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More than 140,000 small businesses have been debanked by major lenders in the past year, according to a report by MPs.
According to the Treasury Committee, about 2.7 percent of the 5.3 million small business merchant accounts were closed by banks.
The data – based on figures from Barclays, HSBC, TSB, Lloyds, Santander, NatWest, Metro and Handelsbanken – has sparked scrutiny over how lenders make decisions to close accounts.
UK lenders have closed more than 140,000 small business accounts, according to official figures.
Reasons currently given by lenders for closing accounts included risk appetite, concerns about financial crime and lack of information sharing.
Debanking came into the spotlight last summer after private firm Coutts closed Nigel Farage’s account, raising concerns it was happening to other people and companies.
This is Money revealed how charities, choirs and small community groups were also being debanked.
Harriett Baldwin, chairwoman of the Treasury Committee, said lenders’ willingness to close accounts with little or no notice was “surprising.”
‘Our Committee believes that any company carrying out legal business in the UK should be able to find a bank that will offer them a bank account.
‘The fact that only three lenders included risk appetite in their criteria indicates that these discussions may not be systematically recorded, leaving questions about whether decisions about debanking certain companies, based on what banks perceive as a risk, are being taken informally.
“I hope that the release of this data can help analyze the decisions made by banks and help ensure that legitimate businesses are not treated unfairly.”
The figures come as Treasury Economic Secretary Bim Afolami appears before the Treasury Committee today.
You will likely be asked if you think small businesses are being treated fairly.
Small businesses have expressed concern about a lack of access to finance, with almost half turning to a personal credit card to finance their businesses.
In the third quarter of 2023, gross loans fell by a fifth and SMEs relied on their personal savings to get by, according to Shawbrook.