Small Talk: It's time SMEs got a better deal on banks competition

The financial crisis may have sent economic growth into a tailspin, but it has been a major boon for one cottage industry: there is no end in sight to the inquiries and investigations into banking that the crisis has prompted. Still, the latest of these inquiries, an Office of Fair Trading investigation into competition in banking for small and medium-sized enterprises, represents an important opportunity.

What the OFT is likely to find in the inquiry, announced last week following the final report of the Parliamentary Commission on Banking Standards, is that there is very little such competition and that has had a damaging effect on the prospects of many SMEs.

The good news, as Small Talk has reported regularly, is that new banks are attempting to shake up the market place. And the launch of the likes of Aldermore, Shawbrook, Metro Bank and others is certainly to be welcomed. Starting from scratch, however, as these banks have, it will take many years before they represent credible competition to the high street giants.

The Independent Commission on Banking, the first set-piece inquiry into banking that took place following the financial crisis, envisaged a major sell-off of branches by Lloyds Banking Group as the best hope for quickly establishing a new challenger bank. Yet three years on, that sell-off has still to be completed – the collapse this year of the Co-op's deal to buy 632 branches from Lloyds prolongs the wait.

The result is that banking in general and SME banking in particular remains a dysfunctional market. In parts of the country there is almost no competition at all.

The results are exactly as you would expect. In the absence of any competitive spur to improve their products and services, the banks, for the most part, have opted not to do so. Charges for SME banking services remain far too high and banks pay little or no interest to small businesses when their accounts are in credit. At the extreme, you get mis-selling scandals such as the interest rate swap crisis, which the banks are now being forced to unpick.

As for lending, the banks should be free to reduce risk if they see fit – most people agree credit was too easy prior to the crisis – and some SMEs will not get credit as a result. The killer statistic, however, concerns the number of SME applications for borrowing that are wrongly rejected by the banks. The Business Finance Taskforce, set up by the banking industry, operates an appeals system for small businesses that think they have been unfairly denied access to credit. It is upholding around 40 per cent of SMEs' complaints.

There are signs of improvement. In September, the Payments Council will introduce rules designed to make it much easier to switch bank accounts. Importantly, these rules will cover the accounts of millions of small businesses – any firm with an annual turnover of less than €2m (£1.7m) and fewer than 10 employees. However, there's not much point in making it easier for small businesses to switch bank accounts unless it's possible for them to get a tangibly better deal by doing so. And in the absence of more robust competition between banks, it is not clear to many SMEs that they will get one.

Moreover, too many businesses still believe that by moving bank, they'll be giving up a working relationship built up over many years. In practice, now banks manage their businesses using centralised and automated controls and processes, this relationship is almost certainly illusory.

In the personal current account market, tougher regulation and relentless effort by groups such as Which? has led to a genuine improvement in the past 10 years. SMEs deserve something similar – if the OFT's inquiry helps them get it, so much the better.

Golden Saint in a £5m IPO to target Sierra Leone

Western mining companies continue to target Sierra Leone, where natural resources exploration has become increasingly important to the developing economy. The latest is Golden Saint Resources, which will today announce an IPO on the alternative investment market that it hopes will raise up to £5m, primarily from institutional investors.

Golden Saint needs the cash to fund the exploration and development of three separate areas in Sierra Leone where it has the rights to look for gold and diamond prospects. The company has already done some preliminary work mapping its assets and believes it can identify deposits that will produce cash flows very quickly. That cash would then be used to bankroll the business as it looks for further and larger gold and diamond deposits in the area.

A number of other international explorers are operating in Sierra Leone, including Aim-listed Amara Mining, and the industry has benefited from the country's relatively stable political environment.

Still, risks remain, with the government increasingly keen to make sure Sierra Leone itself also realises value from its resources.

Edmonds firm set for African spree

Also raising money for African adventures is Africa Oilfield Logistics, which will join the Alternative Investment Market today on completion of a £4.25m placing. The money takes the total funds the company has raised since its launch last December to £6.5m. The cash will be used to buy up businesses focused on oilfield services in sub-Saharan Africa.

The business is run by Phil Edmonds and Andrew Groves, who are well-known in the sector. They already manage Africa-focused, Aim-listed businesses Agriterra, Sable Mining and African Potash. Mr Edmonds is also remembered as a former England cricketer. Given that this new venture will stand or fall on its ability to find the right deals, the experience and contacts of Mr Edmonds and Mr Groves will be crucial. The company says it has already begun looking at several prospects.

Small Business-Woman of the Week: Beatrice Bartlay, founder and managing director, 2B Interface

I launched the business in February 2005:we're a recruitment agency specialising in staff in the shopfitting industry, so it is very niche. I'd been running a public relations agency, but I wanted to do something bigger and more challenging.

I stumbled across the idea accidentally, and I didn't know anything about HR or retail. A friend asked me to help him find a joiner. I made a lot of calls and someone called back and asked if I was running some kind of recruitment agency. My entrepreneurial spirit kicked in, and I saw there was a gap to exploit.

I agreed to meet with that first potential client seven days later. They were the busiest seven days of my life, talking to everyone I possibly could. But by the time we met, I was able to offer a recruitment service. It took me six months to get the company fully up and running. It hasn't always been easy. During the recession, of course we were worried.

Two years ago, it occurred to me that franchising would be a good way to continue growing. We hope to announce our first franchisees next month. We turn over £4m a year and have three offices, and we've won lots of awards. It's all been worth it.

PROMOTED VIDEO
Extras
indybest
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
Arts and Entertainment
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
News
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Poet’s corner: Philip Larkin at the venetian window of his home in 1958
booksOr caring, playful man who lived for others? A new book has the answer
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
art
News
Matthew McConaughey and his son Levi at the game between the Boston Red Sox and the Houston Astros at Fenway Park on August 17, 2014 in Boston, Massachusetts.
advertisingOscar-winner’s Lincoln deal is latest in a lucrative ad production line
Life and Style
Pick of the bunch: Sudi Pigott puts together roasted tomatoes with peppers, aubergines and Labneh cheese for a tomato-inspired vegetarian main dish
food + drink
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
film
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Service Desk Analyst- (Desktop Support, Help desk)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Junior Quant Analyst (Machine Learning, SQL, Brokerage)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

UNIX Application Support Analyst- Support, UNIX, London

£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape