The headlines looked promising:
The Bank of England’s latest report on lending to businesses showed a significant turnaround with lending to businesses increasing £3.4bn in May compared to an average monthly decrease of £2.1bn since December.
Below those headlines though the flow, and positivity dissipated with SMEs seeing another fall in the number of loans written, this time a drop of £200m.
Indeed the proportion of SMEs who were not accessing the financial markets and instead focusing on reducing debt had hit 82% in Q1 2014.
Against that backdrop and the long-standing threats of action, the Competition and Markets Authority has been announced an investigation into the financial markets.
In a parallel with the energy market CMA investigation, the banking industry has reacted with indignation and apocalyptic warnings.
The probe will focus on lending to small businesses with a further focus on both business and personal current accounts.
The CMA and Financial Conduct Authority, found, in their initial investigations that:
“Essential parts of the UK retail banking sector lack effective competition and do not meet the needs of personal consumers or small and medium-sized enterprises (SMEs)”.
And in a parallel with the energy industry that:
Barriers to entry for newer and smaller banks “remain significant”, and that there was “very little movement in the market share of the largest banks” and as with energy suppliers most customers saw very little difference between each of the big players.
Even the timescale for the investigation and potential outcomes will reflect that of the energy industry with an initial estimate of 18 months with a late 2015, early 2016 publication date and the threat of break-up a very real option.
Whereas in the energy industry it is the Big 6 suppliers who dominate, just the Big 4 banks dominate the banking industry and with just 25% of businesses believing they are supported by their bank, as in the energy industry some sort of change is clearly overdue.
For their part, the banks themselves have cautioned that any attempt to reform their ways would end up in a negative impact on customers – the end of free banking.
One banking insider told the FT:
“If the CMA does what it says it is going to do . . . it is hard to see how you have ‘free in credit’ banking at the end of it”
And then as if to underline the threat, the insider said:
“[Paid banking] improves transparency, removes barriers to entry and encourages customers to shop around as they would have a price point to compare.”
Clearly the Sam Laidlaw school of PR management has a lot of willing students in the banking industry.
For SMEs Winter 2015/16 could herald a revolution in energy and banking markets, then again, given the polarised positions and defences being built by both industries, it would be a brave business to bet on change coming to them and not being something they have to drive themselves.