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Angry retailers call for banking review

Retailers have backed the Competition and Markets Authority’s proposal to launch an investigation into the way UK banks treat small businesses, claiming the current system is “onesided” and holds them “to ransom”.

The CMA, which replaced the Competition Commission in April, said practices needed to be investigated after a study it carried out with the Financial Conduct Authority found only 4% of small and medium-sized enterprises switch banks each year, while just 13% trust their bank to act in their best interests and only a quarter feel supported by their bank.

It identified “significant competition concerns”, as the market is dominated by the four largest providers - Barclays, HSBC, Lloyds and RBS, which provide more than 85% of business current accounts and 90% of business loans.

CMA chief executive Alex Chisholm said: “Our provisional view is that a full market investigation by an independent, expert CMA group is necessary to look at this market in detail and identify appropriate measures if competition concerns are found.”

Alexander Jackman, head of policy at the Forum of Private Business, said more transparency was needed to make it easier for businesses to compare banks’ products.

John Alston, managing director of five-store womenswear retailer Collectif, added: “They won’t lend us more than our owner has in property value. They should be able to take more of an investor’s point of view. Bank managers should analyse the value and potential of the company, without holding small businesses to ransom.”

James Jones, owner of Doncaster independent Robinsons of Bawtry, said his business had bypassed bank lending altogether. Rather than take the risk of giving “one-sided” guarantees to banks, “working with credit from brands means both parties can ultimately benefit”, he claimed.

The CMA has launched a consultation into whether an investigation into SME banking should go ahead. The consultation closes on September 17.

It comes as allegations about RBS’s dealings with small businesses resurfaced this week, after it emerged deputy chief executive Chris Sullivan deliberately misled MPs during a hearing about its treatment of SMEs.

Sullivan gave evidence to the Treasury Select Committee last month after government adviser Lawrence Tomlinson claimed the bank’s global restructuring group (GRG) was pushing firms, including retailers such as Peacocks, into administration to seize their assets and sell them at a profit.

Sullivan had previously denied this, though it was reiterated in a second report by former Bank of England governor Sir Andrew Large.

This week he accepted “it is indeed the case that the financial performance of GRG was monitored”.

Treasury Select Committee chairman Andrew Tyrie MP called Sullivan “wilfully obtuse” and plans to look into the matter after the summer.

  • PayPal announced this week (July 23) that it will launch PayPal Working Capital this autumn, providing interest-free loans to smaller existing retail clients, secured against their future sales made through the payment firm.

 

Readers' comments (1)

  • Of course it's one sided. The banks have had their fingers burnt too many times from the clothing sector, which is high risk.

    For all those moaners I would ask this - If you were a bank, given the nature of the clothing trade, it's severe lack of profitability, the poor running and the people involved in it, would you lend them the money?

    Exactly.

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