Leading finance guide, Business Moneyfacts, has published the results of its latest current account survey and found that, since the Competition Commission recommendations designed to make business banking less expensive were published three years ago, most business accounts from the ‘big four’ now cost small businesses more every month.
Business Moneyfacts editor, Nikki Cann, explained: “When we published our first tables three years ago, we looked at three different business types and listed the top six cheapest accounts for each. Of these 18 cheapest accounts eight were from the ‘big four’. In our latest survey, three years since the Competition Commission rules were supposed to make business banking cheaper for big four customers, only three of the top 18 were big four accounts.
“We also looked at the accounts that did well three years ago to see how they had performed this year. Many of the cheaper, smaller business accounts have been withdrawn and replaced with alternatives and some transactions have become more expensive, whilst others have become cheaper. On average, business banking from the big four works out more expensive by about £10 every month. And our examples are only small businesses with a limited amount of transactions. For a real SME the figure could be much higher.
“The only exceptions have been Lloyds TSB which has made no increases to its tariff but reduced a couple of charges on its Business Extra Account, and the Royal Bank of Scotland which made its Business Direct Account free to use.
“The Office of Fair Trading will soon be looking at how successful the Competition Commission’s rules were in reducing business banking costs for SMEs. The results of this survey suggest the answer to that question is, not very.”
In 2002 The Competition Commission found that the ‘big four’ banks were making their customers pay excessive charges and recommended that they should either offer their customers free banking or pay credit interest at a minimum rate of 2.5 per cent below base rate.
Many of the big banks chose to pay interest on credit balances at the minimum recommended level of 2.5 per cent below base rate. As interest rates are at a forty-year low this only equates to 2 per cent. A business would need to keep thousands on an account before it could offset any charges.
The Office of Fair Trading is due to review the success of these recommendations three years after the banks implemented the changes.
