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Competition Commission and banks deaf and dumb to small businesses
The Federation of Small Businesses (FSB) today said that the Competition Commission’s final decision to lift the temporary price controls on the UK’s four largest banks servicing SMEs is wholly misguided and needs an urgent review.
The temporary price controls that were supposed to be offered to SMEs were carved out in a deal reached with the Commission in 2002. As a result the main business banks (Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland Group) agreed to offer small businesses an account that paid interest on credit balances of at least 2.5 percentage points below the base rate or provide free banking or both. They also promised to publicise these benefits to their small business customers.
The FSB asked over 4,000 small business owners about their banking arrangements in September. The findings showed that over 70% were not aware of these undertakings at any time during the five years it had been in place. In addition more than half of small businesses had not been offered either option by their bank.
The decision to lift the controls shows that the Competition Commission has not listened to millions of UK small businesses, just as the banks had failed to communicate with them.
The main banks make over £2 billion per year in profits from small business customers.
Mike Cherry, FSB Financial Affairs Chairman, said: “We are very disappointed the Commission has reached this decision and ask that it is urgently reviewed. This has been a tumultuous year for small businesses and this is the latest in a long line of body blows.
“When the whole case is looked at it is clear to see 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.”