Will the pro-business political party please step forward?

The Institute of Directors’ (IoD) latest survey found that close to 60 per cent of businesses have been denied access to credit. This is in line with our findings. Banks are stifling credit demand with overly stringent security demands (often a charge over the owner’s home), impossibly high interest rates, fees and charges, or a combination of both.This drought of lending is forcing nearly one in five business owners to finance their operations using credit cards, with an average interest rate of 18 per cent.

The IoD also confirmed our findings that the government’s flagship lending support mechanism for small businesses, the Enterprise Finance Guarantee (EFG), is failing to deliver. In fact, the banks denying credit to businesses were not offering the EFG as an alternative funding option in a staggering 83 per cent of instances.

This is a failure of dramatic consequence.

Even though 2009 was the first year on record that lending to business actually fell (8.1 per cent), the British Bankers’ Association still maintains that the UK banks are holding up their part of the bargain, while the Treasury acknowledges that two of the biggest culprits in the bank bail-out drama – the now publicly owned Lloyds and RBS – are failing to hit the lending targets set out for them.

Business owners feel let down by a government that saw fit to pump billions of pounds into the banking system, allowing the saved banks to then quickly revert to their old ways.

The real irony is that many small businesses do not need the “life support” that was given to the banks; they simply want to continue their existing facilities. Instead, the rug has been pulled out from under their feet.

With an election only months away, the parties must now convince these business owners to cast their votes for them. To date, it does not look encouraging. All parties are playing a dangerous hedging game. We all know that the next few years are going to be austere but our political leaders are operating under the theory that we probably wouldn’t have a Christmas if turkeys had the vote.

We need one of the parties to step forward with a radical, pro-business approach that strips away red tape, encourages hiring and incentivises business owners. The party that does this will be swept to power on a wave of optimism.

Anthony Carty is a director at Clifton Asset Management

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