Banks 'must start lending'

Friday 21st November 2008

All banks should be nationalised as a last resort if they refuse to lend to small businesses, the chairman of the Treasury select committee has suggested.

Treasury select committee chairman and MP John McFall has criticised UK banks in an article for the Daily Telegraph for failing small firms who need credit to operate.

Pessimism that many small firms are set to go bust and an eagerness to repay government loans are behind the reluctance to lend, Mr McFall said.

But with overdrafts withdrawn and loans refused, small businesses will inevitably fold, putting a further 13 million jobs at risk, the politician warned.

"If the banks do not play ball, and will not resume lending, then the demand for full-scale nationalisation may well grow," Mr McFall said, calling this the "nuclear option".

The MP also suggested a website should be set up for small and medium businesses "to report the fact that they have been refused a loan and record their dismay about the way they have been treated," effectively naming and shaming banks.

Business groups are calling on the government to ensure credit does not dry up completely for the country's 4.7 million small firms.

The Federation of Small Businesses has written an open letter to the chancellor, Alistair Darling, this week asking for a £1 billion small business survival fund.

The government is expected to announce help for businesses in its pre-Budget report on Monday.

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