Banks charge more to small enterprises, says Business Moneyfacts

08 10 2005 United Kingdom

Small businesses now pay £120 a year more to their banks in current account charges since the Competition Commission published its recommendations in 2002, according to the latest survey by Business Moneyfacts.

At the time of the Competition Commission’s report, banks were accused of making excessive charges on business banking accounts. The Commission recommended they offer their customers free banking or pay them credit interest at a minimum rate of 2.5 per cent below base rate.

Nearly all banks decided to pay the interest on credit balances at this minimum level, rather than offering free banking to their customers.

Nikki Cann, editor of the independent financial guide Business Moneyfacts, says that many of the business accounts provided by ‘Big Four’ banks had been uncompetitive and not much had changed at all in the last three years.

Next year the Office of Fair Trading will launch a further investigation into the Commission’s recommendations on business banking to verify whether the changes have been implemented correctly.

From 1 October 2005 Royal Bank of Scotland has raised its charges for business banking customers using the standard business tariff and free automated transaction tariff.

The price rise means an extra 4p on every cheque paid out (to 59p) in England and Wales, and an extra 3p (to 53p) in Scotland.

Research from Alliance & Leicester has shown that small businesses spend over £136 million with their banks each year, an average of £450 per business.

Those in the South East are charged £27 million, the highest in the country, and London firms with a turnover of less than £1 million are spending £19 million a year on cash transactions, such as direct debits and standing orders.

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