Monthly Archives: September 2014

To SME friends on twitter

Dear David Cameron, Ed Milliband, Nick Clegg and other party leaders,

In the run up to the next election the owners and shareholders of 10s of 1000’s of SMEs who have been systemically abused by banks are wondering who to vote for and if there is any point? Over the last few years it seems there has been little difference in how the major parties have pandered to the banks and Corporates at the expense of the millions of small businesses in Britain. And while the present Government insists the economy is growing, the situation of banks refusing to fund SMEs while continuing to close them down, steal their assets and knowingly defraud them, continues unabated.

Not only do the banks continue with their unethical conduct to SMEs, we can assure you the majority of business owners find the regulators to be at best ineffectual and at worst biased towards the big banks. In all honesty we have no idea which party, if any, would be prepared to change that unethical status quo and support British businesses.

The following statistics come from BIS (beginning of 2013)

  • There were an estimated 4.9 million businesses in the UK which employed 24.3 million people, and had a combined turnover of £3,300 billion

  • SMEs* accounted for 99.9 per cent of all private sector businesses in the UK, 59.3 per cent of private sector employment and 48.1 per cent of private sector turnover

  • SMEs employed 14.4 million people and had a combined turnover of £1,600 billion

  • Small businesses** alone accounted for 47 per cent of private sector employment and 33.1 per cent of turnover

  • Of all businesses, 62.6 per cent (3.7 million) were sole proprietorships, 28.5 per cent (1.4 million) were companies and 8.9 per cent (434,000) partnerships

  • There were 891,000 businesses operating in the construction sector – nearly a fifth of all businesses

  • In the financial and insurance sector, only 27.5 per cent of employment was in SMEs. However, in the agriculture, forestry and fishing sector virtually all employment (95.4 per cent) was in SMEs

  • Only 22.5 per cent of private sector turnover was in the arts, entertainment and recreation activities, while 92.7 per cent was in the agriculture, forestry and fishing sector

  • With 841,000 private sector business, London had more firms than any other region in the UK. The south east had the second largest number of businesses with 791,000. Together these regions account for almost a third of all firm

24.3 million people equals a lot of votes and that’s without taking into account the millions of individuals damaged by the so called ‘credit crunch’ when banks were given billions of pounds from the public coffers with no reference to the public. That is a statement of fact – not a political point and many of us see little difference in the conduct of the last Labour Government to the present coalition Government. The banks and bankers get richer while the society and the small businesses that are such an essential part of the economy are continually ignored or deliberately impoverished.

We would like to know if any of the political parties are genuinely intending to support SMEs in the next term of Government? We’d like to know if that support is included, or proposed to be included, in any manifesto? And we would like to know what guarantees will be given that any promises made in the run up to the election, will be upheld? In the previous election we were all led to believe miscreant bankers would be individually held to account and bankers would not be handsomely rewarded for causing the austerity most of us live with. It has not happened and, if anything, our banks feel empowered to act immorally and even criminally in the knowledge any penalty will be levied against the shareholders by fines from the regulators. It started with new Labour and this situation has been proliferated by the coalition.

We would be grateful if anyone can clarify what we should expect from the next Government and whether any party is intending to support SMEs. The situation for many SMEs in this Country is catastrophic. We want change – we want to know who is prepared to instigate that change – we want to know where our millions of votes should go.

Yours sincerely

SME Alliance.

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Following on from yesterday’s Indy article about the HBOS Rights Issue, can we at least stop subsidising fraudulent conduct in banks?

Tom Harper’s excellent article questioning whether or not investors were given key financial facts regarding the HBOS Rights Issue in 2008, provoked some serious outrage on the ‘Twittersphere’ yesterday – and quite rightly so. http://www.independent.co.uk/news/business/news/hbos-accused-of-misleading-the-public-over-4bn-rescue-9701791.html

I don’t suppose the Government, Lloyds, the Regulator or the BoE will be happy with that line of investigation. Not least because it opens the door to a whole torrent of questions about how many other transactions, involving state subsidised banks, have been less than transparent?

And perhaps the biggest question will be – was the information in the Lloyds/HBOS Merger proposal, as accurate and transparent as it should have been?

I am sure Lloyds bank will say the HBOS Rights Issue was nothing to do with them as it pre-dated the merger. But in order for the Merger Proposal to be correct, it should have contained watertight data about the financial state of HBOS – which, reading Tom’s article, I’m not sure it could have? I’ve looked at the Proposal and it relies on financial accounts for HBOS and Lloyds TSB dating back to 2005 – although conveniently, it only relies on unaudited accounts for HBOS in 2008. Not that it makes much difference because, sadly and to add weight to yesterdays article, the Big 4 auditors appear to have been equally confused as to the solvency of the banks despite the audited accounts, as shown in another excellent article by Ian Fraser, November 2010: http://www.ianfraser.org/connolly-i-do-believe-that-auditors-performed-well/

What I find really upsetting about all this was brought home this morning by an article from the Positive Money site (following up on an article by Jill Treanor in the Guardian). The article dates back to December 2013 and explains, in very clear and simple terms, how banks continue to be subsidised and why. https://www.positivemoney.org/2013/12/uk-banks-benefited-38bn-big-fail-state-subsidy/ And of course, if we are still subsidising the part state owned banks – we are also subsidising bankers’ bonuses – which, considering neither Lloyds nor HBOS have managed to comply with the terms and conditions of the 2008 bailouts, seems entirely unjust not to mention bonkers. In a letter I received from the Treasury dated 15/05/09, Lloyds and HBOS agreed to meet the following terms:

A range of conditions are attached to the recapitalisation package. Lloyds TSB and HBOS have agreed that over the next three years they will maintain the availability and active marketing of competitively priced lending to homeowners and to small businesses at 2007 levels. They will also provide support for schemes to help people struggling with mortgage payments to stay in their homes and the expansion of financial capability initiatives. The remuneration of senior executives will follow strict guidelines – both for 2008 (when the Government expects no cash bonuses to be paid to board members) and for remuneration policy going forward (where incentives schemes will be reviewed and linked to long-term value creation, taking account of risk, and restricting the potential for “rewards for failure”). The Government will also be consulted on the appointment of new independent non-executive directors…”

Joining up all the dots, I begin to get a very clear picture of La La Land and it’s not pretty. As I am definitely a layman in these matters (albeit a fairly well informed one), I thought I’d take this opportunity to share my view of what’s happened over the last few years.

Round up of events in La La Land.

In 2008 and after exceptional spending sprees by both the banks and the public, the proverbial finally hit the fan and many banks ran out of money. The Government, terrified they’d have a repeat of the Northern Rock débâcle, gave the banks billions from the taxpayers’ coffers. As this resulted in mass austerity, the Government were loath to let anyone know exactly how bad a shape some of the banks were in (some were insolvent) and they certainly didn’t want the public to know the exact details of the billions being handed over, so they did their best to keep it all quiet. They (and the banks) even kept it quiet from the people being asked to invest in the banks via rights issues and/or sanction the HBOS-Lloyds merger, although they didn’t have to keep it quiet from institutional investors, because they were ‘in the know’ and had no intention of investing in insolvent banks.

The banks took the money but totally ignored the social responsibility that went with it (terms and conditions) in the same way they ignore little things like money laundering laws or Principle 1 of the FSA Principles of Business: A Firm must conduct its business with integrity. Actually I struggle to see how most banks comply with any of the FCA Principles: http://www.fca.org.uk/static/documents/handbook-releases/high-level-standards136.pdf Section 2.1

However, after the credit crunch the banks could no longer be seen to lend with reckless abandon (which was a bit annoying, as they rather liked basing bonuses on inflated loan books), so they invented other reckless and ingenious ways of making money – e.g crippling the SME sector and stealing assets. Best of all, having totally screwed up and taken everyone’s money, they came up with their most ingenious plan to date – they sold us all the simple concept that – if we didn’t allow bankers to keep taking bonuses, they’d walk away – and then we’d all be screwed. To make sure that dreadful day never comes, we continue to subsidise banks so they all live happily ever after.

That sounds like a pretty dark fairy story and the darkest bit is – it’s not a fairy story. So I hope somewhere, someone in authority (not mentioning any names Mr Tyrie) will have read Tom Harper’s articles, Ian Fraser’s articles and I’m hoping Max Keiser will invite Paul Moore back on the Keiser show to talk about the appalling behaviour of HBOS, Lloyds and other banks. Because, crazy as is it and despite all the rules, laws and regulators we have, I think our best chance of getting banking reform is to report bank misconduct to the media and then spread the word via Twitter? Of course, that could ultimately do enormous damage to some banks but I can see little alternative to this course of action. It’s a huge problem that while we definitely do have regulators, it seems La La land is out of their jurisdiction – which is the obvious reason they cannot do anything to penalise errant bankers.

*Here’s a thought – if we’re going to rely on journalists to clean up the banking world – maybe we should be paying our financial journalists (and their research teams) more and getting rid of regulators? We’d save a fortune and get some results.

Anyway, what upsets me most about all this is how we continue to let ourselves be mugged and my point is: If banks are intent on continuing to cheat their customers, destroy SMEs and refusing to compensate the people they defraud while insisting they still get huge bonuses – fine. It seems there’s little we can do about it. But can we please, please stop subsidising this conduct?