We constantly hear that banks are not lending and the economy is being held back as a result. But why should that be? Steve Jordan, Editor of The Mover, had a recent experience that shed some light on the phenomenon.
Our blessed banks, the architects of our current financial floundering, destroyers of property markets worldwide, thieves of business confidence and dealers of the cruellest blow to hit the moving industry in living memory, tell us that they have money to lend to business but the demand is still very low. It’s all our fault, not theirs. Balderdash! They are not being economical with the truth, they are simply lying – and they think that we are all too stupid to notice. Sorry chaps, nice try.
A good friend of mine recently wanted a small business loan. He wasn’t desperate but his business is looking forward to some interesting opportunities during 2013 and he wanted to be sure he had the funds to take advantage of them without running into cashflow problems. He had been a customer of Barclays Bank for 30 years both for personal and business banking. He had never been overdrawn, was not in arrears with the HMRC or the VAT, had never been bankrupt, had never missed a payment of any kind and Barclays had accepted that his account was in very good order and his business was managed professionally. Getting a few quid shouldn’t, therefore, have been a problem.
He wanted £25,000 – a modest sum by most standards. Barclays was willing to lend the money and, considering the enviable state of his account they would offer him a competitive and concessionary rate of just 16%. What! He assumed that they were joking but then remembered that financial institutions are not well known for their sense of humour. To borrow £25,000 for 18 months was going to cost him over £6,000. Crackers! Of course there is little demand, at that price I am astounded that there is any demand at all. And when you consider that the bank is borrowing the money for virtually nothing, it is close to extortion, in my opinion.
On questioning, the bank explained that the rate had to reflect the risk. What risk exactly? There was easily enough equity in the business to cover the loan, all the directors had exemplary credit ratings, and my friend was required to give a personal guarantee anyway. What risk? No risk!
What really gets up my frock is that Barclays was supposed to be a trusted partner that could be relied upon to provide my friend with sound business advice, yet they were encouraging him to take what a five-year-old could see was a daft financial decision. Whose side are they on? Their side, not ours. They appear to be relying on the fact that some people are too desperate to have a choice or too stupid to realise that they are being led astray by the very organisation that they should be able to trust above any other. It’s a betrayal, a wicked, calculated, predatory act of attempted financial rape and the bank should be damn well ashamed of itself.
When Anthony Jenkins took over as CEO of Barclays last year he was reported as saying: “I’m a transformational leader, and I have every confidence that my business acumen, general experience in banking, and the skills and talents of the team will enable me to continue to take Barclays in the right direction.” Well Mr. Jenkins, a little more transforming yet to do I fear.
Even the Governor of the Bank of England expressed his disapproval at this type of behaviour when he wrote to a Mr. Mike Benson, commenting on his bank’s refusal to lend him £10,000 towards the cost of a new van. Sir Mervyn King said: "I can fully understand how maddening that, and the behaviour you describe from the banks you have spoken to, must have been." Mr. Benson eventually bought the van without the loan.
On a wider stage it appears that the government’s Funding for Lending scheme seems to be faltering – surprise, surprise. The Bank of England figures show that net lending in the last three months of 2012 was £2.4bn less than in the preceding three months - despite participants in the Bank of England's Funding for Lending scheme drawing down £9.5bn of available funds.
So, what are the consequences? My friend will take his business opportunities and will, hopefully, be able to do so from his own resources without having to sell too many of his children into slavery. But at what cost? His business will need to be cautious to manage its cash flow carefully, not invest in anything that can possibly wait, and will manage with the staff it has despite really needing an extra body. His family will probably go without a holiday this year. The three-year-old car will be kept a little longer. His wife will have to wait for her conservatory until next year. And economists scratch their heads about why growth is remaining stubbornly sluggish. Well I can tell them why and I’m not supposed to know anything about economics.
This is bonkers banking. They drag us into the mire then stand on our heads as we struggle gasping our last. There was a time when a bank manager was a professional, someone who would exercise judgement and use his skill and experience of the human condition to make calculated decisions for the mutual benefit of his employer and his customers. What they have degenerated to is caricatures of themselves, lending sunny-day umbrellas and demanding them back as the clouds gather, building resentment, bitterness and bile in a business public that has little choice but to cower beneath their domination.
Well, Mr. Jenkins, my friend did have a choice. He told your people to piss off. It was good for his self respect, somewhat cathartic and the right decision for his business. It’s a shame you tried to swindle him though, and a shame too that it’s such a disaster for the economy in which our prosperity, including yours, so fundamentally depends.
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