CMA business banking investigation extended until August
An investigation into the small business banking sector by the UK's Competition and Markets Authority (CMA) has been extended until mid-August.
The investigation into retail banking incorporates both SME and individual consumer use and was originally scheduled to conclude in May. It is looking at elements including a perceived lack of competition and the ease with which businesses and individuals are able to switch providers and accounts.
The CMA said that an extension was required due to the scope and complexity of the investigation. It wanted to gather more industry responses to the investigation’s preliminary findings, as well as considering the contents and scope of a possible package of remedies.
The preliminary findings suggest that there is a lack of diversity and competition within the sector. The ‘Big 4’ high street banks of Lloyds Banking Group, Royal Bank of Scotland Group, Barclays and HSBC dominate UK retail and business banking, with 80% of business accounts in the UK being held with these banks.
Additionally, the owners of more than half of all start-ups looking for an SME account choose the bank with which they have a personal current account. More than 90% retain their business current account when the initial free banking period comes to an end and around 90% go first to their business current account provider when they are looking for business loans.
The British Business Bank’s Small Business Finance Markets Report 2015/16 has shown that bank lending to smaller businesses has increased of late. The alternative funding market also grew by 75% to a total value of £1.26 billion over the course of 2015.
Despite this, many SMEs still struggle to access finance and the Bank of England has said poor access to credit was one of the reasons why British productivity remained weak for years since the financial crash. For individual businesses, a lack of access to affordable funding can seriously hamper growth and investment and in some cases could lead to serious difficulties or even the prospect of facing company insolvency if they are unable to develop suitable growth models.
By Phil Smith