The pros and cons of switching banking partners

GRUMBLING about service providers is an English pastime, almost to the point where it could be elevated to an Olympic sport for the London 2012 Games. Whether complaining that utility bills are too high, phone providers keep us continually on hold, or all bank managers are cut from the same identikit cloth, there is invariably some form of tension between client and provider.

Those tensions have no doubt been exacerbated by the difficult financial straits in which we find ourselves. The past three years have produced challenges for Britain’s banks and their corporate clients on a scale not seen for decades; the next few years promise more of the same.

Amid the previous crash in the 1990s, Manchester Business School and Financial Director produced a series of surveys to investigate the state of the relationships between finance directors and banks. In this issue, we have taken a fresh look to see how things have changed.

In this year’s survey, we asked FDs, CFOs and financial controllers from 580 UK companies about their bank relationships, causes of relationship stress the areas in which they felt under-served, how the financial crisis affected their bank relationships, and how changes in macro-prudential oversight of the financial services sector will affect their businesses in the near future.

While the sentiments expressed by survey respondents were generally both balanced and moderate, the research also revealed that 14 percent of businesses were either likely or very likely to consider switching their main relationship bank within the next year.

“Anecdotal evidence suggests that fewer than two percent of companies change their main relationship bank in any given year, although our survey shows that switching intention runs much higher,” says Charles Schell, a fellow at Manchester Business School with whom Financial Director worked on this study.