This morning’s publication of the Competition and Markets Authority’s report into the UK banking market has provoked a range of reaction from business groups.
Mike Cherry, FSB national chairman, said: “Today’s banking market does not work well for small businesses. The CMA’s recommendations will help to create a more customer-focused retail banking market by tackling some of the challenges small firms face.”
However, Cherry pointed out that the FSB was,”deeply concerned about the worrying pace of branch closures and the impact this is having on some small businesses’ ability to make informed banking decisions, particularly in rural areas”.
“Unfortunately, 2016 is already looking like a record-breaking year for closures. We are pleased the CMA has taken forward our recommendations of greater communication and support to affected small business customers, but we now want Ministers to look at further options to protect small businesses’ access to their local bank.
“We welcome the package of measures aimed at improving the Current Account Switching Service (CASS) and reassuring small businesses it is a quick, easy and safe way to switch accounts. Current levels of switching among small firms are far too low, with only four per cent of FSB members switching in the last year. We look forward to continuing to work with all organisations to raise awareness of CASS across the small business community.”
‘A missed opportunity to address fundamental issues’
The British Chambers of Commerce welcomed the focus on improving business’ access to information on products and services. However, it lamented a missed opportunity to address “the structural problems in the provision of business finance, which are holding back some of our most dynamic young firms”.
Suren Thiru, head of economics and business finance at the BCC, said: “The CMA’s final report is likely to be met with a mixed response from the business community, but there are some initiatives that will help boost competition. We are pleased, for example, that the CMA has backed Business Banking Insight (BBI), a website that enables SMEs to compare the quality of service from different finance providers. This will help stimulate more competition for business customers by enabling firms to make more informed decisions about their business banking requirements.
“However, even after this exhaustive investigation, the report pulls its punches in some areas. The report fails to address the structural problems in the provision of business finance, which are holding back some of our most dynamic young firms.
“The CMA must also tread carefully in the sharing of data by finance providers via the Open Banking programme, to ensure that businesses retain control over who has access to their data – otherwise any trust between lenders and businesses could be destroyed.
“This report must be the start, rather than the end, of the drive to improve competition and greater choice in SME banking, as our recent survey work has shown that awareness of alternative funding options is low among businesses. The government must also address some of the deep-rooted problems in the provision of finance, such as the availability of long-term patient capital. Finance providers should actively promote the initiatives endorsed by the CMA too, if we are to see real change on the ground for business banking customers.”
‘Reforms must come swiftly’
Finally, one of the banking sector’s competitors has offered a reaction, with Adam Tyler, chief executive of the National Association of Commercial Finance Brokers describing the report as a “Step in the right direction, but these measures need to be implemented swiftly. If the small business community is going to take advantage of the opportunities presented post-Brexit, the Government must drum home the message that banks aren’t the only route to funding.
“With the diversity of funding options now available to SMEs, it’s staggering that most small business owners turn to their existing bank for finance. There needs to be greater awareness and transparency of the types of funding available to small businesses, beyond the high street.
“Business owners shouldn’t see their existing business account provider as their default lender and their only source of finance. At a time when the banks are still ultra cautious about who they lend to, there are more lenders than there’s ever been in the commercial finance sector who are happy to provide finance to small businesses. It would be a positive message from the Government if they highlighted the alternative funding options that are available.
“And I hope that Margot James, in her new position as minister for small business, will support the measures recommended by the CMA, and ensure they are acted upon.”