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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Carillion crisis: UK banks offer help to small firms, as task force launched - as it happened

Workers outside a Carillion construction site in central London.
Workers outside a Carillion construction site in central London. Photograph: Simon Dawson/Reuters

Afternoon summary

Time for a quick recap of the main points.

UK banks are falling over each other to announce support for customers suffering a financial hit from Carillion.

So, no excuse for the banks not to help distressed customers...

Elsewhere....

Updated

This is turning into a bidding war! HSBC have just told us they are going to provide up to £100m of support for its customers.

RBS offers £75m help to Carillion customers

Just in! Royal Bank of Scotland is creating a £75m fund to help its business customers who have been caught up in the Carillion collapse.

Hours after being criticised by MPs over its treatment of small firms in the past, RBS says it will do what it can to help in the current crisis.

This includes providing payment holidays and assistance with their overdraft, for customers whose cashflows have been wrecked by Carillion’s liquidation.

The bank (majority owned by the taxpayer) says:

We have over £75m available to support impacted small businesses and will make more finance available if required to top up this fund. We will also support our Commercial customers on a case-by-case basis with their individual requirements.

We have a proactive, principles-based approach that allows us to assist our customers when there are unexpected external circumstances. This support is available to customers banking with NatWest, Royal Bank of Scotland and Ulster Bank in Northern Ireland.

Les Matheson, CEO for Personal and Business Banking at RBS, is encouraging customers to get in touch if they need help.

Updated

Opposition MPs are also pushing the UK government to explain how Carillion’s pension deficit was allowed to swell in the run-up to its collapse.

The FT’s Josephine Cumbo has the details:

The UK government is being pressed to explain why a funding shortfall at Carillion’s pension scheme was allowed to widen before the construction group’s collapse.

Opposition politicians have written to the government and to the UK Pensions Regulator asking a series of questions about the shortfall, which nearly doubled from £317m in 2015 to £587m at the end of 2016.

About 28,000 members of Carillion’s 13 pension schemes face cuts to their retirement benefits, as payment of their pensions is taken over by the Pension Protection Fund, the industry fund that supports members of collapsed company schemes.

Accountancy firm Blick Rothenberg say the UK tax authorities could help small businesses hurt by Carillion’s collapse.

The UK tax rules allow companies to claim VAT relief on unpaid bills -- but only six months after the money was due. Carillion made some suppliers wait 120 days for payment, so in a worst-case scenario a supplier might face a 10 month wait before they can reclaim VAT from the government.

Daphne Hemingway, VAT Partner at Blick Rothenberg, says the

“In this instance, perhaps HMRC should also look at reducing the wait time for obtaining a VAT refund, especially as the government is trying to get large corporations to deal more fairly with small and medium sized businesses when it comes to the payment of bills.

Labour MP Pat McFadden is trying to get to the bottom of how Carillion lurched into liquidation on Monday morning.

He’s asked business secretary Greg Clark to answer 10 questions -- including how much the crisis will cost the taxpayer, and what discussions went on behind the scenes in recent weeks as Carillion tried to stay afloat.

McFadden says:

“We know that Carillion sought financial help from Government as it sought to put together a rescue package in recent weeks.

It is essential that we know what exactly the company was asking for and how the cost of that compares to the potential costs facing the taxpayer from liquidation.

Here’s the full list of questions:

  1. Press reports indicate that the court statement lodged by Carillion CEO Keith Cochrane says that the company made at least one if approach if not more to the Government seeking financial help. (a) How many approaches did the company make in recent months? (b) When did they take place and what sums of money were discussed?
  2. How much was Carillion seeking from its lenders in the discussions which took place before liquidation?
  3. Was there any discussion between the Government and Carillion’s banks about what would be needed from Government to avoid liquidation? If so, what was the sum of money being requested from Government?
  4. Was there an estimate made of the cost to the public purse of unwinding the business, the impact of liquidation on Carillion’s thousands of sub-contractors, sorting out and re-tendering or selling the existing contracts and all the other associated costs which will now have to be paid? Again, if there was an estimate of these costs given to Ministers before the company went into liquidation, what was the figure involved?
  5. Did the Government make a comparison between the cost to the public purse of any financial help the company may have been seeking and the cost to the public purse which would arise from liquidation?
  6. Why was liquidation chosen as the path for wind up rather than administration? Did the Government make a cost comparison of these two options? If so, what were the estimates of the costs involved that the Government had before them?
  7. When will the official receiver report on their investigation into corporate governance, including changes to the company’s renumeration scheme in 2016?
  8. Did Ministers or officials meet with the company’s management and trade unions in the run up to liquidation? If so when and what was discussed?
  9. Did the Government appoint financial advisors to help it make decisions about this matter? If so, who were they?
  10. What process does the Government have in place for dealing with Carillion’s thousands of sub-contractors, given the potential of a domino effect from the company’s collapse?

Jeremy Corbyn’s response to the Carillion crisis goes beyond a mere task force.

The Labour leader has vowed to rip up current procurement rules for outsourcing services, so that they would be run by the public sector by default.

Speaking to the Guardian, Corbyn said the next Labour government would end the “racket” of outsourcing, pledging:

“We will rewrite the rules to give the public back control of their services.”

Setting up a task force is the easy bit.

Now the government, along with union leaders and business chiefs, must protect Carillion’s workers, maintain public services outsourced to the group, and provide a helping hand to small firms who are suffering losses.

The TUC says it will bring five demands to this afternoon’s task force meeting:

  • 1) the transfer of private sector contracts to alternative providers with jobs, pay and pensions protected;
  • 2) a comprehensive support package for at-risk workers, apprentices and small firms;
  • 3) protection for agency and zero-hours workers on Carillion contracts to ensure they can recover unpaid wages;
  • 4) bringing Carillion’s public-service contracts back in-house to ensure consistent delivery and certainty for workers;
  • 5) an urgent risk assessment on other large outsourcing firms to avoid another crisis, and a moratorium on future outsourcing.

UK government launches Carillion taskforce

NEWSFLASH: The Government is setting up a task force to help firms and workers hurt by the collapse of Carillion.

The national task force will involve businesses, unions and the government, the Business Department has announced.

It wil meet later today, to review the impact of Carillion’s liquidation on Monday morning.

A Business Department spokesman said the move was aimed at supporting and monitoring the impact on small businesses and workers.

The TUC, which called for such a task force earlier this week, is pleased that the government has acted (although it has taken three days!)

TUC General Secretary Frances O’Grady says there’s no time to lose:

“Time is of the essence in dealing with this crisis. We need urgent action to protect jobs, pay and pensions. This cannot be a talking shop.”

More to follow:

Getting back to Carillion....and business secretary Greg Clark has applauded Lloyds for setting up a £50m emergency fund to help small firms.

He might even be trying to take some credit....

Another Labour MP, Kate Green, attacks RBS’s failure to properly compensate customers who suffered from its GRG division.

She says the bank has failed to provide proper information to claimants or the courts, making it harder for them to obtain redress.

Tonia Antoniazzi, Labour MP, says she also has constituents whose businesses have been destroyed by UK banks.

They have lost their homes, had their families torn apart, lost their health and their future

They have been living a hand-to-mouth existence, just so some banker can receive their obscene bonus.

MP: RBS's excuse over GRG 'does not wash'

Fresh questions were raised about Royal Bank of Scotland’s conduct yesterday, when an internal memo showed how staff at its Global Restructuring Group had been encouraged to put customers under pressure.

Called “Just Hit Budget!”, the memo described struggling firms as “basket cases” and urged staff to give customers enough rope to “hang themselves”.

Conservative MP Stephen Kerr says RBS showed a “contempt for small firms”.

Kerr actually joined RBS as a 16-year old, and he’s disappointed that the bank’s reputation has fallen so low since.

He also blasts RBS’s current CEO, Ross McEwan, for blaming a “junior” manager for the Just Hit Budget! memo.

Kerr says:

Frankly, a junior bank manager would not have written this kind of document without understanding that it conformed to the culture of the business that they were operating in.

I”m afraid that the chief executive is condemned by his own justification, which frankly does not wash.

Updated

Vince Cable: Nathan Bostock played role at GRG

Vince Cable speaking in parliament today
Vince Cable speaking in parliament today Photograph: Parliament.live

Liberal Democrat leader Sir Vince Cable has told parliament that he is disgusted that the full report into Royal Bank of Scotland’s Global Restructuring Group has not been published.

Cable also singled out one top UK banker, Nathan Bostock, who became RBS’s Group Chief Risk Officer in 2009 but is now running Santander UK.

Intervening in today’s debate on GRG, Cable says:

“Does the honourable gentleman share my disgust that four-and-a-half years after, as Secretary of State, I referred many of these cases [through] the Tomlinson report, to the FCA we still only have an interim report?

Is he aware that the BBC have actually seen a copy of the final report, which contains the following incriminating phrase: “management knew, or should have known, that this was an intended and co-ordinated strategy and that the mistreatment of business customers was a result of that” and that the head of GRG responsible for that policy, Mr Nathan Bostock, is now chief executive of Santander [UK]?”

Update:

A spokeswoman for RBS has told us that the City watchdog, the FCA, has confirmed that the most serious allegations against the bank had not been upheld.

The FCA said it was supported in its decision not to release the passages of the report by an independent reviewer, Andrew Green QC.

More here:

Updated

Another Conservative MP, Alister Jack, tells the House of Commons that he had experienced Royal Bank of Scotland’s “disgraceful and unscrupulous” tactics for himself.

After the financial crisis, he says,an RBS manager tried to force Jack’s self-storage firm onto a new, more expensive loan - charging 6% over base rate, not the 1% he had been enjoying.

RBS claimed that Jack’s firm was breaching its agreement, because the value of its property had fallen by 40%.

Jack disputed it -- and a valuation proved that it had actually doubled in value.

They were livid....and after that they made things impossible for us.

Updated

MPs roast RBS over its treatment of SMEs

Over in parliament, MPs are debating how Royal Bank of Scotland treated small businesses who got into financial difficulties.

Labour MP Clive Lewis says he didn’t initially believe the stories told by constituents who said they had suffered from RBS’s treatment.

One, Andrew Gibbs, was forced to buy an interest-rate hedging product that was meant to protect his firm, but actually drained it of cash and led to its collapse.

Many businesses were treated in an appalling way, Lewis claims. Some were put into RBS’s Global Restructuring Group simply for complaining about their service.

Another MP accused RBS of imposing ‘gagging orders’ on customers.

Conservative MP William Wragg had a dire tale, of a joinery firm called Pickup and Bradbury which was placed into GRG’s hands after RBS insisted on cutting its overdraft facility and saying it was owed £700,000.

The firm collapsed, Wragg says, due to RBS’s “aggressive repayment plans” which didn’t allow the company time to prove it was solvent.

Wragg says RBS is guilty of crushing lives and livelihoods in its search for profits.

He claimed:

This was organised fraudulent asset-striping on a massive scale, leading to the forced liquidation of many, many businesses, which people have poured massive effort into and were their livelihoods.

Updated

Lloyds Bank offers £50m support to Carillion SMEs

Newsflash: Lloyds Banking Group has set up a £50m ‘emergency fund’ to help small businesses who have suffered losses from Carillion’s collapse.

The money is meant to help SMEs avoid being driven to the wall because they are owed money by Carillion, or were expecting to carry out work for the company.

Lloyds is offering to waiving upfront arrangement fees on overdrafts and invoice finance facilities to existing customers. It could also offer “capital repayment holidays on existing loans” for six month, for firms in the greatest difficulties.

Lloyds adds:

  • Customers will also be able to use the fund to extend or draw new invoice discounting or factoring products, free of arrangement fees.
  • The Group’s support will also include guidance on working capital requirements to help firms unlock cash so they can manage their way through the difficulties they currently face.

Many previously healthy small firms have suddenly found themselves in real financial difficulties due to Carillion’s liquidation.

Jo Harris, Lloyd’s managing director for business banking, says the bank understands that small companies often don’t have the resources to cope with a significant loss of income.

She explains:

“Small businesses don’t normally have the cash reserves that larger businesses do, so any interruption to their cashflow can have a significant impact on their ability to survive.

By supporting our small business customers during this difficult time, we hope we can help as many businesses as possible to get back on an even keel as quickly as possible.”

Carillion’s collapse is a big blow to hundreds of apprentices employed by the firm, or by companies it contracted to help on construction projects.

Work has been suspended at several building sites, such as the Lincoln Eastern Bypass, creating, leaving workers in the lurch.

The Construction Industry Training Board (CITB) has now launched a new helpline and email address for former Carillion apprentices to get in touch, and for construction employers who are interested in helping them.

The helpline is 0344 994 4010 and carillion.apprenticeshipsupport@citb.co.uk.

Carillion ran training centres across England and Scotland, including at Birmingham, Glasgow, Liverpool, Manchester, Sunderland, Sittingbourne and Southampton. The CITB hopes to get apprentices back on the job, learning crucial skills like bricklaying and carpentry and joinery.

Sarah Beale, chief executive of the CITB, says:

“Our industry, which has consistently reported skill shortages and difficulties in attracting apprentices, now needs to step up and support these young people who have so much to offer. There is certainly no shortage of work in construction, with housebuilding and infrastructure particularly strong, so these young people can have great careers despite this setback.

Nationwide’s decision means that most of the Carillion staff employed on private sector have some certainty over their future.

That’s because, as of yesterday, nine in ten of the private companies who employed Carillion to provide services had pledged to keep paying the Official Receiver - at least in the short term while the liquidation is carried out.

But their long-term future is less clear.

Labour MP Rebecca Long Bailey, Shadow Secretary of State for Business, Energy and Industrial Strategy, says the government needs to do more:

“It is welcome that 90% of Carillion’s private sector contractors have suggested that they will continue to pay staff. However, this is just for the interim period and due to the Government’s failure to think long-term, the future is still not certain for most workers.

“This concession has not been the result of any real Government intervention. Apart from meeting a few banks to find a quick fix to a long-term problem, the Government has failed to stop small businesses from going under.

“The collapse of Carillion is a disaster for small businesses. Many now face missing out on unpaid fees which may well go back several months along with a damaging loss of business.”

The Green Party’s former leader, Natalie Bennett, says Nationwide’s decision shows that Carillion wasn’t actually providing much value.

Updated

Here’s some early reaction to the news that Nationwide is taking on Carillion staff:

Nationwide takes on Carillion staff after collapse

A Nationwide branch.
A Nationwide branch. Photograph: Jonathan Brady/PA

In a dramatic reversal of decades of outsourcing, Nationwide Building Society is going to in-source all the Carillion employees who were working for Nationwide.

They are believed to number around 250 workers, such as maintenance engineers in its data centres and reception and security staff.

In a statement, Nationwide said:

“Our contractors perform a vital and valued role for the society. During an unsettling time for Carillion employees we felt it was important to provide them with some reassurances.

“We are today announcing a proposal to bring all services provided directly by Carillion in-house, with Carillion employees becoming Nationwide employees from 22 January. This will provide clarity for those affected and ensure that services are maintained.”

Carillion was also indirectly responsible for more than 1,000 cleaners at Nationwide’s 650-strong branch network, where it had itself outsourced the work to third parties.

Nationwide says it will now contract directly with these third parties, which should protect those jobs too.

It says:

“As part of the wider supply chain arrangements we will also now look to deal directly with third-party suppliers that currently support the Carillion contract.”

Updated

The household spending survey also shows that Britons spent more on recreation and culture last year, mainly due to increased spending on package holidays.

That’s despite the fact that wages didn’t rise in line with earnings.

Hannah Maundrell, Editor in Chief of money.co.uk, says people need to be careful....

It’s surprising to see how many of us are spending on non-essential things like eating out and holidays. Families are still splashing the cash on package holidays and travel despite the fall in the pound after the Brexit vote.

If you’re starting to feel the pinch, now is the time to take a serious look at where you’re spending your money. Make a budget and stick to it, when you look back at bank statements you may be surprised how much you’re actually spending on non-essential items. Getting a hold on your fun money is key.”

The ONS have also produced this chart, showing where households spent their money last year:

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UK household spending returns to pre-crisis levels

Newsflash: UK household spending has finally returned to its levels before the financial crisis.

The Office for National Statistics reports that the average household spent £554.20 per week in 2017. In real terms (ie, adjusted for inflation) this is a return to pre-economic downturn levels.

Household spending
Household spending Photograph: ONS

The survey also shows that transport takes the biggest slice of household spending. The average household spending £79.70 a week on transport costs (either buying a car, running it, or paying for public transport).

Here’s more details:

  • Households in the 65-to-74-year-old age group spent nearly a fifth of their total spending on recreation and culture.
  • Households without children spent a higher proportion of their total spending on transport than households with children.
  • Average weekly spending of a 15-year-old was more than three times that of a 7-year-old.

Updated

Economist Rupert Seggins has also been analysing the RICS housing report:

Profit warning from Countrywide estate agency

Ouch! Britain’s largest estate agency has issued an unexpected profits warning, sending its shares slumping.

Countrywide, which owns a string of estate agents around the UK, reported that revenues and profits both fell sharply last year.

The company blames a “disappointing” performance in the final three months of 2017 -- another sign that the government’s changes to stamp duty haven’t stimulated the market.

Countrywide, whose brands include Taylors, Hamptons and Gascoigne-Pees, now expects to post earnings of £65m for 2017 -- down from £83.5m in 2016.

Shares in the company have slumped by 16% this morning.

In a statement to the City, Countrywide says that revenue from house sales and rentals both fell last year. Here’s the details:

Total income in the sales and lettings business for the full year is expected to be circa £360m, down 14% on 2016, reflecting a disappointing fourth quarter performance.

Income in the UK business is expected to be circa £205m, down 17% year on year, and in London is expected to be circa £155m, down 10% year on year.

Lettings income is expected to be down 4% at circa £169m, driven by an 8% decline in the UK, with London lettings revenue flat year on year.

Countrywide’s brands
Countrywide’s brands Photograph: Countrywide

Updated

Today’s report from the Royal Institution of Chartered Surveyors (RICS) also shows that fewer people have been making inquiries about buying a house.

RICS house price survey
RICS house price survey

Here’s City economist Sam Tombs of Pantheon on the RICS housing report:

Surveyors based in London are more optimistic about the stamp duty change.

RICS says that 28% believe abolishing the tax will help first-time buyers (compared to just 12% nationally).

That’s probably because houses in the capital are so expensive, so stamp duty has a bigger impact on prices.

Brian Murphy, head of lending for Mortgage Advice Bureau (MAB), explains:

In London, more than double the number of surveyors felt that it would have a beneficial impact on the market than those of outside London. Of course, this is reflective of the value of property in the Capital, where those purchasing for the first time can expect to save up to £5,000 under the new scheme.

What the surveyors say:

Oldman-based surveyor Richard Powell of Ryder & Dutton says there’s no sign that abolishing stamp duty for first-time buyers has helped:

The stamp duty changes didn’t seem to have an immediate effect so we will have to see what happens in the early part of 2018. Stock levels are very low.

Stephen Gadsby, of Gadsby Nichols in Derby, agrees:

Usual seasonal downturn in enquiry levels, instructions and sales. Very little impact as a result of stamp duty changes but too soon to tell due to time of year.

Philip Hiatt of Your Move in East Grinstead, reckons the wintery weather deterred people from popping into their estate agents last month:

[The market was] seasonally quiet and snowy weather also had an impact.

Stamp duty change for FTB’s so far has had little impact.

The agenda: Stamp duty cut fails to rouse First time buyers

Prime Minister Theresa May chatting with first-time buyer Laura Paine.
Prime Minister Theresa May chatting with first-time buyer Laura Paine. Photograph: Leon Neal/PA

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, business and the eurozone.

The UK government’s latest attempt to help first-time buyers onto the housing market are failing.

A new survey of Britain’s chartered surveyors shows that that axing stamp duty for many first time buyers ‘has failed to increase house sales’.

Instead existing home owners seem to have taken advantage of the move, and pushed their prices up instead.

RICS has reported this morning that the number of inquiries from new buyers actually dipped in December - after chancellor Philip Hammond announced the immediate abolition of stamp duty for first-time buyers, for all properties up to £300,00.

That stamp duty cut was one of the headline-grabbing moves in the budget, designed to lower the barriers to buying a new house.

But 86% of the surveyors reckon it hasn’t had any impact at all yet.

Simon Rubinsohn, RICS Chief Economist says:

“The initial feedback from the market doesn’t suggest that the change in the Stamp Duty regime announced in the budget is going to have a material impact on activity.

Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first-time buyer.

Two-thirds of surveyors reckon the abolishment of stamp duty for first time buyers will have “little consequence”, while just 12% felt it would result in higher overall activity.

It’s a disappointing finding. Not unexpected, though -- Britain’s budget watchdog warned at the time that it wouldn’t work.

It highlights just how hard it is for younger people to get onto the housing ladder, given the price acceleration over the last decade.

Surveyors also report there is a “lack of momentum” in the housing market at the moment. I’ll pull together some more details now.

Also coming up today

We’ll be watching the Carillion crisis, as unions demand more protection for thousands of workers on its private sector contracts.

Economists are digesting new Chinese growth figures, which show that annual growth ticked up to 6.9% last year. That’s a little stronger than forecast.

In the City, Whitbread, Royal Mail and Halfords are reporting results:

Most European stock markets are expected to rise this morning, but London might lag behind:

And later today, MPs will discuss Royal Bank of Scotland’s treatment of its small business customers.

It should be a bruising debate; yesterday, a memo from 2009 showed that RBS staff were told to let small businesses “hang themselves”.

The agenda

  • 1.30pm BST: US housing statistics
  • 1.30pm BST: US weekly jobless figures
  • Afternoon: UK Parliamentary debate on the treatment of SMEs by RBS Global Restructuring Group

Updated

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