'All options' considered over loans

The Government is looking at "all options" to try to ensure that loans become more easily available to businesses and families, Prime Minister Gordon Brown's spokesman has said.

Alistair Darling is known to be "exasperated" at the failure of High Street banks to step up lending in the wake of last month's £37 billion bail-out, though sources close to the Chancellor played down reports he was considering the "nuclear option" of legislation to force them to do so.

Mr Brown's spokesman said it was "evident" that small businesses were experiencing problems because of difficulties obtaining credit at affordable interest rates.

Asked about the possibility of legal action, he told reporters: "Obviously we need to continue to look at all options, but we want to work constructively with the banks and continue to work with them to see what more they can do to ensure that they fulfil the commitments that they themselves have entered into."

The Government support accepted by Lloyds TSB, HBOS and RBS last month came on the condition that availability of lending was returned to 2007 levels, but small businesses have complained that loans remain difficult to obtain.

However, the British Banking Association has announced that lending to small businesses grew by £1 billion in the third quarter of 2008 - only a marginally lower rate than in the same period of last year.

Total lending grew by 10% to £44.8 billion over the 12 months to September, while overdraft borrowing was up 4% over the year at £9.3 billion.

BBA statistics director David Dooks said: "A rise in lending in the third quarter, consistent with growth in the previous quarter and the corresponding quarter of 2007, shows banks continuing to make finance available."

Deposits rose by 3% over the year to £55 billion, suggesting that small businesses were increasingly funding their activities out of cashflow, said Mr Dooks.

Mr Brown's spokesman said: "Clearly, it is evident that a lot of small businesses are facing difficulties at the moment and that is a real difficulty."