Bank of Dave: Money to Burnley

What can we learn from one man's attempts to set up a bank of his own?

9pm on Channel 4 tonight sees the first episode in a two-part documentary called Bank of Dave. It follows Burnley businessman David Fishwick as he attempts to open his own bank to serve the people and businesses of his home town.

The programme will undoubtedly provide more than a few salutatory lessons for British banks. I know this, not because I have been fortunate to witness an early screening but because I have read David's book Bank of Dave: How I Took on the Banks, which chronicles his endeavour.

David’s attempt at setting up a bank and turning a profit in 180 days is fascinating, and makes one wonder whether we need more Banks of Dave. I think we do.

The total start-up costs for Dave’s bank, including premises and equipment, were £9,000 and his weekly overheads came to £396. Some will argue that Dave’s costs are not indicative of what is required, and in some respects they are right. Banks probably need more than one laptop and a couple of notebooks. Even then, Dave shines an unforgiving light on the high overheads, including inflated salaries and cumbersome, out-dated IT systems, that burden many British banks.

Dave also shows that nowadays banks no longer have a monopoly on the services they provide. Dave's bank does almost everything a high-street bank does: it makes loans, takes deposits and even makes investments in property, stocks and shares. But because he wasn’t granted a banking licence by the FSA he can't call his bank a "bank" or say that he takes "deposits".

Increasingly people are choosing to avoid banks when accessing financial services. Dave himself gets advice from Giles Andrews, CEO of peer-to-peer lender Zopa. The government and regulators should not stand in the way of innovation and regulators could do more to ensure that people feel confident using new financial services that meet appropriate standards.

Dave’s most important insight, and this comes on page one of the book, is that "all banks are about people". This is something forgotten by many of Britain's large banks. Dave meets the people he lends money to, and he knows the property he invests in. His decisions are based on more than just credit scores or the value of the security. A bank that adopted Dave’s practices would have lower default rates, higher customer satisfaction, and greater ability to cross-sell products to loyal customers. The recent growth of Metrobank and Handselsbanken in Britain is testament to this.

The Bank of Dave not only casts many of Britain’s banks in a dim light but, perhaps inadvertently, it also demonstrates one of the inherent weaknesses in our banking system. Dave promises to guarantee every deposit in his bank with his own money. He also makes it clear that "we wouldn’t be lending what we hadn’t got", not leveraging the assets of his bank.

In these two respects Dave’s bank is relatively unique, and therein lies the dilemma. People want security but many also want leverage with the risk and reward this entails. Regulators would love it if all deposits in every bank were guaranteed by their owners but this would come at a price. Leverage and debt is now a sin under the government’s austerity drive but one of the commonest criticisms of the banks is that they are not lending.

In preparing to set up his bank, Dave meets David Buik, a market analyst, who tells him: "you’re not going to stop the banking system blowing up from time to time". Dave disagrees; his bank would be 100 per cent guaranteed. As Britain looks to reform its banking system it would do well to learn from Dave, but some of the lessons may be harder to swallow than others.

Dave Fishwick, in his bank. Photograph: Channel 4

Selling Circuits Short: Improving the prospects of the British electronics industry by Stephen L. Clarke and Georgia Plank was released yesterday by Civitas. It is available on PDF and Amazon Kindle

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.