RBS continues its war on British start-ups

Why are so many start-ups being hit with account closures from banks in the RBS group? And should start-ups avoid doing business with banks that don’t value their custom? Milo Yiannopoulos investigates.

For the third time this year – and we’re only just into February – The Kernel has been made aware of a start-up on the receiving end of Royal Bank of Scotland Group’s war on small business. RBS and its subsidiaries, including NatWest, are closing start-ups’ accounts left, right and centre with vastly inadequate notice periods and a distinct lack of courtesy.

Smarkets, a venture-funded betting company based in Clerkenwell, east London, received the following letter on Friday.

“We are writing,” said the letter, “To inform you that over the past few months The Royal Bank of Scotland Group (“RBSG”) has been evaluating its operational risk, policies and appetite in relation to online gambling. As a result of the evaluation, RBSG has concluded that certain operators sit outside our risk appetite in this sector.”

Smarkets is just the latest company to receive such a perfunctory note. It’s never much more than an administrative headache to switch banks, but it’s a headache busy entrepreneurs could do without. While NatWest is no doubt perfectly within its contractual rights to end banking relationships at such short notice – Smarkets’ card facilities will be withdrawn in just 30 days – it will strike many start-ups as a ruthless way to deal with a company that claims not to have caused the bank any problems in the past.

Smarkets chief executive Jason Trost is nonplussed. ”We’re very disappointed with RBS’s attitude. RBS has provided our UK company’s banking facilities for four years, during which time we’ve not caused them any issues – we pay our bills on time, our debts are neglible, and the business has grown. RBS should be supporting companies like Smarkets but now it has withdrawn our banking facilities with 60 days’ notice, without so much as a warning or a phone call.”

Taking the letter at face value, it would appear that Trost, who has written previously for The Kernel about moving to the UK to start his business from an American climate hostile to gambling, is now experiencing a similarly puritanical atmosphere in Britain.

The Kernel would not dream of questioning NatWest’s motives for closing the account, but in truth it seems unlikely that the nature of Smarkets’ business is really to blame.

“RBS’s claim that we’re a risk due to gambling is ridiculous,” says Trost. “Unlike RBS, the UK company has not engaged in activity that could be called risky. All betting takes place in Malta, where client funds are held, and is operated by a properly-licensed company.”

RBS’s actions are all the more unforgivable given that the bank is now mostly owned by taxpayers, who rely on the value created by enterprise to return their investment in the bank, create jobs and finance the largesse of the welfare state, Europe and the army of management consultants and pen-pushers in the public sector.

Through enterprise capital fund Passion Capital, Smarkets has received Government investment funds. Now its banking facilities are being withdrawn by what is effectively another Government department.

What’s clear is that NatWest, and its parent, RBS, which had not returned a request for comment at the time of going to press, seems not to value the custom of small businesses, especially in the tech sector. A pretty odd strategy for a bank in so much debt.