Written evidence submitted by Unite the
Union
This response is submitted by Unite the Union. Unite
is the UK's largest trade union with 1.5 million members across
the private and public sectors. The union's members work in a
range of industries including financial services, manufacturing,
print, media, construction, transport, local government, education,
health and not for profit sectors.
Unite is the largest trade union in the finance sector
representing some 150,000 workers in all grades and all occupations,
not only in the major English and Scottish banks, but also in
investment banks, the Bank of England, insurance companies, building
societies, finance houses and business services companies.
EXECUTIVE SUMMARY
— Unite
does not believe that the Coalition Government is doing enough
to promote diversity in the sector.
— Unite
believes that takeover and mergers must be fully investigated
by the Competition Commission to ensure that such business decisions
are in the best interests of all stakeholders including consumers,
shareholders and the workforce.
— Unite
would argue that companies operating in an increasingly regulated
market should be more aware of their social obligation and give
greater consideration to whether they are "socially useful".
— Unite
believes that a re-evaluation of the banking business model which
incorporates a moral and ethical dimension to the business is
required.
— Unite
is calling for guarantees to be put in place in takeover situations
which will protect the terms and conditions of the workforce including
pensions and a commitment to no compulsory redundancies or site
closures for a negotiated period.
INTRODUCTION
1. Unite welcomes the opportunity to respond
to this inquiry and is keen to work with employers to ensure that
the financial services sector remains competitive, profitable
and sustainable with customers treated fairly and the workforce
valued and rewarded appropriately.
2. Unite supports the Coalition Governments
intentions to "promote mutuals and create a more competitive
banking industry, increasing competition and encouraging diversity".
3. Unite stated in a previous submission[1]
that the UK needs a diverse finance sector, which includes retail
banks, building societies, mutuals, cooperatives and credit unions,
providing different products and services, relationships and experiences.
A diverse finance sector is better placed to serve the needs
of a diverse population including those who presently find accessing
financial services difficult.
4. However, Unite does not believe that
the Coalition Government is doing enough to promote diversity
in the sector. Indeed it would appear that recent announcements
within the sector show an increase in consolidation and amalgamation
rather than diversification or increased competition.
5. All the evidence points to existing players
in the market buying up other existing organisations which Unite
would argue reduce choice and creates a homogenous banking sector.
This is evident with Lloyds TSB taking over HBOS; Abbey, Alliance
and Leicester, Bradford and Bingley and RBS branches bought by
Santander Group and Nationwide adding Derby and Cheshire Building
Societies to their portfolio.
6. Unite believes that takeover and mergers
must be fully investigated by the Competition Commission to ensure
that such business decisions are in the best interests of all
stakeholders including consumers, shareholders and the workforce.
Workers representatives and consumer groups should be consulted
to ensure the interests of stakeholders are included in any consultation
process prior to the final decision being made.
7. The Government has set up the Independent
Commission on Banking[2]
to carry out a review on reforming banking and promoting competition
and has set one of its objectives as:
Promoting competition in both retail and investment
banking with a view to ensuring that the needs of banks' customers
and clients are efficiently served, and in particular considering
the extent to which large banks gain competitive advantage from
being perceived as too big to fail.
8. However, while Unite welcomes this review,
the date given for reporting of September 2011 would appear to
be too far in the future to influence the outcome of the sale
of those banks that are wholly or part owned by the state as buyers
are likely to become apparent before this date.
SALES VERSUS
SERVICES
9. While Unite welcomes increased competition
which would bring opportunities for employment, we would not wish
to see increased competition at any price; where customers and
employees feel unfairly treated and unable to challenge the might
of the large banks. Indeed Unite would argue that new entrants
as well as existing companies operating in an increasingly regulated
market should be more aware of their social obligation and give
greater consideration to whether they are "socially useful".[3]
10. Unite has evidence of dysfunctional selling
where products and services were sold to customers which were
deemed inappropriate for their needs and the workforce then faced
with the prospect of disciplinary action if they failed to reach
targets on sales. This does not create an environment for delivering
fair treatment to consumers or employees.[4]
BUSINESS AND
BANKING
11. The UK needs a competitive banking sector
which takes account of the needs of customers, including business
customers, by providing the ability to access funding in order
to grow and expand which is an important part of creating a sustainable
and successful economy.
12. There are over 4.5 million small and medium
sized businesses in the UK requiring banking services. However,
it could be argued that not all businesses have been served well
in recent times by the existing players in the market. A lack
of access to affordable finance and a shortage of working capital,
coupled with late payments, are making the situation difficult
for many SMEs.
13. The Federation of Small Business Annual Survey
2009 found that "in the absence of fair lending from the
banks and with only 13% of members who have borrowed new finance
in the last year seeing interest rates decrease (in line with
the Bank of England base rate), businesses have resorted to using
bank overdrafts (28%) and their own savings (24%) to stay afloat."[5]
The FSB is seeking to restore the trust that has been lost between
small businesses and banks by ensuring banks "lend more finance
more fairly".
ENCOURAGING DIVERSITY
14. The sector has much to do to re-engage consumers
and despite the negative experiences many people have, they remained
relatively loyal to their bank. The lack of transparency in the
charging structures together with a perception of the difficulties
associated with switching banks has meant that in 2009 only 1.2
million of the 60 million current account holders in the UK switched
banks.[6]
This is despite the biggest financial crisis in modern times and
the apparent disaffection many consumers had with their bank.
15. In view of this, new players may find it
difficult to penetrate the dominance of existing high street brands
or will be required to provide a different banking experience
that will capture the market.
16. Metro Bank has made an attempt to break in
to the UK high street banking market by opening a branch in central
London with a business model aimed at "service not price"
and calling on customers to "love your bank at last".
The branch opened on Sunday 1 August and it is too
early to see whether the focus towards better customer service
will entice consumers away from existing banks.
17. Unite will however pay close attention to
Metro Bank as an employer as it may be that this approach will
come at a price as the bank advertises the fact that it is opening
longer and later than other banks which may impact on the workers
employed at the bank.[7]
CONSOLIDATION NOT
DIVERSIFICATION
18. The recent announcement that Santander is
to buy 318 RBS branches appears to contradict EU rules on competition
as well as the Coalition Governments own Coalition Agreement statement
on encouraging diversity.
19. Santander has more bank branches than any
other bank in the world[8]
and through its purchase of other UK high street brands such as
Abbey National, Alliance and Leicester and the savings arm of
Bradford and Bingley, has captured a significant proportion of
the banking market in the UK.
20. With Northern Rock likely to be sold off
in the near future and LBG also being forced into selling off
branches due to EU competition rules, Unite would wish to ensure
any sale of Northern Rock, LTSB or Cheltenham and Gloucester branches
are sold to a competitor which increases competition and choice
in the market but also by provides the workforce with a degree
of job security.
21. Unite is calling for guarantees to be put
in place in takeover situations which will protect the terms and
conditions of the workforce including pensions and a commitment
to no compulsory redundancies or site closures for a negotiated
period. These practices should be recognised as good corporate
governance and provide employees with some degree of protection
as significant stakeholders in a business. Those at the top of
a company often have comfort in contractual protections in takeovers
and the workforce should be able to have this level of protection
also.
22. Unite has expanded on its views regarding
the conduct of takeovers in its submission to the Takeover Panel
Codes Committee and this can be viewed on the undernoted weblink.[9]
23. Unite believes that a re-evaluation of the
banking business model which incorporates a moral and ethical
dimension to the business is required; one which regards good
customer service as equal to good sales techniques; one which
gives regard to fairness in employee relations as well as treating
customers fairly. This should be a prerequisite in expanding competition
and choice in the UK banking sector and should be enforced.
September 2010
1 Unite response to HM Treasury discussion paper on
building society capital and related issues. Back
2
http://www.hm-treasury.gov.uk/d/banking_commission_terms_of_reference.pdf Back
3
Adair Turner FSA Chairman described some of the work of banks
as socially useless. Back
4
Unite survey on Sales versus Service. Back
5
FSC-ICM Voice of Small Business Annual Survey 2009. Back
6
Guardian 1 August 2010. Back
7
Unite has written to Metro Bank on two occasions to set up a meeting
however has not yet received a response. Back
8
About Santander www.santander.co.uk Back
9
Unite response to Takeover Panel consultation. Back
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