The OFT has published an update on its current enquiry into business banking, warning further action unless banks change their behaviour. 

The report stated that SMEs find it hard to differentiate between providers and there is a low awareness of alternative sources of finance.

The enquiry found that banks sometimes required customers to open an account as a condition of receiving a loan and there is evidence that this ‘bundling’ practice still occurs.

Vivienne Dews, chief executive of the OFT, said: “SMEs are a vital driver of growth in the UK. They need access to banking services and loans which meet their needs.

“Our work suggests there may be competition concerns in this sector. We will continue our work over the coming weeks and hand this on to the CMA to conclude the analysis, and decide on the next steps.

“We have also taken action in two areas to safeguard and improve competition, including from innovative providers. We welcome the co-operation we have already seen from the industry and the steps that are now being taken.

“However, further action will follow if concerns in these areas are not addressed.”

John Allan, national chairman, Federation of Small Businesses, said: “The FSB has worked with the Office of Fair Trading to show how levels of concentration in this sector along with major barriers to entry are making for an ill-functioning marketplace.  As has been alluded to in the report, some of the concerns were highlighted over a decade ago. We agree with the interim analysis which shows barriers still remain to switching, especially where firms have loans, and opaque pricing for current accounts for small firms. 

“At the end of the process the FSB wants to see the actions it has highlighted in its Budget submission that will correct the market and make it work for small businesses. We welcome this interim report and news that the Competition and Market’s Authority will carry this work forward.”

Image Source

Share this story