Outrage at banker’s Scots' recession jibe

THE managing director of Clydesdale Bank’s parent company has outraged Scotland’s business and political leaders after claiming the country’s economy has been in recession for the past 200 years.

Frank Cicutto, the managing director of National Australia Bank, branded Scotland an "inferior" place to do business. His remarks come as Clydesdale workers face job losses after NAB said it will axe 200 UK posts over the next 18 months.

In response to a question by a banking analyst about why NAB was not pursuing growth in Scotland, Mr Cicutto - Clydesdale’s chief executive between 1994 and 1996 - said: "They have been in a permanent recession for the past 200 years and as such, the opportunities are inferior."

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John Downie, of the Scottish Federation of Small Business, described the remarks by Mr Cicutto as "ill-advised". He said: "His comments are frankly insulting to Scottish business. They are not going to help Clydesdale’s position in the Scottish marketplace."

A spokesman for CBI Scotland said he was "surprised" by Mr Cicutto’s remarks.

The SNP spokesman on the economy, Andrew Wilson MSP, said: "Mr Cicutto’s comments are neither accurate nor helpful."

Clydesdale said the row, which could sour relations between the bank and the tight-knit Scottish financial community, had been blown out of proportion. A spokesman said: "The comments were light-hearted and reported outside the original context. Frank Cicutto knows Scotland and its people and has high regard for them."

Bank chief’s slur on Scottish economy shows lack of logic

SCOTLAND in recession for 200 years? We might give the impression of being in a long recession, if not in a permanent one, never mind just 200 years. But Frank Cicutto, the managing director of National Australia Bank, the parent of the Clydesdale Bank, who claimed Scotland has been in recession since 1800, has got his facts, as well as much of his assessment, upside down.

Asked down under by a banking analyst as to why NAB was not pursuing growth in Scotland, Mr Cicutto retorted: "They have been in a permanent recession for the past 200 years and, as such, the opportunities are inferior."

The declamation came without the normal rhetorical caveats beloved by bankers on occasions of this sort. He might have said the economic data, once seasonally adjusted, was, of course, entirely different, or that "inferior" was a reference to the relative variations in the quality of risk-adjusted lending ratios.

No such luck. John Downie, the head of the Scottish Federation of Small Business, condemned the remarks as "frankly insulting" and warned of a backlash among Clydesdale’s business customers. A Scottish Executive spokesman rebutted the claims in a record-breaking 35 seconds, while Andrew Wilson, the SNP economy spokesman, dismissed the outburst as "neither accurate nor helpful".

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A spokesman for the Clydesdale did his best, describing the comments as "light-hearted", while trying not to grind his teeth into a fine powder.

The only people still smiling were likely to be the public relations staff at the Royal Bank. Clanger remarks by a bigshot banker? Not Sir George Mathewson this time! For Scotland to have been in recession since 1800 would suggest that she missed out on the entire industrial revolution, that Clydeside never grew to be one of the greatest shipbuilding centres in the world and Glasgow one of the key sites for engineering and textiles.

And while the economy has experienced cyclical recession, it has moved closely in tandem with the UK economy for most of this period.

For the record, the latest figures show, that, while GDP growth slowed during the fourth quarter of 1999 and has remained weak since, the economy has not actually recorded a formal recession - that is, two successive quarters of declining output. The Scottish economy grew by 0.8 per cent in the year to the end of September.

Scottish labour productivity compares with the UK, and recent figures show 73 per cent of all people of working age in Scotland are in employment, a rise of 48,000 on the level two years ago. Unemployment on the ILO definition has declined from 7.6 per cent to 5.8 per cent over the same period. Scotland’s manufacturing industry has had it tough over the past two years. But the problems of a strong exchange rate against the weak euro and the downturn in international markets have been experienced throughout the UK, not just Scotland.

Indeed, given the exchange rate problems, Scotland’s manufacturing sector has done well to raise exports consistently over the past seven years. Scottish manufactured exports rose 3.4 per cent last year to 24.8 billion, and they are up 56 per cent on their 1995 level.

One particularly strong area of the economy is one with which Mr Cicutto should be familiar: financial services. This has grown by 3.5 per cent over the 12 months to the end of September and is up 10.6 per cent since 1999. Funds under management, while down last year, were still 16 per cent up, at 326 billion, on the level two years previously and have more than doubled in ten years.

As for Scotland’s leading banks, they have roared ahead. The Royal Bank, which took over NatWest, has seen profits soar sixfold since 1999. It is now the most profitable bank in the world after Citibank and Hong Kong and Shanghai Banking Corporation, and its market capitalisation is greater than Deutsche Bank and greater than all the quoted companies in Scotland combined.

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HBOS, meanwhile, maintains its dominance of the Scottish business lending sector with a lending book in excess of 34.8 billion. These are more likely to be the reasons why Mr Cicutto finds it difficult to expand the Clydesdale in Scotland.

As for those 200 years of recession and "inferior opportunities", they are best put down to a bad day. Why, even bankers have them.


FRANK Cicutto, the managing director of National Australia Bank, does not have a reputation for treading lightly.

In Australia he was recently accused by rivals of damaging the public standing of the banking industry by closing 56 rural branches. Now he may face similar accusations in Scotland.

But despite his penchant for public relations gaffes, Mr Cicutto has had a meteoric rise through the ranks at NAB. He started his career at the bank in 1974 as a junior accountant and was regularly promoted until he was given the chance to become chief executive of Clydesdale in 1994.

After two years, he travelled back across the globe and secured the position of NAB’s chief operating officer in 1998 before gaining the top position of managing director/chief executive in 1999. Times have been tough for NAB and Mr Cicutto since then. The bank had ambitions to become a global player with operations in every financial centre throughout the world, but its expansion plans were dealt a crippling blow after its US-based HomeSide mortgage business lost $2.2 billion (1.5 billion). That, in turn, resulted in savage cost-cutting elsewhere, with the loss of 500 jobs in the UK, over the next 18 months.

NAB has lost out to its rivals, such as the Royal Bank of Scotland, which have taken aggressive steps to expand their market share in a rapidly consolidating market. There are not many smaller banks left to buy in the UK, which might make it increasingly difficult for Clydesdale and Yorkshire to compete on the high street.

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