A widely anticipated report into the UK banking industry has revealed a lack of “effective competition” that means banks “do not meet the needs of small and medium-sized enterprises”.

The joint report by the Competition and Markets Authority (CMA) and the Financial Conduct Authority (FCA) will likely act as a precursor to a formal market investigation.

The SME banking market in the UK is worth about £2 billion.

Despite high-profile attempts to foster competition between banks there were several areas of continued concern, including barriers to new banks entering the market and lack of movement in market share between the established players.

There was also evidence that many customers saw little difference between the offerings of different banks, while levels of ‘shopping around’ or switching banks remains low.

Alex Chisholm, CMA chief executive, said: “Despite some positive developments, significant competition concerns remain which mean that customers may not be getting consistently good service and value from their banks.”

Responding to the findings, Lee Hopley, chief economist at the Engineering Employers Federation, said there was “insufficient choice, a lack of transparency on services and difficulties,” and that these were “exacerbated by the financial crisis”.