Business Secretary Vince Cable has asserted that banks must increase the availability of loans to small and medium-sized companies, and that he is prepared to use 'mandatory action' to force banks to do so.
He predicted a 'supply problem' could occur, which would hit loans to SME's, and that 'this would intensify when the economy starts to grow'.
Banks say requests for business loans have been low, Mr Cable offered an explanation: "If you push the hurdle high enough people are not even going to attempt to jump it."
The Liberal Democrat is working with Tory Chancellor George Osborne to address the issue. Cable explained that the banks' reluctance to lend to SMEs is a substantial problem in the aftermath of the economic downturn.
The private sector has a crucial role to play in the recovery of the British economy, says Mr Cable, and that banks should "act in the wider national interest".
He aims to help private companies gain the confidence to grow, which would, in turn, boost economic growth.
"It's going to be very difficult in an environment where you have an enormous Government budget deficit to stimulate the economy through public spending. So the growth is going to have to come through the business sector, primarily small and medium-sized companies."
