Where to go when you don't trust your bank manager

Advice for SMEs.

Whether that business is large, small or part of the squeezed middle, there is little doubt that the fight to find and keep customers - and indeed to make money from them - is harder than it has been for a long time. One area where this is very evident is in the continuing struggle to access funds. Many owners of small and medium-sized businesses are still finding it difficult to get the funding they need from their bank.

The banks counter this criticism with a valid argument that the demand simply isn’t there and many would-be borrowers simply don’t want to take on more risk at a time of great uncertainty. Nevertheless, figures reporting the number of loan applications turned down suggest that the banks are still busy taking risk off their balance sheets and as a result are either refusing to lend at all or setting very high prices on their lending.

While it is clear that the banks are in a difficult position — castigated for being both too reckless and now for being too conservative — there are some very serious long-term implications from the apparent breakdown in relations between small business owners and the banks.

It wasn’t all that long ago when bank managers were the most valued and trusted advisors for those running small businesses. 

But as a recent survey (organised by Hitachi Capital Invoice Finance, which admittedly competes directly against banks to provide an alternative means of finance) shows, trust in bank managers is currently low. Only 21 per cent of SME owners questioned said they would trust advice from their bank manager. While it’s easy to dismiss the report’s findings as a PR exercise, they tally with other polls measuring the general public’s opinion of bankers (notably the Edelman’s Trust Barometer).

Put a group of business owners together in a room to talk about finance and it won’t be long before one or more bemoans the loss of personal banking relationships and the switch to centralised, call-centre style customer service. The days of a local branch manager having a close relationship with local businesses and being able to make appropriate lending decisions (possibly over a round of golf or a G&T) are gone. For some the more strategic overview of a regional risk committee makes more sense in the modern age. But while we all welcome that added professionalism, it’s difficult not to feel that something has been lost in translation. Many business owners would welcome a move back to a more responsive and locally aware banking system.

If business has lost trust in banks, what about other advisors? In his inaugural address in June ICAEW president Mark Spofforth made it clear that rebuilding trust in the accountancy profession was a major objective for his year in office.

“It worries me deeply that the profession I joined isn’t held in the same esteem that it was when I started out as a trainee”, he said, before adding that these concerns are shared by other qualified professionals.

On the evidence of this survey, things are already improving. Hitachi found that 43 per cent of respondents trust the advice they were given by accountants, a far higher score than for any other type of advisor. This is excellent news for a profession that has experienced considerable self-doubt in the wake of the financial crisis.

There is a long way to go, but the importance of such a key customer group being happy with the advice they get from accountants is underlined by further research from the technology company Portal. This piece of research was into the importance consumers place on service. It found that 52 per cent reported they would change supplier as a result of poor service. See a name and shame graphic listing some of the worst offenders.

If trust in the accountancy profession is to be built, then chartered accountants in firms of all size and shape will have to continue to provide excellent standards of service and to provide insightful and meaningful advice, especially to business clients. As Spofforth rightly pointed out in his inauguration address: “Trust has to be earned – and once lost it can take years to rebuild. It is fundamental to a well-run economy and to a properly functioning society. And it is a concern, a worry that only we as a profession can address.

"We need to show that we deserve people’s trust and we need to work hard to earn it.”

This article first appeared in economia.

Photograph: Getty Images

Richard Cree is the Editor of Economia.

Photo: Getty
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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.