Barclays is the most complained about bank for small business account closures, Money can reveal.
The bank accounted for almost half (205) of the 413 complaints lodged to the Financial Ombudsman Service about small business banking between April 2022 and September 2023.
It was followed by HSBC with 67, Lloyds had 57, NatWest 53, and Santander 31. The data was compiled for Money by the ombudsman on the top five most complained about banks for business account closures.
“The unexpected closure of an account can lead to serious consequences for most small businesses,” said Jean-Martin Louw from the legal firm Collyer Bristow. “It can disrupt their finances, making it impossible to pay invoices and staff, or access funds needed to operate.
“It can also harm a business’s credit rating and damage its reputation among customers and suppliers.”
Businesses with an annual turnover of less than £6.5 million can use the ombudsman if they need help resolving a complaint about a financial services firm.
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Some 85 complaints made about Barclays between April 2023 and September 2023 have been resolved, with 26 per cent being upheld by the ombudsman. Only 9 per cent of the 76 resolved cases in 2022-23 were upheld.
• Barclays is chasing me over £38k debt — for a business I already sold
“Banks can shut accounts without explanation, but it’s clear that they must be monitored closely to ensure they are acting fairly,” said Martyn James, a consumer rights expert.
Banks are facing increasing scrutiny over the closure of customer accounts. The issue has come to the fore since Nigel Farage, the former Ukip leader, had his account with the exclusive bank Coutts closed last June.
Martin McTague from the trade body the Federation of Small Businesses said the impact of account closures for small businesses was devastating. “The situation reveals a disturbing power balance where small firms feel pitted against big banks, who have more resources and time,” he said.
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“The Financial Conduct Authority [the City watchdog] must thoroughly investigate why so many bank accounts are being closed and require them to report every closure every three months.”
Banks are under no legal obligation to tell you why they have shut a business account, but must give two months’ notice of closure.
Experts say that banks may choose to close business accounts for a number of reasons, including reputational risk and trading in “risky” countries.
However, the government is looking into toughening up rules so banks have to give 90 days’ notice before closing an account and they could be forced to give an explanation for a closure in all but exceptional circumstances, such as when there is suspicion of a serious crime.
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Barclays said: “Most closures are because we need to keep up-to-date information about customers’ accounts as part of our ongoing responsibility to help prevent financial crime, and to meet our regulatory obligations.
“We work hard to avoid the last resort of account closure and encourage customers to keep us up to date with important information relating.”
HSBC, Lloyds Bank and Santander said they close accounts in line with legal and regulatory obligations. NatWest was approached for comment.
