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FSB urges intervention in small business bank accounts

26. Dec, 2011 Categories: Business Bank Account Updates, News by Business Bank Account 0 Comments

As the final report of the ICB is due soon, the Federation of Small Businesses has called for government intervention into the small business bank account industry, stating that the market needs more competition.

The FSB has been stating for several months that an increase in competition in the market for business loans to smaller firms is integral for building a secure banking marketplace.  The organisation recently released research to back up its claims, finding that nearly nine out of every ten small businesses feel that reform is needed in the banking system, with seven out of ten believing that increasing competition would help facilitate this goal.

85 per cent of the small business lending market sector is dominated by five high street finance providers.  If competition is introduced into this market, the cost of securing working capital for smaller businesses will decrease, according to the lobbying group, which also added that doing so would make the sector more stable as well.

Additional lenders are needed in order to revitalise the small business lending market in the UK, as doing so would not only have a cushioning effect if a major high street retailer suffers distress but would also lead to new product innovation as well, added the FSB.  The critical nature of this cannot be overstated, said the Federation, as the banking industry in the UK could be seriously impacted by the ongoing European economic crisis.

John Walker, national chairman of the FSB, remarked that he had hopes the Chancellor will demonstrate the understanding that stability and cooperation go together hand in hand.  An increased number of lending providers, especially those who specialise in providing finance to small businesses, could aid in increasing product innovation and develop improvements in the relationship with smaller companies, Mr Walker also said, commenting that the entire banking industry’s systemic risk could be reduced overall as well.

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Tags: business loans, General Small Business, working capital