After a two-year wait, the Government is today expected to outline measures aimed at boosting Britain's enterprise culture by stimulating competition in the market for small business banking services.
Gordon Brown, the Chancellor, is due to give the Treasury's formal response to an 18-month inquiry into the sector by the Competition Commission, launched in March 2000 after Don Cruickshank's damning review of the UK banking industry.
Directors from the so-called Big Four banks were said to have been summoned to meet the Chancellor last night. These banks – Royal Bank of Scotland, Barclays, Lloyds TSB and HSBC – control some 85 per cent of the small business market, a situation described by the commission as a "complex monopoly" in an interim report released last year. They are accused of overcharging small businesses and offering stingy rates of in-credit interest.
Ministers have been scrutinising the final report for almost six months, fuelling speculation that the Government might come down a great deal harder on the sector than had previously been expected.
Among the Treasury's likely proposals is an enterprise fund to be paid for by the banks which would be used to help entrepreneurs rejected by venture capitalists but considered too risky by the high street banks. There are also likely to be measures to encourage greater transparency of charges and to make it easier and quicker for customers to switch their account to a rival bank.
Analysts have argued that the economic slowdown was likely to have spared the sector from draconian regulation for fear of encouraging banks to turn away small businesses that looked at risk of folding in a recession. The emergence of two new forces in small business banking – Halifax, after its merger with Bank of Scotland, and Abbey National – was also thought to have made tough regulations less likely.
However, economists have become more optimistic about the domestic economy, and Halifax's attack on the market suffered a setback last month after admissions that most of its branches could not offer cash handling services to window cleaners and taxi drivers.Reuse content