17th January 2023 at CHAPEL EN LE FRITH GOLF CLUB

Driving back that Friday morning, I heard Chancellor Jeremy Hunt’s Bloomberg speech about the “productivity paradox” and the need to encourage recovery and growth in this country. If he had attended our last two meetings he’d have heard some uncomfortable truths about unexpected consequences. I’ll come back to that in a moment.

Our session with Lloyds had been postponed since September as it clashed with the late Queen’s lying in state, but it was a warm welcome for Geraldine Boylan, Corporate Affairs Director who arranged it, David Golightly, Regional Manager for Business and John McMunn, Area Business Manager for Manchester and Merseyside.

Dave started off, saying he covered the whole area from Lincolnshire to the Scottish borders, 682 branches in all. He’s been in banking 18 years, all with Lloyds and recently moved into managing on the business side. “Business Banking” in Lloyds is a turnover from zero to £3 millions. He is currently upskilling all the staff in branches so they can deal with business queries as well as personal banking. Dave’s LinkedIn profile says, “The core purpose of the role is to support the ‘Business Banking’ face to face strategy for the facilitation of new business through exceptional levels of customer service whilst effectively managing operational risk and supporting the Helping Britain Prosper campaign. My key achievements have been, adopting a customer perspective, creating an entirely customer centric vision within my Region.”

At this point however, there was something of a chorus of disagreement from members listening, who pointed out that rather than any skill shortage within branches, it’s the lack of bank branches that makes communication with small businesses very difficult. Paul Fox reminded us that 95% of all businesses in the UK have fewer than 9 employees; if we want these millions of “micro-businesses” to prosper and grow, then we have to look after them, mentor and nurture them, much better than we are doing at the moment.

Dave said they are indeed getting out into the community, into High Street businesses and onto industrial estates. Members replied that that doesn’t cover Work From Home, which in an area like the High Peak is a lot of operators – nor does it cover the white van man, the self-employed who are on the go long hours. That’s where popping into a local branch was a big help, and is increasingly no longer an option.

A question arose as to why the banks are not lending at the moment. One problem, Dave said, is that so many small businesses are already in debt, having received Covid Business Interruption Loans (CBILs) which kept them going during lockdown, but which now carry interest and are due to be repaid (the funds were government-guaranteed but came from banks).That means, no additional lending to expand, to move premises, to replace stock or equipment. Banks are stuck as no responsible lender want to tip a client over the edge of excess indebtedness; but little growth is possible without additional money. This is a no-win situation.

John McMunn then spoke. He’s been in retail banking 25 years and was a branch manager; he hails from Stockport and first worked in their Marple branch. In 2016 he moved into business banking, where his job includes encouraging businesses to move from their current lender to Lloyds. He continued the conversation about Covid’s negative effects on banking – although bank employees were essential workers during lockdown, they could not engage with customers. Indeed in December 2020 Lloyds stopped opening any new business accounts at all for some months. That pushed customers towards online providers like Starling and Monzo, but “people are coming back to traditional banks now.” Lloyds are investing in the branch network – “It’s really important to us,” and he visits both branches and customers, as do the other 27 managers at his level.

John emphasised that Lloyds still have a bigger branch network than any rivals, and aim to have a branch accessible within 5 miles for everyone. Their flagship premises in central Manchester runs regular business networking hubs, on the second Tuesday in every month. Online is the Lloyds Banking Academy, a virtual round table which is available to everybody. They’re also keen to make the branches themselves more environmentally friendly, which given that they’re often in old buildings is itself some challenge.

Start-ups get a special focus; John has 100 specialist advisers they can call on (brand new businesses don’t have that Covid loan hangover, of course). He outlined the “Business Banking Financial Assistance” scheme, where the intention is to improve resilience through “forbearance” – presumably, giving a longer period to pay back loans. With rates of interest rising, that is not going to be easy. However Lloyds has an interesting partnership with Cambridge University in which shrewd questions can be put to a client – such as where supplies come from (in order to mitigate supply disruptions), or whether grants may be available towards green energy.  The idea is to get clients to think more widely about the issues that face them, just as our Business Club does.

It was an interesting and lively meeting, though our guests might have been nonplussed at the strength of some of the points put to them. See the photo above! But here’s my take on it.

Lloyds like many banks does not realise the impact of closing branches, which they’re still doing – 13 Lloyds branches closed nationally this January alone. The headline is often about elderly people; the unseen impact is on those micro-businesses, where time spent online is time they don’t have, whereas a competent and helpful staffer in a nearby branch is a godsend. Perhaps managers been doing their calculations by looking at branch revenues versus costs. Instead they might treat branch activities as a form of advertising and PR – a public face worth its weight in gold. If a small business can sort out its problems quickly and return to paying corporation tax on its (currently non-existent) profits, then the nation as a whole would benefit, and so would its banks.

I would add that the online offering will continue to be important – but it needs to be vastly more speedy, accurate and efficient than it is now.

And the government could start forgiving some of those Covid loans. The guarantee is part of the National Debt anyway, and it’d help many breathe a sigh of relief and look forwards again. These aren’t zombie companies, they are still functioning, but often barely holding on. Otherwise more will simply give up and walk away… and then the loans won’t be repaid at all.

Lastly, given what we learned from Ian Bingham FCA in December, the extraordinary regulatory burden needs to be reduced; it has good intentions, but costs businesses a fortune which can’t be spent twice. The Law of Unintended Consequences is snapping at our heels.