IT IS not totally unpredictable, but still politically controversial, that Nationwide looks to have delayed its entry into the small business lending market until 2016.
Predictable, because the UK’s biggest building society was snared earlier this year in the regulator’s demand for tougher capital requirements
Nationwide was deemed by the Prudential Regulation Authority (PRA) to have a £400 million hole in its balance sheet. It is unsurprising, in that context, for a naturally conservative mutually-owned organisation to curb its risk appetite, particularly in an area like small business lending where it has little expertise or track record.
Controversial, however, because Nationwide is a high street household name and if it has kicked business lending into the long grass it flies in the face of the government’s trumpeted hopes to galvanise a sector seen as crucial to Britain’s recovery.
Chancellor George Osborne was pleased to tell the Treasury committee last year that Nationwide was looking at entering the SME market, and that it would increase competition in the sector to everyone’s benefit.
It was widely aired that Nationwide would enter the arena this year after studying and fine-tuning a template since 2011. However, now the word, undenied by the group, is that it will be another three years before it moves into SME lending, after it has beefed up its balance sheet to meet the new more rigorous leverage ratios. These are the capital levels that the Bank of England (BoE) deems banks must hold against their assets (or loans).
It will not just be Osborne whose nose will be put out on the political spectrum. With a studied nose for a soundbite, Business Secretary Vince Cable has previously railed against the “capital Taleban” in the BoE who he claims are hobbling the economic recovery by imposing an onerous financial yoke on banks.
Coming on the back of the muted impact on SME lending of the BoE and Treasury’s Funding for Lending Scheme, Cable could point to the Nationwide’s soft-pedalling as further evidence to back his argument.
Whatever the wider implications, though, you cannot argue too strongly that Nationwide has got it wrong from its own perspective.
It is said the building society will instead pivot away from business lending in the next few years to focus instead on nearly doubling its share of the current accounts market to 10 per cent from 5.7 per cent.
For an organisation with its history and skill set, it is a lesser challenger, with fewer pitfalls, than feeding the SME sector.
Big guns don’t want to be railroaded into HS2
WE ARE still not out of the tunnel of government grandiosity. But the momentum of opposition from the business community indicates that the overweening High Speed Rail 2 (HS2) project may be withering on the line.
The Institute of Directors is the latest body to argue that the project is very unlikely to give value for money, and could end up being a white elephant.
The CBI employers body has also been less than effusive in its analysis of the project to link London to Birmingham, Manchester and Leeds with new high speed lines that would rip up the countryside for back-of-the-envelope economic benefits.
Top members of New Labour who originally backed HS2, like Lord Mandelson, also now say it would be a grand folly. It should be scrapped.