Banking competition update

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Earlier this week I blogged on rumours that the Labour Leader was set to take up the issue of increasing competition in banking. EEF has long argued that more diversity, choice and competition in the banking system and beyond was needed to better support growth and investment in the real economy. A lot of reviews have been dedicated to this subject and some actions are currently underway, but there is still a long way to go.

Today, we will be hearing more detail on what more a future labour government would do in this space. There appear to be some good ideas, and some that are more questionable. Here's my take:

A focus on outcomes

The first positive about Mr Miliband's plans is a clear sense of what any reforms would be seeking to deliver. In the rush to make policy announcements, the simple matter of what a good outcome looks like is often overlooked. The focus on lower costs, better service and more new entrants into the market seems like a sensible place to start.

The commitment to a National Credit Register is also positive. More information sharing about SMEs should make it easier for Banks to make better decisions and be more active in competing for SMEs' business. It is also worth noting that while this would be a Bank of England driven project, HM Treasury is currently consulting on something that could plug the gap in the interim.

New entrants, more churn

I have much bigger question marks over the rush to force branch sell offs, not least because in the current climate it is easier to pass a camel through the eye of a needle than find buyers for UK high street bank branches.

Rather we would see stronger arguments for action to remove barriers to new entrants and to encourage more switching among business and personal current account holders.

The aim and direction seems sensible, but the map may be upside down.

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Chief Economist

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