After the 2008 crash, the banking world came close to cardiac arrest as global capital flows dried up. Few would claim that it has returned completely to normal, which offers openings for niche financial players to enter the market.
Sanjeev Gupta, whose GFG Alliance owns businesses across the UK and the world, including Liberty Steel, got into the banking business last year by buying Tungsten Bank and relaunching it as Wyelands Bank.
Nick Peters spoke to David Locking, who heads up the working capital solutions team at Wyelands Bank, and Ian Flaxman, the managing director of the working capital solutions team.
Can you explain to me why the GFG Alliance, led by Sanjeev Gupta, has entered the banking business via Wyelands Bank?
David Locking: Sanjeev Gupta is a visionary businessman who wants to promote the revival in growth of industrial businesses in the UK. His wider family – the Gupta Family Group – make investments on that basis.
Wyelands Bank, which came out of the old Tungsten Bank, believes UK industry needs a bank that focuses on ambitious growing businesses, to fund their growth and to create jobs. So that’s the fundamental principle that Sanjeev sees as part of his overall vision.
The way you put that suggests that he believes strongly that the current system isn’t offering everything that these ambitious businesses seek. So, what gap in the current offering from other banks does Wyelands Bank seek to fill?
We’re trying to keep things relatively simple by sticking to the working capital space. We aren’t looking to provide highly engineered solutions of the investment banking type. It’s about trade. It’s about growth and it’s about jobs.
What we’re trying to do is improve clients’ working capital flows by offering direct access to decision makers in Wyelands Bank, thus filling a gap in the market that isn’t met by the traditional lenders.
We believe larger traditional lenders look at broadening the sort of business they want to be doing with customers, rather than focusing on specific needs. They’re driven by minimum revenue thresholds, minimum size of company and so on.
We’re finding customers are warming to banks like us that are willing to listen and hear what the problems are, and develop a tailored solution. Every business is different; we’re trying to treat businesses as individuals.
Clearly, we see manufacturing as a great opportunity for the bank. What we’ve tried to do is to be a bit more focused on a number of industries that we think are relevant, like automotive, aerospace, commodities, the energy space, food and beverage, and of course, steel and aluminium, and then create a relevancy for the supply chains that are operating in that space.
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Ian, you offer supply chain finance, which means smaller suppliers can get paid on time. Getting cash flow running smoothly can be the difference between success and failure, can it not?
Ian Flaxman: Absolutely, that and the need to hold inventory are the two key components of the working capital cycle. It is an important part of the lifeblood of a business, particularly one that’s looking to trade and grow apace.
We’re looking at the whole working capital cycle, whether it’s small suppliers, bigger businesses, or through to the end user, to structure a solution that ensures that cash flows to everybody’s benefit.
Research, including our Annual Manufacturing Report 2018, indicates that many companies have stored cash on their balance sheets and used that for capital expenditure and investment in preference to bank borrowing. Should we read anything significant into this, and if so, what?
Some of the larger, more successful businesses over the last decade certainly have been conserving cash. I think that that is a function of the way the banking world went post-2008.
To some extent it still remains in uncertain times, not just in funding, but in terms of the economic challenges around things like Brexit and the wider global economy. So, treasurers and finance directors will have conserved cash to be prudent.
Therefore, if businesses have chosen to use those cash reserves for acquisitions, growth or investment we see an opportunity to step in with working capital solutions to enable them to continue to realise the benefits of the investments or acquisition that they’ve made.
A lot of the smaller businesses that lie at the heart of the vision that Sanjeev Gupta and the GFG Alliance have for Wyelands Bank would say that those cash reserves on larger companies’ balance sheets are funded effectively by them through quite onerous payment terms that are applied to them, such as 60, 75, even 120 days.
It does seem like the smaller end of the business sector is getting unfairly squeezed?
David Locking: I think that’s a fair observation. You see that in a variety of situations, such as supermarkets squeezing their suppliers hard. It’s a common theme across the board that the small guy is getting squeezed.
That’s probably what creates part of our opportunity to help, to come in and support those businesses and fund that working capital gap that’s being created.