http://blogs.birminghampost.co.uk/business/

The C word in Banking, it's Competition we need

By Richard Halstead on Feb 6, 13 04:59 PM in Economics

We now have the long awaited plans for reforming the UK banking sector in particular safeguards to try to make it harder for the government to end up on the hook for a big bank and all its risky investment business going down bust.

Unfortunately, once again, increasing competition which businesses in North Wales tell me is the real issue feels like a footnote to the real action on banking reform. But it shouldn't be. A lack of options both on the High Street and beyond is a major supply side factor holding back the flow of lending to the real economy and in particular the small business sector.

Only one in the past sixteen quarters has seen net lending to UK businesses positive whilst the four main business banks hold 85% of business current accounts in the UK. Our own survey results show one third of manufacturers saying viable investments are going unfunded because they have difficulty accessing the credit they need. Organic change is going to take decades to have an overall impact, even if these smaller banks were adding a branch a week.

There have been multiple reviews of the state of competition in banking in the UK over the past 15 years - but definitive action still seems to be lacking. Indeed with respect to business current accounts, market concentration appears to have increased marginally in the last ten years. We think full account number portability should be the aim. Customers are understandably cautious - perhaps moreso than in other sectors - about switching when essential payments depend on systems that have failed too often in the past.

Some in the financial sector might say that account number portability is too hard or that it's not done anywhere else. That seems a strange attitude indeed for a sector that has gone to extraordinary lengths to contort itself in increasingly byzantine financial innovation in search of new customers. Surely, with the right motivation, full account number portability could be cracked by the City.

There may also be a case for considering now whether at least the business current account market should be referred to the Competition Commission. We're not saying definitively that a referral should be made - but rather that the government should consider whether the sum of all its actions is going to add to meaningful enough change or whether a referral is needed.

Business authors

David Bailey

David Bailey - Professor of Industrial Strategy at the Aston Business School, Birmingham
My postings | David Bailey's RSS feed My feed

Stuart Pemble

Stuart Pemble - Construction Lawyer, Mills & Reeve
My postings | Stuart Pemble's RSS feed My feed

John Clancy

John Clancy - Birmingham City Councillor and director of mediafuturesalert.com and justliteracy.com
My postings | John Clancy's RSS feed My feed

John Samuels

John Samuels - Professor of Business Finance, Birmingham Business School
My postings | John Samuels's RSS feed My feed

Chris Tomlinson

Chris Tomlinson - Chris Tomlinson is the founder of social media and online PR agency Friend (frienddigital.com)
My postings | Chris Tomlinson's RSS feed My feed

Andrew Whitehead

Andrew Whitehead - Senior partner at law firm SGH Martineau, leading the firm's Energy & Climate Change practice.
My postings | Andrew Whitehead's RSS feed My feed

Keith Gabriel

Keith Gabriel - A Birmingham-based PR Account Manager
My postings | Keith Gabriel's RSS feed My feed

Beverley Nielsen

Beverley Nielsen - Lecturer, Design Management, at the Birmingham Institute of Art & Design, BCU
My postings  | Beverley Nielsen'a RSS feed My feed

Mike Loftus

Mike Loftus - Director of News from the Future Ltd. Writing on the trials of setting up your own business
My postings | Mike Loftus's RSS feed My feed

Richard Halstead

Richard Halstead - Midlands region director for EEF, the manufacturers organisation.
My postings | Richard Halstead's RSS feed My feed

Karl Edge

Karl Edge - partner at KPMG in Birmingham, specialising in automotive, manufacturing and house building sectors.
My postings | Karl Edge's RSS feed My feed

Peter Owen

Peter Owen - Managing director for construction firm Willmott Dixon Midlands.
My postings | Peter Owen's RSS feed My feed

Dr Steven McCabe

Dr Steven McCabe - director of research degrees for Birmingham City Business School.
My postings | Dr Steven McCabe's RSS feed My feed

Francis Greene

Francis Greene - Professor of Small Business and Entrepreneurship, at the University of Birmingham.
My postings

Alan Gilmour

Alan Gilmour - Director at Cogent Elliott, experienced in marketing, brand development and customer relationship management.
My postings

Paul Noon

Paul Noon - Paul Noon, OBE, West Midlands International Trade Director at UK Trade & Investment.
My postings

Latest Birmingham Post Lifestyle blog

Lifestyle Blog

Birmingham Post staff and guest bloggers from the midlands give you the lowdown on what's happening in your region and some musings on culture in the UK and beyond.

Keep up to date

Sponsored Links