Sep. 13--Former blue-chip bank chief Sir Peter Burt has poured cold water on hopes that any new banks could be launched to serve the struggling small business sector.

The former head of Bank of Scotland has been tipped to be chairman of a new start-up bank, raising hopes that more competition could ease the flow of credit to struggling companies.

But Burt said it would be difficult for a newly launched bank to offer the services small businesses want, as they needed the branch network that only established banking groups could offer.

"I notice the Federation of Small Businesses has said the main clearing banks are being difficult in offering credit," he said. "But to join that market you must have a large footprint, a big presence in the High Street. That would be a very hard thing for a newcomer to do."

He added that his involvement in the plans for a new bank, being drawn up by Sandy Chen, the highly regarded banking analyst at broker Panmure Gordon, was still tentative.

"Sandy approached me and asked if I would be interested," said Burt. "I said possibly, but it would depend on the details. I think there may be a market for a new bank, but you have to be very clear about what that market is."

It is thought that Chen's plan will focus more on medium-sized groups and wealthy individuals.

Burt made his name at BoS, where he became chief executive and oversaw its merger with Halifax to form HBOS. He made fresh headlines in the banking industry last year when he and former Royal Bank of Scotland chairman Sir George Mathewson attempted to launch a coup to take the top jobs at HBOS and reject the planned takeover by Lloyds TSB.

Banking for small businesses will also be high on the agenda at this week's annual conference of the Trades Union Congress, where union leaders are expected to call on banks to join forces to create an investment business to provide credit to small businesses.

Paul Kenny, GMB General Secretary, said saving small business would also help rebuild public finances and help avoid spending cuts. "So much of the public spending cuts could be avoided if the banks acted to help small-to-medium businesses that are struggling to cope," he said.

"There is a lot of work out there, but companies don't have the financial resources to act.

"If the banks were to form an arm to help these companies, this would lead to a higher employment level. A huge amount of public spending is being used for people being on the dole."

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