Press Release

Small firms can’t afford competition cop-out for banks

The Federation of Small Businesses (FSB) has called on the Competition Commission to reverse its provisional decision to lift the price controls on the small business services provided by the ‘Big Four’ banks. 

The call comes as the FSB formally responds to the Competition Commission’s consultation on the issue, which closed on the 28th of September.

Under a deal reached with the competition authorities, the main business banks (Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland Group) agreed to offer small businesses an account that pays interest on credit balances of at least 2.5 percentage points below the base rate or provide free banking or both. In addition they promised to advertise these benefits to their customers.

But the FSB’s response to the consultation reveals that of over 4,000 small business owners asked about their banking arrangements, more than 70 percent were not aware of the undertakings and more than half had not been offered either option. 

This is despite the main banks making over £2 billion per year in profits from small business customers. 

Mike Cherry, FSB Financial Affairs Chairman, said:

"It is very worrying that small businesses now face the real prospect of their banking services deteriorating further. 

"Our members feel that they have been badly let down - not only by their banks but also by the Competition Commission.

"The Competition Commission’s proposal to lift these controls flies in the face of the evidence that we have compiled.  It appears to our members as though the big boys, with their armies of lawyers and advisers, can ride roughshod over their small business customers and that the Competition Commission is going to let them.

"Small businesses cannot afford to see the banks being let off the hook.  Some welcome progress has been made but there is a long way to go yet. 

"The Competition Commission should keep the price controls in place, with a review in 2010 to reconsider their position ".