Slough Office: Herschel House,
58 Herschel Street, Slough SL1 1PG
London Office: 10 John Street,
London WC1N 2EB
Slough Office: Herschel House,
58 Herschel Street, Slough SL1 1PG
London Office: 10 John Street,
London WC1N 2EB
Posted on: 18 Jun, 19
While it’s possible to open a UK Limited company online in a matter of hours, getting a UK bank account in the UK can seem like attempting an impossible assault course. This is particularly true with complex ownership structures, or complex business trades. Oury & Clark are on the case to try to help…
I have a simple question, why… oh why…!? is it so damn impossible to open a bank in London?!
I know isn’t it absurd.
It has just taken a client over a year to get a bank account open…
A year…? Gosh – that’s ridiculous.
… and then a year later they want to close it anyway – as they errr… had some fraud on the account, or something? who knows…???
Does a bank have to have reasons?
Quite! Is there anyone at the end of that telephone who actually cares who you are? When you are dealing with an enormous entity, is it a decision or is just a workflow of people saying “NO”??
Yes, the old – Computer says “No”. It’s enough to drive anyone off a cliff. But before we both have asthmatic anger attacks, I just wanted to point out that we must make these chats shorter… I read that the average attention span is 8 seconds now – we’ve got to do it all – in 8 seconds.
8 seconds…???
Forget 8 seconds. Just make it snappy- I’ll do the questions –
And I’ll do the complaining.
Exactly. So… Oury… do tell me why it is so difficult to open a UK bank account in the UK, particularly with foreign ownership did you say?
Ahem – well thank you Clark.
The UK banking system has some of the strictest anti money laundering rules in the world. Turns out London is a funny money capital of the world… and that’s not funny.
That means very strict and complex identification processes of the owners and controllers of any company who wants a UK bank account.
Plus, the world is getting more global and more complicated, and people are into industries and strange cross border transactions the banks are just crying into their cheque books trying to understand let alone manage the risk of.
Add to this the global financial crisis of 2008 which means the banks have had their teeth kicked really hard for not following the rules, any rules…. so now they are really trying to.
Is this for anyone? Even normal long term Brits?
Yes, to some extent – but in particular there was a major clamp down on UK banks dealing with non-UK nationals, and foreign ownership. Maybe it was their insurers, maybe the FCA, but suddenly banks were told dealing with someone overseas was outside of their banking license and things became much more tricky.
Plus a really key point, in order to even get the attention of the bank so that they will go through the laborious process of identifying you and open a bank account, you need to be big enough.
And what’s “big enough”?
Well, usually a business with a turnover of £2m or so is a minimum. Probably a lot more if it’s complicated… (see the table at the bottom of the page)
Worldwide?
No. In the UK.
OK, so what do startups do?
Start ups are okay if they are in the UK and owned by people in the UK. But there is a real problem when you are an overseas company coming to the UK, opening a UK subsidiary. Because no matter how big you are at home, you are a start up here. And it’s so hard for banks to make any money out of you, indeed you cost them money.
And why can’t banks make money out of their customers these days? Even smaller ones… why do they need to be that big?
Things have just changed. It’s a vicious circle. Banks stopped lending to smaller businesses, and small businesses stopped even bothering to ask…
Why?
You can see it two ways. From the bank’s point of view it’s the 2008 debt crisis, increased regulation, lack of local assessment of risk, and indeed computer saying “no” … eventually… in India. Or you can see it from the client’s point of view, the fact that banks are too big, too difficult, too complicated, too slow and just completely unable to provide debt to entrepreneurial businesses. I mean if you can’t get a bank account even open easily, how easy will it be to get some lending?
Yes, it’s true, banks have forgotten how to understand credit of small businesses. Everything is a computer risk assessment now done in India. Gone are the local credit decisions, looking at the fact this is a good person, with a family, who always pays his bills.
Which to be honest is why there have been so many new debt providers, things like Funding Circle (www.fundingcircle.com), and these are part of the Fintech revolution going on around the world.
Oury, we are never going to do it in 8 seconds.
I know… I mean the only thing I can do in 8 seconds is …
Oury!
Right, sorry… So well more like 8 weeks is a pretty normal sort of time-line to get a bank account, especially if you don’t get the ID requirements right…
What do you mean the ID requirements?
Well this is the main part of the obstacle course of getting a bank account. All the banks have completely different requirements. It is at the discretion of banks to interpret the rules on a risk based approach as to how much ID, and what set ups they require. Essentially it involves getting lawyers to take copies of your passports and other documents of the key owners and controllers of any company, and get these hand posted to the UK.
So what is key?
Do exactly what they ask, and also most all of them want a UK Director. It’s not required by UK law for companies – AT ALL. You can be anyone, live anywhere and you only need one person for a UK company. Something that frankly all companies should adopt worldwide – as it makes total sense. This whole – having to pay to have a local director, just so some local idiot can be employed to pretend that he is a director and keep people in a job – its bull..
Oury! Ahem… 8 seconds…
Sorry. Well look, there are some banks that don’t require a UK Director, and are prepared to deal with foreign owned companies. Can I name them Mr Legal?
Erm…. Yeah? I think so? But be nice.
Cool. So Natwest, HSBC and Metro don’t require you to have a UK Director. But Metro require you to have a UK employee.
(See table at base of blog)
Oh.
Yes. And Natwest won’t help you really if you have a complex structure. They are UK focused.
What’s complex?
Oh, foreign parent company owned by another company, or some trusts? Anything more than something which is simple. Like…. these two people own everything, and they have a really Vanilla set up.
Okay – so keep it simple.
Yes. Very simple. HSBC in theory are the global bank, but don’t get your hopes up. It is going to be a hard slog, unless you are already a decent customer overseas, and they need you doing £3m in turnover/income here for them to be interested.
What about Metro?
Yes – I mean, they have come into the market to be “quick” – set up by this rather eccentric American entrepreneur to shake up the UK banking market. And they have to some extent – but don’t expect it that “quick” – it will probably still take months … and they can require you to pay to get the account open. Indeed they are generally expensive, and now slightly worrisomely might even fall over if they aren’t careful. They do have a team who deals with overseas companies, they are better than most… but yes…
I guess this is good news that there are now new alternatives like the Challenger Banks.
One hundred and ten percent. They are shaking up the market and providing new options and to be honest will eat up the small end of the market over the next decade I would guess.
These are new banks like Tide.co, Revolute, Curve, Transferwise…. There are more and more popping up every second. Although, they are technically not banks but deposit holders. They don’t have a real banking license, and this can cause issues if you are relying on one to use as part of your VISA application.
For sure – they piggy-back a real bank – but apart from this, the customer doesn’t notice, and they, mostly, work. They can’t lend you money – but no-one wants debt anymore from a bank. They just want a bank account, that is open, they can access online, and receive, send money as they wish.
Yeah, I guess. So, anything else to be aware of?
Yes. Some require UK directors of the UK company. Some don’t accept direct debits out of the bank account.
Eh? Direct debits. Do I need this ability?
Yes, and this screws you up more than you think. The UK pension regulations require you to operate a pension scheme for UK employees – and get this – it must be taken by direct debit from the company’s bank account.
Argh… yes, I have heard you complaining about this.
Oh it’s a nightmare. We have a temporary short-term fix for people in emergencies. But it does make me sad for clients. The other thing to watch is can the receive or send international transfers and can they receive or deal in foreign currencies?
Ergh. So, what’s the bottom the line. What do you do?
Key points are:
What’s that?
You need to get some help with your intros and do your research.
Why’s that annoying?
As I just want to tell you the answer. But I can’t. Because… “it depends”.
Oh. Yeah – that’s a really annoying phrase.
Yeah. But you know. We will try and update this page and keep a record of who is doing what right now, depending on your set up. What ID they require, can you have a foreign director etc.
That’s brilliant Oury. Let’s do that.
Excellent. Can we get a flipping drink now?
Oh yes. I know this great bar… it used to be a bank…
Arrrghh!
We are but two fictitious characters throwing out ideas and comment to stimulate debate and collect information. As professional service firms, we are open-minded people and think independent thought and debate are essential to help us understand as well as navigate complex problems. By joves – doing business across Europe (and the world) is set to become a whole lot more complex in light of recent seismic political events. As businesses – we provide information and hopefully some wisdom – and we see this blog and its caricatures merely as a much more fun, perhaps slightly controversial, way of stimulating debate and collecting ideas. We’re searching for some true pearls of wisdom, and as we find them, we’ll share them with you.
To find your nearest office or get in touch with one of our specialist advisors to see how we can help your business, please go to our contact page.
