The Federation of Small Businesses (FSB) has said that the Competition Commission’s final decision to lift the temporary price controls on the UK’s four largest banks servicing SMEs is wholly misguided and needs an urgent review.

The temporary price controls that were supposed to be offered to SMEs were carved out in a deal reached with the Commission in 2002.

As a result the main business banks - Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland Group - agreed to offer small businesses an account that paid interest on credit balances of at least 2.5 percentage points below the base rate or provide free banking or both.

They also promised to publicise these benefits to their small business customers.

Not aware 

The FSB asked over 4,000 small business owners about their banking arrangements in September.

The findings showed that over 70 per cent were not aware of these undertakings at any time during the five years it had been in place. In addition more than half of small businesses had not been offered either option by their bank.

The decision to lift the controls shows that the Competition Commission has not listened to millions of UK small businesses, just as the banks had failed to communicate with them.

The FSB said the main banks made over £2 billion per year in profits from small business customers.

Tumultuous year for small businesses 

Mike Cherry, FSB financial affairs chairman, expressed disappointment that the Commission had reached this decision and asked that it would be urgently reviewed.

"This has been a tumultuous year for small businesses and this is the latest in a long line of body blows," Cherry added.

"When the whole case is looked at it is clear to see that the Commission has been deaf to the actual experiences of small businesses, whilst the big banks have been dumb in offering those options that had been agreed. To take this away now is a travesty," he concluded.

Related articles

• CC lifts SME bank price controls but keeps other measures
• Watchdog refuses to name and shame financial services firms
• New cheque payment rules to provide certainty
• Faster banking delayed by six months

Related links

• Federation of Small Businesses
• Competition Commission
• OFT report on SME banking
• Office for Fair Trading
• British Bankers' Association

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