Banks urged to lend firms EU cash

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The money is Britain's share of a £24 billion Europe-wide emergency help package of loans on offer from the European Investment Bank.

Mr Darling told a conference in the City of London that small and medium sized enterprises were "the lifeblood of UK business" and everyone in the country has a collective interest in strengthening them.

Many businesses have blamed lack of access to credit at competitive rates for driving companies to the wall during the current crisis, and Mr Darling urged banks to take this opportunity to offer help to them.

Speaking alongside EIB President Philippe Maystadt and Business Secretary Lord Mandelson in London's Guildhall, Mr Darling said: "I want to encourage British banks and small businesses to get their share of this extra support, which we estimate to be up to £4 billion.

"It is important, I believe, that banks do sign up to this. Here are funds available. The banks have as much interest as small businesses and the rest of us in ensuring that we help small companies get through this period.

"It is very easy - in the good times - to go around encouraging people to sign up with you as a bank, but remember in the difficult times, small businesses need help as well and we want to make sure they get that help."

Total new lending to UK small businesses by banks in the year to June was just over £5.7 billion, and the £4 billion on offer from the EIB over the coming four years will make "a significant difference", said Mr Darling.

He welcomed the fact that British banks have signalled an interest in securing an initial £1 billion, but urged more institutions to do so.

Lord Mandelson said that it was essential that small businesses had access to finance and he urged the banks to honour their commitment to maintain lending to firms at competitive rates.