‘Shop around to boost small business banking competition’, is the message from The Forum of Private Business (FPB) following the Competition Commission’s decision to lift price controls on the UK’s four largest banks.
The controls, which had been in place since 2003, were lifted last week in a bid to allow banks to compete more freely. Until then, the ruling had required banks to offer small businesses a minimum interest rate 2.5 percentage points below the base rate and/or free money transitions.
Switching banks remains fairly uncommon, despite attempts to make the market more fluid. However, the big four – HSBC, Lloyds TSB, Barclays Bank and the Royal Bank of Scotland – have been put under increasing pressure by alternative banks, such as Allied Irish, Clydesdale, HBOS and Abbey, for smaller business customers.
The FPB has called on smaller business owners to act now to continue that trend. “Our aim is to make competition work and encourage smaller businesses to negotiate with banks, shop around for the best service and change banks if they are not satisfied,” said the FPB’s policy representative Matt Goodman.
Despite the changes, some measures imposed in 2003 will remain, such as those designed to enable businesses to switch more easily between banks as well as transparent pricing of products to prevent bundling products and services.
The latter ruling has stopped banks from requiring customers to open personal accounts in order to qualify for a loan. They will also still have to make public announcements about any changes to customer charges.
© Crimson Business Ltd. 2007