New bank plans to pump £600m into Yorkshire

GBB plans to lend £3bn in total - primarily in the North - to SME builders who are currently starved of traditional bank funding to build in places which are in desperate need of new houses.

The five-year plan aims to fund up to 25,000 new houses plus hundreds of commercial buildings.

Speaking to The Yorkshire Post, Steve Deutsch, chief executive of GBB, said he expects to lend £400m to fund the building of 5,000 new homes in Yorkshire and another £200m to fund the construction of up to 150 commercial properties in the region.

“The Government has long since said it wants 200,000 new homes built per annum,” he said. “The reality is only just over 100,000 are built. “There are many small construction firms that are seeking finance. We know that 46 per cent of them are struggling to get finance. And we know there is therefore a clear gap in the market for a new bank to enter that space.”

GBB will provide secured loans of £1-5m to experienced residential and commercial property developers and small construction businesses.

Funding will come from the bank’s retail savings in common with existing challenger and specialist banks.

Although the bank is headquartered in Newcastle, there will be a sales team in Yorkshire who will seek appropriate opportunities for residential and commercial projects across the region, Mr Deutsch said.

He added that, initially, they will focus on Yorkshire’s cities, including Leeds and Sheffield.

He believes that pumping money into small house builders is ‘part of the answer’ to solving Britain’s housing crisis.

“There has been a squeeze on SME construction builders. I think it’s a good thing that we are funding, small scale projects that take a plot of land and put 10 or 20 units on it, which simply would not be of any interest at all to the bigger players,” he said.

Mr Deutsch said there had been huge interest from property developers and small construction companies following the announcement of the new bank last month. “I’ve got an order book already that I could start lending to now if I had a banking licence,” he said.

GBB expects to receive its provisional banking licence in the third quarter of 2020.

The bank is in the process of raising £200m over two phases, with the first tranche to complete the bank build and provide the initial regulatory capital required for the bank’s authorisation with restrictions later this year. GBB will offer savers competitive fixed rate savings products via a digital self-service platform.

Mr Deutsch said he hoped the bank would be in a position to start lending in the second quarter of 2021.

“I think it’s an unfortunate state of affairs that there's a bit of stagnation at the moment in terms of residential property builds when we know that the demand far exceeds the supply, he said.

He added: “So we hope in our own small way we can contribute to everybody's efforts to try to correct that position.”

State of the the North

In 2018, research found that only half of under-40s living in the North can afford to buy a home and Yorkshire and Humber needs around 6,000 extra houses built a year to solve the crisis.

The region needs 18,900 homes building every year, far more than the 12,600 that were built last year, to fix the housing shortage, according to the National Housing Federation, which represents housing associations, and the Crisis homelessness charity.

Unlike most estimates, the innovative new research – conducted by Heriot-Watt University –calculates how many homes are needed to address the existing shortage of houses, as well as the future demands of the growing population.

The study also suggests the types of homes which need to be built, calculating that Yorkshire and Humber needs around 5,500 affordable homes for people on the lowest income, more than the 1,800 built in the region last year.

Last year, the federation estimated that 8.4 million people in England are living in an unaffordable, insecure or unsuitable home.

It said analysis suggests the housing crisis was impacting all ages across every part of the country.

It includes people facing issues such as overcrowded housing or being unable to afford their rent or mortgage.