s important is that small businesses are aware of the alternative routes to finance.”

The CBI has revised down its economic forecasts for the year.

The UK’s largest employers’ group said that it had made the amendments in response to the ongoing squeeze on household budgets and a slump in business confidence.

Its May forecast had the economy growing at 1.7 per cent for 2011. That figure has now been cut to 1.3 per cent.

However, GDP expansion, according to the CBI, should show a marked recovery in 2012, up to 2.2 per cent.

The news follows on from last month’s announcement from the Office for National Statistics that growth for the second quarter of the year was mired at just 0.2 per cent. The CBI predicted that third quarter growth should hit 0.8 per cent. Quarterly expansion is predicted to average between 0.5 per cent and 0.6 per cent throughout 2012.

Household consumption is expected to slide back by 1 per cent in 2011, the consequence of stubbornly high inflation, the hike in VAT and subdued pay settlements.

Meanwhile, business optimism about the future has been dented by the continuing crisis in the eurozone and by worries over levels of US debt, which together represent the UK’s largest export markets. This year is expected to see relatively modest investment growth of 3.7 per cent, but that should pick up in 2012 to 9.3 per cent.

The UK will still rely heavily on export drives to lubricate the economy this year. The CBI estimated an upturn in exports of 7.7 per cent in 2011 on the back of a competitive exchange rate.

In the business group’s view, inflation will be higher in the autumn and into next year than previously forecast, mainly as a result of increases in utility prices.

But as the impact of the VAT rise falls away, inflation is set to moderate during 2012 and fall back closer to the Bank of England’s 2 per cent rate towards the end of next year.

The CBI believes the Bank of England will hold interest rates until the first quarter of 2012 or at least until there is real evidence of a marked and sustained pickup in the economy.

John Cridland, the CBI’s director-general, said: “The economic outlook has become even more challenging but we still expect the economy to continue to grow modestly this year and next.

“The global economy has slowed in the face of several shocks including the Japanese tsunami and soaring commodity prices.

“These factors have combined with political uncertainties around the eurozone sovereign debt crisis, the wrangling in Congress over the US debt ceiling and the policy tightening in China, to erode confidence and soften activity.

“It may be a lacklustre recovery, but with solid net trade contributions and the positive impact of business investment, the UK will remain on a growth track.”

Ian McCafferty, chief economic adviser at the CBI, added: “Economic conditions will be very tough for the rest of this year as household budgets continue to be squeezed by a combination of inflation and weak wage growth. But conditions will be a little brighter in 2012 as inflation eases back and take home pay improves.

“We don’t expect the Bank to adjust interest rates until there are clear signs of a marked and sustained pickup in economic activity. This adjustment is now likely to come later than previously expected, in the first quarter of 2012.”

HM Revenue and Customs (HMRC) has reminded taxpayers of changes to its bank account.

As from 9 August 2011, businesses and individuals will no longer be able to use the old Bank of England account.

Any payments directed to the Bank of England accounts after this date will be rejected automatically by the banking system, HMRC said.

To ensure that that payments are made on time, it is essential that the correct bank account information is used.

Details can be found at: http://www.hmrc.gov.uk/payinghmrc/index.htm