Small businesses are still being held back by banks which refuse to lend money or make unreasonable demands, MPs have warned.
Ministers were urged to intervene and make sure credit was available, as West Midlands MPs criticised bank lending practises in the House of Commons.
Jeremy Lefroy (Con Stafford) claimed bankers were unwilling to take risks – and had little in common with the great merchant banks of the 19th and 20th centuries which made Britain wealthy.
He said: “I long to see the formation of some new British merchant banks. All our old ones were largely taken over and are now part of massive conglomerates.
‘‘I would like to see young entrepreneurs come into the City – indeed, I would like to see this not just in the City of London but all over – set up merchant banks and really take some risks and make a difference to the country, because I believe that they can do that and it might help firms.”
He added: “I ask the minister to consider how to make it easier and less costly for small businesses to raise equity capital.”
Lorely Burt (Lib Dem Solihull) warned: “One reason why companies are reticent to approach banks is the exorbitantly high rates that they are charging in interest and administration fees.”
She said: “The five biggest banks made £15 billion in the first half of this year. Are not the rates that they are charging part of the problem? Many companies are repaying loans because they cannot afford to hang on to them.”
And Staffordshire MP Karen Bradley (Con Staffordshire Moorlands) said she was dealing with two cases of businesses which had suffered because they could not obtain credit.
“One concerns a builder of affordable housing that is unable to obtain bank finance to build the affordable housing that we need so desperately in North Staffordshire.
“Another case is a small retailer that stocks stoves and Agas. It cannot expand to take on more staff because it desperately needs new premises but is unable to obtain them due to lack of bank finance.”
Burton MP Andrew Griffiths (Con) said firms could see the “green shoots” of recovery, but could not buy products or services they needed from suppliers.
He said: “There is a drag effect on manufacturing in particular. If we could get that supply of finance to small manufacturing businesses, that would make a massive impact.”
Nuneaton MP Marcus Jones (Con) said banks were imposing strict conditions on loans.
“Evidence from my constituency suggests that banks can be unwilling to give such credit facilities, even to long-standing businesses with strong trading records, without demanding security in the form of the business owner’s home, which is often quite an issue.”
Business Minister Mark Prisk told the MPs: “As we emerge from the deepest and longest recession since the second world war, the continuing constraints on finance for small and medium sized enterprises are a prime concern for the Coalition Government.
“The coalition agreement made it clear that one of our core priorities is to increase the availability of both debt and equity finance to businesses that are fundamentally sound.
‘‘As several Members have rightly pointed out, that is crucial to the future growth and structure of the economy.”