The uncertainty caused by Brexit? The skills deficit? The dire quality of digital connections in vast swathes of Britain? The gridlock on our roads? These are all deep-rooted problems, I’ll grant you, but there is one issue that hangs like a cloud over all our economic prospects and there is no sign of it blowing away soon.
It’s the collapse in the relationship of trust between SMEs (small-and-medium-sized enterprises) and some of the major banks. The mis-treatment of SMEs by these banks has destroyed businesses, wrecked marriages, and according to campaigners, pushed some victims to the brink of suicide.
Small firms are the life blood of the UK economy. If they stop securing the support they need from the big banks they will be unable to grow and we will all suffer. There will be fewer thriving small firms offering jobs to local graduates. Productivity will stall and the UK will fall behind its economic rivals.
It’s not hard to understand why so many small firms view some of the banks with suspicion. Many fear the banks will turn nasty if their business encounters problems during a downturn.
Earlier this year, a group of MPs branded the findings of a report into the Royal Bank of Scotland’s mistreatment of small businesses “disgraceful” after wielding parliamentary privilege to publish the dossier. The previously withheld document described “widespread inappropriate treatment of customers” by the bank’s Global Restructuring Group (GRG).
The mistreatment of customers by GRG led to “material financial distress”, according to the 350-page report, which was published by the Treasury Select Committee under parliamentary privilege.
To quote the committee chairwoman Nicky Morgan: “The findings in the report are disgraceful. The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property.”
The committee said there was “overwhelming public interest” in shifting the Global Restructuring Group report into the public domain after it was widely leaked. The move came after Andrew Bailey, head of the Financial Conduct Authority (FCA), was ordered by the committee to publish the document. However, he said the release “proved impossible” for legal reasons. This is despite the fact that the FCA was set up “to get a fair deal for consumers” and had commissioned the report as long ago as 2014.
Let that point sink in. Almost four years after the report was commissioned, the FCA had still not got around to publishing it, despite the overwhelming public interest in its contents. Many of the bosses of the small firms who had made complaints against RBS have been driven to despair.
For them, justice delayed was truly justice denied. In response, RBS stressed that the culture, structure and way the bank operates has changed fundamentally since the period under review.
This terrible saga is an indictment of the current regulatory system. Critics - such as the All Party Parliamentary Group on Fair Business Banking - are demanding sweeping changes.
Here’s a two-pronged attack which I believe will shore up confidence in the banks. Firstly, we must have an independent inquiry into misconduct committed by the financial services sector. Witnesses must be called to shed light on the cultural weaknesses within the banks which allowed small firms to fall victims to the bullies.
Secondly, we must have a new regulator answerable to MPs, and not the banks. If the FCA cannot provide speedy access to justice for victims, then it must be scrapped. The fact MPs had to use parlamentary privilege to place the GRG report in the public domain tells you all you need to know about the FCA’s ability to handle disputes involving SMEs. It’s time for a new chapter, written by a regulator who strikes fear in the banks.