Despite many banks reporting bumper profits, lending to small businesses in the UK declines by almost a half

The amount that banks lend to small and medium-sized businesses in the UK has halved since the recession took hold, according to figures released by the British Bankers Association (BBA).

Data from the BBA has revealed that average monthly loans to small firms has declined by nearly 50% since 2008 from £991m to £564m in 2010.

The banking sector has been posting some large profits recently

The banking sector has been posting some large profits recently, with HSBC, Lloyds TSB and Barclays recording bumper multi-million pound profits. HSBC reported profits of $11bn and Barclays revealed they made £4bn in the first half of this year.

"The need for finance is only going to increase as the economy grows and as small firms which must be the catalyst for sustained economic recovery, try to meet renewed demand," said Matthew Goodman, head of policy at the Forum of Private Business.

Business Secretary Vince Cable has said that Britain's banks are "ripping off" their customers and that whether or not they are able to force banks to change their practices would be a key test of how successful the new government is. Chancellor George Osborne also called on the banks to increase their lending.

The government has recently launched the Financing A Private Sector Recovery consultation paper to explore the options for small firms to fund future growth, including private equity and debt capital markets.