More than 40% of applications for credit by small companies have been refused by the UK's 'big banks', according to a survey released today by the Federation of Small Businesses (FSB).
The report, which comes a few days after the Bank of England announced plans to boost lending by providing cheap loans to banks, also found the growth prospects of one in five firms are being curtailed by a lack of finance.
"The FSB believes the credit squeeze will impair small businesses' growth plans, reduce new job creation and further set back the UK's struggle to emerge from recession," it said.
"The FSB has long called for more competition in the banking sector and strongly believes that small firms - which collectively produce more than half the UK's wealth (GDP) - will only be able to access the reasonably-priced finance they need when there is more competition in the banking sector."
The 'Voice of Small Business' Index, the FSB's quarterly survey of confidence among UK small business also found the last quarter marked the 10th consecutive quarter of job losses, with a net balance of 3.9% of respondents announcing layoffs.
Meanwhile, confidence among the UK's small businesses and entrepreneurs has fallen in every industry sector except those working in health and motor services.