Despite promises to lend fairly, a third of small businesses are still struggling to get affordable credit according to an industry body.

According to figures from the Federation of Small Businesses (FSB), 30 per cent of small businesses have seen an increase in the cost of new or existing loans in the last two months.

The slowdown in demand and a lack of credit is squeezing the UK’s 4.7 million small firms, the FSB said.

In a survey, over 60 per cent reported a fall in trade over the last two months and 40 per cent are being paid later for services and supplies.

This has led to more than a third (35 per cent) considering cutting headcount, 36 per cent mulling a cut in staff working hours, 41 per cent contemplating curbing future hiring and 39 per cent even thinking about closing down.

FSB national chairman John Wright said: “With trade down and invoices increasingly being paid late, small businesses are having to turn to their banks for credit to tide them over.

“But, despite the government’s £500 billion bailout, the banks still do not seem to be lending to small businesses.

“These figures show that with nowhere to turn, small businesses are having to consider cutting jobs and maybe even closing down.”

The FSB is meeting with the government and the banks and plans to urge both to get the flow of credit moving again.

“The onus will now be on the banks and their branch managers to stop their Scrooge-like tactics and open their pockets to small businesses,” Mr Wright said.