CAUTIOUS banks are preventing East Lancashire’s economy from kick-starting following the recession, a top financial advisor has warned.

Mark Ashton, whose firm Ashton Hoyle works with more than 500 clients, said a failure to lend or take risks was strangling the growth needed to create jobs and wealth.

Political leaders are desperate for the area’s businesses to provide employment for the thousands of people likely to be left jobless by the Government’s public spending squeeze.

But Mr Ashton said that he has seen little evidence of big banks providing finance to companies to invest and expand.

The issue was also highlighted recently when Clydesdale Bank withdrew its backing of Barnoldswick-based Silentnight, briefly pushing the bed firm into administration.

Mr Ashton said: “From speaking to businesses about banks, the impression I have got is that finance is not forthcoming to those who need it.

“It seems as if the only companies being offered lending are those who don’t need it.

“Banks are not taking risks and the result is that cash flow is strangled.” Mr Ashton suggested a rise in interest rates may bring down inflation, currently running at 4.5 per cent according to the Government’s preferred consumer price index, and help stimulate certain businesses, like retailers.

He said: “Most East Lancashire companies went through the recession quite well but that confidence is now waning and the economy has not fully recovered.” A Clydesdale Bank source said its decision to withdraw services from Silentnight, which has since been taken over by US-based HIG Capital, was part of a ‘review’ of its ‘debt exposure’.

Britain’s five biggest banks last year agreed Project Merlin, a scheme designed to boost the lending to small and medium-sized businesses.

However, it emerged earlier this month that a £17billion target for lending in the first-quarter of 2011 was missed.

Ashton Hoyle is based in Blakewater Road, Blackburn.