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Royal Bank of Scotland fears that 100,000 of its 1 million small business customers could get into financial difficulty as the economic climate deteriorates.
The high street bank, which is likely to be 60%-owned by the taxpayer by next month, is assembling a team of 500 experienced "grey haired" bankers who will be able to offer intensive support and advice to businesses running into trouble. "Inevitably more businesses are getting into difficulty," said Alan Dickinson, chief executive of RBS UK.
On the eve of the pre-budget report, which is expected to lean on banks to keep up funding to small businesses, Dickinson said his expectation was that "at least 10% will need some sort of advice". He made his prediction as RBS made a price pledge on overdrafts intended to give businesses security about their financing in the year ahead. RBS also owns NatWest and between them they provide banking facilities to more than a quarter of Britain's small businesses.
The bank, led by Stephen Hester, expects businesses set up after 2002 to be most at risk as they will not have experience of operating in an economic downturn. The previous period of uncertainty was at the end of the dotcom boom at the turn of the century, though most bankers admit they are experiencing the most difficult conditions they have seen in their career. This was a sentiment expressed at last week's shareholder meeting by outgoing RBS chairman, Sir Tom McKillop.
RBS wants to "give peace of mind" on borrowing and pricing to its small business customers, those with a turnover of less than £1m, by committing to overdraft pricing for 12 months from the time the facility was agreed. NatWest and RBS both promise not to increase the price of the funding unless there has been a rise in the risk associated with lending. The price promise will stay in place until at least the end of next year.
The move prompted a Liberal Democrat business spokesman, John Thurso, to call on other banks to follow suit. "The government must now ensure other part-nationalised banks make similar pledges to their customers to ensure the current recession does not become a deep slump," he said.
Some bankers noted that most banks were obliged to maintain overdraft agreements for a year and that only £9bn of the £51bn lent to small business was in the form of overdrafts.
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