The government and banks are again at odds, amid fears that their three-month old Project Merlin peace deal is not delivering enough credit support to Britain’s smaller companies, the Financial Times reported. David Cameron warned banks this week to improve their lending to small and medium-sized companies or face new taxes, a threat which provoked an angry reaction in the City. Banks argue they only agreed to provide “lending capacity” of £190bn of gross new corporate loans – including £76bn for SMEs – and that there is little they can do in the absence of demand for new borrowing.

Five of Britain's top banks are backing a 2.5 billion pound fund launched on Thursday to invest in small and medium-sized businesses that are struggling to attract financing, Reuters reported. The Business Growth Fund (BGF), which will target businesses with an annual turnover of 10 million to 100 million pounds, follows the "Project Merlin" deal between Britain and its banks to curb their bonuses and lend more in the wake of a sharp downturn in business lending after the credit crisis.

Future bonus and dividend payments by UK banks will depend upon convincing regulators the handouts will not dent capital reserves or undermine sound risk management, the head of the city watchdog has warned. Banks would also be forced to make public detailed information about their holdings that they currently share only with regulators, Hector Sants told the Financial Times as he prepared to unveil the detailed plans for a new authority that will supervise banks and insurers for safety and soundness.

The Ernst & Young ITEM Club says in a report to be published later Monday that UK retailers face a decade of austerity with consumer spending remaining below its pre-recession peaks until at least 2013, and growth in spending constrained for another seven years, Finfacts reported. The economists using the Treasury's own economic model for the UK economy, say that consumer spending will expand by just 0.6% this year and 1.3% in 2012 as depressed wage growth and rising inflation stretch incomes.

The manufacturing future of Silentnight, the UK’s biggest bedmaker, has been saved after HIG Capital, the US-based private equity firm, bought the company out of administration on Saturday night, the Financial Times reported. But Neil Mernock, chief executive, in effect blamed the Pension Protection Fund for the failure of attempts to win agreement among creditors to support a Company Voluntary Agreement which had offered suppliers 65p in the pound owed.

British house prices suffered their biggest annual fall in 1.5 years in April as worries about the economic outlook deterred buyers, mortgage lender Halifax said, the Irish Times reported. On the month, prices were 1.2 per cent lower, the biggest fall since September 2010 and confounding forecasts for a 0.1 per cent gain. Prices had been flat in March. "Weak confidence amongst households, partly due to uncertainty over the economic outlook, is constraining housing demand and resulting in some downward movement in prices," said Halifax housing economist Martin Ellis.

The number of company insolvencies in England and Wales rose sharply in the early months of 2011, while individual insolvencies continued to decline, Dow Jones Daily Bankruptcy Review reported. The government's Insolvency Service said Friday that there were 4,121 compulsory liquidations of businesses during the first quarter, an increase of 3.7% from the fourth quarter of 2010, and of 2.1% from the first quarter of 2010.

The number of British retailers falling into administration jumped 30 percent to 60 in the first three months of this year, the highest number for two years, and more could be on the way, a report said on Thursday, Reuters reported. The gloomy assessment from business advisory firm Deloitte came just hours after British home improvements chain Focus DIY said it was on the verge of appointing administrators, in what would be one of the biggest casualties in the retail sector since the demise of Woolworths in 2009.

The U.K.'s financial regulator is pressuring some European financial institutions to restructure their London operations in ways that would subject them to greater oversight by the regulator, according to people familiar with the matter, The Wall Street Journal reported. The Financial Services Authority's goal is to prevent certain companies from exploiting European rules to set up banking and brokerage operations that the agency views as potentially risky because they use a structure that doesn't face tough local supervision. But the move by the FSA is controversial.

Lloyds Banking Group PLC Tuesday said it has put a package of distressed commercial real-estate loans on the market, stepping up its asset-disposal program to boost its balance sheet in line with other U.K. banks, Dow Jones Daily Bankruptcy Review reported. The portfolio, code-named Flagstaff, comprises some 38 assets including office, retail, leisure and industrial space, all of which were in receivership. It is the first time a package of individual assets in receivership has been aggregated.