Brown wants EIB boost for lending

By Sumeet Desai

LONDON (Reuters) - Prime Minister Gordon Brown called on Thursday for the European Investment Bank to boost lending to small businesses that are suffering because of the global credit crunch and looming recession.

Chancellor Alistair Darling and business minister Peter Mandelson will meet Philippe Maystadt, the head of the EIB, the European Union's lending arm, later on Thursday.

"At this difficult time for the world economy it is right that we look at innovative forms of finance for our small businesses. And it is right that we work with our international partners to help businesses here in Britain," Brown told Reuters.

"I have discussed with President Sarkozy and Chancellor Merkel in recent weeks how we best use the resources of the European Investment Bank to help businesses across Europe," he said, referring to French President Nicolas Sarkozy and German Chancellor Angela Merkel.

The government said small and medium-sized businesses could get an extra 4 billion pounds of lending as part of a 24 billion pound European-wide package.

The loans would be delivered to businesses by commercial banks through simplified, more flexible EIB loans than have been applied in the past.

British Bankers' Association figures show total new net lending to small business from banks in the year to June 2008 stood at 5.7 billion pounds, of which EIB funding was around 1 percent.

"Central to our recovery is lending by banks to business. So my number one priority for small firms is to ensure that they can carry on getting access to the credit and loans that they need to keep growing," Brown said.

"That is why we have taken unprecedented action to ensure the financial stability of our high street banks. But that was just the first step as we ensure that the banks do not unfairly penalise small firms."