Small firms banking report may introduce controls

The Government is expected this week finally to publish recommendations by the Competition Commission on how high street banks should improve the way they treat small business customers.

The Government is expected this week finally to publish recommendations by the Competition Commission on how high street banks should improve the way they treat small business customers.

Banking sources believe that Gordon Brown, the chancellor, has seized upon the issue in recent weeks as part of his campaign to make this year's Budget pro-small business.

The report has been due since before Christmas. There was speculation at the weekend that its delay was due to a tussle between the Treasury and Department of Trade and Industry about how the Government should react.

The banks have been kept in the dark about the exact contents of the Commission's report and about what the Government will implement from the recommendations.

Banks believe that, contrary to expectations last year, the recommendations will be a mixture of quite stringent and less demanding changes.

Lenders fear that the Government may introduce price controls on banks' charges and rates. They are deeply opposed to this, claiming it would increase the overall cost of business banking.

One observer said: "We think they will introduce an enterprise fund which they will expect the banks to contribute to – it won't be anything as vulgar as a windfall tax, but it will be a way to get banks to do their bit to help businesses."

Banks make far more money out of small companies than personal customers because they often impose charges for services such as cheque-clearing and levy much higher interest rates for business loans.

After examining the small business banking market for two years, the Competition Commission has concluded that a "complex monopoly" existed that may have been against the interests of customers.

Banks tried to head off major reform last week when they unveiled the first ever industry-wide code for business banking.