Richard Lambert, CBI director-general, has called on the Government to consider funding an investment corporation like the Industrial and Commercial Finance Corporation (ICFC) created in 1945, to provide finance to small and medium-sized companies.

Lambert said in a speech to the British Venture Capital Association, the private-equity industry body, that a modern-day ICFC could provide similar financial encouragement.

He said that similar ideas aimed at providing finance to companies were being discussed by ministers in Whitehall, and that the skills of private-equity investors could play a valuable role. He also highlighted a fund being raised by Prudential to lend money to larger firms, saying that such funds could potentially be used to invest government money and assist the economy.

Lambert said: “In the UK, as in a number of other big economies, the Government now has a significant direct shareholding in the banking sector and one which, with the best will in the world, is likely to stay in public hands for some time to come.

“It seems to me, therefore, that we badly need to find ways of injecting new private capital and competition into the banking market, in order to get the recovery juices flowing and to keep the state-influenced behemoths on their toes. And now would be a pretty good time for a newcomer to get going.

“In the new and more volatile environment of 2009, one obvious question is: why not reinvent the old ICFC? It’s clear that growing numbers of SMEs are going to be in need of the blend of equity and long term capital that it used to provide - a role that turned out to be especially valuable during the turbulent times of the 1970s, thanks to the long-term stability of its portfolio, good marketing, and sound investment management.”