The Bank of Ireland is beating a lonely path to ease the worries of construction managers. Since 1998 it has provided specific services to the construction industry, unique in the banking world. Its latest service, the Construction Reserve account, launched in April, offers a higher rate of interest than other instant-access business accounts. Malcolm Davies, senior manager of the construction banking division, explains that the bank has a historical connection with construction, but more than that, it makes good business sense.
"Two years ago, we reviewed our UK business and decided a sector strategy was the best way forward," says Davies. "We add value to what we do by having specialists from construction as part of the team. The clearing banks have so many accounts that you're just a number." Davies was previously finance director at Lovell Construction's head office, and works with Tom Kilraine, who was a chartered surveyor with Wimpey. The other two team members have banking backgrounds.
Davies claims that while offering higher interest rates may lose the bank money on one front, he is confident that the volume of businesses using the Construction Reserve account will make it worthwhile. Davies's team usually deals with firms having a turnover of £5m or more, though it will look at smaller concerns as long as there is a definable management structure and the business is profitable. The team looks after 3000 accounts at present, through 25 branches in England, Wales and Scotland. The Bank of Ireland also has agreements with Barclays, NatWest, HSBC and Lloyds/TSB, so customers can manage their account through their local branch, whatever bank that may be.
If the Bank of Ireland can see that contractors, who control 8.1% of GDP, can be good clients, why can't Barclays, NatWest and the others? Although most major banks have business specialists, they don't usually have a background in construction. Many banks have specific accounts for agriculture, for example, but not specialised construction accounts.
Some firms don't find this a problem. Sandy McArthur, financial controller for YJL, is happy with the service that oft-criticised Barclays provides his company. He doesn't think construction should be a special case, and that each business should be considered on its merits. Paul Maynard, accountant for Leadbitter Construction, and David Malligan, group financial controller at Morgan Sindall, are both happy with the service they get from Lloyds/TSB, although they point out that there are inherent problems in construction banking. "Cash flow is very lumpy, not like other industries," says Maynard. "There are unique financial arrangements in construction, such as bonds, and a banker needs an appreciation of the industry they are working in," adds Malligan.
“We add value to what we do by having specialists from construction as part of the team. The clearing banks have so many accounts that you’re just a number.”
Malcolm Davies of the Bank of Ireland’s construction banking division
Chris McGee, operational director at Knowles & Son, is not so welcoming towards the banks. Two years ago, the company he was then running, Kemp Stroud, went into administration because its bank wouldn't support the firm. He says banks "don't understand how the construction industry gets paid". He welcomes the Bank of Ireland's approach and points out that banks usually "don't differentiate between chartered builders and a man with a van. To them, it's all building."
Barclays has come in for particular criticism in the past few months: after closing 171 branches in March, chief executive Matthew Barrett was grilled by a House of Commons select committee in April over charges and board members' salaries. Out of the 450000 small businesses that bank with Barclays, 13% are construction firms, and its lending to the construction industry in the past three years has increased by £300m to £1.33bn. A Barclays spokesman said that rather than taking the Bank of Ireland approach and looking at particular sectors, it tailors each business account to the individual firm.
However, the managing director of a building firm in Northumberland, with a turnover of £800000, found the Barclays approach lacking. His firm is leaving Barclays for the Bank of Scotland. This follows 10 years of agitation with the bank. He says that he "complained bitterly" about bank charges and that Barclays "neither understood nor cared" about the needs of his firm. Barclays said for 10 years that it would close the company's local branch if he moved his account. When the bank closed the branch anyway, it was the last straw. As for the alternatives, he says the local post office services are not enough, and Internet banking seems too risky. This construction boss is not hopeful that government or trade associations can do anything to help.
Banks defend their behaviour. A spokesman for the British Bankers Association, the trade association for high-street banks, says that "everything is negotiable" and where a bank can accommodate a business, it will. "People have to realise that a bank is a supplier of services," he adds, and that closing unprofitable branches means banks can redirect resources to other areas, such as Internet banking.
The FMB knows that banking is an important issue. "For some time, small builders have been treated unfairly by banks," says deputy director general Brian Flint. He says that, despite the fact that small businesses can generate a lot of work for banks (even though they may be dealing with small sums), banks tend to ignore them. The FMB's next quarterly trade survey of members will look at banking, and after it has the results, later this month, it plans to consult with the DTI's small business advisory service, along with other trade outfits.
How Barclays branch closures have affected small builders:
Since Barclays closed its branch in Crowland, Lincolnshire, Ann Eastwood, secretary at local firm DSL Builders, has to leave the office unattended for over an hour, three times a week, to do the company’s banking, instead of the two-minute walk she had to her old branch. “I feel like we’re a number, not a customer, to the bank,” she says. “I feel completely let down and very angry at Barclays’ behaviour.” She doesn’t think the Internet is something she would be comfortable using, and that the Post Office is unsuitable for DSL’s type of business. A partner in a small building firm in a village in rural Norfolk also has to leave the office unattended every day, for about an hour, to do the company’s banking, instead of the ten minutes it used to take her. She is now losing an eighth of her working time each week. As compensation, Barclays has installed a PC-based account management programme at the firm’s office, free for a year. But the company has had to invest in a modem (cost: approximately £100) to use the system. The partner says she is happy with the service from Barclays staff, but that alternatives like Internet or telephone banking do not appeal. “People still like money in their hands, especially in a country town like ours,” she says.Alternatives to the high street
After the closure of 171 Barclays branches comes the expected closure of 60 NatWest branches as a result of its takeover by the Royal Bank of Scotland. With other high-street banks set to follow suit, it may be time to consider alternatives to the high-street banks. Here's a short guide to what's on offer: PC banking: This makes use of HOBS, the Home & Office Banking System. The bank supplies you with software to load on to your PC at home, which allows you to view account details and transfer money between accounts. Major banks offering this service include Lloyds/TSB, Barclays, HSBC, Bank of Scotland, Bank of Wales, Yorkshire Bank, the Co-op and Girobank. The Post Office: Although the Post Office offers services to personal customers of Lloyds/TSB, Barclays, the Co-op and Alliance & Leicester, at present only Girobank has a business service available at post offices. Lloyds/TSB and Barclays are piloting the use of post offices for small business customers. Telephone banking: Services available over the phone range from account queries to setting up direct debits and transferring money. Banks that offer telephone banking to businesses are Lloyds/TSB, NatWest, Barclays, HSBC, First Trust, Clydesdale, Yorkshire, Bank of Ireland, Girobank, the Co-op and the Norwich & Peterborough building society. Online account access: Most banks and businesses now recognise the importance of the Internet when it comes to processing accounts and company administration, and banks claim that resources saved by branch closures are to be redirected to this area. Although all the major banks have websites, not all provide Internet banking. At present, these banks provide access to business accounts via the Internet: NatWest, Bank of Ireland, the Co-op, Girobank, Royal Bank of Scotland and the Norwich & Peterborough building society. Internet banking: The only stand-alone Internet bank (or ebank) that offers business services is BankNet, a joint venture between MarketNet and the Secure Trust Bank. To have a business account with BankNet, you must have an annual turnover of under £100000, and not require hefty withdrawals or deposits. It claims to have found an electronic alternative to the cheque, but this is not yet available online. Visit http://dvanadecet.mkn.co.uk. Lloyds/TSB and HSBC plan to have Internet business services live by the end of 2000. Lloyds/TSB and Abbey National also plan to launch stand-alone ebanks. Mobile banking: HSBC has a mobile bank service that covers 100 different areas, visiting nominated towns and villages for up to two hours every week. Sessions with personal bankers are by appointment only.Source
Construction Manager
