Sorry for interrupting, this website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Learn more
Accept & Close

Small Business Banking - UK - October 2016

“Small business owners show a reasonable level of interest in value-added services such as access to accountancy software but few are prepared to pay extra for these benefits. However, as efforts to drive up competition in the market intensify, we can expect to see more diversified offerings emerge that will be designed to suit a range of business needs.”
– Deborah Osguthorpe, Head of UK Financial Services Research

This report examines the following issues:

  • Uncertainty surrounding Brexit creates opportunity for business banking providers to deepen customer relationships
  • A significant proportion of small business owners rely on borrowing from friends and family

Entrepreneurship and small business ownership is deemed a vital component of the UK economy. During the recession that followed the 2008 economic crisis, policymakers introduced a number of measures to support small businesses and improve access to finance in order to encourage growth. Many of the schemes have been extended in 2016 to continue this support. The potential customer base for business banking providers continues to grow, but an influx of new challenger banks attempting to gain a share of the market poses a threat to existing incumbents.

This Report examines the UK market for small business banking, specifically small business current accounts. This includes discussion of the size of the market for small business current accounts, with a forecast for the next five years, and a look at major factors which influence the market. The Report also examines lending to small businesses.

Mintel’s exclusive consumer research covers the market in detail. This includes looking at the rates of ownership of small business bank accounts, the services that small business owners use, the length of business owners’ relationships with their banks, what other products they have, and how interested they are in new business banking services. Finally, the Report looks at small business owners’ experience of borrowing and awareness of peer-to-peer lending platforms.

What you get

What's included

Why buy from us?

Succeed

Our reports will provide you with market data, consumer research and competitive intelligence to succeed in your market.

Instant Access

Buy now and you'll have instant access to the information you need to make the right decisions.

Opportunities

Find out what's next in the markets that matter to you: where opportunities lie and what challenges you will face.

Trusted

A business Superbrand, Mintel is a source you can trust. We have been defining and refining the Market Intelligence mix since 1972.

Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Small business account numbers edge up…
              • Figure 1: Number of small business current accounts, 2011-15
            • …but account balances see strong growth
              • Figure 2: Forecast of small business account balances (current and savings accounts), 2011-21
            • Overdraft use continues to decline
              • Number of small businesses in the UK continues to rise
                • Regulatory measures aim to increase competition in the market
                  • Companies and brands
                    • Top four banking groups dominate the business banking market
                      • Figure 3: Market share for business bank accounts, June 2016
                    • Competition from new challengers
                      • The consumer
                        • Two thirds of small business owners use a business current account
                          • Customer service is most important factor when choosing a business bank account
                            • Figure 4: Important factors when choosing a business bank account, June 2016
                          • Small business owners reluctant to pay for additional services
                            • Figure 5: Interest in new business banking services, June 2016
                          • Fixed monthly tariff is most attractive payment structure for business bank accounts
                            • Figure 6: Business account payment preferences, June 2016
                          • Informal borrowing is filling a credit gap
                            • Figure 7: Small business lending experience in the last three years, June 2016
                          • What we think
                          • Issues and Insights

                            • Uncertainty surrounding Brexit creates opportunity for business banking providers to deepen customer relationships
                              • The facts
                                • The implications
                                  • A significant proportion of small business owners rely on borrowing from friends and family
                                    • The facts
                                      • The implications
                                      • The Market – What You Need to Know

                                        • Small business account numbers edge up but balances see strong growth
                                          • Overdraft use continues to decline
                                            • Regulatory measures aim to increase competition in the market
                                              • Number of small businesses in the UK continues to rise…
                                                • …driven by further increase in self-employed workers
                                                  • Small business owner confidence has dropped in 2016
                                                    • Overdraft use continues to decline
                                                    • Market Size and Forecast

                                                      • Number of small business current accounts edges up…
                                                        • Figure 8: Number of small business current accounts, by in credit and overdrawn, 2011-15
                                                      • …but the number that are overdrawn continues to fall
                                                        • Small business account balances surpass £82 billion in 2015
                                                          • Figure 9: Number and value of small business current and savings accounts, 2011-15
                                                        • Market forecast
                                                          • Account balances forecast to reach £121 billion by 2021
                                                            • Figure 10: Forecast of small business account balances (current and savings accounts), 2011-21
                                                            • Figure 11: Forecast of small business account balances (current and savings accounts), 2011-21
                                                          • Forecast methodology
                                                            • The impact of the EU referendum vote
                                                              • Small business banking account balances are susceptible to economic slowdown
                                                                • Figure 12: Alternative market scenarios for small business banking account balances post-Brexit, 2016-21
                                                                • Figure 13: Detailed scenarios for small business banking account balances post-Brexit, 2016-21
                                                              • Small business confidence dropped prior to and after the EU vote
                                                              • Small Business Lending

                                                                • Lending to small businesses increased in value in 2015
                                                                  • Figure 14: Quarterly value of gross loans advanced to small businesses, Q1 2012-Q2 2016
                                                                • Overdraft use continues to decline
                                                                  • Figure 15: Quarterly volumes of approved loans and overdraft facilities for small businesses, Q1 2012-Q2 2016
                                                              • Market Drivers

                                                                • Number of small businesses in the UK continues to rise…
                                                                  • Figure 16: Volume of UK private businesses at the start of the year, 2011-15
                                                                • …driven by further increase in self-employed workers
                                                                  • Figure 17: Number of self-employed workers in the UK, January 2011-March 2016
                                                                • SMEs have a combined turnover of £1.8 trillion
                                                                  • Figure 18: Total annual turnover of UK private businesses, 2015
                                                                • Small business owner confidence has dropped in 2016
                                                                  • Figure 19: Current financial situation of the business, March 2015 vs. June 2016
                                                              • Regulatory and Legislative Environment

                                                                  • CMA Retail Banking investigation concludes with list of new measures for banks
                                                                    • Proposed introduction of an Open API banking standard
                                                                      • The Enterprise Finance Guarantee scheme is extended until 2018
                                                                        • Bank Referral Scheme extended in 2016
                                                                          • New data sharing rules for SME lending
                                                                            • Funding for Lending Scheme extended to January 2018
                                                                              • Bank of England relaxes bank-capital requirements
                                                                                • Introduction of National Living Wage in April 2016
                                                                                  • Digital tax reporting
                                                                                    • Small business rate relief
                                                                                      • Online allowances
                                                                                        • Automatic enrolment staging deadlines approach
                                                                                          • EIB and Funding Circle invest £100 million into UK small businesses
                                                                                            • Small Business Finance Guide published
                                                                                              • Exporting is Great campaign
                                                                                              • Companies and Brands – What You Need to Know

                                                                                                • Top four banking groups dominate the business banking market
                                                                                                  • Competition from new challengers
                                                                                                    • Partnerships to support businesses
                                                                                                    • Market Share

                                                                                                      • Barclays is leading brand for business bank accounts
                                                                                                        • Figure 20: Market share for business bank accounts, June 2016
                                                                                                      • Top four banking groups dominate the business banking market
                                                                                                        • Figure 21: Market share for business bank accounts, by banking group, June 2016
                                                                                                    • Competitive Strategies

                                                                                                      • Partnerships to support businesses
                                                                                                        • Barclaycard backs Small Business Mentoring competition
                                                                                                          • Funding Circle partners with EIB
                                                                                                            • HSBC creates ‘The Elevator’ competition with the Telegraph
                                                                                                              • Competition from new challengers
                                                                                                                • P2P lending platforms offer alternative finance to small business owners
                                                                                                                • Launch Activity and Innovation

                                                                                                                  • Barclays launches cash collect service
                                                                                                                    • Lloyds Banking Group publishes 2016 SME charter with pledges to help small businesses
                                                                                                                      • Lloyds launches simple business bank account
                                                                                                                        • NatWest launches new iPad lending app
                                                                                                                          • NatWest offers payroll feature
                                                                                                                            • AIB offers discount on MyBusinessToolkit
                                                                                                                              • Barclays launches SmartBusiness big data app
                                                                                                                                • FinTech start-up Tide expected to launch in 2016
                                                                                                                                  • Business Banking Insight launches new website
                                                                                                                                    • Success for PayPal Working Capital
                                                                                                                                    • Advertising and Marketing Activity

                                                                                                                                      • Above-the-line adspend on business banking services continues to decline
                                                                                                                                        • Figure 22: Total above-the-line, online display and direct mail advertising expenditure on business banking services, 2011/12-2015/16*
                                                                                                                                      • Top 10 advertisers account for 75% of advertising expenditure
                                                                                                                                        • Figure 23: Above-the-line, direct mail and online display business banking adspend, by brand, 2013/14-2015/16
                                                                                                                                      • HSBC dominates adspend for business brand building and finance
                                                                                                                                        • Figure 24: Total above-the-line, direct mail and online display business banking adspend by major high street banks, by product category, 2015/16*
                                                                                                                                      • Expenditure is distributed across a range of media types
                                                                                                                                        • Figure 25: Total above-the-line, direct mail and online display business banking adspend, by media type, 12 months to 31 May 2016
                                                                                                                                      • Nielsen Ad Intel coverage
                                                                                                                                      • The Consumer – What You Need to Know

                                                                                                                                        • Two thirds of small business owners use a business current account
                                                                                                                                          • Majority have held business account with current provider for more than a decade
                                                                                                                                            • Dedicated personal relationship managers have limited engagement
                                                                                                                                              • Fixed monthly tariff is most attractive payment structure for business bank accounts
                                                                                                                                                • Informal borrowing is filling a credit gap
                                                                                                                                                • Business Bank Account Ownership

                                                                                                                                                  • Two thirds of small business owners use a business current account
                                                                                                                                                    • Figure 26: Type of bank account used to manage business finances, 2013-16
                                                                                                                                                • Business Account Tenure

                                                                                                                                                  • Majority have held business account with current provider for more than a decade
                                                                                                                                                    • CMA taking steps to increase switching
                                                                                                                                                      • Figure 27: Business account tenure, June 2016
                                                                                                                                                  • Use of Business Banking Services

                                                                                                                                                    • Online banking is a key service for business owners
                                                                                                                                                      • Figure 28: Use of business banking features in the last three months, March 2015 and June 2016
                                                                                                                                                    • Dedicated personal relationship managers have limited engagement
                                                                                                                                                      • Two thirds of business owners use multiple banking services
                                                                                                                                                        • Figure 29: Repertoire of types of business banking features used in the last three months, June 2016
                                                                                                                                                    • Other Business Banking Products Held

                                                                                                                                                      • Shopping around for business credit cards and savings accounts is limited
                                                                                                                                                        • Figure 30: Ownership of other business banking products, June 2016
                                                                                                                                                      • Insurance products are least central to customer loyalty
                                                                                                                                                      • Important Factors when Choosing a Business Bank Account

                                                                                                                                                        • Customer service is most important factor when choosing a business bank account
                                                                                                                                                          • Figure 31: Important factors when choosing a business bank account, June 2016
                                                                                                                                                        • Branch services valued by majority of business owners
                                                                                                                                                        • Influential Factors when Switching Business Account Provider

                                                                                                                                                          • Consistency in account charges is crucial for customer retention
                                                                                                                                                            • SME customers say they could be persuaded to switch by higher rates
                                                                                                                                                              • Figure 32: Influential factors when switching business account provider, June 2016
                                                                                                                                                          • Interest in New Business Banking Services

                                                                                                                                                            • Small business owners reluctant to pay for additional services
                                                                                                                                                              • Peer-to-peer payments system is most interesting to small business owners
                                                                                                                                                                • Mobile ATM services are least relevant for small business owners
                                                                                                                                                                  • Figure 33: Interest in new business banking services, June 2016
                                                                                                                                                              • Business Account Payment Preferences

                                                                                                                                                                • Fixed monthly tariff is most attractive payment structure for business bank accounts
                                                                                                                                                                  • Figure 34: Business account payment preferences, June 2016
                                                                                                                                                                • One-person businesses need convincing to pay for business bank account services
                                                                                                                                                                  • Figure 35: Proportion of business owners that would not consider paying for a business bank account, by number of employees, June 2016
                                                                                                                                                              • Lending Experience and Awareness of P2P Lending

                                                                                                                                                                • Nearly a third of small business owners are turned down for credit
                                                                                                                                                                  • Figure 36: Small business lending experience in the last three years, June 2016
                                                                                                                                                                • Borrowing from friends/family is greater than borrowing from other providers
                                                                                                                                                                  • Awareness and usage of P2P lending has not improved significantly in past year
                                                                                                                                                                    • Figure 37: Awareness and experience of peer-to-peer lending, March 2015 and June 2016
                                                                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                    • Abbreviations
                                                                                                                                                                      • Consumer research methodology
                                                                                                                                                                        • Panel composition
                                                                                                                                                                        • Appendix – Market Size and Forecast

                                                                                                                                                                          • Best- and worst-case scenario forecast
                                                                                                                                                                            • Figure 38: Best- and worst-case forecast for small business banking account balances, 2016-21
                                                                                                                                                                          • Forecast methodology

                                                                                                                                                                          Small Business Banking - UK - October 2016

                                                                                                                                                                          US $2,552.20 (Excl.Tax)