STATE-OWNED banks may have to be compelled to start lending to small businesses, leading Lib Dem Menzies Campbell said yesterday.

After meeting traders in Durham Indoor Market, the former Liberal Democrat leader said: “Bureaucracy is the thing that gets in the way of economic activity – but the biggest problem is getting banks to lend to viable businesses.

“Everyone’s agreed that the way to help put the economy back on track is to ensure the health of small and medium-sized enterprises.

“That’s why the Lib Dems say banks need to be persuaded and perhaps compelled to lend to viable businesses, rather than trying to stock up cash and return to private ownership as quickly as possible.”

Sir Menzies also praised market stallholders, saying: “Some of the businesses here are family businesses over 100 years old. They’re providing a specialist service and personal contact. They deal with clients on a first-name basis and you can tell when you’re talking to them that they know what they’re talking about.”

Sir Menzies visited the market’s newly revamped cafe and met a fishmonger, cheesemaker and shoemaker.

The Scottish-born MP toured the market with Carol Woods, the Lib Dem candidate for Durham City.

He said: “We’re optimistic, but not complacent. Carol’s an outstanding candidate and has been outstanding in local government.”

Labour has held Durham City since the Thirties, but it is a key Lib Dem target.