Lee Tillcock – Editor of Business Moneyfacts

Two years on from their previous look at the business bank account switching process, Business Moneyfacts Editor Lee Tillcock takes a look at the current state of play, identifying just how keen banks seem to be in securing new small business customers from their competitors.

Tuned in but switched off

Shoppers’ Choice: Website – Alliance & Leicester Commercial Bank

Shoppers’ Choice: Phone call – HSBC

The small business sector accounts for over 97% of UK businesses and generates over half of the UK’s GDP. The 2004 University of Warwick UK Survey of SME finances found that 97 per cent of SMEs use a current account. Little surprise then that the issue of businesses switching remains high on the agenda. Various surveys and reports over the last year have provided details on the number of small businesses switching or at least considering switching their business current account to a new provider. Figures differ but tend to indicate that, of the businesses interviewed during the last year, some 3%-5% have switched, with a further 10%-15% at least looking into the process. Considering the size of the market, this is a not inconsiderable amount.

So, who stands out from, and who becomes lost in the crowd? In our latest ‘Mystery Shopper’ survey, we approached the banks as a micro business looking to switch a business current account from one provider to another. We mystery shopped Abbey, Alliance & Leicester Commercial Bank (A&LCB), Bank of Scotland, Barclays, Co-operative Bank, HSBC, Lloyds TSB, NatWest and Royal Bank of Scotland.

We must note at this stage that any survey of this nature is somewhat subjective; however we do also stress that banks only get one chance to impress, so we may have been a new customer won or lost – first impressions do count. The results make interesting reading. There are clearly some providers more switched on than others in the competitive environment of today’s small business market.

We visited each of the banks’ websites, spending no more than 30 minutes on each site, assessing the site’s usability, content, both product based and general business information, and also whether the site provided any additional facilities.

We found a range of standards which would affect the ability of a new business looking to make a switching decision. A&LCB and HSBC were both slightly ahead of the field, with the former edging ahead overall. Its excellent Business Advice section helped to make the additional facilities offered provide the slight difference. Encouragement is taken by the number of banks offering commendable sites and features, with Abbey, Bank of Scotland, Lloyds TSB and RBS all providing clear and informative content.

We then telephoned a specialist ‘switching account’ centralised number where one could be found on the bank’s website. We assessed the quality of the initial telephone response, general manner and helpfulness, ability to deal with the enquiry, level of information provided as well as the follow up by means of promised literature sent.

It was A&LCB, HSBC and Bank of Scotland that led the way, with HSBC narrowly taking the plaudits. The flow and professional approach of HSBC, providing information and advice in a concise manner fostered a rapport and ‘relationship’ unmatched, even by A&LCB or Bank of Scotland.

Other providers faring well this time include Abbey, Barclays, Co-operative, Lloyds TSB and NatWest. For so many banks to offer an acceptable first contact to a prospective new client is indeed encouraging.

Business banks have always insisted that the Competition Commission et al have got it wrong; that service is the issue – not pricing. Fair point, as far as it goes. What seems to be highlighted by our survey is that the issue of service is indeed important, but not perhaps in the same way as the banks believe. The level of service perceived or not is decided before a banking relationship begins: get the first contact right and the level of switching could climb. The providers that took the time to show a genuine interest in our business, HSBC, A&LCB and Bank of Scotland would have led us to switch.

Another reason for the SMEs’ apparent lack of willingness or desire to switch is the fact that there are so few introductory offers available to switchers. There is a case that an established business will offer more additional sales possibilities for the new provider, and that more introductory offers would see a rise in the numbers of businesses switching their accounts.

It seems that an SME not only needs to weigh the price on offer against the level of service, but also more surprisingly to identify a bank that wants their account. The intangible but important benefits that arise from building relationships begin with the first contact. From our mystery shopping experience, it would seem that banks need to change their approach to switching and to offer a more knowledgeable and proactive ‘first contact’ to potential new customers.

The banks’ apparent unwillingness to secure a new client is perhaps the main reason for the perceived low take-up of switching opportunities, as the anticipated efficiency of the switching process will be judged on the first contact with a potential new provider. It seems that the phrase “know your customer” still has a particular resonance in the modern banking world. For most suppliers of goods and services, the commercial benefits of knowing their customers make it a golden rule of business. Business banks are no different.

The Forum of Private Business (FPB) has recently published its tenth biennial report, investigating the service banks provide for private businesses. Around 3,700 firms participated in the survey, ‘Private Businesses & their Banks’. The past three surveys have indicated that the percentage of those businesses not considering changing bank has fallen, from 63.8% in 2002 to 58.3% in 2006. This shows that firms are becoming inclined to shop around for the best deal. Banks should take note; it’s time to tune in as the switch is on.

For full and regularly updated information on business bank accounts visit www.moneyfactsonline.co.uk/mfBAF/root.asp

Click here to view the survey results in full (PDF)

© Certain Shops Ltd 2006 All Rights Reserved

All text is copyright © of the author and Certain Shops Ltd. Logos are copyright © their respective owners.

The information and opinions in contributions to this newsletter and printed on the Certain Shops web site in no way reflects the opinions of Certain Shops Ltd.

Certain Shops Ltd. 72 Medway Drive Forest Row E Sussex RH18 5NX Tel: 01342 824871 textphone 18001 01342 824871 www.certainshops.com e:join-us@certainshops.com Registered in England & Wales Company no. 5685386 VAT no. 880175810 Registered office North Park Lodge South St East Hoathly Lewes E Sussex BN8

PROFESSIONAL SPOTLIGHTS

Val and Don Rush – TR Resolutions, Matrimonial Financial Mediators

Divorce Fairs and why Financial Mediators can save you thousands



A common misconception is that Financial Mediators helping divorcing couples are hoping to get the couple back together again. A more accurate way to think of these skilled professionals is that they advise on your exit strategy from a relationship fraught with financial complications.

It is a sad fact that around 40% of marriages end in divorce, and the Government has been aware of the expense and misery that beset many divorcing couples for some time, and the Family Law Act 1996 was brought in to steer more people into mediation to resolve the problems of divorce and separation.

In 1999, Lord Woolf produced his report called “Access to Justice”. It set out a number of shortcomings he found in the current legal system. Amongst other things, he found it to be:- · Too expensive · Too complicated · Too adversarial · Too slow

Lord Woolf suggested mediation in appropriate cases as a way to overcome these shortcomings.

So what do Financial Mediators actually do? How do they make a difference?

- the reduction of animosity and fighting therefore much easier on the children who really hate to see Mum and Dad at loggerheads

- they allow clients to go at a pace that is comfortable to them. Having made the decision to split it still takes a while to accept and adapt to the inevitable changes and cope with the official paperwork – some people find this quite scary. It’s a big big step and mediators like Val and Don are sensitive to this- although they focus on the financial and children issues there is invariably psychological turmoil, and whilst mediators may not be counsellors, they are ready to empathise and give what emotional support they can- they have seen clients rekindle a workable friendship at the end of the process – really satisfying!- high profile cases like Paul and Linda M are so unusual. Often they have cases where funds are really really tight and it just doesn’t make any sense at all to pay competing solicitors unnecessarilyVal is adamant: “we do not in any way try to mend broken relationships. We make sure before we start that there is absolutely no chance of restoration and then work to make the inevitable split as painless as possible.”

Rather like marriage fairs which help you plan your wedding, there is a divorce fair in Holland which aims to give all you need to plan the perfect split.

The very first ever divorce or `break up’ fair was held in Austria last year. The fair gave advice on how to organise a post-married life, and to help couples to untie the knot as painlessly as possible.

The two-day fair was held under the motto “New beginning”. The event allowed would-be divorcees to consult lawyers about their rights and seek advice. The divorce rate in Austria hit an all time high of 50% in 2006, with 66% of marriages in Vienna ending in divorce.

The Saturday was reserved for men, and Sunday for women, so couples could avoid awkward encounters and retain a degree of anonymity. There was also a series of lectures on subjects like how divorce affects children and coping as a single parent.

This move towards accepting that the break up of marriages, and also civil partnerships, provoke complex emotional dilemmas and a great deal of fear, shows how the role of financial divorce mediators will become increasingly a necessary part of a healthy break up.

(thank you to Val Rush and BBC news)

Lee Tillcock – Editor of Business Moneyfacts

In the CertainShops newsletter

The Competition Commission (CC) has published its provisional decision to lift the temporary price controls imposed in 2003 on the UK’s four largest banks servicing small and medium-sized enterprises (SMEs). The requirement on the banks to publicise changes in charges will, however, be retained.

The decision has prompted a mixed response. Whilst welcoming the Competition Commission’s provisional decision to lift price controls on the four main business banks in England and Wales, the Office of Fair Trading (OFT) noted continuing concerns around low levels of switching in the market and a lack of price transparency for customers. John Fingleton, Chief Executive of the OFT, said: “The OFT will continue actively to monitor the market in future, and ensure the banks comply with their undertakings on switching and price transparency. If we find that competition is not working well for SMEs, we will consider further action.”

The Federation of Small Businesses (FSB) has reacted angrily to the provisional decision, Mike Cherry, FSB Financial Affairs Chairman, said: “We are utterly bewildered by the Competition Commission’s provisional decision in this case. We have provided concrete evidence that the big four banks are not complying with the undertakings they signed up to in 2002 and the Competition Commission appears to have completely ignored it.”

Abbey Business Banking welcomed the decision to remove its recommendation of price control, Ian Wilson, Managing Director of Business Banking said: “The removal of these controls will create a more transparent and competitive market.” Commenting on the announcement Steve Jennings, Director of Business Banking at Alliance & Leicester Commercial Bank said: “We welcome today’s announcement and the recognition by the Competition Commission of the gains that SMEs can enjoy from switching to a challenger bank such as Alliance & Leicester. The small business banking market has changed considerably since the Competition Commission implemented price controls, with a number of providers offering better value current accounts that can make a real difference to a business’s bottom line.” HBOS is pleased with the decision to remove price controls, as it believes a truly competitive market is more effective than one managed through artificial price controls. Mark Curran, Head of Relationship Management, Business Banking, HBOS, said, “This will enable Bank of Scotland Business Banking to push for more market share in the SME sector. We will continue to campaign for greater transparency and portability in the SME banking arena.”

SMEs have raised their expectations of what banks should provide. Similarly all banks providing SME banking services will have to continue to comply with the undertakings on the ease of switching and transparency of prices. The deadline for responses to the CC’s consultation on its provisional decision is 28 September 2007. I suspect that any move by any institution that may detrimentally affect the SME business-banking sector will be remembered for a far greater period of time.

For full and regularly updated information on financial business information visit: MoneyFacts Online

© Certain Shops Ltd 2006 All Rights Reserved

All text is copyright © of the author and Certain Shops Ltd. Logos are copyright © their respective owners.

The information and opinions in contributions to this newsletter and printed on the Certain Shops web site in no way reflects the opinions of Certain Shops Ltd.

Certain Shops Ltd. 72 Medway Drive Forest Row E Sussex RH18 5NX Tel: 01342 824871 textphone 18001 01342 824871 www.certainshops.com e:join-us@certainshops.com Registered in England & Wales Company no. 5685386 VAT no. 880175810 Registered office North Park Lodge South St East Hoathly Lewes E Sussex BN8

Lee Tillcock – Editor of Business Moneyfacts

Could CCA 2006 cause the downfall of Buy To Let?

The last year has seen a raft of legislation impacting on the buy-to-let sector, with more new rules and regulations still to be implemented. So far the new regulation has covered areas to protect both the landlord’s and tenant’s rights. However lenders and borrowers should also be aware that The Consumer Credit Act 2006 (CCA 2006) presents potentially far more serious issues when its provisions begin to take full effect next April.

As a general rule, buy-to-let (BTL) lending is unregulated. However, it risks becoming CCA regulated once the £25,000 financial limit is removed in April 2008. In principle it has been argued that a landlord who buys just one or two properties to let may not be considered to be entering into a business transaction, but rather making a personal investment. If that was the case then the business exemptions would not apply and therefore the transaction would fall under the CCA regulations.

The rules regarding business exemption state that loans which exceed £25,000 will not be regulated if entered into solely or predominately for the purposes of a business. Clearly if the former interpretation was applied then the implications to the buy-to-let lending industry would be immense. The growing numbers of stories in the trade press have highlighted these worries with the end of the buy-to-let sector offered as the worst possible case scenario.

Ray Bolger has recently raised his concerns on the issue of the new Act, saying: “If implemented in its current form, it will crucify our buy-to-let market by imposing requirements such as banning interest-only mortgages.”

Paul Rocket, TBMC believes common sense will prevail, stating that: “The good news is that the DTI has consistently maintained that it does not intend to regulate buy-to-let and that buy-to-let will fall within the scope of the business exemption. Also the DTI has become more and more precise about this point, making it very unlikely that the fears mentioned above will come to pass.”

The general lack of clarity surrounding this issue means that it would not be clear who would and who would not be caught by this law. What constitutes a business and what does not is the key to this conundrum. The people that decide are in the Department of Trade and Industry (DTI). Thankfully, it appears that common sense may have prevailed as the DTI recently announced an amendment that should ensure that lenders are not faced with CCA regulation of loans to buy-to-let borrowers with a small number of properties.

The Council of Mortgage Lenders has called for lenders to challenge the DTI and Government on the changes. Whatever the outcome of the discussions, legal uncertainty is at the least unsettling and potentially very expensive for lenders, and subsequently consumers alike. The Government needs a very healthy private landlord market and whilst regulation has come in to protect tenants, stopping investment in commercial enterprise (which buy-to-let is) would be counter productive.

The exact rules and effect of the CCA 2006 need to be made clear and quickly, before too much speculation about the adverse consequences puts doubt into potential landlords’ minds. Simply, it cannot include banning interest only mortgages, as this would be sure a sure fire way to collapse the BTL industry. But without the full facts the industry continues to speculate, possibly turning something relatively harmless into a whirlwind of confusion. With landlords, lenders and tenants already contending with the raft of new regulation, let’s hope this latest Act is clarified sooner rather than later.

For full and regularly updated information on financial business information visit: www.moneyfactsonline.co.uk/mfBAF/root.asp

© Certain Shops Ltd 2006 All Rights Reserved

All text is copyright © of the author and Certain Shops Ltd. Logos are copyright © their respective owners.

The information and opinions in contributions to this newsletter and printed on the Certain Shops web site in no way reflects the opinions of Certain Shops Ltd.

Certain Shops Ltd. 72 Medway Drive Forest Row E Sussex RH18 5NX Tel: 01342 824871 textphone 18001 01342 824871 www.certainshops.com e:join-us@certainshops.com Registered in England & Wales Company no. 5685386 VAT no. 880175810 Registered office North Park Lodge South St East Hoathly Lewes E Sussex BN8

Juan Carlos Venegas – Tax Consultant

To VAT or not to VAT – that is the question!

When should you register for VAT? Tax Consultant Juan Carlos works with clients both in the UK and in Spain, and here tries to clear up some of the confusion that new businesses can have over whether they need to register or not…

“You can register voluntarily because you may be interested in recovering the input VAT you have been charged on your purchases.

However, compulsory registration is due if your taxable supplies exceeds the annual registration threshold, which is currently £61,000.

A person will have to apply for registration if:

at the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £61,000; or

at any time there are reasonable grounds for believing that the value of the taxable supplies to be made in the next 30 days alone will exceed £61,000.

If at the end of any month, a person’s taxable turnover in the past 12 months or less exceeds £61,000 but HM Revenue and Customs is satisfied that it will not exceed £59,000 in the next 12 months, that person will not have to be registered.

You will be required to register for VAT if at the end of any calendar month, the value of your taxable supplies in the last 12 months exceeds £61,000.

If you have exceeded the limit then you must notify Revenue & Customs of your requirement to be registred by completing form VAT 1 and submitting it within 30 days of the month that you exceeded the limit.

The registration will be effective from the first day of the second month following the end of the month the £61,000 was exceeded. Therefore, you must charge VAT from that date.

If you need any further information or help, please contact me, Juan Carlos Venegas, at www.certainshops.com/service-provider.php?sp=11

© Certain Shops Ltd 2006 All Rights Reserved

All text is copyright © of the author and Certain Shops Ltd. Logos are copyright © their respective owners.

The information and opinions in contributions to this newsletter and printed on the Certain Shops web site in no way reflects the opinions of Certain Shops Ltd.

Certain Shops Ltd. 72 Medway Drive Forest Row E Sussex RH18 5NX Tel: 01342 824871 textphone 18001 01342 824871 www.certainshops.com e:join-us@certainshops.com Registered in England & Wales Company no. 5685386 VAT no. 880175810 Registered office North Park Lodge South St East Hoathly Lewes E Sussex BN8

Juan Carlos Venegas – Tax Consultant

To VAT or not to VAT – that is the question!

When should you register for VAT? Tax Consultant Juan Carlos works with clients both in the UK and in Spain, and here tries to clear up some of the confusion that new businesses can have over whether they need to register or not…

“You can register voluntarily because you may be interested in recovering the input VAT you have been charged on your purchases.

However, compulsory registration is due if your taxable supplies exceeds the annual registration threshold, which is currently £61,000.

A person will have to apply for registration if:

at the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £61,000; or

at any time there are reasonable grounds for believing that the value of the taxable supplies to be made in the next 30 days alone will exceed £61,000.

If at the end of any month, a person’s taxable turnover in the past 12 months or less exceeds £61,000 but HM Revenue and Customs is satisfied that it will not exceed £59,000 in the next 12 months, that person will not have to be registered.

You will be required to register for VAT if at the end of any calendar month, the value of your taxable supplies in the last 12 months exceeds £61,000.

If you have exceeded the limit then you must notify Revenue & Customs of your requirement to be registred by completing form VAT 1 and submitting it within 30 days of the month that you exceeded the limit.

The registration will be effective from the first day of the second month following the end of the month the £61,000 was exceeded. Therefore, you must charge VAT from that date.

If you need any further information or help, please contact me, Juan Carlos Venegas, at www.certainshops.com/service-provider.php?sp=11

© Certain Shops Ltd 2006 All Rights Reserved

All text is copyright © of the author and Certain Shops Ltd. Logos are copyright © their respective owners.

The information and opinions in contributions to this newsletter and printed on the Certain Shops web site in no way reflects the opinions of Certain Shops Ltd.

Certain Shops Ltd. 72 Medway Drive Forest Row E Sussex RH18 5NX Tel: 01342 824871 textphone 18001 01342 824871 www.certainshops.com e:join-us@certainshops.com Registered in England & Wales Company no. 5685386 VAT no. 880175810 Registered office North Park Lodge South St East Hoathly Lewes E Sussex BN8