Small firms disadvantaged by banking stranglehold

According to the Federation of Small Businesses (FSB), small firms are suffering as a result of Lloyds Banking Group and RBS’s stranglehold on the business banking market.

The group says that the dominant position of the two banks meant that small and medium sized businesses may be effectively forced to bank with them.

After continued struggles from small businesses to get credit on affordable terms, the FSB warns that the lack of competition could mean these problems become the norm.

“The only choice which too many small firms feel they have with banking is ‘take it or leave it’,” says Colin Borland, public affairs manager for the FSB in Scotland.

The FSB believes the Government should encourage smaller players to compete in business banking to ensure that minnows can benefit from a “real choice”.

It is also calling for the introduction of alternative sources of finance and the entry into the market of new players. This might be achieved through the creation of a “Post Bank” via the Post Office network.

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