The £170 billion small business lending market is to be the first major investigation of the new competition watchdog.
A full-scale inquiry into the sector by the Competition and Markets Authority could be announced early next week.
The Office of Fair Trading began a study of the sector last year which is understood to have concluded that an investigation is required by the CMA.
The CMA is taking over from the Competition Commission and the OFT next month.
The news comes as the Business Secretary, Vince Cable, last night described the failure of the government-backed Funding for Lending Scheme to get finance to small firms as “utterly perverse”. Figures from the Bank of England showed that lending to businesses through the scheme fell by £1.3 billion between the second and fourth quarters of last year.
“I am confident that refocusing the Funding for Lending Scheme on to business lending, and the measures we are taking via increased competition and business bank funding will bear fruit,” he told the annual Mansion House Trade and Industry dinner.
The Treasury Select Committee has also launched an investigation of its own and has called for evidence to be submitted from small businesses.
