‘They took everything away apart from my entrepreneurial talent’ - Norwich architect Andrew Gibbs describes how RBS battle ruined his business
- Credit: Sonya Duncan
A Norfolk architect behind the regeneration of one of Norwich's most rundown districts today describes how he fought back from the brink after he said one of his businesses was ruined by a battle with his bank
Andrew Gibbs blames the Royal Bank of Scotland (RBS) for the collapse of his successful creative industries firm which helped revamp King Street in the city in the mid 2000s from a red-light district to a cultural quarter.
Mr Gibbs, who lives in the Golden Triangle area of the city, lost his business, Wall Work Project, and sold his family home after getting into financial problems following a £1.3m loan the company took with RBS in 2008.
The 58-year-old said he suffered a mental breakdown and his marriage collapsed under the stress of losing his business and property to RBS.
It was a bitter end to a bright project.
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The King Street buildings had been turned into offices for 11 creative companies, including three of his own, and his work won several architecture award.
Mr Gibbs was also awarded a fellowship from the Royal Society of Arts for the project.
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Mr Gibbs said Wall Work was in good financial shape, getting a rental income from tenants in the King Street buildings of around £85,000 a year, but problems began in 2008.
His business had borrowed money from NatWest to fund the regeneration project two years earlier and he transferred the loan of £1.3m to RBS in 2008.
He claimed a condition of the loan was for the firm to buy from RBS a product called an IRHP 2008.
'The product was totally inappropriate for small businesses,' he said.
IRHP, which stands for Interest Rate Hedging Product, was meant to protect the company against rising interest rates, but days later interest rates collapsed as the financial crisis bit, but his interest rates didn't fall.
He also had to pay RBS £732 a month in premiums for the product and Mr Gibbs said the IRHP cost his business tens of thousands of pounds.
But he said it was the re-valuation of his property by RBS which really damaged the firm.
In 2009 he was told by RBS that his property on King Street was now worth £1.3m – the same as the value of his loan. The building had previously been valued at more than £2m, he said.
With the company's RBS loan now worth the same as the company's asset, the firm was passed onto an RBS' business 'turnaround' unit called Global Restructuring Group (GRG).
As part of the 'turnaround' of his business, he claimed RBS effectively 'took control' of the firm's accounts by deciding who should and shouldn't be paid.
In October 2009 RBS sent him a letter asking for payment of the entire loan. He refused.
Just before Christmas the bank called in administrators for Wall Work Project.
He sold his family home on Heigham Grove in Norwich to pay off some of the loan but it wasn't enough to meet the amount in full and RBS appointed BNP Paribas Real Estate as receivers for King Street.
The architect had lost the historic office block which he had poured his passion and cash in to.
Mr Gibbs said administrators sold the building 10 months later for less than £1m. 'They took everything away apart from my entrepreneurial talent,' he said.
Mr Gibbs, who has three children and two step-children, fought back from the mental breakdown and met the woman who is now his wife and business partner.
She helped him recover and four years ago he started again – setting up architects Studio Urban Blu on Princes Street in Norwich.
•A 'dash for cash'
Firms earmarked for help from RBS were hit with hefty fees and fines and saw their assets bought up on the cheap.
Confidential files leaked to the media organisations suggest bank staff could also pocket bigger bonuses by pinpointing firms for a restructure in what an RBS executive described as a 'dash for cash'.
Around 12,000 firms were placed into the RBS turnaround arm, GRG, following the banking crisis of 2008.
The unit is alleged to have brought in extra fee income by squeezing small businesses. This is denied by RBS.
An online petition demanding a full inquiry into what happened has reached around 100,000 signatures.
And shadow secretary of state for business and Norwich South MP Clive Lewis said: 'The picture emerging about how SMEs were treated at the hands of RBS is appalling.
'A well-functioning financial sector should help businesses finance the investment they need to grow, not extract value and destroy companies for their own short-term gain.'
The Financial Conduct Authority is investigating RBS and GRG, while Mr Gibbs is working with other businesses in a similar situation and their legal advisors to look at their next steps.
•What RBS says
Jon Pain, chief conduct and regulatory affairs officer at RBS, said the GRG's role was to 'protect the bank's position, where possible by working with distressed businesses to return them to financial health'.
But he added: 'In the aftermath of the financial crisis we did not always meet our own high standards and we let some of our SME customers down.
'We have already acknowledged that, in some areas, we could, and should, have done better for SME customers.
'Specifically, we could have managed the transition to GRG better and we could have better explained to customers any changes to the prices or fees we were charging.
'We also did not always handle customer complaints well. As a result, a number of our customers did not receive the level of service they should have done or, importantly, that they would receive now.'
He said RBS was now a different bank and had gone through cultural changes.
But he added: 'We have seen nothing to support the allegations that the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail. In regard to the wider allegations raised, we have found no evidence that the bank either inappropriately targeted such businesses to transfer them to GRG or drove them to insolvency. Nor did it buy their assets at a lower than market price.
'The FCA review of the treatment of SME customers in GRG remains ongoing. It would not be appropriate to comment further.'
•Has your business been affected by RBS? Call Tom Bristow on 01603 772834 or email firstname.lastname@example.org