Current Accounts for Small Businesses and Charities

In this guide we investigate, score and rank the ethical and environmental record of 30 current account brands for small businesses, NGOs and charities

We also shine a spotlight on 'new challengers' and accounts for community groups and give our Best Buy recommendations.

About Ethical Consumer

This is a product guide from Ethical Consumer, the UK's leading alternative consumer organisation. Since 1989 we've been researching and recording the social and environmental records of companies, and making the results available to you in a simple format.

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What to buy

What to look for when choosing a current account for a small business or charity:

  • Does it have an ethical lending policy? Banks can set themselves apart from the crowd by committing to only providing finance to companies that meet ethical criteria. For banks that provide mainly retail banking services, this is the main way they can ensure their business has a positive impact on society and the environment.

  • Does it eschew dodgy investments? Whether a mutual building society, a new bank focusing on retail banking, or a company with a strong ethical investment policy, the sustainable finance of the future must revolve around banks that say no to funding damaging industries.

Subscribe to see which companies we recommend as Best Buys and why 

What not to buy

What to avoid when choosing a current account for a small business or charity:

  • Does it invest in unethical corporations? Many UK banks provide important financial services for some of the worst offending corporations. Whether giants in retail, tech or energy, the unethical practices of many multinationals are effectively given the green light by our high street banks.

  • Does it avoid tax? The UK financial system is awash with questionable tax arrangements. Holding companies registered in tax havens are commonplace amongst the biggest banks. Make sure your account provider pays its fair share.

Subscribe to see which companies to avoid and why

Score table

Updated live from our research database

← Swipe left / right to view table contents →
Brand Score(out of 20) Ratings Categories Positive Scores

Our Analysis

This guide reveals which banks are the most ethical providers of current accounts for small businesses and not-for-profit organisations.

Most banks provide current accounts specifically for businesses and these tend to come with monthly fees and transaction charges. Also tucked away in the business section of banks’ websites are accounts for charities and other not-for-profit organisations, though not all banks provide these.

The table includes companies that provide business current accounts. Banks that only offer business savings accounts have not been included, but many banks listed both here and in our consumer savings accounts guide will offer business savings accounts too.

In this guide we discuss the table in-depth, as well as taking a broader look at the business banking sector. We also provide further detail of those banks that provide accounts for charities and not-for-profit community organisations. Finally, look at the issue of ‘de-risking’ to see if there have been any changes in this area.

Table highlights

Bottom of the table

The bottom end of our ethical rankings tell a frustratingly predictable story. Most of the mainstream banks score badly and thus occupy the lower rungs on account of their manifold bad financial practices.

Excessive directors’ pay and tax avoidance are still rife in the UK banking sector. Furthermore, the big banks get marked down across most categories because of their investment practices. Far too many banks lend money to unethical corporations and a lack of transparency doesn’t help them take positive steps forward.

Barclays and HSBC stand out, but for the wrong reasons – they are two of the world’s leading providers of fossil fuel finance. However, the fact that the ‘Big 5’ all receive an Ethiscore below 5 demonstrates how unethical financial practices are most definitely the norm in the UK banking sector.

Top of the table

An assortment of other options offer some hope for small organisations looking to choose a bank with a social conscience. ‘Challenger’ banks such as Starling and Metro – as well as new entrants to the digital business banking market, Tide and Coconut – lose marks for lacking adequate environmental and carbon reporting.

But their current lack of dodgy investments sees them remain a step above more established banks. Falling further behind the challenger banks but remaining markedly better than the ‘Big 5’ are Co-op Bank and Clydesdale/Yorkshire Bank. Co-op still has a strong and wide-ranging ethical policy.

Clydesdale/Yorkshire, now owned by Virgin Money, offers over two years of free banking for businesses with a turnover of less than £2 million, plus their accounts for voluntary community organisations come with a debit card (see the table on page 33).

Positive company ethos

Better still are accounts from organisations that get positive marks for their company ethos. The Cumberland Building Society, now the only major building society to offer business current accounts, keeps its business practices simple by sticking to mortgage lending. Plus, it is mutually owned which helps to avoid the pressures of profit-hungry shareholders. Triodos is once again awarded the Best Buy in this guide due to the strength of its environmental reporting and ethical policies.

Changes since the last guide

Previous Best Buys don’t quite make the cut this time.

  • Unity Trust performs well and has a clear and well-established commitment to providing banking services that have a positive social impact. However, its ethical policies are far less robust than those of Triodos.
     
  • Falling even further is CAF Bank. The decrease in its Ethiscore is because of the investment funds that it offers for charity investors. Though not direct investments from the organisation itself, its own named funds hold equities in a number of unsavoury sectors including oil and tobacco.
    As there was no narrative to explain this, CAF Bank lost half marks across all our categories. It still received some positive marks for being a charitable organisation and for providing services exclusively to not-for-profits.
Image: Business and charity bank accounts

Worrying times for businesses

It has been and continues to be, an extremely difficult period for many small businesses. As COVID-19 brought most non-essential economic activity to a halt, the government launched waves of support packages for struggling companies. However, these hundreds of billions of pounds did not make their way directly to businesses. Instead, they were in the form of guarantees for banks that provided the loans.

This meant businesses were obliged to take on more private debt in a pandemic, whilst the banks were reassured. Unsurprisingly, this reassurance was not passed on to borrowers. Banks came under fire for demanding personal guarantees from those wishing to access government-backed loans. Further criticism was directed at banks’ inability to approve loan requests with the necessary speed. This perhaps demonstrates more the inadequacy of banks than serious malpractice.

The shift of UK mainstream banking in the last few decades towards financial speculation and real estate lending led to a neglect of productive small- and medium-sized businesses – the ‘real economy’. The focus of banks on easy profits in the financial and housing sectors meant less emphasis on branch-based ‘relationship banking’. The resulting reduced capacity and expertise in providing quality services for small businesses amplifies banks’ difficulty processing loan requests.

Though these are exceptional times and loan demand has been incredibly high, the crisis has further underlined the misalignment between mainstream banks and the needs of small organisations.

The big five: dominance in the banking industry

For all their neglect of the small business sector over the years, the big banks remain dominant in the provision of business accounts in the UK. According to market research, Barclays, Santander, Lloyds Banking Group, HSBC, and RBS Group (now NatWest) hold 85% of the main accounts of small businesses.

This is hardly surprising – switching is rare, physical branches are still important for financial advice, and many business directors prefer the ease of using the same bank for business as they do for personal finances.

Interestingly, as a condition of its government bail-out, RBS has been tasked with boosting competition in the SME business banking sector. A pot of £425 million has been used to support challenger banks to increase and improve their offerings for small businesses. A further £275 million is being used to incentivise RBS business banking customers to switch banks.

Most of the first pot of cash has gone to challenger banks such as Metro, Starling, and Tide. But the scheme has been criticised for being opaque and having made questionable decisions. Serious irregularities were identified on Metro’s balance sheet before it received £120 million, and Starling’s CEO had a close relationship with the executive director of the body overseeing the distribution of the funds. Business account switching has seen a steep increase, in part due to the incentives of the scheme.

However, it is questionable how much of a shake-up will really be delivered by these packages. Notwithstanding the manifold issues, including a lack of transparency in awarding funds, the scheme appears to leave the power of the other four banking giants relatively untouched.

New challengers

It’s clear that in a bid to disrupt the ‘legacy’ high-street giants, most new banks are focusing on digital services. This makes sense, as the vast majority of small business’s financial activity is now conducted online.

After price, quality online and mobile banking is the top priority for small business owners when choosing a bank.

The growing assortment of primarily app-based business account providers, including Starling, Monzo, Revolut, Tide, and Coconut, offer not only their own account but also access to software that can manage other bank accounts and company financial administration.

However, the inability to provide face-to-face financial advice, the one activity that small businesses still prefer to do in-branch, means the lack of bricks and mortar will continue to be a double-edged sword for online-only banks. New banks are certainly more ethical than the established names. However, it is an open question whether this will remain the case.

Starling Bank, for example, has some good statements on avoiding investment in certain industries such as fossil fuels and arms manufacture. But its environmental reporting and transparency commitment is not comprehensive.

The Starling website also names its leading financial backers as Harald McPike, reported to be a “secretive Bahamas-based investor”, and Merian Global Investors.

Merian was recently acquired by Jupiter Fund Management PLC, a company that receives Ethical Consumer’s worst rating for likely use of tax avoidance strategies. However, a lack of clear linkages between the companies means Starling currently avoids losing any Ethiscore marks. With Starling’s sights set on rapid growth and an initial public offering in the coming years, it will have to work hard to not let its first ethical steps be diluted by the world of unethical finance.

In some ways, the Co-operative Bank remains a better option than these challengers because of its crystal-clear ethical policies. It also retains a small but diminishing branch network and a co-operative union of customers.

Community groups?

The brands ranked on the score table overleaf all provide current accounts for small business, but the offering for community groups and voluntary societies is much slimmer. Whilst the ‘challenger’ app-based banks listed above tailor their products towards making life easy for micro-businesses, they are still only for sole traders or registered companies. The banks that do have accounts for non-profit organisations tend to come with the stipulation of being a registered charity.

For example, in 2018 a customer of the Co-op Bank and member of Save Our Bank complained that they weren’t able to open an account for a voluntary association. In response, Co-op Bank clarified that their Community Directplus Account was only for registered groups: Charities, Co-operatives and Community Benefit Societies, Credit Unions and Community Interest Companies.

This policy was based on the bank’s risk appetite and regulation around fraud and money laundering. It acknowledged that it now didn’t offer anything for small community organisations, and that it would be reviewing the eligibility for its accounts in 2020.

When a small voluntary organisation does manage to open an account, they can miss out on important banking features, such as the use of a debit card. To help make sense of this, below we list the charity or community accounts on offer from the banks that achieve an Ethiscore of at least 5, along with their key features.

Accounts for charities or community groups

table: accounts for charities and community groups

De-risking update

In 2018, we reported on the issue of ‘de-risking’, a process whereby banks, in a bid to comply with new international regulations against money laundering, freeze or cancel bank accounts that seem risky. Unfortunately, many humanitarian charities rely on transferring funds to high-risk locations to carry out their work. This can raise red flags for cautious account providers – banks such as Co-op and HSBC faced criticism, in 2015 and 2017, respectively, for closing the accounts of NGOs with little warning.

Since this time, there has been less reporting of de-risking which suggests banks are applying greater care and thought before they freeze an organisation’s account. However, it is often unclear whether any concrete action has taken place.

In a 2019 report from the House of Commons Treasury Committee, Stephen Jones from UK Finance highlighted the need for better communication from banks, stating “In terms of access to banking, it is very important that, if someone is de-banked, they understand why they have been de-banked, why the institution has de-risked, and we are working with the FCA on better communications around that.”

The Sanctions and Anti-Money Laundering Bill, due to come into force once the Brexit transition period ends, would create general exemptions and licenses for NGOs carrying out humanitarian work in sanctioned countries. This has been received as a positive step by some charity bodies. However, whether this will represent a major break from current de-risking practice remains to be seen.

Company behind the brand

CAF Bank, and its parent charity Charities Aid Foundation, provide a hub for all forms of financial services linked to charities. Individuals and businesses can access resources and charitable giving accounts.

Charities themselves can access CAF Cash Accounts, a bank account specifically for not-for-profit organisations, as well as savings, investment options, loans and donating platforms.

Though CAF Bank is a keen supporter of charities – it reinvests all its profits into the charity sector – one could doubt if it is strong enough in its advocacy of ethical business. Its own CAF Venturesome loan programme invests in not-for-profits and social enterprises, but the investment funds that it offers to charities invest in an array of bad corporations. A CAF factsheet from 2018 showed the CAF UK Equitrack Fund (managed by Legal & General) to have holdings in Shell, BP, HSBC and British American Tobacco.

Furthermore, a 2016 report produced by CAF and the London School of Economics entitled “Beyond Integrity” was criticised by human rights campaigners for promoting corporations as a positive force in advancing human rights. War on Want called the report a “tool to whitewash the exploitative nature of many private sector industries, from the extractive companies through to fashion and electronics brands.”

Want to know more?

If you want to find out detailed information about a company and more about its ethical rating, then click on a brand name in the Score table. 

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