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
  • Get to the point
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

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence