Competition Commission and banks 'deaf' to small businesses

21 12 2007 United Kingdom

The Federation of Small Businesses said that the Competition Commission’s decision to lift the temporary price controls on the UK’s four largest banks servicing smaller enterprises is wholly misguided and needs an urgent review.

In a deal reached with the Competition Commission in 2002, the banks were obliged to observe a temporary pricing regime for small and medium-size businesses.

As a result Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland Group (including Nat West) agreed to provide free banking for small businesses or to offer an account that paid interest on credit balances of at least 2.5 percentage points below the base rate.

In September this year, the FSB asked over 4,000 owners of small business about their banking arrangements. The survey showed that over 70 per cent were not aware of these undertakings at any time during the five years it had been in place.

The banks also promised to publicise these benefits to their small business customers. But the FSB’s survey showed that more than half of small businesses had not been offered either option by their bank.

The recent decision to lift the controls shows that the Competition Commission has not listened to millions of UK small businesses, says the FSB, just as the banks had failed to communicate with them.

FSB Financial Affairs Chairman Mike Cherry said, "We are very disappointed the Commission has reached this decision and ask that it is urgently reviewed.

"When the whole case is looked at, it is clear that the Commission has been deaf to the actual experiences of small businesses, whilst the big banks have been dumb in offering those options that had been agreed. To take this away now is a travesty."

The four main banks control 85 per cent of all small business accounts and make over £2 billion per year in profits from small business customers.

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