Mind your own business

Over one million small businesses are shunning specialist accounts in favour of retail accounts, which typically offer better rates on balances and overdrafts and don't have transaction fees.

Data from moneysupermarket.com has found a gulf exists between the best business and retail bank accounts. Alliance & Leicester, for example, offers 5.73 per cent on business balances of up to £999, whereas retail customers can enjoy a whopping 8.5 per cent on balances of up to £2,500.

Kevin Mountford, head of current accounts at moneysupermarket.com, said: "It's not a surprise that so many home-based small businesses are looking to the retail current account market for the best options, especially as they tend to have a better offering.

"Historically business accounts were supported by relationship managers, but with increased pressure on costs and centrally managed decision making, the value of these account managers is somewhat diluted. We will undoubtedly see better priced, no-frills accounts coming into play, and A&L is leading the way at present.

"A&L's business account may not be as attractive as its retail option, but it is bucking the trend by imposing lower fees and less onerous terms and conditions for the use of the account. This offers business users a genuine alternative to retail accounts.

"The majority of sole-traders and business partners act and think like consumers and with the threat of fee based banking coming into the retail sector, we could see a seismic change and the whole market merging into one."