The Chancellor has announced he is planning measures to give more businesses access to capital markets as part of his wider efforts to reduce the dominance of high street lenders.

Alistair Darling plans to announce steps in his forthcoming Pre-Budget Report which will allow institutional investors to raise capital or package loans for small companies.

It is understood that the plan will target mid-sized companies rather than small businesses, which officials believe should be benefiting from existing bank lending commitments.

Writing in The Observer, Darling said he wanted to "broaden the sources of finance" available to companies.

"If there is one lesson to be learnt from this crisis, it is that credit must never be allowed to dry up because of reliance on a small number of banks," he wrote.

"In the same way that big companies can access funding directly from capital markets, by issuing bonds or commercial paper, I want to start creating a different financial model in the future, in which small companies get funding from sources other than banks."

© Crimson Business Ltd. 2009