What happened to relationship business banking?

Our survey shows businesses are missing out on a long-term bank relationship

Businesses used to know their local bank manager. He or she knew what challenges and successes those businesses went through. This helped business owners and finance directors get access to finance when investment for growth was needed. It also meant they could call on that local banker in other things finance anytime.

It seems these days businesses are missing out on a long-term relationship with their bank: almost half of UK SMEs (46%) don’t know the availability of their relationship manager or don’t have one at all. That’s what SMEs told us in our recent survey.

almost half of UK SMEs (46%) don’t know the availability of their relationship manager or don’t have one at all.

Among those businesses that have a relationship manager and turn over more than £1m per year, only 18% or less than 1 in 5 are extremely satisfied with the support they receive from their banker. Of businesses with a turnover of more than £500,000 per year, this drops further to 15%, or less than 1 in 7.

Why aren’t businesses more satisfied with their bank relationship?

Given the importance business customers place on a good personal relationship with their bank, why are satisfaction levels this low?

The average tenure of a bank relationship manager is only 2 years

From experience, it takes relationship managers one to two years to really get to know their customer’s business. Of course, it also takes time for a personal relationship to build. However, we found that the average tenure of a relationship banker is only 2 years.

Add to that the fact that only 43% of SMEs who have a relationship manager confirm that theirs is always on call when they need help.

What is more, there are questions about how effective relationship managers can be: over a quarter (28%) of those with a relationship manager noted that he/she does not have the authority or ability to make credit decisions locally without having to refer to head office. A further 22% are unsure whether their relationship banker has any lending authority.

A new approach to relationship banking is needed

British businesses need an improved, personal service from their bank. Relationship managers need to be service driven, rather than feel pushed to close deals for the sake of sales targets. They should be given time to get to know their customers and their business, and be on call when they need help.

Businesses need to have relationship bankers who can make credit decisions locally. In complex lending cases SME owners and CFOs need to know that their bank manager has the necessary support from their head office to give them a timely decision.

Looking at the continued drive to reduce costs and close branches by incumbent banks, challenger banks have been expanding to bridge the resulting gap. We expect this trend to continue, and hopefully create more choice for businesses than they’ve ever had before.

Keep updated about our progress towards launching CivilisedBank in early 2018.

Survey methodology:
Field work: 13th to 20th September 2017, online survey of 503 Senior Decision Makers within UK SMEs through Opinium Research.