A third of small construction businesses have seen access to credit restricted as a result of banks prejudice against construction businesses says the Federation of Master Builders (FMB) as Gordon Banks MP asks the Government to act.

Gordon Banks MP raised the issue of lending to businesses with the Business, Innovation and Skills Secretary, Vince Cable MP.

Mr Banks MP said: "At last the Secretary of State is recognising the failings of the banks in respect of lending and nowhere is it being felt more acutely than in the construction industry. High rates, high set up and management costs are all impacting negatively on the sector. What the banks and indeed the Government fail to grasp is that a strong construction and indeed housing sector is necessary for economic growth in the UK. The industry is also a major skills provider and without bank lending into the industry, skills targets will not be met and the UK economy will be all the poorer for this failing."

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Mr Banks continued: "The Government acknowledges that Project Merlin has fallen at its first hurdle but sadly it has been duped by the banks and is now in a position where it can do very little if they won't budge.

"That Santander have withdrawn from the Business Growth Fund, further weakens this fund and suggests that there is little to be gained from it if individual lenders are able to do their own things to the same effect as seems to have been suggested by the Secretary of State."

Brian Berry, Director of External Affairs at the FMB, said: "The banks have decided that the construction industry is high risk and good firms with exemplary credit histories are having facilities withdrawn and prices raised as a result. More than a third of FMB members have seen access to credit restricted and nearly half have had the cost of it increased. Banks have also restricted the availability of credit to construction clients, with nearly two thirds of our members saying that access to credit is also hampering the commissioning of work by clients.

"The small building firms that the government needs to deliver many of its objectives from economic growth to green deal are being prevented from doing so because of a blind prejudice by the banks against construction firms and it has to stop."

(CD/KMcA)