RBS ‘unscrupulous’ over treatment of small businesses

ENTREPRENEUR Lawrence Tomlinson, an adviser to Business Secretary Vince Cable, has published a damning report which claims that Royal Bank of Scotland treated British businesses in an “unscrupulous” and “shocking” way.

Mr Tomlinson, the founder of Leeds-based LNT Group which includes sports car brand Ginetta and has interests including care homes and software, was appointed as an ‘entrepreneur in residence’ at the Department for Business, Innovation and Skills earlier this year with a remit to look at smaller firms who struggle to access bank finance.

While Mr Tomlinson’s report looked at the actions of all the major banks, it focuses on the operations of RBS’ turnaround division, Global Restructuring Group (GRG) and he claims he he has uncovered “very concerning patterns of behaviour leading to the destruction of good and viable UK businesses”.

Mr Tomlinson is calling for further investigation into this behaviour by the appropriate authorities and immediate action to stop this “unscrupulous treatment of businesses”.

He recommends that RBS and Lloyds Banks are each split up to create more competition in the banking market. The findings of his report suggest that there are occasions in which RBS is engineering a business into default in order to move the business out of local management and into their turnaround division, GRG.

He says this then generates revenue for the bank through fees, increased margins and the purchase of devalued assets by its property division, West Register. Once in GRG, Mr Tomlinson asserts that the business is trapped with no ability to move or opportunity to trade out of the position.  

He said: “The profit-making nature of GRG significantly undermines its position as a turnaround division, in which good businesses should be restructured and returned to normal banking. The temptation to get hold of assets and take additional profit from these businesses to boost GRG’s balance sheet is clear.

“From the cases I have heard, it is clear that a perception has arisen that the intention is to purposefully distress businesses to put them in GRG and subsequently take their assets for the West Register at a discounted price. This needs to be addressed and the conflict of interest removed.  

“There are many devastating stories of how RBS has wrecked good businesses and the ruinous impact this has on the lives of the business owners.   I look forward to seeing how RBS proposes to take forward the forensic investigation into this part of the bank.”

Mr Tomlinson calls for more competition to remove incentives to make short-term decisions purely in favour of bank profit rather than in the interest of the longer term customer relationship.

“Without competition in the banking sector, these scandals will continue to come to light and ever more business will be hurt in the process,” he said.  

“With RBS and Lloyds at the size they are at, smaller challenger banks will never be able to adequately compete to take their customers and drive true market forces. It is vital that RBS and Lloyds are made significantly smaller, removing conflicts of interest within the bank, and creating a number of smaller, purely retail/commercial banks.”

* The report is available at www.tomlinsonreport.com and businesses which have experienced similar treatment at the hands of the banks will be able to submit their cases anonymously on the website.