As the UK’s financial industry goes through its blackest period in years, it might seem to be a strange time to be reviewing your business banking.

However, news of collapsing share prices and mass withdrawals has also had the effect of purging from memory a very relevant ruling by the Competition Commission. The body has lifted price controls on the charges that the ‘Big Four’ can impose on businesses, giving them free reign over how much they can hit you for. Business lobby groups, such as the Federation of Small Businesses (FSB), were “utterly bewildered” by the decision. Whereas The British Banking Association (BBA) said that it was a clear sign that competition was working. The banks are indeed competing hard to gain your custom, but the adage that you are more likely to leave your wife than your bank still appears to be true. Just over 4% of businesses move their accounts each year. So isn’t it time you considered it too?

MAKING THE SWITCH

All the major banks offer incentives to move your current account to them, and the offer of free banking and services appear to be their favourite carrots:

  • HSBC offers six months free banking to switchers and 12 months for companies with turnovers between £500,000 and £1m, as well as a fee-free credit card for 12 months.
  • Lloyds TSB also offers six months free banking and an interest free overdraft of up to £5,000 for the first three months
  • NatWest offers three months free banking for switchers 
  • Bank of Scotland offers 12 months free banking for firms with a turnover of less than a £1m. For those with revenues above that, it offers to beat ‘any printed rate’ of interest offered by the main banks for the first year.
  • Alliance & Leicester offers a free current account for all fi rms with turnovers less than £1m.

Barclays offers free tax and legal advice 24 hours a day and will also arrange a face-to-face consultation with a solicitor. The above offers may look tempting, but there’s an inertia stopping you from switching. It’s a hassle and if this means stalling your business you aren’t going to fancy it, even if it would get you a better deal. The banks appear to have acknowledged this and are offering to handle much of the switching process for you. The Royal Bank of Scotland offers a timetabled approach, which it says can be completed in two working days. Barclays similarly quotes 48 hours provided your turnover is less than £25m. Meanwhile, Lloyds TSB publishes its success rate in switching businesses and says it has completed more than 99% in three days.

Now that banks are offering to do all the work for you, switching doesn’t take that long anymore. So perhaps you should be a bit more demanding of your bank now that they can’t take your custom for granted. The Competition Commission is confident the market is working, so why not give it a try?

RELATIONSHIP MANAGEMENT

Banks all pride themselves on their ability to look after you. Dedicated client or relationship managers and meetings “as regular as you want them” are the norm. However, you should also consider how banks want to work in order to get the most out of them. Familiarising yourself with the main types of fi nance available (see above) is a good start. Relationship managers are unlikely to have an in-depth knowledge of all business services and are primarily there to act as your fi rst point of contact and advise on your account. If you enter the bank knowing what you want, you have a better chance of leaving with it, especially if you give plenty of notice. Otherwise, they move a little slower than you would like. Banks are risk averse and want to know as much as possible about you.

“A no-surprises culture is great,” says Stuart Yuill, relationship manager at the Bank of Scotland. “A key question we will always ask is: ‘What are your plans for the business?’.” Yuill says he regards his relationship with his clients as a “partnership” and seeks to really understand their business.

Socialising with your banker is still something which happens and can be a good idea as they may have a lot of experience in your sector. Your manager is a good potential source of contacts and there’s no harm in picking their brains, even if it costs you lunch. Also, although banking is increasingly automated, it is still a person that has to make the decisions and you’re more likely to get a favourable one if you’ve spent time with the one that is making it.

Charm offensives aside, the better your business is doing the greater the infl uence you are going to have in dealing with your manager. Paul McCormick, managing director of engineering consultancy GCA, joined four years ago when the company had cashfl ow problems and brought it out of the red. The company has remained with NatWest throughout its trading history and McCormick meets his bank once a year. However, since he turned the company around, he feels he’s in a much stronger negotiating position.

“The key is to try not to be reliant on them. If you have a permanent overdraft, you are at their beck and call and it is very hard to switch,” he says. “At our annual meeting we ask them to reduce the charges and really they have to.”

The banks are keen to point out that it isn’t just the charges you should be concerned with, but also the level of customer care. This might sound a bit glib and it is an argument that’s clearly in their interest, but a lack of relationship might leave you feeling a bit isolated. Jennifer Irvine, founder of £1mturnover food business the Pure Package, has been with Abbey National since she began trading fi ve years ago. She incurs no charges at all, but feels that no one at the bank even knows who she is. “I suppose you get what you pay for, and I pay nothing,” says Irvine who has not even got an overdraft facility.

“There’s no personal service at all, and this is important as there are products I could be using.” However, she says the prospect of switching is galling and is concerned she might lose important data. She has managed to handle her finances to date by using online banking, which is becoming very popular.