Of Pious Hopes And Safety First

20th August 09 – Of pious hopes and safety first

I so remember the MD of a Price Waterhouse client (Coopers was a rival then) branding my main recommendation as a “pious hope”. Ironically, his division actually made bank notes but, as far as I ever knew, did not actually issue them (unlike someone we could mention). I also remember thinking his little speech that followed had an element of sanctimonious twaddle about it, but in the interests of client relations, desisted from saying so.

A certain UK national broadsheet, and on the day of their highest circulation, carried one full page in full glorious colour and three three-quarter pages, of advertisements from RBS about their avowed help to customers in this time of stress and specifically in one advertisement the help given to a niche brewer in purchasing more pubs. It did not mention the reason for the pubs being on the market. Such huge publicity spend was spread also over other broadsheet newspapers. All this gelled nicely with the B of E’s QE programme and the dressing-down such banks had been given by the Treasury for not trying harder to help small businesses. The trouble is it was all, in the main, barely camouflaged deception. I have a letter from this same bank to prove it. Safety first until we have our money back – that is the true policy.

The Insolvency Service has just announced that 5,055 companies in England and Wales were liquidated in the second quarter of 2009, a 39.1% year-on-year rise. To compound this, the availability of credit insurance has declined at the fastest rate ever. In terms of financial help, things could well get worse. The big four UK based banks now have over 80% of the market and unless the investment trusts (see an earlier article) get involved, it can only get worse.

The B of E has revealed that collectively the high street banks lent £14.7bn less in the second quarter of 2009 than in the first quarter and interest rates (not to mention rearrangement fees and visit fees) on commercial loans and overdrafts were way above the 0.5% bank rage.

The moral of this diary entry is never, ever come to rely on a high street bank if you are a small to medium sized business. To think you have a proper “relationship” would be to hold a pious hope.

More comment at http://www.jgwalkersmith.co.uk