Banking Competition Remedies Ltd (BCR) has awarded £280 million of funding from the £775 million Royal Bank of Scotland ‘remedies package’ (put up to satisfy the conditions of its Government bail-out during the financial crash) to Metro Bank (£120 million), Starling (£100 million) and ClearBank (£60 million).

Responding to the announcement, Federation of Small Businesses (FSB) national chairman Mike Cherry, (www.fsb.org.uk) said: “It is a relief to see that this funding is finally being handed out, after a lengthy application process.

"For too long, the small-business banking market has been dogged by the lack of competition and poor customerservice. Properly used, the remedies package will go some way towards addressing these challenges.

“These sizeable sums must be put to good use. Where grants are being handed to well-established players — particularly those under financial pressure — BCR needs to step up its scrutiny.

“What we can’t have is a situation where this funding is swallowed up by day-to-day operations, rather than being dedicated to improving small-business offerings.”

Meanwhile, FSB says the Government should recognise the fundamental role played by small firms in local communities by making it easier for them to support those who are disadvantaged in the jobs market.

The FSB report Small Business, Big Heart shows that 80% of small firms contribute to local charities or the wider community in some way, with 38% donating their time and 32% providing skills, wider resources or mentoring to others.

The publication also says that small employers are already more likely to hire those from harder-to-reach groups than big corporations.

To increase this activity, FSB is calling on the Government to deliver on its manifesto promise of a one-year National Insurance Contributions holiday for firms that employ people from disadvantaged groups.

Mr Cherry said: “The contribution of small businesses to local communities is too often overlooked by policy-makers. We are not just generators of profits and tax; we are an active force for good in society.”