The Competition and Markets Authority (CMA) has launched an investigation into the banking market for consumers and small businesses.

Pressure groups have long complained that major banks provide a poor service to start-ups and SMEs, with many firms seeking alternative forms of finance.

The investigation was first proposed in July and will look at the dominance of big high street banks as well as barriers preventing people switching accounts easily.

Welcoming the news, John Longworth, director general of the British Chambers of Commerce, said: “This is undoubtedly the right decision as businesses want more competition and greater choice in the banking sector.

“For many years Britain's dysfunctional banking sector has struggled to meet the needs of SMEs, impeding the growth prospects of some of our most promising young companies.

“This investigation represents a unique opportunity which must be seized, in order to deliver real change in the banking sector. We call on the government to commit to implementing the findings of the CMA's investigation to restore trust.”

But some of the major banks have described the review as unnecessary. BBC News reported a statement from Barclays, saying: "Various developments, innovations and stimuli are changing the competitive landscape in in relation to both [personal current accounts] and [small and medium enterprise] banking, and these must be given time to mature.”

The inquiry will report its findings in 18 months’ time, early in 2016.