1 00:00:01,250 --> 00:00:05,660 Good afternoon and welcome. My name is Colin Mayer. 2 00:00:05,660 --> 00:00:16,920 I am an emeritus professor at the Side Business School here in Oxford and a professor of finance at the School of Government. 3 00:00:16,920 --> 00:00:32,230 My very great pleasure to welcome you to this. The fourth session in the series on levelling up regional disparities, inequality and social exclusion. 4 00:00:32,230 --> 00:00:40,720 In the first three, we looked at issues around business skills, 5 00:00:40,720 --> 00:00:51,920 and then we turn to how these issues enact themselves in a place, namely in South Yorkshire and Sheffield. 6 00:00:51,920 --> 00:01:02,090 And today we talk, we turn to a third big issue in the levelling up agenda around finance. 7 00:01:02,090 --> 00:01:15,770 Now, it's commonly thought that in the context of regional policy, that addressing questions of regional disparity is really a public issue. 8 00:01:15,770 --> 00:01:27,930 It's about public finance, about taxation, redistribution, incentives for employment and investment. 9 00:01:27,930 --> 00:01:32,790 And public finance and infrastructure. 10 00:01:32,790 --> 00:01:46,610 But we heard from a last speaker, Dave Smith, who is chief executive of the regional authority in South Yorkshire, the combined authority. 11 00:01:46,610 --> 00:01:55,550 But he thought that private finance was at least as important and in some respects more important than public finance, 12 00:01:55,550 --> 00:02:04,180 and that it should come before public finance. And, for example, thinking about investment in infrastructure. 13 00:02:04,180 --> 00:02:09,640 So one of the ideas that we're going to be exploring this afternoon is. 14 00:02:09,640 --> 00:02:20,920 Private financing of levelling up. Is this a news this is never a realistic idea to think of private capital markets 15 00:02:20,920 --> 00:02:29,380 and private finance really playing a key role in terms of the levelling up agenda. 16 00:02:29,380 --> 00:02:39,640 And to address that question, we're very fortunate in having someone who knows more about these issues than really anyone else in this country. 17 00:02:39,640 --> 00:02:52,660 Ron Amazon. He was from 2013 until 2016, the founding chairman of Britain's state owned development bank. 18 00:02:52,660 --> 00:03:00,010 The British businessman. And he therefore laid the foundation for one of the most important financial 19 00:03:00,010 --> 00:03:09,530 institutions in this country involved in issues around the financing of levelling up. 20 00:03:09,530 --> 00:03:18,960 He's now chairman of an extremely interesting and innovative new bank called Bank Rules. 21 00:03:18,960 --> 00:03:31,740 Which is seeking to provide innovative solutions to giving regional finance available to growing companies. 22 00:03:31,740 --> 00:03:37,360 So it's a tremendous pleasure to have you with us. Thank you very much for being here. 23 00:03:37,360 --> 00:03:43,150 And could I just start by asking you a little bit about your personal story and how you got 24 00:03:43,150 --> 00:03:52,720 interested in this issue around the financing of the private financing of regional disparities? 25 00:03:52,720 --> 00:04:00,040 Well, the business bank itself was was probably the beginning of that, although I'd been involved in banking for a very long time. 26 00:04:00,040 --> 00:04:06,580 But it brought home. And this was Vince Cable's idea to set up this bank. 27 00:04:06,580 --> 00:04:11,890 There wasn't much support for it politically at the time. This isn't necessary or what. 28 00:04:11,890 --> 00:04:18,790 It's not for the government to fix this. So we set this up from scratch. 29 00:04:18,790 --> 00:04:27,370 And what we found, first of all, was some incredibly interesting people who came to join it who believed it was important. 30 00:04:27,370 --> 00:04:35,350 So just as an example, we were told we had to pay bottom quartile salaries, which of course, in banking is anathema. 31 00:04:35,350 --> 00:04:42,760 And everyone said, Well, no one will join. So the top end, we had a senior partner or ex-partner from a private equity company. 32 00:04:42,760 --> 00:04:50,140 We had a senior member of J.P. Morgan, people who had been around and wanted to put something back into the system, not the other end. 33 00:04:50,140 --> 00:04:56,540 We got fantastic people from McKinsey and BCG who wanted to work with government for a while, 34 00:04:56,540 --> 00:05:03,220 so we had very high quality people of all of them had a sense of this is actually important, this court. 35 00:05:03,220 --> 00:05:12,190 One of the things we were charged with amongst many was to become a subject expert on this because it seems it's not a sector, 36 00:05:12,190 --> 00:05:17,560 it's this amorphous mix of things around the country and a great variation. 37 00:05:17,560 --> 00:05:19,180 So we did a lot of research, 38 00:05:19,180 --> 00:05:31,330 and that research brought home the dilemma that many of these systems faced in accessing finance and building growing the businesses. 39 00:05:31,330 --> 00:05:38,200 So that was a social experience. It was interesting how rapidly it moved. 40 00:05:38,200 --> 00:05:44,800 You know, within three years, we mobilised seven billion of new money. We financed 40000 new start-ups, 41 00:05:44,800 --> 00:05:53,620 which no one else what government could have done because these were start ups for people who had no business experience, 42 00:05:53,620 --> 00:06:00,490 no security to offer, and we would lend them up to twenty five thousand pounds. 43 00:06:00,490 --> 00:06:05,950 Every other bank would run a mile. We gave them a mentor. And this is still true. 44 00:06:05,950 --> 00:06:13,060 But but that had an extraordinary impact, too, because we learnt something about the social side of this. 45 00:06:13,060 --> 00:06:16,060 I don't know what the number is now, but at the time. 46 00:06:16,060 --> 00:06:26,290 So for 40 percent of our applications were from long term unemployed people, and the longer you're out of employment, the harder it is to get back. 47 00:06:26,290 --> 00:06:34,330 Probably would never have thought of starting a business and what someone's prepared to take a risk on me. 48 00:06:34,330 --> 00:06:41,260 They had the lowest default rates. Which was interesting, someone's given me a chance. 49 00:06:41,260 --> 00:06:50,230 Now the Taxpayers Alliance thought this whole thing was a waste of money anyway because we budgeted to write off 35 percent of these loans, 50 00:06:50,230 --> 00:06:59,560 which was realistic. But the average loan for these people, people's find a half thousand in $7200. 51 00:06:59,560 --> 00:07:03,910 If you get someone off welfare for six months, you pay for it. 52 00:07:03,910 --> 00:07:12,430 So you get into an unexpected consequence in this case of starting to understand what's out there and what's going on. 53 00:07:12,430 --> 00:07:17,410 And it's it's from the individual all the way through to bigger corporates. 54 00:07:17,410 --> 00:07:22,870 So that's more than sparked my interest when I was asked to chair back north. 55 00:07:22,870 --> 00:07:30,430 I looked at it and it was quite simple. In a way, it was the best esame bank model I'd seen. 56 00:07:30,430 --> 00:07:38,950 And one of the best teams I'd ever come across. And again, some extraordinarily good people coming together around an idea and a cause. 57 00:07:38,950 --> 00:07:51,340 And that's what it was seeming to put back finance where it was needed for SMEs, and that was critical for the regeneration of the economy. 58 00:07:51,340 --> 00:07:55,360 So it was getting back to the shop and having been at the government then. 59 00:07:55,360 --> 00:08:03,270 So that's how we got to where I am now. So. Why is that so important in this story? 60 00:08:03,270 --> 00:08:09,720 And do you think the private finance is really an alternative to public finance? 61 00:08:09,720 --> 00:08:15,090 Well, it's not an alternative. This is a complementary fit. This is about a partnership. 62 00:08:15,090 --> 00:08:19,500 I'm absolutely convinced levelling up cannot be done without private finance. 63 00:08:19,500 --> 00:08:28,260 But if we come back, we circle back a bit because it always goes without saying that finance is critical to supporting the growth of businesses and, 64 00:08:28,260 --> 00:08:30,120 of course, economies. 65 00:08:30,120 --> 00:08:37,290 Most of the conversation recently about the government's role has been, well, how much are they going to spend and what will they spend it on? 66 00:08:37,290 --> 00:08:43,710 And a lot of that is brewing around infrastructure, roads, rail and connectivity. 67 00:08:43,710 --> 00:08:53,550 Clearly is important, but on its own, it's not enough to regenerate an icon, especially as the back-pedalling on this now. 68 00:08:53,550 --> 00:09:01,350 But it's not irrelevant and a conversation I had with Andy Burnham a little while ago and I said, Well, what's your major challenge right now? 69 00:09:01,350 --> 00:09:08,840 He said transport is its transport. So very important issue. 70 00:09:08,840 --> 00:09:16,160 But the other thing about government and what the conversation is going on now is that a criticism that's been levelled is, 71 00:09:16,160 --> 00:09:26,240 they have, quote, defined what levelling up meanings. And my view is they can't define it, nor should they try to define it, 72 00:09:26,240 --> 00:09:32,990 because what levelling up will take has to be defined by the regions themselves within the regions. 73 00:09:32,990 --> 00:09:37,790 All of these regions are different. They've got different histories, different cultures. 74 00:09:37,790 --> 00:09:44,450 So they've got different challenges, just opportunities. They're all at different stages of development. 75 00:09:44,450 --> 00:09:49,280 So there's an enormous difference between them and a lot of this, and it's emerging now, 76 00:09:49,280 --> 00:09:55,370 as we're seeing of local leadership taking back control over their own feet. 77 00:09:55,370 --> 00:10:02,180 And it's for these regions to come up with objectives and strategies that define the resources they need, 78 00:10:02,180 --> 00:10:06,860 some of which government will be able to supply. 79 00:10:06,860 --> 00:10:13,310 But in a sense, what you want to do is pull what you need, not just take what you're given, which has been the pattern in the past. 80 00:10:13,310 --> 00:10:24,410 So, so that is critical. And another conversation with Roger Marsh, who's head of the Leeds LEP and chair of the Northern Powerhouse Project, 81 00:10:24,410 --> 00:10:32,160 said The last thing we need from government is a template. One size fits all just doesn't work. 82 00:10:32,160 --> 00:10:42,150 So if we look at an example of what's emerging here and you look at, say, Ben Houston and Cheese Valley three four five year old guy, 83 00:10:42,150 --> 00:10:49,020 he bought the local airport because it looked like it was going to close, and he saw that being important for the future development. 84 00:10:49,020 --> 00:10:59,440 He persuaded the government to let them set up a free port and decide they're actually thinking about buying the port. 85 00:10:59,440 --> 00:11:05,620 The new local bank GB bank that's just got its licence there and to capitalise it when 86 00:11:05,620 --> 00:11:11,080 Russian pulled 20 million out of the local pension fund to capitalise this bank. 87 00:11:11,080 --> 00:11:18,760 This bank is a development bank and it will build houses construction in the local economy. 88 00:11:18,760 --> 00:11:24,790 So what we're seeing is a what do we need? What can we get from government in this case? 89 00:11:24,790 --> 00:11:37,330 We've got the free. What can we do for ourselves? And I find this certainly encouraging, but it needs the leadership and it needs that the confidence. 90 00:11:37,330 --> 00:11:41,950 But if we come back to the levelling up pace and finance in general, 91 00:11:41,950 --> 00:11:53,200 it will be impossible to level up this economy unless we address the needs of the SMB community, as well as 50 percent of our economy, GDP and jobs. 92 00:11:53,200 --> 00:12:00,610 And we have to provide finance for that. So the one thing all of these regions have in common as opposed to differences 93 00:12:00,610 --> 00:12:07,720 is a serious impediment to accessing finance to scale up these businesses. 94 00:12:07,720 --> 00:12:09,300 So if we look at Germany in the Middle East, 95 00:12:09,300 --> 00:12:19,230 then what we know about that is it's the core of the German economy and the engine of the normal export success. 96 00:12:19,230 --> 00:12:31,710 But it has a stable infrastructure of local banks to spark housing lenders that are totally dedicated to supporting that esame community, 97 00:12:31,710 --> 00:12:35,790 so much so that it's it's against the law. 98 00:12:35,790 --> 00:12:45,090 So each of these banks to move outside of the region and lend money, so we don't have that infrastructure, what infrastructure we had, we've lost. 99 00:12:45,090 --> 00:12:53,610 So very interesting report that I know you contributed to Colin from the All-Party Parliamentary Group that was published in September, 100 00:12:53,610 --> 00:12:57,900 was scathing about the availability of private finance. 101 00:12:57,900 --> 00:13:04,870 But the critical nature of it. And two things to me leapt out of that report. 102 00:13:04,870 --> 00:13:16,390 One was because of the difficulty accessing finance, 73 percent of all SMEs would rather grow slowly and borrow money and grow quickly. 103 00:13:16,390 --> 00:13:25,330 There you have a central dilemma to any levelling up. The second interesting step was from Sherry Coutu from the Scale-Up Institute, 104 00:13:25,330 --> 00:13:31,450 and her calculation is that if you can get a one percent increase in scale ups, 105 00:13:31,450 --> 00:13:40,210 it would create up to a quarter million jobs and 38 billion GZA contribution to the economy over three years. 106 00:13:40,210 --> 00:13:45,820 Now we might argue about the statistics and whether she's accurate, but order of magnitude, we know it's true. 107 00:13:45,820 --> 00:13:52,560 There is plenty of evidence that scaling up SMEs has a major economic impact. 108 00:13:52,560 --> 00:13:58,270 Finance for that would be critical in levelling up. It's not there, sir. 109 00:13:58,270 --> 00:14:09,010 So what's the problem we have? The finest, largest, most international capital market in the world. 110 00:14:09,010 --> 00:14:17,950 And yet you seem to be saying that there's something that's not working in terms of financing growing companies in the region. 111 00:14:17,950 --> 00:14:23,050 What's the problem? Well, it's one that I think is easy to define. 112 00:14:23,050 --> 00:14:26,920 We had a dominant for banks and I'm not here to knock these banks, 113 00:14:26,920 --> 00:14:33,250 but I think it's important to understand what's happened and what therefore was pretty predictable. 114 00:14:33,250 --> 00:14:38,200 The distribution system for their financial services was essentially a 19th century, 115 00:14:38,200 --> 00:14:47,410 early 20th century model of bricks and mortar branches around the country in the second half of the 20th century. 116 00:14:47,410 --> 00:14:50,890 It became clear this wasn't sustainable, if only on a cost basis. 117 00:14:50,890 --> 00:14:55,600 They were losing some of the traditional sources of finance and income. 118 00:14:55,600 --> 00:15:01,470 So they had to do something about the costs, so they started to close branches. 119 00:15:01,470 --> 00:15:09,270 With the advent of the digital economy, with the revolution one who was installing aiming at the mass market consumer market, 120 00:15:09,270 --> 00:15:14,070 it was clear that branch network was now totally irrelevant regardless of cost. 121 00:15:14,070 --> 00:15:22,200 It was a relevant delivery system and of course, it was always irrelevant for the big corporates. 122 00:15:22,200 --> 00:15:29,430 Unfortunately, the sector for whom it was relevant was the Esame community because they required a 123 00:15:29,430 --> 00:15:36,880 local capability to get decisions about financing their businesses from the banks. 124 00:15:36,880 --> 00:15:44,860 And what had happened, the double whammy this, if you like, was that not only were the closing branches, but where the branches still existed, 125 00:15:44,860 --> 00:15:52,010 the banks have withdrawn all of the people and skills from those branches that could make those decisions about lending money and 126 00:15:52,010 --> 00:16:00,790 remote that into call centres and head offices of call centres can only do fairly trivial things like opening accounts or whatever. 127 00:16:00,790 --> 00:16:09,530 But if you wanted to earn money, if you want to borrow five million for seven years to scale up your business, that goes to head office. 128 00:16:09,530 --> 00:16:16,010 And the problem for the bank then was having withdrawn all of these skills that seriously 129 00:16:16,010 --> 00:16:22,670 undermine their ability to assess the risk because the risk in an SMB isn't just in the numbers. 130 00:16:22,670 --> 00:16:27,860 The balance sheet a personal account and not only had the remote to the decision making, 131 00:16:27,860 --> 00:16:33,530 but they moved towards credit scoring systems algorithms which worked fine for mass market. 132 00:16:33,530 --> 00:16:36,020 They do not work for the SMEs. 133 00:16:36,020 --> 00:16:42,440 You have to know who the people are because a successful entrepreneur may have brought the business to a really good place. 134 00:16:42,440 --> 00:16:48,200 Wants to borrow long term to move it forward. Very good. 135 00:16:48,200 --> 00:16:53,540 But there the right people to take it to that next stage. Are they aware of their own limitations? 136 00:16:53,540 --> 00:17:01,940 What else they might need to bring in? Do they have a clear plan? You need to know the people, and for that you need things to be local. 137 00:17:01,940 --> 00:17:10,030 And it was interesting. I was talking when we were building the business bank to an ex chair of one of the big banks. 138 00:17:10,030 --> 00:17:16,210 About this topic and this problem for us, amazing said, you know, is it it's all our fault. 139 00:17:16,210 --> 00:17:22,360 He said we spent the last 15 to 20 years discussing the client interface. 140 00:17:22,360 --> 00:17:31,780 So what happened was pretty predictable. It might have been inevitable for them, but it left this void. 141 00:17:31,780 --> 00:17:38,250 And in this going back to the old party? 142 00:17:38,250 --> 00:17:48,930 Comment and statistics. Luxury cruise have showed, but there's this massive opportunity, but you removed the vehicle for it. 143 00:17:48,930 --> 00:17:59,520 Now this isn't just about bank finance. Clearly, it crosses into and includes, if you will, about patient capital investment itself. 144 00:17:59,520 --> 00:18:05,100 And that's probably a separate subject in its own right. But there are problems there, too. 145 00:18:05,100 --> 00:18:10,920 Talking to the CEO of one of the investment hubs in London and we were talking about how there's a very strong, 146 00:18:10,920 --> 00:18:19,320 inward foreign investment still into the UK, especially in tech. I think we're number three in the world after the US and China. 147 00:18:19,320 --> 00:18:24,240 And I said, well, how much of this gets north of Watford? And he said none of it. 148 00:18:24,240 --> 00:18:31,410 I think there are over one hundred and sixty finance houses in London, I think six have offices outside of London, 149 00:18:31,410 --> 00:18:38,550 so there's almost a statement of intent or lack of intent or a sense of what we can do it from here. 150 00:18:38,550 --> 00:18:44,430 But you know, the credit officer in a big bank sitting in London looking at a loan application term 151 00:18:44,430 --> 00:18:49,620 loan application for business in Rotherham has no idea how to make that decision. 152 00:18:49,620 --> 00:19:00,630 And I think with the investment houses, because of the power of London and the Southeast, there's ample opportunities to fill the funds locally. 153 00:19:00,630 --> 00:19:06,990 So there's a big question there about how do you persuade the investors to move north that there are great opportunities? 154 00:19:06,990 --> 00:19:18,990 I think this comes back to local leadership and the ability to for want of a better term, sell the region to to to these investors. 155 00:19:18,990 --> 00:19:23,640 But right now, it's a cap all of the. 156 00:19:23,640 --> 00:19:34,440 If we think scaling up is critical for levelling up, finance is critical, we rank number 13 out of 14 obesity countries and success in doing that. 157 00:19:34,440 --> 00:19:46,480 It's an indictment and it has to be fixed. So what's needed on the banking side, what what, what would turn around the British banking system? 158 00:19:46,480 --> 00:19:54,430 Clearly, this isn't easy, but I think the first thing to say is it's unrealistic to expect that the big banks will come back and fix this. 159 00:19:54,430 --> 00:20:02,650 I find it extraordinary. People I talked to think that will happen. And it's a mixture of things were funny in this country. 160 00:20:02,650 --> 00:20:09,190 We tend to think of banks almost as utilities, and certainly we'll look if they cause a problem, they should solve it. 161 00:20:09,190 --> 00:20:14,080 Nothing to do with that. It's about their own strategies and how they've evolved. 162 00:20:14,080 --> 00:20:21,250 And if you look back at the big four banks 30 40 years ago, they all look pretty much the same today. 163 00:20:21,250 --> 00:20:30,430 You know, you look at Barclays pursuing growth through investment banking. You've got NatWest to try to rebuild things after the obvious problems. 164 00:20:30,430 --> 00:20:42,550 You've got HSBC with the vast bulk of its business in Asia, and you've got Lloyds who actually does have a commitment on the semi front. 165 00:20:42,550 --> 00:20:48,360 But of course. They face the same structural issues that all of those big banks have had to 166 00:20:48,360 --> 00:20:54,900 deal with in terms of costs and systems and so on and so forth and whatever. 167 00:20:54,900 --> 00:20:58,860 So typically what you're going to get from these banks, 168 00:20:58,860 --> 00:21:08,630 if you get anything is short term working capital and you can't scale up a business on that basis, so it won't come from that. 169 00:21:08,630 --> 00:21:16,050 So what we are seeing is the emergence of a lot of new players, 170 00:21:16,050 --> 00:21:23,730 and there's still a lot of cynicism about what we call challenger banks when we all get lumped together, but they're all quite different. 171 00:21:23,730 --> 00:21:32,370 But certainly, I'd be worried as a big bank in terms of maybe I should look at this image of the threat of the new players, 172 00:21:32,370 --> 00:21:37,410 the Revolut sponsors and starlings of this world to the mass market business. 173 00:21:37,410 --> 00:21:43,680 So they are diverted by strategically. We've got to defend that. 174 00:21:43,680 --> 00:21:51,380 But it's also shown that part of this answer is completely new platforms. 175 00:21:51,380 --> 00:21:56,120 So what is happening with the challenge weighing on the business side? 176 00:21:56,120 --> 00:22:00,650 And if we look at some ease and if I look at what we are doing right now is 177 00:22:00,650 --> 00:22:06,350 we're putting back the skills into the marketplace that were withdrawn before. 178 00:22:06,350 --> 00:22:16,850 So I see a significant move here for new players to come in and remodel whole thing. 179 00:22:16,850 --> 00:22:24,110 It's very difficult for the big banks with big legacy systems to rewrite those systems and make them flexible. 180 00:22:24,110 --> 00:22:27,350 So we are seeing a lot of new ones. 181 00:22:27,350 --> 00:22:31,610 So if we take us, I mean, you look at up north of Rishi Kozlov, 182 00:22:31,610 --> 00:22:41,810 who set it up and he came to see us at the business bank when he was doing that, and he launched that in 2016 and. 183 00:22:41,810 --> 00:22:47,840 It was valued then at 60 million, and a lot of people said, well, you can't make money out of enemies and it's a waste of time. 184 00:22:47,840 --> 00:22:52,410 It's value today, five years later. Just over two and a half billion. 185 00:22:52,410 --> 00:22:55,630 And they've got a big balance sheet and they are profitable. 186 00:22:55,630 --> 00:23:04,180 If I look at another example, Australia actually mirrors the UK in terms of the structure of banking there and that the history is of dominant banks. 187 00:23:04,180 --> 00:23:11,020 The estimates lost out on a new bank was founded a few years ago, called Judo Bank by a chucker. 188 00:23:11,020 --> 00:23:16,060 Joe Healy and his colleagues and it's entirely focussed. 189 00:23:16,060 --> 00:23:20,810 No distractions, entirely focussed on SMEs. 190 00:23:20,810 --> 00:23:30,860 And he wrote a book called Breaking the Banks in which he talks and on his website talks about the craft of esame lending, 191 00:23:30,860 --> 00:23:41,000 and it's a very good phrase. This craft, which is a part about analysis and numbers, it's about some softer skills of knowing who these people are. 192 00:23:41,000 --> 00:23:45,120 It's about knowing the region in which they operate these SMEs. 193 00:23:45,120 --> 00:23:50,780 There are many myriad connexions within the regions in which they offer people that know each other. 194 00:23:50,780 --> 00:23:57,200 And you have to know those communities, as well as knowing that pledge to know how to succeed. 195 00:23:57,200 --> 00:24:04,340 So I see the move being to complete a new kind of the big banks won't fix it and nor should they. 196 00:24:04,340 --> 00:24:10,580 They're not obliged if they've got their own obligations to shareholders strategically that move somewhere else. 197 00:24:10,580 --> 00:24:20,000 It's time for a structural change of what will be, I think, can only be on the banking side, new players. 198 00:24:20,000 --> 00:24:28,760 So tell us a little bit about what you see as being the structure that is successful. 199 00:24:28,760 --> 00:24:37,610 Personal relationships, the type of lending that they need to give to really help as a means to start. 200 00:24:37,610 --> 00:24:45,800 Well, I can probably best do that by talking about Bank North and we can relate it to other banks as well. 201 00:24:45,800 --> 00:24:50,500 What we're doing is we a bank that is just focussed on enemies. 202 00:24:50,500 --> 00:25:02,270 I mean, particularly it's. Focussed on term lending and providing growth capital to scale up businesses, so that's what we do. 203 00:25:02,270 --> 00:25:09,780 We claim it's the first truly regional bank in over 100 years. 204 00:25:09,780 --> 00:25:14,010 And not just mother. True or not, but in the sense of it actually being dedicated to regions, 205 00:25:14,010 --> 00:25:23,330 it is so structurally we will deliver service through what we call ports around the country. 206 00:25:23,330 --> 00:25:32,150 We will roll out these pods and a pod will have not just relationship managers, but it will have risk assessment lawyers values. 207 00:25:32,150 --> 00:25:36,050 It will have all of the people there that can make a decision. 208 00:25:36,050 --> 00:25:45,890 So the person you talk to in the bank as a client approves your loan unless there's something truly unusual about it. 209 00:25:45,890 --> 00:25:49,220 But also, this is built on a digital platform, 210 00:25:49,220 --> 00:25:58,220 which allows enormous flexibility and what it allows us to do with this decentralised approach is approve that loan in less than two weeks. 211 00:25:58,220 --> 00:26:03,350 And typically with one of the big banks, it will take two to three months. 212 00:26:03,350 --> 00:26:06,980 And the answer could be no. 213 00:26:06,980 --> 00:26:16,250 And time is of the essence and that came out of this report from parliamentary group of the time wasters business don't have a lot of time. 214 00:26:16,250 --> 00:26:22,170 They don't have a lot of resource. So getting an answer quickly is as important. 215 00:26:22,170 --> 00:26:26,790 Research we did at the business bank early on was what is important to you. 216 00:26:26,790 --> 00:26:34,420 Very early piece of research and top of the thing for all enemies was speed of response. 217 00:26:34,420 --> 00:26:38,830 Cashflow is everything. You can go bust very quickly if you're not careful. 218 00:26:38,830 --> 00:26:47,230 If you haven't got the money, so. So we can give an answer very quickly, and it's based on local knowledge, local capabilities. 219 00:26:47,230 --> 00:26:53,620 There are some banks that have got regional representatives, but this is essentially a sales force. 220 00:26:53,620 --> 00:27:00,670 It's a way of generating deals which then go back to to head office. 221 00:27:00,670 --> 00:27:06,520 So it's it's purely dedicated locally with the infrastructure to support it. 222 00:27:06,520 --> 00:27:11,350 So that's the structure of a new plan, if you like, based on technology. 223 00:27:11,350 --> 00:27:15,910 But it's this combination of technology and people, which is critical. 224 00:27:15,910 --> 00:27:20,020 These people will not get the loan on an app they will talk through. 225 00:27:20,020 --> 00:27:27,310 Another thing that's emerging, which is very interesting, is we will work a lot with brokers. 226 00:27:27,310 --> 00:27:39,380 And this is a new dimension. And so what will happen is the client will go to a broker so don't know where else to go and say, Well, here's my. 227 00:27:39,380 --> 00:27:44,690 Transaction. This is what I want to do. And the broker with local knowledge will say, if that's what you want. 228 00:27:44,690 --> 00:27:51,980 This is the bank. Go to there has an appetite for that sort of transaction or perhaps several banks who know. 229 00:27:51,980 --> 00:27:58,850 But it's more than just a referral system. It is they will prepare paperwork which helps the client. 230 00:27:58,850 --> 00:28:05,990 It helps the bank. So it's a really important intermediary function. 231 00:28:05,990 --> 00:28:11,510 And last year, more than 20 billion of SMB lending went through the brokerage network. 232 00:28:11,510 --> 00:28:18,380 And we know these people, so we've already lined up all of the brokers we work with through these are around around the country. 233 00:28:18,380 --> 00:28:26,060 Interestingly, the business bank we were tasked by the Treasury to set up a bank referral scheme 234 00:28:26,060 --> 00:28:31,100 because what would happen with the banks in the past some extensive losses, 235 00:28:31,100 --> 00:28:37,370 if you got a no on an application you made, you just left your own resort. 236 00:28:37,370 --> 00:28:44,060 And so the Treasury said, we want you to build two platforms so that the banks will now be required to refer 237 00:28:44,060 --> 00:28:50,540 somebody onto a platform of other people who might be able to give them an answer. 238 00:28:50,540 --> 00:28:59,210 It's frankly not a great scheme. I'll be honest about that, and we were sceptical at the time because it's not an intelligent interface, 239 00:28:59,210 --> 00:29:04,100 whereas the broken system is a lot of these brokers are bankers. 240 00:29:04,100 --> 00:29:12,020 And so they will understand the mutuality of that request and appetites over here. 241 00:29:12,020 --> 00:29:17,850 It's another part of the efficiency of speeding up. So we're already seeing. 242 00:29:17,850 --> 00:29:24,680 An important structural shift that wasn't there at all before, and it's already significant. 243 00:29:24,680 --> 00:29:35,910 Now, though, the branch manager of the traditional British commercial bank was one of the most highly regarded members of his or her community. 244 00:29:35,910 --> 00:29:42,780 Will your relationship managers have that sort of status within the communities that are operating, 245 00:29:42,780 --> 00:29:52,380 do you envisage that clients a company coming to you will have the same relationship manager for a long period of time? 246 00:29:52,380 --> 00:30:00,150 Is that how you're trying to build the team? Yes. Look, if you have the power to give money, it tends to give you a status. 247 00:30:00,150 --> 00:30:10,440 You know, you're a respected member. And more particularly the respect in the past for the branch manager came from not just the boss in the bank, 248 00:30:10,440 --> 00:30:14,190 but the fact is they were a member of the community in which they operate. 249 00:30:14,190 --> 00:30:21,240 They knew people and they were respected on a much broader scale of actually this individual, 250 00:30:21,240 --> 00:30:28,860 male or female is important to us as a community and our community thriving. 251 00:30:28,860 --> 00:30:37,530 And it is this taking back control and people feel right to feel they've lost control over their destiny because 252 00:30:37,530 --> 00:30:44,130 something they need is being taken away from them to some faceless individual in London who couldn't care less. 253 00:30:44,130 --> 00:30:47,820 In the end, about your account, local economy, these are people. 254 00:30:47,820 --> 00:30:52,860 We will recruit local people to opt to head up these ports. 255 00:30:52,860 --> 00:30:55,020 It's interesting we had an approach. 256 00:30:55,020 --> 00:31:03,000 We have a plan to roll out these ports, but we had an approach from another city that wasn't on our initial rollout scheme. 257 00:31:03,000 --> 00:31:09,660 That said, look, we've been researching some issues in our community and every one of them said the same thing. 258 00:31:09,660 --> 00:31:17,700 Access to finance was everything. When you put one of your ports in our city because we need a local bank and that's what this is, 259 00:31:17,700 --> 00:31:23,700 it's putting a local bank back with local people and a local awareness and commitment. 260 00:31:23,700 --> 00:31:28,200 And they're so passion about, we're going to fix this. 261 00:31:28,200 --> 00:31:34,080 I think it's interesting. There's a re-emergence, I think of regional identities in this country where, you know, 262 00:31:34,080 --> 00:31:42,720 it's all gone too far from mass market and, you know, anonymous sort of things, and I'm wanting to rebuild pride. 263 00:31:42,720 --> 00:31:46,410 And this is going to be a partnership in this whole thing. 264 00:31:46,410 --> 00:31:53,970 And I'm I'm impressed by your study, Colin, where you talk about the need to look at the role of the private sector, 265 00:31:53,970 --> 00:32:01,890 the public sector, education and training and communities. We have to have all of those who finance is a critical piece of this. 266 00:32:01,890 --> 00:32:04,810 And without that, by the way, none of it can happen. 267 00:32:04,810 --> 00:32:14,050 But for it to work effectively, we've got to think about the changing dynamics of the UK and its economy and how those dynamics have to change. 268 00:32:14,050 --> 00:32:24,030 So levelling up. Has to be pulled from the regions, and I always say we take government out of this because I think there is a great complementarity. 269 00:32:24,030 --> 00:32:30,300 I'm a great believer in government involvement. It was a great example wouldn't happen without it. 270 00:32:30,300 --> 00:32:33,540 But at the business bank, you know, we put the Northern Powerhouse fund together, 271 00:32:33,540 --> 00:32:40,340 a middle engine fund for two million Northern Powerhouse and I think 600 million. 272 00:32:40,340 --> 00:32:48,110 And a number of other angel funds, low level VC funds that weren't available through the normal channels, but in the end, 273 00:32:48,110 --> 00:32:55,640 the government cannot be the system, the government cannot be the new infrastructure to replace what the banks have. 274 00:32:55,640 --> 00:33:02,390 It simply doesn't make sense. It's not practical, but it's a great partner. 275 00:33:02,390 --> 00:33:11,120 Look, we as a new bank are talking to the British business bank. We see that as a possible partner that wasn't there before. 276 00:33:11,120 --> 00:33:15,890 So I look, I'm a big fan of the business, but I would say that, wouldn't I? 277 00:33:15,890 --> 00:33:18,680 But the fact it's still there and is growing, 278 00:33:18,680 --> 00:33:25,970 and we found that we were being asked constantly by the Treasury to do more and we had an extraordinary experience. 279 00:33:25,970 --> 00:33:28,970 We went in off for more money, which we did all the time. 280 00:33:28,970 --> 00:33:36,170 At one point, and they gave us more than we asked for which other things ever happened before in Treasury. 281 00:33:36,170 --> 00:33:41,270 So. So the government has to be there, 282 00:33:41,270 --> 00:33:45,920 but I think it's back to this actually government British business might be 283 00:33:45,920 --> 00:33:51,590 really good for our community if you could do something that looked like this. 284 00:33:51,590 --> 00:33:56,380 So a real partnership, along with the other things that we talk about. 285 00:33:56,380 --> 00:34:06,260 What about the other parts of. The financial system, Duncan is clearly important, but it's not the only component and. 286 00:34:06,260 --> 00:34:11,810 Business needs equity sources of finance outside of the southeast. 287 00:34:11,810 --> 00:34:20,590 There's very little in the way of an angel community. Private equity is very heavily concentrated in the southeast. 288 00:34:20,590 --> 00:34:27,130 What what needs to happen in that school? Well, there's no doubt we need to get equity into this. 289 00:34:27,130 --> 00:34:33,040 This equation on the business bank has helped some of that. 290 00:34:33,040 --> 00:34:37,480 The real question I don't think we have an answer to this year is why isn't it there? 291 00:34:37,480 --> 00:34:44,740 Why amongst all of these houses in London, I mentioned the only six of them have offices outside. 292 00:34:44,740 --> 00:34:53,770 Is it a lack of appetite? Is it a lack of awareness? I think it it's a fear isn't the right word, but let me use that. 293 00:34:53,770 --> 00:34:58,810 It's a fear of the unknown. We're familiar with this territory. 294 00:34:58,810 --> 00:35:03,820 It's a community. Obviously, the city and everybody knows everyone. 295 00:35:03,820 --> 00:35:10,510 They know who the different players are. It's therefore easier for them to do the transaction, arguably. 296 00:35:10,510 --> 00:35:15,400 And if they don't need the additional business, well, why would we bother? 297 00:35:15,400 --> 00:35:21,400 I think this comes back to the regions have to say, Look, we do need equity. 298 00:35:21,400 --> 00:35:24,760 This is the sort of quantum we look for. This is where we have it. 299 00:35:24,760 --> 00:35:36,670 And for them to go and ply their trade in London, for them to look locally, to build local equity capability again. 300 00:35:36,670 --> 00:35:44,530 You made a comment in your research brief that if we look at the industrial revolution, none of that was driven from London. 301 00:35:44,530 --> 00:35:50,320 It was the Chamberlains and Wedgwood, all supported by local banks, which have now disappeared. 302 00:35:50,320 --> 00:35:55,660 But they also had local stock exchanges, so local people invested in local companies. 303 00:35:55,660 --> 00:36:02,880 But there isn't that capability at the moment. So something like that has to be rebuilt. 304 00:36:02,880 --> 00:36:13,110 I I wouldn't be entirely optimistic about dragging people out of London, but I see no reason why investment houses can't be set up locally, 305 00:36:13,110 --> 00:36:18,290 and we're having a conversation right now with an organisation called Regionally. 306 00:36:18,290 --> 00:36:24,600 Which is an advisory firm on equity investment, and it's based in Wolverhampton. 307 00:36:24,600 --> 00:36:36,740 And they're absolutely dedicated to. To help companies raise equity funds, so they have connexions in London, so they know what the appetites are. 308 00:36:36,740 --> 00:36:45,360 So it's a little bit like the broker analogy of matching people up across the piece. 309 00:36:45,360 --> 00:36:50,860 So we're seeing more of this, and this doesn't seem in any sense like a flash in the pan, 310 00:36:50,860 --> 00:36:56,760 there's more and more of this not happening of local initiatives. 311 00:36:56,760 --> 00:37:05,730 The fact that Ben shot and killed 20 million out of his pension fund. There are more ways of getting equity than just talking to some fund. 312 00:37:05,730 --> 00:37:18,320 And I think the local authorities. Need to are looking at should we be moving money into these things we have as part of our capitalisation, 313 00:37:18,320 --> 00:37:24,600 an investment from the Greater Manchester Combined Authority. They decided to invest in us. 314 00:37:24,600 --> 00:37:30,390 I think that's another component. So that's equity in our bank from them. 315 00:37:30,390 --> 00:37:35,610 So I think that's another avenue because people are going to take responsibility for fixing these problems. 316 00:37:35,610 --> 00:37:42,120 This is back to leadership and taking ownership for what can we do? 317 00:37:42,120 --> 00:37:46,950 And to say, well, we can't do equity because it's all in a lot of fun. Find your own. 318 00:37:46,950 --> 00:37:56,280 Get creative about this. Roger Marsh. When I was speaking to him, I was talking about the new West Yorkshire morality that's been set up. 319 00:37:56,280 --> 00:38:06,030 And I won't mention the actual numbers because it may not be public knowledge, but they will get a fairly significant annual income for that morality. 320 00:38:06,030 --> 00:38:08,820 And instead of it being dissipated, I'm not saying it would be wasted, 321 00:38:08,820 --> 00:38:14,790 but you can often see these things go across a million projects that doesn't move the dial on anything. 322 00:38:14,790 --> 00:38:23,730 He's got to securitise it into an investment fund so that we'll look at that investment fund as something very powerful. 323 00:38:23,730 --> 00:38:31,170 And he's talking about a big number where they can look across the territory and say, Where's this money needed? 324 00:38:31,170 --> 00:38:38,800 I think this great that's taking control. So it's there's a variety of ways you can find it equity. 325 00:38:38,800 --> 00:38:43,840 If there was a little local stock exchange, I'm not sure if that's ever realistic. 326 00:38:43,840 --> 00:38:50,410 But it is a way, and there's lots of rich entrepreneurs, some of them invested in our business. 327 00:38:50,410 --> 00:38:56,080 So we've got a lot of high net worth individuals to invest in our bank. 328 00:38:56,080 --> 00:39:00,430 Another form of equity. And there are ways to access that. 329 00:39:00,430 --> 00:39:08,020 There are companies in the regions, one that we use who know how to get to these people. 330 00:39:08,020 --> 00:39:15,470 So there's a multitude of sources of equity. It's about mobilising it in the region locally. 331 00:39:15,470 --> 00:39:21,110 But what about the need for people to have the skills to be able to? 332 00:39:21,110 --> 00:39:31,620 Gain access to the finance and the mentoring and the networking that goes on in places where there's a really vibrant, entrepreneurial culture. 333 00:39:31,620 --> 00:39:35,870 Isn't there a problem in terms of provision of that knowledge base? 334 00:39:35,870 --> 00:39:46,360 Yes. One of the things we did right at the start of the business bank was to produce a pamphlet on how to write a business plan. 335 00:39:46,360 --> 00:39:53,580 And one of the problems many Hashmi's had and still have is if you want someone's money, you need a persuasive argument. 336 00:39:53,580 --> 00:39:59,130 You may be passionate about your business, but they look at it in a different way, which is how am I going to get my money back? 337 00:39:59,130 --> 00:40:04,260 Hopefully, a bit of profit so that skill set on its own. 338 00:40:04,260 --> 00:40:10,020 If you're an entrepreneur with a passion about a particular product, it's probably never been part of your past. 339 00:40:10,020 --> 00:40:15,420 So that was a small gesture. We work with 21 different organisations to put that together. 340 00:40:15,420 --> 00:40:21,530 The FSB was one of them. Chamber of Commerce was another. 341 00:40:21,530 --> 00:40:27,110 What's needed, of course, there is an awareness of I've got a problem. I need some training. 342 00:40:27,110 --> 00:40:30,050 And again, I think that's that's coming. 343 00:40:30,050 --> 00:40:40,760 And I do think that's a big part of your project about the need for education and training, which is you can't just moan about not getting money. 344 00:40:40,760 --> 00:40:44,540 You have to understand why you didn't get it. No, this has been a big problem. 345 00:40:44,540 --> 00:40:52,370 I have to say with the big banks came out of that report that most of the time when businesses were turned down for banking finance, 346 00:40:52,370 --> 00:40:57,410 nobody explained why the money wasn't approved, which doesn't help at all. 347 00:40:57,410 --> 00:41:01,760 Was it because, well, we just don't have enough time for that or actually the business? 348 00:41:01,760 --> 00:41:08,030 Probably just awful. If you've done this, this this well, then we might have listened to it. 349 00:41:08,030 --> 00:41:23,220 So there is a big educational issue. The. I think what happened or can happen here is there's an awful lot of role monitoring, monitoring if you like, 350 00:41:23,220 --> 00:41:28,440 where people look across their territory in the region and see successful businesses. 351 00:41:28,440 --> 00:41:32,940 They do learn growing various functions and whatever and chatting to other business people. 352 00:41:32,940 --> 00:41:36,390 How did you get that money? How did you go about it? 353 00:41:36,390 --> 00:41:43,710 So there's a lateral thing that an informal process, but I do think. 354 00:41:43,710 --> 00:41:47,820 Yes. Look, it's an issue. How is it going to be fixed? 355 00:41:47,820 --> 00:41:52,640 I think there's. A range of ways, 356 00:41:52,640 --> 00:41:57,410 and I want to encourage actually if the re-emergence of local technical colleges that 357 00:41:57,410 --> 00:42:05,710 have been kind of sidelined from the education system but re-emerging as providers of. 358 00:42:05,710 --> 00:42:20,410 Genuinely needed skills training not to do with banking and finance, but gee, make wind turbines in Hoshiarpur seriously deprived town. 359 00:42:20,410 --> 00:42:31,240 And I know because I come from there and they are sponsoring students at the local technical college to develop skills that they need. 360 00:42:31,240 --> 00:42:39,040 There is no reason why that technical college and others can't provide training on business management, 361 00:42:39,040 --> 00:42:50,860 business plan preparation, understanding how capital markets work, understanding the way investors think. 362 00:42:50,860 --> 00:42:55,390 And this is not, dare I say, rocket science. 363 00:42:55,390 --> 00:43:02,770 These are easily trainable. You have to see the need. Well, desperation might get you there if you're not getting the money you want. 364 00:43:02,770 --> 00:43:06,970 So, yes, it's an issue. There are things happening. 365 00:43:06,970 --> 00:43:18,250 Isn't enough? Probably not. But I have to say, if we get back to truly regional delivery of banking services and by the way, 366 00:43:18,250 --> 00:43:21,070 one thing I forgot to mention that most people might be aware of is handles. 367 00:43:21,070 --> 00:43:29,050 Banking has proven this benefit of local decision making the top rated for SMEs because 368 00:43:29,050 --> 00:43:33,760 they have branches actually in towns where they make decisions expensive structure, 369 00:43:33,760 --> 00:43:41,050 but nevertheless. But what you will get then, because you're talking to the people. 370 00:43:41,050 --> 00:43:49,300 Actually making the decision is you do get the opportunity to learn because if the answer is no, you can ask the person, Well, why didn't you do it? 371 00:43:49,300 --> 00:43:56,470 If it's somebody sitting in head office in London, you're never going to get. It's just someone else pushes the message on. 372 00:43:56,470 --> 00:44:00,550 And will the relationship managers and bank rules be providing that Typekit? 373 00:44:00,550 --> 00:44:06,850 Yes, absolutely. These are all bankers recruited locally. 374 00:44:06,850 --> 00:44:15,070 We've had, interestingly, a bit like the business being extraordinary income of talent, 375 00:44:15,070 --> 00:44:19,270 of people who want to join this sort of institution in this region. 376 00:44:19,270 --> 00:44:28,540 Put something but. And so we get some very talented people who have been at the sharp end in other banks don't like the way it works. 377 00:44:28,540 --> 00:44:35,560 But these are smart, clever people and they see it as their job. 378 00:44:35,560 --> 00:44:38,980 We are developing relationship shops here that we want to be long term. 379 00:44:38,980 --> 00:44:45,430 We're a long term lender. And for that, you can't just have one conversation and then wave goodbye. 380 00:44:45,430 --> 00:44:50,770 It's a constant discussion about what's happening with the business. 381 00:44:50,770 --> 00:44:55,690 What isn't happening could be helps more and someone else help. 382 00:44:55,690 --> 00:45:01,870 We expect to work with other partners. So if somebody says. 383 00:45:01,870 --> 00:45:07,660 Actually, you know, we need even more patient capital, you're likely to say, you know, 384 00:45:07,660 --> 00:45:13,690 you got to the stage where you need a different capital structure, you need some equity in here. 385 00:45:13,690 --> 00:45:15,130 And this is what you want to do. 386 00:45:15,130 --> 00:45:22,800 A lot of small businesses are terrified because they said, Well, whoever puts this in is going to want to put a director on my board. 387 00:45:22,800 --> 00:45:29,600 I'm going to lose control. So it was a classic reaction. Not necessarily true. 388 00:45:29,600 --> 00:45:37,160 But we are looking at, well, talking to regionally. We would look to work with other partners where if that happens, if you say, look, 389 00:45:37,160 --> 00:45:42,200 you really need more than just bank finance, we know somebody who can help you. 390 00:45:42,200 --> 00:45:51,610 And it's it's an educational thing, as well as just a referral thing that sending it to someone like that. 391 00:45:51,610 --> 00:46:02,200 So again, the spark of partnerships and communities and groups of people who, as Bob, say families are not famous, 392 00:46:02,200 --> 00:46:09,190 but something I always ask when things are tricky is are we having the right conversation here on all the right people in it? 393 00:46:09,190 --> 00:46:13,190 And frequently, we don't make progress because we don't have the right people. 394 00:46:13,190 --> 00:46:18,070 It's well, I don't know the answer to that. Well, actually, I do, but I know some might. 395 00:46:18,070 --> 00:46:23,020 And it's that willingness to work with and be generous. 396 00:46:23,020 --> 00:46:29,770 I care about a business that you want to help them help them through that. 397 00:46:29,770 --> 00:46:36,790 Each of these poses a different challenge, and getting them through that is often an educational thing. 398 00:46:36,790 --> 00:46:43,420 This fear is based on an ignorance or, well, it was a story published which I saw, which was bad news. 399 00:46:43,420 --> 00:46:48,190 Well, the stories that get published? Yes. 400 00:46:48,190 --> 00:46:57,830 Look, that's another challenge. It needs to be tackled. And one of the biggest challenges that Britain faces is that starts businesses, 401 00:46:57,830 --> 00:47:04,620 but it's very bad at them building them into national and international competitors. 402 00:47:04,620 --> 00:47:09,870 How far does your lending go? What's the maximum loan? 403 00:47:09,870 --> 00:47:17,310 Well, at the moment it would be up to five million, but you know, we're we're just starting out, right? 404 00:47:17,310 --> 00:47:24,390 That could increase. But you know, in the early stages, you watched very critically by the regulator, right? 405 00:47:24,390 --> 00:47:32,280 During this period, we need to increase our capital, which would certainly increase our capability to lend more than that. 406 00:47:32,280 --> 00:47:40,000 But in the early stages, we can end up to five million. Five million is quite a lot for most businesses, most small businesses. 407 00:47:40,000 --> 00:47:44,690 And we are in a very specific part of this sector, as I say, those that want to grow. 408 00:47:44,690 --> 00:47:49,450 So that's, you know, it's half a million, up to five million. 409 00:47:49,450 --> 00:48:00,610 But I can tell you, OK, North, having shot it out like that five years later, are lending much, much bigger amounts, tens of millions. 410 00:48:00,610 --> 00:48:04,810 So this doesn't have to be a constraint. 411 00:48:04,810 --> 00:48:17,710 It's largely early stage. Growth. If you like pangs of the capital that's required and getting that capital, you know, there's a challenge here to. 412 00:48:17,710 --> 00:48:26,680 It's had some publicity lately in that the capital ratios that small banks have to keep a much the same as the big banks. 413 00:48:26,680 --> 00:48:32,470 And it's a real Panopto. So we've got to hold what we think are bigger amounts of capital necessary 414 00:48:32,470 --> 00:48:37,740 because the smaller banks are much simpler risk structures than the big banks. 415 00:48:37,740 --> 00:48:42,900 And we feel that these should be eased and immediate after breakfast, 416 00:48:42,900 --> 00:48:49,320 the Brexit and the PR said, we're going to look at this to ease the restrictions. 417 00:48:49,320 --> 00:49:01,840 We haven't heard anything yet. So there are some things that could be done there that would increase the the capacity of us and others. 418 00:49:01,840 --> 00:49:07,850 And when you talked about government partnerships, do you see a role for the government in terms of. 419 00:49:07,850 --> 00:49:12,050 Partnering with private financial institutions. Absolutely. 420 00:49:12,050 --> 00:49:14,720 Providing large amounts of finance. Absolutely. 421 00:49:14,720 --> 00:49:22,800 As I said, we're in conversation with the British business bank about where they may be able to help us and. 422 00:49:22,800 --> 00:49:30,540 That's we've had several and there's one next week. So this isn't a story, we're not going to do that. 423 00:49:30,540 --> 00:49:36,090 They've evolved. They've set up a subsidiary called Patient Capital. 424 00:49:36,090 --> 00:49:43,740 They're well aware of this gap and the need for patient care, both equity and debt. 425 00:49:43,740 --> 00:49:48,420 So yes, we expect to to work with British business. Absolutely. 426 00:49:48,420 --> 00:49:54,570 And of course, they have from day one provided a number of facilities to banks where, 427 00:49:54,570 --> 00:50:00,240 for example, if you've reached your limits on a particular client and look, 428 00:50:00,240 --> 00:50:08,280 that's up to our risk appetite of providing guarantees to support a lifting a government guarantee to lift that limit. 429 00:50:08,280 --> 00:50:16,500 So that was there from day one when we kept on still there finest guarantees. 430 00:50:16,500 --> 00:50:27,900 So there's a multitude of things and they're very open and constantly talking about what else can we do and what we found. 431 00:50:27,900 --> 00:50:35,220 So I think I hinted at earlier was although there was a lot of political scepticism which changed rapidly 432 00:50:35,220 --> 00:50:44,260 because we had all of our targets and exceeded most them was the strong support throughout was Treasury. 433 00:50:44,260 --> 00:50:50,110 And I think now looking at levelling up, everyone's aware that there's a big role. 434 00:50:50,110 --> 00:50:58,540 Possibly expanding role for businessmen to play. But I repeat my earlier comment. 435 00:50:58,540 --> 00:51:04,570 It can't fix the system that went bust or disappeared. This is a rebuild. 436 00:51:04,570 --> 00:51:12,720 In my view, with private finance, private banking. And the opportunity is huge. 437 00:51:12,720 --> 00:51:20,750 In terms of already, we've started to obviously talk about lending now we just got a licence a few months ago. 438 00:51:20,750 --> 00:51:28,630 And we've got a load of applications more than we frankly can handle. 439 00:51:28,630 --> 00:51:36,670 This is a. A low hanging fruit for new players, and I say that advisedly, you know, 440 00:51:36,670 --> 00:51:44,440 the risks involved and have to know what you're doing, but it's like the whole levelling up thing the show recruited. 441 00:51:44,440 --> 00:51:50,080 There's a big prise here for the government, for economies, for new players. 442 00:51:50,080 --> 00:51:57,710 This is not a fly by night thing at all. So we're very optimistic and. 443 00:51:57,710 --> 00:52:05,820 All the conversations, we're having a seriously positive with the various players that we are working with them hope to. 444 00:52:05,820 --> 00:52:12,170 Thank you. Let me just throw it open to any questions that people have got. 445 00:52:12,170 --> 00:52:17,690 I'm just. Thank you so much. 446 00:52:17,690 --> 00:52:22,820 This has been absolutely fascinating. To that point of this being such a large opportunity, 447 00:52:22,820 --> 00:52:31,310 I'm curious what it has been like to raise funds to increase the amount of capital you have at your at your disposal. 448 00:52:31,310 --> 00:52:37,820 Have investors been able to see the great opportunity? Are you trying to you know, what is that relationship like? 449 00:52:37,820 --> 00:52:45,280 What is that? What is it like to have those conversations with people? Thank you. I'm not sure I caught all of that, but. 450 00:52:45,280 --> 00:52:57,050 What was the central question? In terms of raising the amount of funding you have available and talking to private investors to invest in your fund, 451 00:52:57,050 --> 00:53:05,710 I mean, maybe I'm using the wrong words, but raising the capital you have at your disposal for for the bank? 452 00:53:05,710 --> 00:53:10,520 Are are people willing to do that? Are people interested? Do they see the opportunity? 453 00:53:10,520 --> 00:53:15,420 What are those conversations like me asking the right question? Well, that's fine. 454 00:53:15,420 --> 00:53:20,980 No. The short answer is yes, they are. 455 00:53:20,980 --> 00:53:25,910 The question is. I think what we've been talking about here is it's sufficient. 456 00:53:25,910 --> 00:53:32,840 What we do know is there isn't enough of an appetite to do that. 457 00:53:32,840 --> 00:53:41,780 And these appetites do change an awful lot. So for example, if you were a biotech start-up or some deep tech start-up, 458 00:53:41,780 --> 00:53:52,640 you get people far more interested because they're seeing all sorts of fantastic growth as opposed to something might be just more local. 459 00:53:52,640 --> 00:53:53,840 Think about techies. 460 00:53:53,840 --> 00:54:02,790 You can globalise that if it's any good, whereas if it's a local business with just a local opportunity, that may not go very far. 461 00:54:02,790 --> 00:54:10,280 So some investors are really looking to a significant payoff from that particular deal. 462 00:54:10,280 --> 00:54:14,900 Others a bank regionally would look at. 463 00:54:14,900 --> 00:54:22,910 We're looking at making money in the region from a multitude of transactions, each of which we would hope be profitable. 464 00:54:22,910 --> 00:54:34,370 But we see the return being a collective thing by work with good risks, whereas there are certainly on the equity side people saying no. 465 00:54:34,370 --> 00:54:42,800 I mean, if you're dealing with private equity, for example, private equity has only one interest is what's the exit multiple and when is it? 466 00:54:42,800 --> 00:54:45,830 So they're saying, Look, this is a good investment. 467 00:54:45,830 --> 00:54:53,870 I went out in five years and I want a multiple of 10 times, and if I can't get it, I will invest the money. 468 00:54:53,870 --> 00:54:59,600 But that's what product is about. And if you don't like that fine, so choosing a partner is important. 469 00:54:59,600 --> 00:55:00,620 It's not just getting the money, 470 00:55:00,620 --> 00:55:13,010 but I chaired a company that was funded by private equity and the chief executive was hard at work for a major corporation. 471 00:55:13,010 --> 00:55:17,660 And he said, I can't stand these private equity people. They're on my case every week. 472 00:55:17,660 --> 00:55:25,820 He said I used to put a budget together. We monitor it every quarter with head office or whatever, and then it lead me to it. 473 00:55:25,820 --> 00:55:30,800 These people want numbers every week. Every fortnight they're ringing me up the calling in. 474 00:55:30,800 --> 00:55:39,010 That's how they operate the forensic. As long as you are aware of that, that might be OK. 475 00:55:39,010 --> 00:55:44,490 So picking your partner, this is important because it can backfire. 476 00:55:44,490 --> 00:55:49,750 But. There are appetites for good business everywhere. 477 00:55:49,750 --> 00:55:54,820 If you've got a good idea, if you've got a viable proposition, you can find the funding. 478 00:55:54,820 --> 00:56:00,340 It depends where you are geographically, depending on how well you've written. 479 00:56:00,340 --> 00:56:05,100 Your business plan depends on a number of factors. It may be more or less difficult. 480 00:56:05,100 --> 00:56:12,030 But it's not that often that something that really absolutely hits the button in terms of an 481 00:56:12,030 --> 00:56:18,090 opportunity and the need in a particular market that there won't be someone out there that says, 482 00:56:18,090 --> 00:56:25,780 that's for me. And it might just be a high net worth individual. 483 00:56:25,780 --> 00:56:34,360 So Vincent Online has asked, how quickly could you get scaling up to a level of regional banking, say, as there is in Germany? 484 00:56:34,360 --> 00:56:39,460 How long, how quickly or how quickly to a reasonable level? 485 00:56:39,460 --> 00:56:43,690 Well, what's a reasonable level? Look, it's a good question. 486 00:56:43,690 --> 00:56:47,180 How fast can this move? 487 00:56:47,180 --> 00:56:55,190 It will depend on a number of factors, I think the principle one will be the success of players who are going into this market. 488 00:56:55,190 --> 00:56:59,630 Things can move very quickly if they say we were sceptical about this. 489 00:56:59,630 --> 00:57:05,120 And one of the problems we have is people said, Well, you're a fintech challenger bank. 490 00:57:05,120 --> 00:57:12,170 And you know, most those are not making money. But actually what they're talking about are mass market consumer. 491 00:57:12,170 --> 00:57:22,370 So Revolut as managing going to something like 10 million customers from the big banks and I can't remember, I think it's to lose about 120 million. 492 00:57:22,370 --> 00:57:26,570 So you know this, this if this doesn't work, then it'll attract a lot of capital. 493 00:57:26,570 --> 00:57:31,010 Interesting. Despite that, we get lumped in with that. 494 00:57:31,010 --> 00:57:40,640 So we're not even remotely in that area. So if I look at our area of esame banking up north has done extremely well. 495 00:57:40,640 --> 00:57:49,490 It's one example, I think when you get two or three players who really start motor rapidly and we're getting a lot of pull, 496 00:57:49,490 --> 00:57:55,130 if you like from the regions about this is what we need. 497 00:57:55,130 --> 00:58:06,940 It pulls in all this pretty quickly. I think the real question is linking it to levelling up of how urgent is this for levelling up? 498 00:58:06,940 --> 00:58:10,210 And of course, we still have to define what we mean by levelling up. But again, 499 00:58:10,210 --> 00:58:16,060 this becomes a regional thing about how big is the problem and how quickly do you 500 00:58:16,060 --> 00:58:24,190 need to move it in West Yorkshire as opposed to Cornwall in Seattle's interest? 501 00:58:24,190 --> 00:58:32,560 If we put the Northern Powerhouse and the Midlands engine front together, Cornwall and Scilly ask Could you do one for us? 502 00:58:32,560 --> 00:58:42,160 And they do struggle down there, and I talk to somebody who is trying to raise a fund for that area and people just say to remote and well, 503 00:58:42,160 --> 00:58:48,100 it's just about holiday destinations, so they suffer from an image factor. 504 00:58:48,100 --> 00:58:55,960 So how quickly it moves and needs to move is very much a function of what the problem and opportunity is. 505 00:58:55,960 --> 00:59:01,480 And in the local economy, I think it will move fast. What do I mean by fast? 506 00:59:01,480 --> 00:59:08,800 I can't put a number on it, but I think we are seeing a serious movement in this country. 507 00:59:08,800 --> 00:59:15,220 First of all, the recognition, we've got a serious problem and the sense that while it might go away, 508 00:59:15,220 --> 00:59:20,530 all the big banks might come back set against a serious opportunity. 509 00:59:20,530 --> 00:59:29,020 And, of course, necessity. The government, I'm quite sure, pushed the whole levelling up thing initially as a political thing to the red, 510 00:59:29,020 --> 00:59:36,670 although its post-Brexit imperative that we get the economy firing on all cylinders. 511 00:59:36,670 --> 00:59:43,460 So there's an urgency undoubtedly about this, but I think it will move rapidly. 512 00:59:43,460 --> 00:59:55,520 We're out of time, but. Paul, you wanted to be on our politics in all this conversation. 513 00:59:55,520 --> 01:00:04,040 We barely use it, use the word universities, and it's not just that we're in one, 514 01:00:04,040 --> 01:00:16,040 it's it's that Britain has 18 of the top 100 universities in the world, and that's where the ideas are coming from. 515 01:00:16,040 --> 01:00:20,210 And how are you going to relate to that? 516 01:00:20,210 --> 01:00:26,870 Is it is it the is it a much earlier stage that these ideas and he did? 517 01:00:26,870 --> 01:00:33,290 Is that what's missing as well as the angels and and mentoring? 518 01:00:33,290 --> 01:00:43,040 And what are you going to do in connexion to that? Are you going to put your arm around these companies or are you just going to make the loan? 519 01:00:43,040 --> 01:00:48,680 Well, first of all, I think it's a very good point and I'm on your side and I've spent a lot of years on the faculty here, 520 01:00:48,680 --> 01:00:59,000 so I'm your friend and the I heard a comment that came out of it was actually conversation with John Brown, 521 01:00:59,000 --> 01:01:01,880 who was working on these committees with number 10. 522 01:01:01,880 --> 01:01:09,410 And he said, Well, one of the people is absolutely clear that levelling up is all about R&D and university research. 523 01:01:09,410 --> 01:01:14,810 And so it's part of that. From our point of view, we're not interested in that. 524 01:01:14,810 --> 01:01:21,680 We will not finance start-ups. We've just decided we're going to focus because by focussing, we can do the job better. 525 01:01:21,680 --> 01:01:29,000 And where some banks have strayed is where they've spread their interests too wide too soon. 526 01:01:29,000 --> 01:01:34,220 And so they've dropped some in some banking and the other banks was dropped because 527 01:01:34,220 --> 01:01:45,380 they were too busy trying to sort out the mass market stuff they were doing. So we said we're going to stay focussed on that early stage start-up. 528 01:01:45,380 --> 01:01:50,420 So much, as you know, depends on what is it, so if it's biotech out of Oxford? 529 01:01:50,420 --> 01:02:01,430 People are queuing up to invest, but these are a very special kind of funds individuals back to high net worth individuals. 530 01:02:01,430 --> 01:02:09,950 But tech funds and we talked earlier about the amount of tech funding coming into UK from foreign investors. 531 01:02:09,950 --> 01:02:15,390 Number three in the world of. So it's coming from a whole variety of it. 532 01:02:15,390 --> 01:02:20,030 Again, back to the that's the sort of stuff you can globalise. 533 01:02:20,030 --> 01:02:27,800 So this is very attractive now. If it's not biotech or what we might call deep tech, then it really does depend on it, 534 01:02:27,800 --> 01:02:34,070 but it requires a very specialist kind of funder who's ready for that sort of thing. 535 01:02:34,070 --> 01:02:42,080 We have suffered as a start-up because an awful lot of the investors who you would see out of there, 536 01:02:42,080 --> 01:02:50,750 from the big to small, have policies that do not allow them to invest in what you call a pre-money start-up. 537 01:02:50,750 --> 01:02:57,170 Well, it sounds like a brilliant plan. It seems to make sense, but you're not actually making any money, 538 01:02:57,170 --> 01:03:07,160 and we have a rule constraint in our investment process that we simply don't invest in. 539 01:03:07,160 --> 01:03:11,100 In our case as well. We won't invest to get a licence. Well, we've got a licence now. 540 01:03:11,100 --> 01:03:21,680 We'll see if anyone's more interested. So it is a struggle to find what is a much smaller community of players who absolutely have an appetite. 541 01:03:21,680 --> 01:03:27,890 And of course, the skill set to work on that. But look, the success. 542 01:03:27,890 --> 01:03:37,190 I look at Cambridge. The tech part of Cambridge knows Microsoft and whatever all of that originating out of 543 01:03:37,190 --> 01:03:43,400 early tech transfer out of the university and the biotech piece Oxford is enormous. 544 01:03:43,400 --> 01:03:49,220 And I don't know a single university that doesn't have a department that just does this. 545 01:03:49,220 --> 01:03:57,980 How are we going to monetise this research? We've got plenty of ways to finance university, but for anything else. 546 01:03:57,980 --> 01:04:02,960 So this is a piece of it, Paul. 547 01:04:02,960 --> 01:04:06,440 And this is why this is a multitudinous, 548 01:04:06,440 --> 01:04:15,790 multidisciplinary challenge because there's so many components with different types of challenge or different needs. 549 01:04:15,790 --> 01:04:24,210 But marketplaces tend to sort these things out eventually, maybe with some help from time to time from government. 550 01:04:24,210 --> 01:04:31,620 And I I had a difficult conversation with the minister at the business bank, 551 01:04:31,620 --> 01:04:37,920 where ministers sometimes will come along with a favourite project in their constituency and want you to fund it. 552 01:04:37,920 --> 01:04:44,520 And it was a bioscience thing which at that time we were not interested in for all sorts of reasons. 553 01:04:44,520 --> 01:04:55,000 And I had to decide whether I made a career limiting decision to say no, which I did, but. 554 01:04:55,000 --> 01:04:59,950 But it is about appetites much. But look, you're right, this is a. 555 01:04:59,950 --> 01:05:03,160 Economic enormous opportunity, you're right. 556 01:05:03,160 --> 01:05:14,930 Fantastic university regularly three in the top 10 in the world, no other European well, EU country has got one in the top 10. 557 01:05:14,930 --> 01:05:19,000 We don't play that card as well as we should. 558 01:05:19,000 --> 01:05:25,480 I think. And on that happy note, we will have to draw this to a close. 559 01:05:25,480 --> 01:05:34,330 Ron, thank you very much indeed for a fantastically insightful discussion about what is clearly a central part of the whole levelling up jigsaw. 560 01:05:34,330 --> 01:05:37,907 So thank you very much indeed. It was a pleasure. Thank you.