RBS used vampire practices to strangle viable companies, MPs told

Government adviser reveals his frustration at talk of bank kindness to zombie businesses

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The Independent Online

The Government adviser Lawrence Tomlinson has told MPs that viable businesses were being “strangled” by the activities of Royal Bank of Scotland’s Global Reconstruction Group (GRG).

Appearing before the Treasury Select Committee, the Business Department’s “entrepreneur in residence”, said: “I find it really frustrating, this talk about zombie businesses and that the banks are being so kind to them. It’s more like vampire businesses... As soon as they get any cash that they can use to grow, it gets taken out of them. We’ve seen people whose charges come to exactly the amount of profit that they made.”

The release of Mr Tomlinson’s report into RBS, GRG and the bank’s West Register property arm generated a huge controversy and the bank is now being investigated by the Financial Services Authority. RBS has also commissioned a report from the City law firm Clifford Chance, which is due in the spring.

Sir Andrew Large, the former deputy governor of the Bank of England, who wrote a sharply critical report on RBS’s treatment of small businesses that was also commissioned by the bank, has said he would be disturbed if the more “extreme” accusations made by Mr Tomlinson were proved to be true.

Mr Tomlinson said: “I am under no illusion about how shocking these assertions in my report are. I was truly shocked... I didn’t believe them.” He said he had been approached by “more than 1,000” businesses which have faced problems with GRG since the report’s publication.

He accused RBS of, in effect, turning GRG into a “debt collection agency” and said whistleblowers told him that they “couldn’t remember” when they had seen a business go into GRG and later emerge sound.

Mr Tomlinson pointed out that in the 2011-12 period “GRG was working on £14.5bn of debt of which only 6 per cent returned to performing portfolio. Now that’s a pretty stark number”.

He agreed when Mark Garnier MP described GRG as a profit centre that was a “incentivised to asset strip” businesses falling into its hands.

“I run a business employing more than 2,000 so I have a lot of suppliers. Since I’ve been entrepreneur in residence, people have come to me and said ‘I’m in GRG this is what happened to me’. These are people whose businesses I know and I have been shocked they are in there.”

Mr Tomlinson denied that the people contacting him had been running failing businesses and were blaming the bank for their troubles.

Several MPs said they had heard similar tales of woe from their own constituents.

Mr Tomlinson has called for both RBS and Lloyds to be split into three separate banks each. He denied this would be overly expensive, pointing to what he described as the “success” of the spin-off of TSB from Lloyds.