The amount banks lend to small businesses has halved since the recession took hold in the UK, official figures have revealed.
Recovery in the banking sector in well under way with HSBC, Lloyds TSB and Barclays recording bumper multi-million pound profits but banks are continuing to restrict lending to SMEs, which underpin economic growth.
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According to the British Bankers Association, average monthly loans have declined by nearly 50% since 2008 from £991m to small firms to £564m in 2010.
The Forum for Private Business (FPB) claimed its own research showed that loans and overdrafts have fallen since the start of June.
"The need for finance is only going to increase as the economy grows and as small firms which must be the catalyst for sustained economic recovery, try to meet renewed demand," said Matthew Goodman, head of policy at FPB.
The government recently launched the Financing A Private Sector Recovery consultation paper to explore the options for SMEs to fund future growth, including private equity and debt capital markets.
At the time, Business Secretary Vince Cable said it was in the national interest that banks start lending again, "growth could be choked off by a lack of business finance unless we are very careful."