Vince Cable warned that banks face extra taxes on profits, bonuses and balance sheets if they do not publish figures showing how much they were lending to enterprises.

The business secretary told MPs that the government’s Project Merlin deal with banks was for one year and that if targets were not met then the government was prepared to impose extra penalties.

He said, ‘It will be a question of the government saying ‘Sorry, this agreement hasn’t worked and we are absolved of any commitment on our part in terms of taxation.’

While the banks insist that lending shortfalls are due to a lack of demand, Cable said he believed they had ‘discouraged demand’ by charging high prices or showing a lack of interest in lending.

Dr Adam Marshall, director of policy at the British Chambers of Commerce says, ‘Restoring trust between businesses and banks relies on more than just meeting lending targets. Banks should reconsider how they communicate with business customers, and be able to make decisions at a local level about their financing needs.’

Andrew Jesse, vice president of financial management solution company Basware UK adds, ‘The announcement today confirms what many already know; if small businesses remain unable to access finance, recovery and growth will be stifled. If firms are going to play their part in the economic turnaround of the country, as the government expects, they need to be able to rely on a steady cash flow.

‘It wasn’t so long ago taxpayers bailed out some of the country’s biggest financial institutions, hopefully the banks will repay the favour by helping to keep these vital small businesses up and running.’