LONDON: Smaller merchants struggling to raise business finance are not alone: Britain's banks lent just £900m to small businesses last year, bank statistics show.

A spokesperson for the Federation of Small Businesses said that the demand for credit was as strong as in previous years but that small business is "losing faith in the banks" because of the rising cost of finance. "Instead, they've been dipping into savings or borrowing from friends and family."

The British Banking Association statistics show that total lending to small business grew from £54.4bn to £55.3bn last year. In each of the previous five years, lending grew by roughly £4bn. David Dooks, a director of the BBA, said the numbers reflected a "reduction in demand for credit".