UK retail banks are not meeting the needs of SMEs, and an in-depth investigation into the market is required, according to a study by regulators.
The study, undertaken jointly by the Financial Conduct Authority (FCA) and the Competition and Markets Authority (CMA), found that 13% of small businesses trust their bank to act in their best interests and 25% feel supported by their lender.
The report highlights the lack of effective competition in the business lending market, with more than 85% of business current accounts and 90% of business loans held by the UK’s four major banks. In this context, the CMA has provisionally recommended an investigation into banking services for SMEs in the UK and has launched a consultation on that possibility.
The authority has recommended a separate review of personal consumer accounts.
“Whilst there have been some recent improvements, for small businesses, competition in the banking system isn’t working as it should,” Christopher Woolard, director of policy, risk, and research at the FCA, said in a news release. “The market is still concentrated, switching between providers is low, and those running small businesses don’t believe there is much differentiation in terms of the products on offer and the standard of service they receive.
“Small businesses are the lifeblood of the British economy, employing more than half of those in work in the private sector, which is why it is vital that they have access to a banking market that works for them,” he continued.
—Samantha White (swhite@aicpa.org) is a CGMA Magazine senior editor.