The Royal Bank of Scotland (RBS) and Natwest are considering charging business customers to deposit money.
The Federation of Small Businesses has called the news “deeply concerning” to SMEs. National chairman of the FSB Mike Cherry said: “When the Monetary Policy Committee meets next week to decide on interest rates, we would call on them to do everything possible to consider the implications of changing interest rates for smaller firms and the self-employed looking to maintain or grow their business.
“It is now vital that all finance providers holding deposits from small businesses do everything they can to update customers concerned about any changes to their Business Current Account (BCA) during this uncertain economic period.”
The FSB also encouraged small firms themselves to take action and consider whether it’s worth switching to a more competitive BCA.
The move has also drawn negative comment from Made Simple Group CEO Howard Graham, who claims that in an already uncertain time charging for deposits would be worrying for micro-businesses and start-ups with small margins.
“Both lenders are clearly taking precautions in the event of interest rates turning negative, but the strategy could backfire if businesses begin to vote with their feet and abandon the traditional loyalty, so common among business customers, in search of free banking,” he said.
“That said, if rates do turn negative, it is conceivable that all of the big banks will eventually go down this route. In a seemingly never-ending climate of very low interest rates, they are struggling to make money and this could be the way that banking goes.”
Indeed, for many businesses, this new measure could be the last straw according to Growth Street CEO James Sherwin Smith.
“Businesses are not receiving the financial support they need from banks. Business overdraft lending by banks is down 50% in four years. Many businesses have resorted to holding deposits to survive dips in cash flow,” he says.
“This news further highlights the need for a competitive and wholly diversified business finance sector. The Government must ensure that it supports alternative providers so that SMEs are not reliant on large banks.”