'Businesses need to up pressure on banks for loans'

Business bosses should be able to go "over the heads" of bank managers to get loans, Business Secretary Lord Mandelson said today.

The peer said a recent easing of lending policies was not satisfactory and that the banks needed tougher treatment to get them to lend.

Lord Mandelson told BBC Radio Scotland today: "Banks have eased the constraints they've been operating in their lending to small businesses, but I'm not satisfied with that - I think they have to go further.

"I know it's difficult for the banks because on the one hand they're being told to repair their balance sheets, and next they're being asked to increase their lending. They would see this lending as being more risky during a recession.

"Well, we're now into recovery and what I'm concerned about - and I've discussed this with the banks - is that as the demand for lending picks up, as the recovery strengthens, they at the same time must respond to that and increase their supply of lending."

The lending constraints have caused anger because much of the banking sector was rescued by multi-billion-pound government bailouts during the financial crisis two years ago. The state owns 84% of Royal Bank of Scotland and 43.5% of Lloyds.

Lord Mandelson, who will speak at the Federation of Small Businesses annual conference in Aberdeen today with shadow chancellor George Osborne, said he was aware of many cases where small businesses felt they were being "unfairly treated".

"What I want to do is raise that with the banks and find a better means of doing so to enable small businesses, in a sense, to appeal over the heads of their local managers and area directors, go to a central point in the banks and say Look I've been a long-standing customer of yours and I don't expected to be treated in this way'.

"We've got to be, I think, much tougher on that."