Defence companies are being refused bank accounts because of the sector they work in, and the practice should be brought to an end, according to a report by the Scottish Affairs Committee which describes the situation as unacceptable.
The committee heard during a private roundtable with small and medium-sized enterprises that defence businesses are often viewed by financial institutions as carrying reputational risk, and that one of the companies giving evidence had been debanked because of its connections to the sector.
Participants suggested defence businesses are treated as undesirable by some institutions and support bodies. The committee also heard of landlords who will not rent properties to defence companies.
Luke Pollard, Minister for Defence Readiness and Industry, acknowledged the problem in oral evidence, telling the committee the department had seen examples of “good defence businesses supporting our national security” being debanked, which he said was “not acceptable in a time of increasing risk”. He expressed hope that financial institutions would increasingly support defence firms and ensure they have access to appropriate banking services.
The committee’s recommendation states: “It is unacceptable that SMEs working to deliver the UK’s national security objectives are being denied access to financial services through so-called ‘debanking’. The UK Government should assess the impact of this practice on Scotland’s defence industry and engage with the financial services sector to end this practice, which is damaging to the UK’s national security objectives, SME growth, and the provision of highly-skilled jobs in Scotland’s defence sector.”
The Scotland Office is asked to report back to the committee within six months on the findings of that work and the actions taken in response.
In its summary, the committee says it is “especially concerned by reports of defence businesses being denied access to banking services, which risks undermining investment and growth in the sector”.
Debanking sits within a broader section of the report on how the sector is regarded, which the committee found continues to affect recruitment and business sustainability.
Some witnesses expressed a view that Scottish Government policies have contributed to detrimental perceptions. The committee describes the sector’s negative public image as one of its most persistent barriers to recruitment.
On the government side, the report records plans for Destination Defence, a communications campaign intended to increase awareness of careers in the industry, which the department says is seeking to improve the sector’s reputation and attract new talent. John Howie of Babcock, who is involved through the Defence Industrial Council, drew a comparison with Destination Nuclear, which he said had increased applicant numbers by raising awareness of less visible roles.
The committee concludes that the Defence Industrial Strategy called for a public conversation on the importance of defence but that sufficient progress has not been made, and asks the government to set out in its response how it plans to deliver that conversation in Scotland.
Europe could be on the brink of conflict and it appears banks are blinkered in respect to our security. A bit like our new Prime Minister, who will never favour defence over social security. I wonder if such matters were on the minds of the Ukrainian people on the day of Russia’s invasion. The plain truth is that our security is not the number one responsibility of the current Labour Government.
I don’t think it even gets to number 100.
There has a fundamental change in attitude and regulation in regards to defence companies. I work for a large accounting and professional services firm, if I wanted to take on a SME client who operated in the defence sector, it would be immediately assessed as a High Risk. I would then spend a huge amount of time and effort jumping through hoops for the “Know Your Client” and “Anti Money Laundering” processes, at the end of which the Compliance and Ethics Committee will still almost certainly decide “No, we don’t want to do business with them”.
how long does it take to change the law..
then fine the banks millions for putting the defence of the realm in danger.
just a thought..