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I notice that the appointment of Bob Diamond as Group Chief Executive of Barclays has caused a large amount of uproar this week. Vince Cable has predictably waded in with his “casino banking” comments and Matthew Oakeshott, the Lib Dem treasury spokesman said “he’s a great gambler but has no experience of retail banking”. Ouch.
Few would understate the importance of Bob Diamond in transforming the small investment banking arm of Barclays, BZW, into the international giant that is now Barclays Capital.
For me, this raises a number of questions:
Is it fair to label one of the greatest bankers of his generation as a “gambler”?
Is it appropriate for the Government to criticise the board appointments of a public company that has not been part of a taxpayer bail out?
Are Barclays right to appoint an investment banker to run retail bank?
Your comments, as ever, would be appreciated.
Andrew McIntee is a Director and Head of Financial Services at Interim Partners
The UK housing market has exhibited signs of slowing growth in the past few days. Bank of England figures show that the number of mortgage approvals were just 160 higher in July than in June and only a little higher than the average for the previous 6 months. The National Housing Federation is also forecasting that house prices will fall by 3% next year.
Given that the real impact of the Government Spending Review scheduled for the 20th October has yet to bite into the economy, one can only wonder what effect a slowing housing market and rising unemployment will have on consumer confidence, particularly in the crucial run up to Christmas.
That said the banking sector in the UK posted encouraging half year results, Barclays reported increased profits to £3.95bn up from £2.75bn, HSBC’s profits more than doubled to $11.1bn and RBS returned to profitability to the tune of £1.14bn, good news for taxpayers who own 83% of the shares, although some of that profit was due to changes in accounting rules.
Most of the gains are due to far fewer loan impairment charges than in the previous couple of years and an increase in retail and commercial banking divisions. Contrasting with recent times the investment banking arms have struggled, Barcap for example saw its income fall by 38% compared with 2009.
In the US, banking profits are also on the up and lender profits have now reached pre-banking crisis levels owing to a fall in the rate of loan losses. The US banking market is polarised, however, with larger banks performing well but smaller banks still in the doldrums. The Chairman of the banking regulator, FDIC, said that almost 2 out of 3 banks are reporting better like for like figures.
As the old saying goes “what happens in America happens over here” so hopefully the worst is behind us and the sector can look forward to increased activity in 2011, despite the wider economic turmoil which is set to come out of the public sector.
Demand for interim managers in the financial services division at Interim Partners is very strong. We have just posted record results for July and August and appointed two new members to the team who will help expand the practice.
As always, I welcome comments and observations on the sector from interim managers in our network.
Andrew McIntee is a Director and Head of Financial Services at Interim Partners.
It seems that every time I open the broadsheets someone else is attacking the Support Services Industry. Recent examples have derived from the profit warnings at Connaught and ROK and not satisfied with the fact that public sector spending on services is set to fall in the short term, the focus for criticism seems to have changed to governance related issues and the interpretation of accounting policy.
Questions have been asked about the way that long term contracts are accounted for with many leading analysts calling for a change in accounting standards to help separate the good from the bad. It seems clear to me that it is not in the best interest of the long standing CFO or Audit Partner to highlight such grey areas as that in turn will reflect badly on them and may lead to the FD’s sudden departure as we have seen recently at ROK.
I have two questions for our Interim community;
1. How can the Chairmen and Chief Executives of Support Services companies ensure that the results that they are communicating to the City are not based on accounting policy grey areas?
2. How can the Support Services companies who manage long term contracts build confidence with the City analysts?
Mark Kitchen is Head of Business & Support Services at Interim Partners.
There never seems to be a good time in Interim Management to go on holiday. I’ve heard from a number of interims this year ‘……I’ve had to cancel due to work commitments before, if I cancel this one my wife / husband / significant other will leave / kill me’. As an interim provider you’re always thinking, if I book this particular week will the big change programme I’ve been tracking since last year kick off while I’m baking in the sun, lathered in factor 50 looking for a deckchair without a towel while the kids nag for an ice cream.
The ‘Great British Summer Holiday’ has changed dramatically in recent years and the demise of several tour operators in recent months is testament to this. In the last couple of months we’ve seen Goldtrail, Sun4U, Kiss all collapse leaving many stranded abroad and bearing the cost of getting home. Why would you bother? Well it seems this year that many aren’t and are choosing to stay in the UK to go to one of our own seaside resorts or as I’ve seen more commonly this year go on a family camping holiday. There are more people I know who have families, relatives or friends with holiday homes in Europe so getting abroad via a budget airline and quick transfer at the other end is hassle free and cheaper.
With more people becoming internet savvy and the rise and rise of sites such as Expedia, Last Minute and Trip Advisor planning and booking a holiday and almost knowing what to expect before you get there is more bad news for the operators. Among my friends and peers, it’s almost become an integral part of the holiday experience; sitting down with your family and laptop to choose a destination, find a hotel, read the reviews and book cheap flights. Is this why we hear of all the ‘last minute deals’ with only 2 weeks of the summer holidays remaining?
While writing this blog I’ve notice a news article on the Wall Street Journal with the headline ‘More UK Tour Operators to Face Insolvency’. Large companies like TUI Travel and Thomas Cook will survive the downturn but smaller, lower-budget operators working on tight margins are under huge pressure. So what is your opinion on package holiday operators and their future? Is the demise reversible with people opting to book their own via budget airlines and discount websites or choosing to holiday in the UK? Holidays are close to all of our hearts so I would like to hear some interesting comments and debate on this subject.
Jonathan Flynn is Head of Retail at Interim Partners.
There was plenty of coverage last week surrounding hospital PFI projects, and whether they represent good value for money. Of course it’s the familiar theme of “public sector wastes money in times of austerity” and the headline numbers offered by the media are at first alarming, the NHS pays 65B over 30 years for projects with a build value of 11.5B, but of course maintenance and upkeep of the building is usually a standard part of any PFI contract and the private partner is meant to hand over the hospital as an asset to the trust in pristine condition at the end of the term.
But if PFI deals are so bad, why do trusts go for them?
Two main reasons, firstly the ageing stock of the NHS’ hospital buildings. Old Victorian hospitals, with poor physical configuration of services are just not fit for purpose to support the health needs of communities in the 21st century. Secondly lack of alternative options, the reality is that any trust approaching their local SHA and the DH for funding to build a new hospital is likely to have received short shrift in recent times. PFI is a neat way of keeping extra public borrowing off the public books, and the last Labour government have preferred to have schemes funded by private finance than go to the money markets to secure extra borrowing to fund the build of new hospitals.
But even despite the lack of alternative options, surely the level of cost / benefit analysis applied when a trust is considering a PFI is pretty robust?
Julie Moore, CEX of University Hospitals Birmingham NHS Foundation Trust appeared on BBC’s Hard Talk programme and also a Radio 5 live interview, defending their PFI, saying the annual cost of payments is only 4% higher than their current estate management and maintenance budget, and that’s for a brand new, modern hospital. I spoke to one of our interim managers who works as an Interim Director of Estates and Facilities and he commented that he has worked in trusts where the annual maintenance bill has run to 30-40M on a TO of circa 225M and the annual capital allowance has only been enough to paper over the cracks, which of course both prolongs and exponentially increases your maintenance liability. Building via PFI eradicates that maintenance bill in one fell swoop and presumably some trusts often come to that tipping point where the PFI starts to look more attractive as maintenance bills rise year on year.
And there are the softer and less tangible benefits as well – improved staff morale, better physical re organisation of services to allow for more efficient patient pathways, higher patient satisfaction, lower carbon footprint, lower HAI rates, and decreased inter-site supply chain and transport costs. Not to mention indirect local economic benefits, such as the taxes paid and employment offered by the companies running PFI schemes.
I particularly liked one poster’s comment on a PFI article last week – Show me anyone who can buy a new house with all the costs and refurbishment rolled up over 30 years for less than 10% of their in come per annum.
I’d be keen to hear back from interim managers who have worked in PFI trusts. Have you worked in a trust where onerous PFI payments meant patient care has been affected as other budgets have been squeezed? Or have you worked in a PFI hospital where delivery of service improvements have clearly justified the cost of the PFI?
I’d be keen as ever to hear your comments.
Steve Melber is Senior Consultant, Health at Interim Partners.
The Times reported on 29th July on ‘cash strapped’ Dorset County Hospital Foundation Trust spending £2500 / day on an interim chief executive, and there was the predictable angle covering the outrage from union representatives about the justification for paying such exorbitant fees to interims when front line services are under threat. Tales of spending excess in what are supposed to be times of austerity make for good copy at the moment, and its easy for the media to fan the flames of public condemnation, but the public don’t always see the full picture. The media create a glass ceiling in the mindset of the public around the Prime Minister’s salary, after all he does have the most important job in the country? But market forces and consumer demand dictate the earnings of bankers, footballer and pop stars, and likewise market rates for interim managers in the NHS are driven by supply and demand and return on investment. Rates for interim chief executives are roughly £2500 / day because trusts are willing to pay it, and because there are not a huge number of credible ex NHS Chief Executives out there to create over supply and drive down rates. As the chairman of the trust comments in the article, the interims at Dorset represented good value for money, at a cost of 647K, and they were instrumental in reducing the trust’s deficit by 8.5M, that’s a return on investment of 13:1! And what would the cost have been of doing nothing? One would have to assume that in recruiting the interim team the board of the trust had concluded the experience and capability did not exist in-house to address the deficit. If they could have done it themselves, they would have done it themselves.
I met a candidate last week with a background in turnaround and financial recovery work, he was on the market but had recently had a verbal offer from an acute trust rescinded after the local press whipped up a storm and the local MP stepped in when it was discovered their local hospital was about to employ a interim at £1500 / day. I sincerely hope that there is a growing recognition of the value added by NHS interim managers, and opportunities for them to assist trusts are not thwarted by local press trying to sell papers and politicians trying to score points with their constituents. One of the issues is around perception: interim managers operate as individuals, it personalises the fees and it just doesn’t sit well with the public to think that individuals can earn that much in public services. The reality is that if you really asked the public whether they would be happy about their local trust making an investment which would realise a ten fold return, which would cut waste, improve healthcare services, reduce a deficit and help safeguard front line jobs indefinitely in their local community, most would be overwhelmingly in favour.
Your comments as ever are always appreciated.
As ever, recent contradictory headlines in the business press have me wondering which is right? Surely the BoE’s statement that QE is back on the agenda in the face of ‘weaker than expected growth’ as is at odds with GDP surging to its highest level for 4 years?!
Looking at the fundamentals, US commodities are off their May lows, and the commodity shipping market has also rebounded on the back of increased demand for steel in China – all good signs in that this indicates demand is rising, although less good if we hoped for some relief with petrol pump prices!
Closer to home, manufacturing output was reported to be at its highest for 15 years with strong domestic and overseas demand, and is set to continue rising albeit at a slower rate over the next 3 months. I was very surprised to read in the CBI Survey that more firms have reported credit availability improving, as this not what I’m hearing. I wonder if this loosening of credit is applies only to the larger firms – I would be keen to hear if any interim managers agree with the CBI findings?
It remains a tough market out there for interim managers specialising in the manufacturing sector, as the mixed messages in the Press testify – last month, we were led to believe that growth figures were going to be revised down, something that looks highly unlikely this month!
However, storm clouds do remain on the horizon – the PIGS economies panic has subsided to a murmur for the time being and the LIBOR rate remains high, but few companies are seemingly prepared to commit cash from reserves for projects. I am beginning to see an increase in finance led projects, driven in the main by the banks but operational projects remain subdued. My view is that payback periods are perceived as being too long, or the returns not deemed to outweigh the benefits of cash in the bank pending the uncertain outlook. Is this a view shared by readers?
In summary, I sense that the recovery feels more resilient than the headlines give credit for although as a business, we’re seeing very clearly that demand for interim’s varies between sectors. Financial Services (Insurers/ Retail Banks) is booming, Retail is having a tough time as is the Public Sector. Demand in the manufacturing sector remains patchy but there are opportunities, even if finding them is taking rather more effort! Historically, FS has led the UK economy out of recession – will it be the case this time, and if so, is all we have to do hold on for the next 6 to 8mths until the recovery spreads to other sectors? What are your thoughts?
Tom Legard is Head of Manufacturing at Interim Partners.
The question of retail banking charges on overdraft fees have been back on the agenda this week. Research for Panorama reveals that high street banks surveyed are charging as much as 167% interest on unauthorised overdrafts and an average of 32% interest on authorised overdrafts, despite advertised rates of around 19%.
Vince Cable, the Government’s Business Secretary and long term critic of the banking sector couldn’t resist a broadside. Mr Cable said: “When we talk about restructuring the banks what’s going to come out of this is a more competitive system where the customers are not ripped off.”
According to the Office of Fair Trading, in 2006, Britain’s banks earned £2.6bn in profit from penalty charges. Based on that fact it may appear that Vince Cable has a point, but given that to the general public current accounts are largely offered free of charge banks have to make money from somewhere. The alternative is monthly fees for all which would surely penalise those customers who run their accounts sensibly and therefore do incur penalty charges.
Vince Cable also made the point that the banking system is now even more concentrated than before the crisis leading to less choice which allows the banks to increase margins. It was however the former Prime Minister who waived competition laws to enable Lloyds to take over HBOS, thus putting Halifax, Lloyds, C&G, Scottish Widows and Bank of Scotland under the same roof.
The FSA are also putting significant pressure on banks to strengthen their balance sheets, something which can only be done if the banks continue to make good margins.
The question remains, are banks ripping off customers or do they represent a vital pillar of the economy trying to get back on its feet?
I would welcome your comments.
Andrew McIntee is Director, Financial Services at Interim Partners.
As for anyone working in a profession providing goods or services to the NHS you’re always wondering what impact new policy will have on your business, and I wanted to offer my opinions but also invite comment from our networks of candidates in terms of what the White Paper might mean for NHS interim managers.
The BBC estimated the abolition of PCTs by 2013 could affect up to 68000 NHS managers. Many will be redeployed of course as the responsibilities of the PCTs are distributed into other areas of public services, public health professionals may find themselves working for the local authority for example, but a good percentage might decide to try their hand at interim management. Some, but not all, might be cut out for interim work but short term the influx of new candidates will depress rates, and I think it likely that that evermore price sensitive clients might prefer to appoint an ex PCT manager turned interim, who is already in their network, rather than seasoned NHS interim managers with a track record, who come at a higher headline rate (but arguably are much more likely to deliver value). Going forward you might not expect PCTs to be the target clients for recruiters, but if substantive employees start to leave early (and who could blame them) then the PCTs might opt to recruit to vacancies on an interim basis so they are covered for the remaining lifespan of the PCT. However, perhaps more likely will be the inclination for substantive employees to sit tight until 2013 and await a redundancy payout. Either way will the key skill set in demand here be HR, with the amount of TUPE, consultation and redundancy work that is on the horizon?
Chris Ham asked on BBC news on Monday night whether GPs are “motivated or competent” enough to effectively commission healthcare services in consortia. The White Paper states that “GP consortia will have the freedom to decide what commissioning activities they undertake for themselves and for what activities they may choose to buy in support from external organisations, including local authorities, private and voluntary sector bodies.” If it turns out there is not the right level of competence across GP consortia to effectively commission services then that commissioning support may well be bought in, and perhaps we will see a marketplace where providers such as ourselves can directly provide that commissioning support to consortia in the form of interims. There may even be potential for an element of performance related pay in such roles given that “consortia will receive a maximum management allowance to reflect the costs associated with commissioning, with a premium for achieving high quality outcomes and for financial performance.”
Another key theme is that of patient choice and the vision to ensure that patients have a choice of any provider will hopefully be reflected in commissioning practices. If a genuinely free market is created between providers then the increased competition should drive quality innovation, productivity and prevention in the QIPP agenda as well as potentially create demand for business development and marketing skills. In our experience trusts that are trying to achieve FT status often need interim support to help them improve standards of healthcare and meet core targets, and if all trusts now have an obligation to go through that process it should increase general demand for change and performance improvement specialists.
Ultimately though the longer term picture might show a general reduction in the demand for interim resource, given that the Government will “impose the largest reduction in administrative costs in NHS history” and the fact that “the NHS will employ fewer staff at the end of this Parliament; although rebalanced towards clinical staffing and front-line support rather than excessive administration.” The White Paper does admit there will be a cost for this transitional work and I believe that interim managers as agents of change will certainly play a part in making it happen, but ultimately if the vision is to be realised the NHS in a few years time may look like a leaner and more clinically driven service with less need for general management support.
What are your thoughts? What intelligence have you picked up from the marketplace? I would be keen to hear the thoughts of our interim management community on how the White Paper will affect demand for interim resource in the NHS in future.
Steve Melber is Senior Consultant, Health at Interim Partners.
We are searching for excellent recruitment consultants to help us to continue to grow Interim Partners. It is not easy to find exceptional recruiters who are passionate about service and want to work hard to support our interim community. Can you help us identify them?
Here’s how. You are probably already networked with good recruiters and have built excellent relationships with them. These are the people we are looking for. Please recommend them to us and tell us what attributes make them stand out from a crowded market.
We are looking for high quality, tenacious and goal orientated people who have an impressive and successful career. They may already be in recruitment – either Interim Management or Executive Search. They could be in Consulting or have experience of selling solutions to C level contacts. They will be great at building relationships, naturally inquisitive and have the ability to influence. They will have the soft skills that clearly recognise we work with talented people and need to manage their hopes and expectations. Importantly, they must understand that we are marketing the skills of our interims and that they are not a “product.” The positions will be based in our London office.
Why Interim Partners?
• Sunday Fast Track 100 in 2008 and 2009. We are outperforming our sector.
• Our business achieved double digit growth in 2009 and we have achieved record revenues in quarters 1 and 2 of 2010.
• We have great relationships with our clients. We are preferred supplier to numerous FTSE 250 companies.
• Exceptional track record of supplying interim managers to some of the UK’s largest change programmes- we have fantastic case studies.
• Supportive culture, close knit team.
• Exceptional Financial rewards.
If we hire someone you recommend we would like to say a big thank you – so tell us what that thank you could be. Tickets to a major sporting event? Tickets for a must see show in the West End? A case of champagne? Of course you would always get our complete focus to help you identify your next assignment!
Please email me your thoughts at dbaird@interimpartners.com
Doug Baird is Managing Director of Interim Partners.
