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Finance for Small and Medium-Sized Enterprises: A Report on the 2004 UK Survey of SME Finances 5% Scotland 95% Top Four Providers Other Providers Base: All SM Es in Scotland N = 194,266 (Unweighted N = 199) 12% P Northern Ireland Top Four Providers Other Providers Base: Al l SMEs in Northern Ireland N = 104,385 (Unweighted N = 133) P The key results from these figures are as follows: • In England and Wales the top four providers supply just over 80% of the market. • In Scotland the top four providers supply 95% of the market. 88% 75
Finance for Small and Medium-Sized Enterprises: A Report on the 2004 UK Survey of SME Finances • In Northern Ireland the top four providers supply almost 90% of the market. Also, we found that (not reported above) • England, Wales and Northern Ireland have the same largest supplier; Scotland has a different largest provider from the rest of the UK. • In Scotland the largest provider accounts for over 50% of the market; the top two providers account for more than three-quarters of the market. • The banks, comprising the top four, differ across the three geographical markets. These results indicate that Scotland has the highest degree of market concentration in the UK. 6.1 Breadth of relationship wi th the main provider SMEs one main sup ier of exter inancial services. There are several reasons why this is the case. end to consis limited number of products: e.g., a current rdraft; and, pe s, a term loan. coveri the firm’s fina iness, available to the lender. Good therefo e prefer broader relationships since, through ation ows, a ore rable terms. aditionally bundled products, such as g the business to open rrent account in order to access a loan. Whilst bundling may help information flows, and increase access to finance, ide is that it restricts competition. 44 tend to use pl nal f • SME finances t t of a account; an ove rhap • A single relationship, ng all of ncial products, increases the breadth of information, about the bus businesses may r improved inform fl they re able to obtain finance on m favou • On the supply side, banks have tr requirin a cu the downs We begin this analysis by looking at the distribution of the number of separate p roviders of financial services. A full tabulation of these results, by firm size, are reported in Table A6.1 (Append ix to Section 6) 44 In fact, following the recommendations of the Competition Commission (2002), banks have undertaken not to bundle products unless there are legal or technical reasons for doing so. 76
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