The importance of a supportive banking culture

I started an estate agency business, Hunters, in April 1992 in the midst of the (then) biggest recession in the financial and housing markets in living memory. Despite the obvious challenges, we were full of optimism for the future and had three very simple objectives; to become a market leader locally and then nationally, to have a lot of fun, but most importantly, to provide a brilliant service to our customers.

The starting point for any business must be to first understand what your customers want and then try to work out how to become profitable in the process.

We were never shy about wanting to make a profit. To offer a great service you need to invest in people and processes to get a fair return on your investment. If your returns fall below the cost of capital your organisation will eventually fail. And those who need to keep plugging the financial gaps will eventually lose interest.

Even 27 years later, we still have moments when we have to remind ourselves that any new business initiative or sales opportunity has to start with what is right for our customers, rather than what is right for our business. When the two coincide, we know we are onto a sure-fire winner.

Five months after our opening, the deepening crisis culminated in Black Wednesday when the government resorted to the desperate measure of increasing interest rates from 10% to 12% and then again to an increase of 15%. Our already struggling business faced almost certain ruin. When our bank returned cheques made out to our most important suppliers, our relationship manager said to us “we’re all in business, and this is just business”. Somehow, we made it through the first year and almost miraculously the market started to come back to life in 1993 as cash buyers started to invest on the back of the Assured Shorthold Tenancy reforms and the ability to pick up bargain buy-to-lets.

The relative plain sailing of the next 15 years led to overconfidence and overexpansion. This resulted in Hunters being terribly ill-prepared for the financial crash in 2008. Our brilliant Finance Director, Ed Jones, arranged for us to meet an insolvency practitioner regarding a pre-pack, as the worst looked like coming to the worst. Determined to avoid this failure, we scythed away large parts of our business, reducing headcount (from the top down) from 210 members of staff to 65 inside six months.

Our bank was tough but fair and we survived. By 2011 we were flying again and bought the franchise division of Countrywide. We floated the business on AIM in 2015 and our business is now a 200-office strong national network employing around 1,000 people. Our management team has been with us almost from the start and they are, without doubt, the reason we survived and prospered. There have been some great times over the years, and some very tough times, but never any bad times.

Despite the fact that we have been fairly treated by our bankers for vast majority of the last 27 years, at times of crisis UK banks take a very short-term approach to their own business situations and do not always demonstrate the level of patience and understanding needed to help good businesses get through down-cycles.

The common thread in the many SME stories recited in numerous parliamentary debates was that when things go wrong with your bank you face an uphill and often insurmountable battle to get justice.

Our aim at the All-Party Parliamentary Group (APPG) on Fair Business Banking is to provide a remedy for the inequality of arms, resources and information between SMEs and banks and to level the playing field between them.

We are currently working with the CBI, the FSB and other business representatives, as well as seven participating banks, to design and implement a new Business Banking Resolution Service (BBRS), which will, for the first time, provide an independent dispute resolution mechanism for larger businesses with complaints about their banks and other financial services providers.