An Oxfordshire business leader has called on the Government and banks to help small firms as the country lurches towards recession.

Barry Wheatley, chairman of the Oxfordshire branch of the Federation of Small Businesses, wants to see direct action to boost the fortunes of the county's entrepreneurs and small companies.

He said: "There's no doubt some of our members are struggling and we want to see banks make money available at an affordable rate.

"The Government has said some very positive things about small businesses but we want to see help filter down to the companies themselves."

Mr Wheatley was speaking after official data revealed the economy shrank by 0.5 per cent between July and September — the first time in 16 years that Britain had fallen into negative growth.

It prompted Chancellor Alistair Darling to admit the UK was moving “towards” recession and shares on the London Stock Exchange slid while the pound slumped to a new five-year low against the dollar.

Mr Wheatley added that FSB members were reporting that banks, some of which have been bailed out by the Government for billions of pounds, have been increasing charges and turning overdrafts into higher interest loans.

He said: "They are not passing on any of the benefits they have been receiving to their business customers."

Mr Wheatley also called on the Government to directly invest in small firms by cutting corporation tax and making business rates a standard charge across all areas of the UK. He also wants to see big firms forced to cut the time taken to pay their smaller suppliers.

He said: "Small businesses are the lifeblood of the economy but more and more owners are having to tap into their own personal funds to prop up their companies."

However, a survey for the Thames Valley Chamber of Commerce which includes Oxfordshire, shows many businesses are continuing to perform well with increased profits and turnover and encouraging export sales helped by the weaker pound.

Claire Prosser, policy executive for the Oxfordshire Chamber of Commerce, said: "We recognise the domestic economy is under immense pressure and that there has been a collapse in confidence across sectors; however, the results state that on a whole business has remained stable.

"We need the Government to support businesses during these challenging times."