Lloyds Bank has been hit with a government and business backlash over its decision to raise bank fees for businesses. As reported in the Daily Mail and the Times newspapers, the bank has increased charges for business clients with turnover of more than £3 million per year.
Users of the lender’s ‘business extra’ account will see the monthly fee double from £7.50 to £15 and for users of its electronic business account, the monthly cost jumps from £12.50 to £20. Fees will also rise for other services, such as paying in or taking money out at a branch and writing or paying in cheques. With the Bank of England committed to a long period of low interest rates to support the post-covid recovery, Lloyds’ decision has suffered harsh rebuke. MPs, business leaders and the Institute of Directors have all criticised the hikes. Kevin Hollinrake, co-chairman of the all-party parliamentary group on fair business banking said: “Now is not the time to be doubling the cost of doing business.”
Lloyds has countered that the increases were the first in two years and that support was available for any business customer who “may encounter difficulties”.
Regardless of the backlash, the Lloyds move highlights an issue that is keeping economists awake at night. Are rising bank fees just a sign of things to come? Many UK businesses have struggled since the pandemic started. Will their urgent need to rebuild spur a war of rising prices? The evidence so far is neutral. But if Lloyds are the canary in the coalmine, there remains a strong chance that UK businesses will pay more for an array of products and services as the economy recovers. For those companies that cannot raise their prices, switching bank to reduce charges seems like a no brainer. But is swapping lender truly cost-effective?
The UK’s big high street banks watch each other’s fee schedules very carefully. You can be sure that Lloyds’ competitors are taking close note of the fallout from their fees hike. If Lloyds escapes the spotlight, more big banks may copy their model. Which would seem to negate the idea of changing lender. However, many banks offer special introductory fees for new business customers. Low to no fees are commonplace. This means switching could provide useful savings in the introductory period. Additionally, smaller banks and lenders like Tide, Revolut and Anna offer banking that is low cost across the board.
Of course, many business owners may resist switching because of their lending arrangements. They may think it will be difficult to replicate the loan facilities their current bankers offer. However, further evidence says this idea is false. Most banks, be they long established or online newbies, are only too happy to absorb the loans their competitors once held. Reduced rates and charges to attract new borrowers are also available. Additionally, the selection of secured loans, unsecured loans, merchant cash advances, asset financing and invoice financing options for business has never been larger, or the interest rates lower. The truth is there’s never been a better time to find a cheaper lender. Worries about borrowing should not prevent business owners from switching bank to save hundreds or thousands of pounds per year.