The Clydesdale and Yorkshire Banks will stop lending to commercial property firms, following an announcement by parent company National Bank of Australia (NAB). This decision was made following “a significant downgrade in the growth prospects of the UK economy.”
Unfortunately, this could have a knock-on effect upon commercial property lending elsewhere, as Clydesdale Bank itself runs funding lines to some of the biggest independent commercial property lenders in the UK, examples being Tiuta Plc and Masthaven Bridging Finance.
Chief Executive of National Australia Bank, Cameron Clyne, stated that the company was unwilling to risk haemorrhaging money by lending to the unstable UK commercial property market. The bank was forced to take a £150 million charge for commercial property losses in the UK alone.
He said: “This has contributed to the current downturn in the UK being longer and slower to recover than experienced in the 1930s following the Great Depression, and has led us to take these actions at this time.”
The double-dip recession has cast a lot of doubt in the eyes of the international community about whether investing in Britain will be profitable in the long run. However, Clydesdale commercial properties suffered a blow last September when the company’s credit rating was downgraded following a disastrous last financial quarter in 2011. This was possibly the result of a rising cost of funding, along with commercial property loans deteriorating steadily since the start of the economic crisis.
As a result of the decision, dramatic restructuring has been proposed in the UK Clydesdale and Yorkshire Bank franchises. By 2015, 1400 jobs will be cut and many of the company’s commercial properties will close, including 29 “financial solution centres” in southern England. This will cost around £195 million in total, although the cutbacks will save £74 million by 2015.
Unite national officer David Fleming described the job losses as “nothing short of brutal for the UK workforce”, adding; “Unite finds it disgusting that the company decided to release a statement from Australia in the middle of the night so UK staff across Yorkshire and Clydesdale banks would wake up to hear that their jobs are being cut through the morning news reports.
“This is not the behaviour of a responsible or credible organisation.”
Rather than focusing on the whole of the UK, Yorkshire and Clydesdale banks will now be concentrating specifically upon their original market – Scotland and Northern England. Clydesdale bank commercial properties were bought by NAB in 1987, while their Yorkshire counterparts joined the banking giant in 1990.
Rumours that former Northern Rock CEO Gary Hoffman considered bidding on the stricken commercial properties, on behalf of his new company NBNK, are currently being firmly refuted by officials at NAB. Cameron Clyne said: “We’ve never rejected a formal offer. So it’s not as though we’ve been walking past deals in the last 3 and a half years.
“While there’s been much speculation about the outright sale of Clydesdale Bank, the reality is that given current pricing of listed UK banks and the difficulty in executing a clean sale it is unlikely to be a realistic option which could provide value for NAB shareholders.”
