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George Osborne has warned banks they must increase lending to small and medium sized businesses.
In an interview in the Sunday Telegraph the chancellor said banks had an "economic obligation" to lend and said the government would "not tolerate banks piling the pressure" on businesses.
"Every small and medium-sized company that I have visited in recent weeks has had some problem with their bank - either they have found it difficult to renew their overdraft or they demanded additional collateral, often someone's house," he said.
"The danger is that, particularly next year, when there is a huge amount of refinancing required, that the small and medium-sized businesses suffer from a lack of access to working capital."
Speaking on BBC Radio 4's Today programme this morning Tory MP Michael Fallon said given they had posted profits of around £8bn it was time for the big banks to start lending again.
"They’ve really got to get on now and meet their lending targets, in fact they are behind their lending targets," he said.
"They’ve now got to help fire up this recovery, they have to show the public that business and home buyers can have confidence in the banks.”
Fallon, a member of the Commons Treasury committee said small businesses were now only able to get loans renewed on "much harsher" terms than before.
And he suggested that the bigger banks should be broken up in order to facilitate lending.
"If the old banks are too big and too slow and too uncompetitive, then maybe we need to look at the structure of banking," he said.
But also appearing on the programme Peter Ibbetson, chairman of small businesses for NatWest and RBS, said the banks were doing as much as they could.
"We are approving 17 out of 20 applications that come to us. We are starting about 2,000 start-ups every week," he insisted.
"There are some clearly who we find it difficult to help but they are the ones we regard as not viable. And it would be quite wrong of us to help businesses and support businesses if we don't regard them as viable."
He added: "We are open, we are lending an awful lot of money, but we must lend that responsibly".
Article Comments
We would welcome any pressure that can be put on the banks to increase lending to small businesses. Average monthly loans have declined by almost half since 2008. In order to increase growth in the economy we need small and medium-sized firms to be able to expand and grow.
Head of Campaigns, Forum of Private Business
Jane Bennett
2nd Aug 2010 at 10:52 am
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