Safe ports in a storm

14/03/2019 12:00:00
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Redwood, a business bank with its head office in Letchworth, says smaller 'challenger banks' are proving the safer bet in the stormy waters of Brexit.

As a departure from the European Union hurtles towards us, a feeling of unease and uncertainty is gripping the nation, but is there good reason to feel this way or is everyone overreacting?

When the news broke in 2016 that the country had voted to leave the EU, smaller 'challenger banks' and financial technology start-ups vowed they would continue pursuing their UK plans. Despite this, the sector dipped, with the FTSE 100 suffering record losses, leaving some feeling vulnerable; bracing themselves for another economic crisis once the final decree absolute comes through.

'A tailored service is what people want amid a turbulent political climate.'

However, while some businesses wallowed in the negative headlines screaming out at readers from the popular press, others took advantage of the challenging times ahead and saw an opportunity. 

Cycle of negativity 

In April 2017, Graham Reynolds shrugged off the cycle of negativity that Brexit had introduced and joined the team at what has become the UK’s first 100 per cent born in the cloud business bank, Redwood Bank. Based in Hertfordshire, and now more than a year since its inception, the company’s Chief Development Officer says the bank has thrived in an unpredictable political arena.
‘The June 2016 vote definitely rocked the global financial markets,’ he says. ‘Shares in listed challenger banks were sold off. But I spotted there was a huge potential and used this to my advantage. The challenger banking sector generally had an average loan-to-value ratio of only between 60 and 70 per cent, meaning their loan books were better protected against house price corrections. Their comparative low-cost base and the difference between what they receive from borrowers and collect from savers meant it unlikely the challengers would get into trouble.’

Tense trend

Graham is now seeing an enhanced nervous and tense trend among businesses; the closer Brexit gets.

‘As we’re entering unchartered waters, no one is able to predict the unforeseen consequences that exiting Europe may bring. But, amongst scepticism, anxiety and unease, challenger banks are providing the be the safer bet. They may be small, but they are resilient. They are also more than simply a smaller version of a larger bank. It’s all about standing ou from the crowd and offering something that no one else does. A tailored and customer-centric service is what people want amid a turbulent political climate.

‘Brexit provides an excellent opportunity for the government to slash red tape for small banks, allowing the financial field to be levelled further and help break the dominance fo the big five.

‘Challenger banks deliver strong growth and being smaller allows them to be more dynamic. Not only do they offer similar banking services as the big players, but also focus more on customer service and loyalty as unique selling points, so during this time of uncertainty they can be trusted more.’


Extract from the Hertfordshire Life magazine.
To view the original article, visit: goo.gl/u4kvi9 (pages 158-159).