Vince Cable will warn on Saturday that a lack of lending by banks could negate positive developments being made elsewhere in the economy.
Speaking at the Liberal Democrat Spring Conference in Gateshead, Cable will outline the coalition’s commitment to “grow our way out of our inheritance of debt and broken banks” saying that an “active government” with an “effective industrial strategy” is essential to lift the UK out of economic turmoil.
After a week in which he helped to secure the creation of 2000 jobs at the Nissan car production plant in Sunderland, Cable was quick to highlight other initiatives such as increasing apprenticeship schemes and rerouting government procurement through British suppliers where possible.
However, Cable also warns that a lack of lending by banks could negate any positive developments in the business sector. He will say: "Business needs access to finance, just as plants need water - and the banks aren't supplying it."
Businesses have found it difficult to access the credit that they need to expand and develop new products, hindering economic growth.
Cable believes they're trapped in a “valley of death”, and that the solution needs to involve the state-owned banks like RBS lending more.
Cable recently backed away from an idea leaked in a letter dated 8 Feb to break up the 83 per cent public owned Royal Bank of Scotland in an attempt to boost lending to small firms.
He said that the process would be too complex and would result delaying the process of returning the bank to private hands which the government hope can be done at a profit to taxpayers.