Fury from small businesses as price controls lifted on big four

Small businesses let out a yell of protest after Britain's big four banks had price controls lifted on accounts for small and medium-sized companies (SMEs).

The Competition Commission said it would remove the controls on HSBC, Royal Bank of Scotland, Barclays and Lloyds TSB because the market had become more competitive since the measures were introduced in 2003.

But the Federation of Small Businesses said the banks were not complying with agreements they made when the price controls came in. Mike Cherry, the FSB's financial affairs chairman, said: "We are utterly bewildered by the Competition Commission's provisional decision in this case. It flies in the face of all the evidence we have given and completely contradicts the experience of thousands of our members."

The FSB said its survey of more than 4,000 businesses found that more than 70 per cent did not know about the banks' agreements to give them a better deal, and more than half had not been offered either of the options on pricing. The FSB said it would try to get the commission to change its mind during a consultation that ends on 28 September.

As well as the pricing measures for the big four, the commission had imposed "behavioural" measures on all the UK's SME banks, including making it easier to switch account, making pricing clearer and stopping them bundling up different products and services. The commission said it was concerned that switching remained low and that SMEs were not aware of the banks' undertakings. It said the Office of Fair Trading should work with the banks to publicise the lenders' responsibilities.

The Competition Commission imposed the controls because the big four dominated the market with a 92 per cent share in 2000. Their share fell to 85 per cent by last year, with challengers such as HBOS, Alliance & Leicester and Abbey increasing their share to 9 per cent from 3 per cent.

Challengers to the big four had already started paying interest before the controls came in and had said their imposition reduced their ability to attract customers. HBOS said it was pleased with the decision and that it would now have more of a competitive advantage to get customers to switch.

Deloitte, the accountancy firm, said that with the market now more competitive the lifting of the controls could be good news for SMEs in the long run. "By relaxing the price controls now, banks are being given the flexibility to compete on pricing as well as on products and services," said Neil Tomlinson, Deloitte's head of business-to-business financial services consulting.

The decision is a rare regulatory respite for the big banks, which have faced a barrage of intervention since the Cruickshank report said in 2000 that the industry was uncompetitive. The banks are locked in a tussle with the Office of Fair Trading over overdraft and credit card charges.