Chancellor Rishi Sunak’s determination to drive UK enterprise and innovation as part of the country’s “bounce back” strategy risks being paralysed by a lack of access to new business bank accounts, according to national audit, tax, risk and advisory firm Crowe.
Johnathan Dudley, Midlands Managing Partner said the pandemic had led many would-be entrepreneurs to consider launching new business enterprises, but many banks were still declining to consider applications for new accounts.
“The COVID-19 pandemic has had many side effects, one of which has been that many staff working from home or furloughed have taken the brave decision to branch out on their own.
“Others want to invest their redundancy cheques in their future.“The UK is a hotbed of innovation and we can deliver – as our rapid vaccine development and deployment has demonstrated.”
In 2020, many high street banks stopped accepting new business customers.
Dudley said: “They all cited similar reasons, such as the wish to support existing customers during the pandemic, and I can well imagine that other issues such as anti-money laundering measures which require physical proof, and meetings also contributed to their decision.”
At the same time, in the quarter April-June 2020, Companies House recorded 176,115 new incorporations, the largest increase, year-on-year, ever seen.
Dudley added: “Lockdown has given many people the time and encouragement to progress their plans.
“However, if it is difficult to open a new business bank account, how are you expected to trade? It is not just UK individuals who want to start their own business, there are a number of companies in Commonwealth countries who want to open subsidiaries in the UK in order to trade here.
“Those banks that say they are still accepting new applications for business bank accounts are being swamped and in any event there is a distinct lack of competition among banks for new business customers, which cannot be good for fairness and value in the market.”
He said that challenger banks are invariably more expensive and usually only offer online services, which does not suit all businesses, particularly those that still handle cash.
He pointed out that start-ups and the self-employed launching new businesses played a key role in the recovery from previous recessions, and the exit from the coronavirus pandemic would be no exception.
“It is absolutely vital we turn the tap on to provide essential business banking facilities if we are to achieve the rapid return to growth which is vital to the UK’s economic recovery.”
He is calling on The Treasury and the Prudential Regulation Authority, the part of the Bank of England which oversees the banking industry, to sit down with the major high street banks and encourage them to back new businesses.
“The bank account is the artery of any business, and we need competition for new business as a means to ensure that good value is offered by all banks to those who need it most at the beginning of their business journey.”
He urged would-be entrepreneurs who need to open a bank account to talk to Crowe.
“We have our ear to the ground and constantly monitor the policy of banks towards new business accounts. Some doors are shut, others ajar.”
If you would like advice on how to manage the challenging early days of your new venture, please contact johnathan.dudley@crowe.co.uk or call 0121 543 1900.
