Table of Contents
Introduction and Abbreviations
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- Market definitions
- Key sources
- Global information and research
- Abbreviations
Premier Insight
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- Potential for growth – 20% do not have a separate business account
- Upsetting the ‘status quo’ that pervades the sector
- A changing environment – smaller players need to invest
- Established players need to defend against possible ‘switchers’
Executive Summary
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- Scene-setting
- Market penetration not as high as it could be
- The regulatory landscape
- The target audience
- The business environment
- Size of the business banking market
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- Figure 1: Number of small business bank accounts, by type, 2002 and 2003
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- Figure 2: Average amounts borrowed on term loans and overdraft versus average value of deposits during the year, 2002-03
- Changing competitive landscape
- Market shares of the largest providers
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- Figure 3: Estimated (volume) market share of the small business banking sector – England & Wales, by the main banking groups, July 2004
- The distribution mix remains branch-biased
- Advertising expenditure on the increase
- Profile of the small business owner
- Variation in the profile of small businesses according to provider
- Other key findings
- The market outlook
- Mintel’s forecast
Market Context
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- Recent milestones in small business banking and other related initiatives
- New undertakings imposed on banks
- Understanding the pressures on small business
- The main business banking services and related products
Market Drivers
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- Figure 4: Summary of the main market drivers in the small business banking sector, 2004
- A benevolent macro-economic environment is crucial for small business growth
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- Figure 5: GDP, at current and constant 1999 prices, 1999-2005
- Confidence among small firms rises strongly in Q2 2004
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- Figure 6: Business confidence (turnover), quarterly basis, Q1 2002-Q2 2004
- Small firms’ contribution to the economy is no minor feat
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- Figure 7: Number of UK businesses, employment size and turnover, 2003
- Sole proprietorships account for three fifths of all UK firms
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- Figure 8: Number of companies, by legal status, 1999-2003
- VAT registered business stock swells…
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- Figure 9: Volume of VAT registrations and de-registrations, 1994-2002
- …thanks to a benevolent economic climate
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- Figure 10: One-year and three-year VAT registered business survival rates, 1993-2001
- Other sources say the same
- Wide regional and sector variances
- Business closure does not necessarily equate to failure
- Number of self-employed set to stabilise
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- Figure 11: Number of self-employed and as a percentage of the total employed, 1993-2009
- Sources of income for the self-employed
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- Figure 12: total income of self-employed individuals, by source of income, 2001/02
- Nearly two thirds of self-employed earned less than £10,000 from self-employment income in 2001/02
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- Figure 13: Self-employment income, by income range, 2001/02
- Diverse range of finance now available to small businesses
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- Figure 14: Sources of finance used in the last two years, in order of significance, 2002 versus 2004
- Issues affecting finance for small firms
- Increasing competition threatens the dominance of the big four
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- Figure 15: Reasons for switching banks, in order of significance, 2004
- Less than half of those who have not switched are happy with the services provided by their current provider
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- Figure 16: Reasons for not switching banks, in order of significance, 2004
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Market Size and Trends
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- Number of small business current accounts continues to rise
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- Figure 17: Number of small business bank accounts, by type, 2000-03
- Robust business environment boosts both lending and deposits in 2003
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- Figure 18: Annual value of small business bank lending versus deposits, 2000-03
- Less demand for overdrafts as other forms of finance take preference
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- Figure 19: Average amounts borrowed on term loans and overdraft versus average value of deposits during the year, 2000-03
- Variable-rate loans favoured by small firms
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- Figure 20: Value of term loans, by length and by type, 2000-03
- Surge in SFLGs…
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- Figure 21: Number and value of SFLGs issued and average loan size, 2000-04
- …as review is carried out
Key Players and the Competitive Environment
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- The competitive landscape – a swirl of conflicting forces
- Non-traditional banking suppliers are thin on the ground in the business sector
- Market share – a snapshot
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- Figure 22: Share of small business banking customer base – England & Wales, by provider, July 2004
- RBS Group comes out top
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- Figure 23: Estimated (volume) market share of the small business banking sector – England & Wales, by the main banking groups, July 2004
- The big four
- Barclays
- HSBC
- Lloyds TSB
- NatWest
- The challengers
- Abbey
- Alliance & Leicester
- Allied Irish Bank
- HBOS
Distribution and the Internet
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- The local branch remains an important delivery channel and source of advice
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- Figure 24: Number of UK branches, by institution, 1998, 2002 and 2003
- Developing relationships
- Online banking grows strongly in the small business sector…
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- Figure 25: Number and proportion of small businesses using online facilities, 2001-03
- …and yet evidence suggests that small firms find online banking lacking
Advertising and Promotion
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- Adspend on business bank accounts more than triples over the past four years
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- Figure 26: Advertising expenditure on business banking products and services, by product type, 2000/01-2003/04
- The press is a firm favourite for business bank account advertisers
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- Figure 27: Distribution of advertising expenditure on business bank accounts by main media, 2000/01-2003/04
- NatWest is the top business bank account advertiser
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- Figure 28: Top ten advertisers of business bank accounts, 2002/03 and 2003/04
The Small Business Owner
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- Profile of the small business owner
- Over a third of small business owners are women
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- Figure 29: Profile of the small business owner/financial decision maker, by gender, age, region and whether based at home, July 2004
- Women are more prone to forming partnerships than men
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- Figure 30: Profile of the small business owner/financial decision maker, by legal status, turnover and number of full-time employees, July 2004
- Sector profiles vary considerably between the genders
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- Figure 31: Profile of the small business owner/financial decision maker, by sector and number of years trading, July 2004
- Internet access and usage
- More than one in five small businesses do not have a PC
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- Figure 32: Presence of PC for business use, July 2004
- Most of those that do have a PC are connected to the Web
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- Figure 33: Access and usage of Internet for business purposes, July 2004
- One in three small firms have broadband at work
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- Figure 34: Intention to get broadband access in next six months, July 2004
- Younger businesses are more likely to be connected
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- Figure 35: PC ownership, Internet access and usage and intention to get broadband by number of years trading, legal status, annual turnover and number of full-time employees, July 2004
- Service sector the keenest to log on
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- Figure 36: PC ownership, Internet access and intention to get broadband, by sector, region and where based, July 2004
- Business bank provider
- Barclays attracts the highest proportion of sole traders
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- Figure 37: Main business bank, by annual turnover and legal status, July 2004
- Significant variation in relation to the core classifications
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- Figure 38: Four largest providers’ shares of the small business banking customer base, by gender, age, region, whether based at home and have PC, July 2004
- Small providers are most successful at attracting partnerships
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- Figure 39: Four largest providers’ shares of the small business banking customer base, by legal status, number of years trading, annual turnover, number of full-time employees and sector, July 2004
- Business banking
- Reasons for having a business account
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- Figure 40: Proportion who agree with statements relating to ownership of business bank account, July 2004
- Small businesses based at home are more likely to shun business accounts…
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- Figure 41: Proportion who agree with statements relating to ownership of business bank account, by gender, age, region, whether based at home and whether own a PC, July 2004
- …as are those on the low end of the turnover scale
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- Figure 42: Proportion who agree with statements relating to ownership of business bank account, by legal status, number of years trading, annual turnover, number of full-time employees and sector, July 2004
- Identifying the leading characteristics of two bi-polar groups
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- Figure 43: Main target groups – those who have a business bank account to keep business transactions separate from personal and those who do not have one but have a separate personal account, July 2004
- How satisfied are small business customers with their banks?
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- Figure 44: Level of satisfaction with main business bank provider, July 2004
- The level of contentment does vary between providers
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- Figure 45: Level of satisfaction with main business bank provider, by largest four banks, July 2004
- One in six 35-44-year-olds are not satisfied with the service they get from their business bank account provider
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- Figure 46: Level of satisfaction with main business bank provider, by gender, age, region, whether based at home and whether own a PC, July 2004
- Significant potential to persuade smaller retailers to switch
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- Figure 47: Level of satisfaction with main business bank provider, by legal status, number of years trading, annual turnover, number of full-time employees and sector, July 2004
- Small firms want faster cheque clearance
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- Figure 48: Aspects business customers would like to see their bank do, in order of importance, July 2004
- Some banks are better than others
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- Figure 49: Aspects business customers would like to see their bank do, by main business bank, July 2004
- Top marks, generally, for product range
- Further analysis
Attitudes and Targeting Opportunities
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- One in four small firms have changed banks
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- Figure 50: Percentage of small business customers who have switched banks, July 2004
- The big four have more to worry about than other providers
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- Figure 51: Percentage of small business customers who have switched banks, by main business bank, July 2004
- Relationship between switching activity and level of satisfaction
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- Figure 52: Percentage of business customers who have switched banks, by level of satisfaction, July 2004
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- Figure 53: Level of satisfaction with main provider by switching activity, July 2004
- Home-based businesses are the most loyal customers
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- Figure 54: Switching activity, by gender, age, region and whether based at home, July 2004
- Propensity to switch increases with age of the business
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- Figure 55: Switching activity, by legal status, years trading, annual turnover, number of full-time employees and sector, July 2004
- ‘Switcher’ targets
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- Figure 56: Main target groups – those who have switched banks versus those who have not, July 2004
- Slow clearance times are top reason for dissatisfaction
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- Figure 57: Aspects business customers would like to see their bank do, by level of satisfaction, July 2004
- Correlation analysis shows synergies in areas to improve
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- Figure 58: Correlation analysis of aspects business customers would like to see their bank do, July 2004
- Cluster analysis shows that most crave convenience
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- Figure 59: Illustration of how the small business customer base dissects into the three clusters
- Figure 60: Small business clusters, by gender, age, region and whether based at home, July 2004
- Sole traders seek value for their money
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- Figure 61: Small business clusters, by legal status, years trading, annual turnover, number of full-time employees and sector, July 2004
- Lloyds TSB has the highest proportion of convenience cravers
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- Figure 62: Small business clusters, by main business bank, July 2004
- A third of ‘seemingly content’ small firms are merely ‘quite satisfied’
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- Figure 63: Small business clusters, by level of satisfaction with provider, July 2004
- Desire for greater convenience and better value drives switching activity
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- Figure 64: Small business clusters, by whether or not switched provider, July 2004
- Four out of five small businesses say they have always had a good relationship with their (current) bank
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- Figure 65: Level of agreement to statements about business bank usage and relationship with provider, July 2004
- Banks better at forging relationships with female customers
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- Figure 66: Level of agreement to statements about business bank usage and relationship with provider, by gender, age, region, whether based at home and whether have PC, July 2004
- The less they earn the more they try to avoid charges
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- Figure 67: Level of agreement to statements about business bank usage and relationship with provider, by legal status, annual turnover, number of full-time employees, sector and years trading, July 2004
- ‘Seemingly content’ group less concerned with charges, but most likely to shun business accounts in the first place
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- Figure 68: Level of agreement to statements about business bank usage and relationship with provider, by three cluster groups, July 2004
- Maintaining good relationships is the key to success
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- Figure 69: Level of agreement to statements about business bank usage and relationship with provider, by level of satisfaction with provider, July 2004
- Personal account usage is highest among ‘other’ suppliers
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- Figure 70: Level of agreement to statements about business bank usage and relationship with provider, by main business bank, July 2004
The Future
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- Rising competition on the cards
- New entrants to emerge – a question of when not if
- Switching activity will steadily grow
- Scope to improve penetration
- Increasing trend to target specific sectors
- Further regulatory changes on the horizon
- Faster cheque clearance – pressure mounts
Forecast
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- Number of business current accounts to grow steadily
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- Figure 71: Forecast of small business current account market, 2003-09
- Fair prospects for term lending
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- Figure 72: Forecast of the small business term lending market, by type, 2003-09
- Deposits ascend strongly
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- Figure 73: Forecast of the small business deposit market, 2003-09
- In summary
- A note of caution
- Factors incorporated
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