The Federation of Small Businesses has recently said that the business bank account sector needs to leave off on business loan targets and instead focus on increasing competition to give smaller businesses better deals.
Financial service providers specialising in offering credit to small firms are needed, said the lobbying group, as part of a new initiative to increase the banking sector’s competition. Such actions would also result in an increase in the smallest firms successfully securing venture capital through bank lending, the FSB also said.
More than ten years ago, the Cruickshank Report found that increased competition was needed in the banking industry. However, according to figures released by the FSB, since that time the number of UK banks has declined by 20 per cent.
The lobbying group has been campaigning for quite some time in order to bring more competition to the financial services market. The banking crisis and resultant global economic slowdown has further reduced the number of choices small firms have for banking services.
The FSB came out in favour of the that the Independent Commission on Banking’s recommendations to split the retail and investment divisions of banking providers in an effort to aid smaller firms to get a fair shake. However, increased competition is needed as much as structural changes to stabilise the banking industry and thus ensure the future growth and health of the UK economy.
John Walker, national chairman of the FSB, remarked that the ‘Big Four’ banking providers hold larger market shares than they did a decade ago. This is even despite Santander, the Spanish banking giant that has been a recent newcomer to the UK sector, having a small percentage of the market.