By Iain Withers
LONDON (Reuters) - Britain's finance ministry has canvassed banks for ideas to boost the country's "left-behind" northern towns and cities, weeks after the governing Conservatives won an election promising to boost the regions outside London.
The call comes as figures show lending by banks to small and medium sized businesses has shrunk rapidly in the north of England.
Treasury officials have requested policy ideas for fuelling growth in the north of England in meetings with banks and finance industry trade bodies including since the new year, banking industry sources told Reuters.
Policy ideas drawn up by finance firms include developing better technical skills locally, setting up regional specialist hubs and moving financial regulators from London to give start-ups better support in meeting requirements when setting up.
Banks have attracted criticism for doing too little to support Britain's regional economies, including slashing their branch networks in small towns and rural areas.
Outstanding lending to small firms in the northwest and northeast of England fell by 15% and 8% respectively between the end of 2014 and June last year, according to data from trade body UK Finance, compared to a 2% increase in London. The regional lending trends were first reported by the Times newspaper.
A spokesman for the Treasury confirmed officials had asked finance firms how they could play a role in boosting the regions.
"The financial services sector is vital to our economy, which is why we are working closely with firms to ensure that together we promote growth, create jobs and boost investment across the whole of the UK," the spokesman added.
The request comes ahead of finance minister Sajid Javid presenting the government's budget in March. Javid has said injecting cash into the regions will be a priority.
"We've been asked what do people in financial services need. It's very northern-specific and very northern-focussed," a banking source said. "There's a recognition from officials that it can't all be about delivering shiny new infrastructure projects."
Prime Minister Boris Johnson's Conservative Party won a big majority last month, winning scores of seats in the north of England, traditional heartlands of the opposition Labour Party.
Since then Johnson has pledged to 'level up' the regions to repay his new backers' support, although opposition politicians have expressed scepticism and blame the Conservatives' previous austerity policies for harming the regions.
Finance jobs are heavily skewed towards London, although several other cities each employ more than 30,000 people in the sector, including Glasgow and Edinburgh in Scotland, and Leeds and Manchester in northern England.
Britain has struggled for decades to find ways of fuelling regional growth outside London. The government already spends more than it generates in taxes in every part of Britain apart from London, the South-east and the East, according to Reuters analysis of public spending data.
Miles Celic, CEO of TheCityUK, a finance industry trade group, said: "Ensuring the industry's future as a national asset will require a concerted effort. This includes more regionally focused policies and initiatives."
(Reporting by Iain Withers; Editing by Peter Graff)