The Federation of Small Businesses has called on an independent body to "shake-up" the UK's banking sector.
The Independent Commission on Banking (ICB) has been tasked by the government with considering reforms to the banking sector in order to promote financial stability and competition. The ICB is due to deliver its recommendations on September 12, but following the deadline for submissions from interested parties, the FSB called on the body to change the structure of banking in the UK.
The FSB disputes claims from high street banks that demand for credit from small businesses is falling, saying it has not changed for some time. However, figures show lending to SMEs fell by £1.8m in May.
A recent survey of FSB members found out of the 20 per cent that had approached banks for credit in the past 12 months, a third had been refused.
John Walker, national chairman of the Federation of Small Businesses, said: "Experience shows that demand for credit is at its highest when the economy starts to enter a recovery period.
"Our survey work is indicating that businesses are starting to think about expanding or buying new machinery and it is really disappointing firms are having to abandon these plans because of the banks refusing to lend."
Mr Walker added that unless banks work with businesses, the UK economy may never fully recover.
