Derek Sach and RBS: Last of Fred Goodwin’s trusty lieutenants comes under fire over 'restructuring' tactics

Derek Sach placed at heart of the restructuring at RBS that drove viable businesses to the wall

Months ago he was being  fêted after helping nurse the stricken travel agent Thomas Cook back to health. Now Derek Sach’s ruthless restructuring unit at Royal Bank of Scotland has provided yet more evidence of the sickness at heart of the nationalised lender.

Lawrence Tomlinson, “entrepreneur at large” at the Department for Business Innovation & Skills, has accused Sach’s Global Restructuring Group (GRG) of forcing viable businesses to the wall purely to turn a profit for the bank. And a Bank of England report into RBS’s lending by Sir Andrew Large has now said that RBS has left itself open to accusations of conflicts of interest from small firms that fall into the clutches of the GRG given that West Register, an RBS business, was able to get property cheaply from distressed firms.

Read more:

RBS told customers to stop paying tax

Derek Sach: Last of Fred Goodwin’s trusty lieutenants comes under fire over 'restructuring' tactics

Editorial: Has RBS learned nothing from the financial crisis?

The Prudential Regulation Authority and the Financial Conduct Authority will also have to decide whether to launch formal investigations having had the report passed on to them by Business Secretary Vince Cable. In response RBS has hired City legal firm Clifford Chance to assess the claims made in the Tomlinson report. It’s a dramatic fall for Sach, who had been dubbed a “sage” of the restructuring community by his admirers.

Not only did he help reverse Thomas Cook’s alarming nosedive, he also played a key role in giving HMV a second chance, while his division was instrumental in securing Liverpool Football Club for John Henry’s Fenway Sports Group in the teeth of opposition from the club’s previous owners, Tom Hicks and George Gillette.

Mr Sach was hired by RBS in 1992 at a time when the bank was saddled with a sizeable core of under performing loans from a bugbear of the banking industry: commercial property. Having cut his teeth with 3i, the private equity firm, he took a radical new approach to dealing with troubled and insolvent businesses, seeing them as an asset rather than a burden and as such something that could be turned for a profit. In charge of his own unit at the heart of the bank, he went about treading on toes and slaying sacred cows. First, he made accountants tender for receiverships.  RBS’s rivals were in the practice of handing out receivership jobs to selected firms, but Mr Sach wanted competition even if his critics claimed it led to “low- balling”, where the firms  keenest for the work would quote ruinously low fees.

Secondly, Mr Sach abolished the practice of allowing insolvency specialists who had been nursing sick companies to be appointed as receivers once those companies had gone bust. This annoyed the rest of the profession, which worked on the notion that the incumbent specialist is best placed to handle a receivership. Despite the opposition, his policies were described as “a rip-roaring success” both for RBS and its shareholders.

More recently Mr Sach, the last of Fred Goodwin’s lieutenants  at RBS, has taken on the role of a business “elder statesman”, offering his opinions, and his solutions, for a selection of society’s ills.

Earlier this year on a visit to Birmingham he growled about the internet revolution, blaming it for breeding a generation of young adults who can’t write English and rely on “incomprehensible text messages”.

He also talked about the need for a “fundamental restructuring” on the High Street in the wake of the problems of companies such as Jessops, HMV and Blockbuster.

“GRG’s modus operandi is helping to promote a ‘turnaround culture’ in the banking industry,” he told The Daily Telegraph in an article sponsored by his unit in October. “Our approach offers the best possible chance to turn businesses around.”

By contrast, Mr Sach’s critics accuse him of arrogance, while small firms gobbled up by the GRG have a ready supply of horror stories. 

Dave Williams, the proprietor of  Orchard Private Day Nurseries, is one of them. He says he found himself at the mercy of the GRG after a bad year following the financial crash. He says his predicament was compounded by his having to accept an interest rate swap product as a condition of a loan from NatWest, part of the RBS group,  that left him paying £6,500 a month over the odds for his borrowing.

Mr Williams said: “Fortunately I’m still in business. They were turning the screw to cut me off when the interest rate swap thing broke and then I got letter two days later to say they weren’t. My life been on hold for five years.” He says he has restructured his business but because of the swap he reckons the company is short of up to £500,000. Music, no doubt, to Derek Sach’s ears.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
News
people
Sport
football
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all