BRITAIN’S small firms have to try harder to push their banks to work for them, and be prepared to walk away if they do not, Britain’s competition chief said yesterday.
Banks have been hit by waves of complaints from small- and medium-sized enterprises (SMEs) even since before the financial crisis.
But only a tiny proportion ever leave their bank, which Competition and Markets Authority boss Alex Chisholm said gives dominant lenders little incentive to improve their behaviour.
Just 11,000 of the UK’s 3.6m SMEs have moved their main bank account since the new switching scheme came in last year, he told MPs on the Treasury Select Committee.
And most entrepreneurs use the same bank for their business as they do for their personal account – indicating they do not shop around for the best bank.
“It can be hard to make straight comparisons between banks ... it does require SMEs themselves to invest some time and effort,” Chisholm said.
“In the SME market there are very low levels of satisfaction with banks. In a healthy market you would expect to see a lot of shopping around, but we are not seeing that.”
Chisholm added that banks bear some of the blame, as does the structure of the market.
He pointed to the position in Scotland where almost half of all SMEs bank with RBS yet big banks like Barclays and HSBC barely have a toe-hold, as an example of a situation where radical action may have to be taken.
“A break up of the banks... is a remedy that could be used,” he said, noting that any decision must come after the market investigation announced last week.
Despite the wave of new banks entering the market, such as Metro Bank which is completely new and Santander which is expanding its SME offering, Chisholm said it will take years for new entrants to take market share from established banks.