BANKS should be pressed to give branch managers greater freedom to lend to small businesses, the Government has been urged.

The Federation of Small Businesses (FSB) warned that the cost of loans was putting firms under real pressure.

FSB chief spokesman Stephen Alambritis called for lenders to return to "relationship banking", with branch managers having more contact with their local businesses.

He told BBC Radio 4's Today programme that "opaque and hidden charges" meant that even if loans were offered to firms, the conditions were "really squeezing the small business".

He urged Chancellor Alistair Darling not to rely on assurances from the British Bankers' Association (BBA) that lending had been increasing.

Bank lending is a politically-charged issue after commitments were extracted from institutions given state support last year.

Mr Darling called in bank executives for "robust" Treasury talks last week.

Mr Alambritis said: "I wouldn't want the Government to rely on the BBA, the trade association of the banks, and it is right that Alistair Darling met with each individual bank separately."

He added: "The Government should be getting as much (as possible) in the way of facts and figures about their lending policies and their charging costs.

"But also there should be a push towards the banks to go back to relationship banking to see whether they can use some of the profits, those that have made profits, to close their call centre approach and visit businesses individually and give a huge swathe of discretion to branch managers who know what's happening at the high street level."