Barclays hits small firms with banking charges

By on January 22, 2014

Barclays has been sent to the naughty step, as hundreds of thousands of businesses being switched to new accounts are hit with higher charges.

Is there ever a good week in banking? No sooner has the dust settled on politicians’ squawking about Royal Bank of Scotland’s (RBS) bonuses and Ed Miliband’s call to break up high street banks, than Barclays decides to risk the wrath of the masses over small business banking.

Barclays, the second largest provider of banking to small businesses after RBS, is forcing firms to change their accounts, hitting 800 000 with new charges. Small business banking has been a hot political topic throughout the recession, with politicians queuing up to bash banks over their lack of lending.

Barclays is planning to switch business customers over to a small business account launched last May. Around a third of those companies, having previously banked for free, will now face higher charges. About 60 percent will pay the same or less, Barclays’ head of business banking Sue Hayes told the Mail on Sunday.

Around 30 000 of the companies, whose monthly banking fees will go up by more than R449, will be protected by a cap of 0.5 percent of the money leaving their account each month. However, businesses where a R449 rise is less than 20 percent of their debit turnover won’t get any cap.

The companies facing fees of over R449 (or more than 20 percent of outgoing money) will have the changes phased in over a couple of years to prevent financial problems, Hayes told the Mail. Loyal customers – long-standing and/or high paying – will get some fee refunds.

“I want to send a message to our small and medium-sized businesses. Under the next Labour government, instead of you serving the banks, the banks will serve you,” Labour leader Ed Miliband crowed last week, when calling for Britain’s biggest banks to be broken up. Except – as with everything in a capitalist economy – not even serving comes for free.

Meanwhile, Metro Bank has raised almost R7 billion in a private share sale, and is now delaying floating on the stock market until 2016. The company has 24 ‘stores’ (not branches – they are way too cool for that), and plans to open a further 12 this year, although it is yet to break even since it opened in 2010.

If Barclays’ small business customers struggle with the new charges, a company like Metro Bank, which prides itself on friendly customer service, could nab some of their clients. Furthermore, if Metro Bank keeps on growing (and even makes a profit), Ed Miliband’s call for more high street banking competition could look even more redundant.

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