Although the UK’s economic recovery appears to be well underway, access to finance remains a persistent problem for the nation’s small businesses. Bank lending to small and medium-sized enterprises has been consistently low throughout the recession, and difficulties securing credit has been repeatedly cited as a major concern for business owners.
Today the Office of Fair Trading published an update on their ongoing study of banking for SMEs, and announced that there may be sufficient concerns within the sector to launch a full-blown investigation.
Chief executive Vivienne Dews said:
“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 [the new competition body launching in April] to conclude the analysis, and decide on the next steps.”
The OFT’s study so far has indicated a lack of competition within the business banking sector, with the vast majority of business bank accounts “concentrated among a small number of major banks.” SMEs also find it difficult to differentiate between providers, a situation which may be exacerbated by the lack of new entrants to the market. Essentially, a lack of competition means there is no incentive for existing providers to change their pricing or products.
“SMEs are a vital driver of growth in the UK. They need access to banking services and loans which meet their needs.”
The decision on whether to investigate the market further will be taken in July.
Photo by Harshil Shah