The Competition and Markets Authority (CMA) has today published its Interim Report looking at the state of competition in retail banking. It says that there are still competition issues in the market that are causing SMEs and businesses to stick with their current banking provider. As a result customers could be receiving worse service, higher fees and innovation could be stifled.
Commenting on the findings, George Nikolaidis, Senior Economist at EEF, the manufacturers’ organisation, says: “This Interim Report has hit some right notes, but it’s doubtful many businesses will be buying into its song. Competition issues in the UK’s retail banking sector are still widespread and continue to hit businesses hard – especially SMEs - by restricting their access to finance. Although some steps in the right direction have been made – such as the Current Account Switch Service, the setting up of referrals platforms, and the emergence of new finance providers - it’s clear that still more needs to be done.
"The CMA is focussing its remedies on comparison and switching. However, given the low impact these remedies have had in other failing markets, such as energy, we shouldn't be putting all our eggs in this particular basket. These remedies are unlikely to be the magic bullet that will solve the underlying competition issues in the financial sector. Despite welcomed efforts by the banks, data from the Bank of England and SME Finance Monitor show that the needle has not moved enough. The banks are still struggling to deliver product diversity, transparency and accessibility for UK business and these issues must be addressed.
“The lack of adequate funding for business has important consequences; it constrains the ability of companies to invest and grow, and therefore the potential growth of the economy as a whole. The CMA must keep pushing hard at this – a dynamic and competitive financial sector is crucial for the health of the UK economy. It must ensure that the scale of its intervention is sufficient to ensure that we don’t come back to the same issues in a couple of years’ time.”