Corbynism -Attack on the Wealthy

Jeremy Corbyn/John McDonnell have announced their brave new world of far-left socialism. What will be the impact of trying to tax the rich and business to engage in unaffordable social engineering and to destroy the UK economy? Let us illustrate this in terms that Labour supporters should understand. It’s a sobering message.

Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the Corbyn expects to collect our taxes, it would go something like this:

  • The first four men (the poorest; out of work, zero hours, etc) would pay nothing
  • The fifth (labourer) would pay £1
  • The sixth (skilled worker) would pay £3
  • The seventh (professional) would pay £7
  • The eighth (management) would pay £12
  • The ninth (executive) would pay £18
  • And the tenth man (richest) would pay £59

The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a dilemma. “Since minimum wage, corporate and income taxes have been increased” he said, “I have to increase the cost of your weekly beer by £20.” Drinks for the ten men would now cost £120.

They realised that £20 divided by five is £4 but if added to everybody’s share then not only would the first five men be drinking for free, but the sixth man would have his contribution increased by 133%!

The group still wanted to pay their bill the way we pay our taxes. The first four men were unaffected. They would still drink for free but what about the other six men – the paying customers? The fifth member was employed by a small business which could not cope with the increases so was made redundant thus joined the first four and paid nothing. How could the remaining five divide the £20 increase so that everyone would pay his fair share?

The bar owner suggested that it would be fairer to increase each man’s bill according to the principle of the new tax system and he proceeded to work out the amounts he suggested that each should now pay.

The result was that the fifth man, like the first four, now paid nothing (a 100% saving).

  • The sixth man now paid £4 instead of £3 (a 33% rise)
  • The seventh man now paid £9 instead of £7 (a 28% rise)
  • The eighth man now paid £15 instead of £12 (a 25% rise)
  • The ninth man now paid £22 instead of £18 (a 22% rise)
  • And the tenth man now paid £70 instead of £59 (a 16% rise)

Each of the last five was worse off than before with the first five now drinking for free.

But, once outside the bar, the paying men began to compare their rises.

“I paid 33% extra; double the tenth man,” declared the sixth man. He pointed to the tenth man, “his share was much less than mine!”

“That’s true!” shouted the seventh man. “Why should he only pay 16% when I paid 28%? The wealthy get all the breaks!”

“Wait a minute,” yelled the first five men in unison, “we can’t get a job because of this new system. This new tax system exploits the poor!”

The nine men surrounded the tenth and beat him up demanding a greater contribution from him.

The following week the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important – they didn’t have enough money between them to pay for even half of the bill!

And that, ladies and gentlemen, is how the Corbyn/McDonnell tax system will work. The people who already pay the highest taxes will naturally consider their position. Tax them too much, attack them for being wealthy, and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier, and take their business with them. This happened in the late 1970s when higher rate tax rates were 83%. Didn’t work then; won’t work now.

Lest we forget when Labour lost the General Election to the Conservatives in 2010. Liam Bryne, Chief Secretary to the Treasury under Gordon Brown, left a note for his successor stating, ‘I’m afraid there is no money.’ This has been the case with every Labour Government since the war.

Any political promises more than 5 years away are pure fantasy because they exceed the term of a Government and thus why spades of such promises are put out there to woo the gullible. As for free broadband (re-nationalise BT with 5G driving future internet access??  – whoops), there is no such thing as a free lunch. Even the air you breath leaves you exposed to pay taxes. Anything for free will be abused, as we see in the NHS. Someone has to pay at the end of the day.

There is also an assumption by Corbyn/McDonnell that the financial community will agree to fund an additional £55 billion p.a. for 10 years – not likely, not least because much of this funding is not directly linked to increased productivity. A more likely consequence of a Corbyn Government would be a downgrade in the UK credit rating which would increase the cost of any available borrowing thus negating the McDonnell argument that borrowing will be cheap. The more modest extra £20 billion p.a. for 5 years spending pledged by the Conservatives will raise eyebrows in the financial markets; even with a majority Conservative Government.

It is only possible to spend if you have a strong underlying economy. Without the rich, and wealthy businesses to provide jobs and generate profits upon which the Government depends to accumulate tax revenues, there is no money to spend.


BREXIT – What a difference a week makes

univestBREXIT – What a difference a week makes

The past week has yielded so many interesting events that I have shelved my scheduled blog to consider the potential impacts to the whole EU debate.

In no particular order let us start with the UK Budget speech given by George Osbourne last Wednesday. All sounded good with much bravado albeit two of his three fiscal rules were already in shatters. But the economy is growing so such rules are only political rhetoric. However, he used this platform to make a clear statement that the Office for Budget Responsibility (OBR) had provided evidence that UK exit from the EU would damage the UK economy in the short-term. This statement clearly aggrieved the OBR as, by tea time, they had completely refuted his representations as they only provided (conveniently selected?) views provided by third parties.

Then he expounded the view that we were all in this together as he slashed corporate taxes at the same time as slashing benefit payments (some £4 billion) to the most disadvantaged. Whereas there is no doubt that the welfare budget in the UK does need to be reined in, it cannot be achieved merely by setting arbitrary limits and crossing out figures on a spreadsheet with a complete disregard for social justice. Again, by the end of the week, these welfare cuts had diluted from hard cuts, to a discussion, to kicking into the long grass, to being scrapped with the very public resignation of the Work & Pensions Secretary, Iain Duncan Smith who gave an impassioned account of his position on the Sunday morning Andrew Marr show. Let us not forget that this happened to Osbourne in his last budget as well.

Also, during his budget speech, he confirmed that the continued refusal by the EU to relax VAT rules to allow tampons to be zero rated, the so-called tampon tax (some £500 million pa), would result in the taxes collected continuing to be distributed to various women-based charities. The following day David Cameron went to an EU Summit meeting in Brussels regarding the important refugee crisis. Apparently, during a coffee break, all 28 EU leaders agreed to relax the EU VAT rules. Clearly not planned. Has Europe realised that BREXIT is gaining support? How many more rabbits will be drawn from EU hats between now and 23rd June?

It was interesting to tour the Highlands of Scotland a few weeks before the Scottish Independence referendum to test my view that Scotland would be stronger in the Union, and thus the vote would be to stay part of the UK. Having purposely stayed in B&B and small privately owned hotels it was interesting to speak privately with the Scottish people about their thoughts. In those 8 days only one person clearly stated that they wanted independence. Much was offered by the UK Government in fear of the noise by those shouting ‘independence’. Had they copied my trip they would determine that no deals were necessary. Everyone else was keeping their thoughts to themselves because of what they were seeing in places like Glasgow where Alex Salmond’s equivalent of Hitler’s brown shirt nationalistic youth movement were intimidating those who openly wanted to remain with the UK. Come the day the silent majority, proud of their heritage within the UK, prevailed. I would therefore suggest that rabbits from the EU, at this late stage, will not work. Indeed, I think the canny Scots are likely to deal Nicola Sturgeon a blow in the EU referendum. Ouch, Nicola.

Then we have the third fiscal rule imposed upon himself regarding converting the current budget deficit into a surplus by the end of this parliament. The general view on this pronouncement is that he needs a major event, such as an exit from the EU, to provide a credible excuse for missing this target, as most surely will be the case. But not because of misguided ambition as a budget surplus should be the goal for fiscal prudence, but the target has to be reasonably achievable with a balanced approach. Ouch for political ambition.

And Peter Mandelson amused me by suggesting that if Maggie Thatcher was still in charge that she would vote to stay in. Having known her views, I’m sure that she found the surrender of so much UK sovereignty to the EU by Tony Blair in her final years as depressing, and would certainly have returned from negotiations with a credible reform deal before even thinking of such a stand to remain a member. It was also interesting that Mandelson had conveniently forgotten that he proposed we join the Euro. Beware of the so-called Prince of Darkness.

Then I read a City Comment in the London Evening Standard by a journalist with the name of Anthony Hilton. Firstly, he was abusing a quote by a long deceased industrialist, Sir Arnold Hall, “What problem do we have which is so serious that (BREXIT) could possibly provide the answer”? Then he used comparators that demonstrated his armchair approach to journalism. For example, he states that the German economy can operate very well within the EU, so why can’t the UK? If he remotely understood the difference between the German and the UK economies he would understand the answer. Whereas the UK sits with the USA economy as an outsider, or open structure, the German economy is quite the opposite as an insider, or closed structure. Ownership of German companies is protected with incestuous patrimonial linkages between German banks and companies, with preferential proxy votes and cross-shareholdings. Foreign ownership of a German company is so rare that it is major news. An example of the vast difference this closed structure reveals can be illustrated by reference to the steel dumping by China. The incestuous linkages in Germany mean that steel users (car production construction, and other major engineering companies) can be compelled to buy from German steel manufacturers rather than buying cheaper steel being dumped by China. This is protectionism. Our open system cannot compel our companies to use British steel. So when our steel companies suffer the impact of dumping we can do nothing about it because it would require Government intervention – not allowed by the EU. And will Germany fully support an anti-dumping campaign against China – not likely as China is an important market for Germany exports. We should also remember that Germany makes the trade rules within the EU to favour Germany, as with the Euro fiscal policy.

He further cites Wolfgang Schäuble, the German Finance Minister, and one of the nationalistic dinosaurs standing in the way of the much needed radical EU reform, who stated at the recent BCC conference that, after BREXIT, any trade deal with the EU would be conditional on maintaining free movement, and continuation of some form of payment into Brussels. This is typical scaremonger nonsense. Do the USA, or even Canada suffer such impositions in their trade agreements? The German Foreign Minister was far more realistic. He endorsed the view that a free trade deal would be agreed within days of BREXIT irrespective of EU political views not least because the German Government would be bombarded by their major companies and banks because of the high level of exports to the UK, not to mention that imports from Germany to the UK are significantly larger than UK exports to Germany.

I could further dismantle his arguments, but would suggest that he listens to someone like Sir Peter Hargreaves, the co-founder of the very successful Hargreaves Lansdown investment manager, who has a real-world experience and suggest that not only would the UK be better off outside of the EU, but such a stimulus would re-energise the British people to take more pride in the UK, buy British, and put the ‘Great’ back into Britain. For certain the UK has problems in productivity, poor venture investment, and lack of manufacturing. Perhaps a refusal by the EU to provide goods will stimulate the UK to make their own – a boost to employment, and needed reduction in the balance of payments – all positive. We could also relabel our much heralded sparkling wine as Champagne (as do the Americans), retain our traditions of sausages, Cornish pasties, pork pies et al without meddling interference in the British way of life from Brussels.

My final observation for today is the visit by Obama to Cuba. The opportunity to re-engage with Cuba has been staring at Europe for some years, with the doors open to engage. Whilst visiting a few years ago on an exploratory trip ‘America’ still invoked hatred with the Cuban people because of the Bay of Pigs incident. The opportunities for European businesses was considerable, as was the opportunity to substantially re-establish original European businesses in sugar, and other agri-products, as well as new off-shore oil & gas finds. The inward looking nature of the EU has surrendered this opportunity to the USA who will now move in and, no doubt, ignore repatriation of former European assets. The British understand the importance of such opportunities because of their historic trans-global, outward view of the world, in stark contrast to the introspective view of the EU.

Let us hope that the coming weeks are somewhat quieter, and less damaging.



Where are the banks today?

univestWhere are the banks today?

Having explained the history associated with where the banks are today, I would now like to examine the current situation.

Ironically the banks are essentially in the same situation as they were in 1986/87. Then they had spent enormous excesses preparing themselves for the new era of investment and corporate banking, they needed more capital to expand into new business opportunities, and remuneration packages reflected the desire to attract the most prolific profit generators. Today we have the enormous losses of the banking collapse in 2008/2009, enormous sums paid to regulators in the form of fines, large claims for damages including large legal bills, demands for more capital adequacy, and remuneration packages still need to attract profit generators.

There are essentially two ways to increase capital: a) asking investors for more investment, or b) translating profits into capital. The latter is by far the easiest with no impact on existing investment returns. The former puts pressure on profit generation to maintain a good dividend yield, which then places pressures on costs to support the remuneration required by the profit generators.

But are some of these profit generators really worth the cost? How many of these profit generators produced large profits through excessive risk or even market manipulation, have been paid their bonuses and moved on, leaving the bank with credibility problems and fines exceeding the benefit of the profit generator.

Let us look at an extreme example. Interest rate swaps are a sophisticated instrument that should only be sold to qualified professionals. Yet some profit generator convinced someone in the banks that these instruments should be sold to small corporates (SME’s) that would have difficulties even qualifying for a straight-forward interest swap under normal corporate banking rules. The structure of interest rate swaps are so complex that there should be more pages of cautionary notes attached than explanation of the mechanism of the instrument. And the banks would know that base interest rates are not going anywhere fast. So do we assume any interest rate movement is geared towards the bank’s borrowing cost? If so then manipulation of these rates by the banks must also be an issue.

Last year I designed a Documentary Credit solution for a tri-party tolling deal (a raw material supplier provides materials of a given quality to a producer of goods with a third party guarantee buyer of the finished goods thus guaranteeing payment to the raw material producer, i.e. guaranteed cash flow) over three countries. The safest mechanism was a conditional tri-party letter of credit which is only a small step removed from a conventional letter of credit. Although the banker to the third party buyer was completely satisfied with the structure they were not convinced that the financial director of the third party buyer fully understood the structure, and thus would not engage. An interest rate swap is streets ahead in complexity to such an instrument, and I would be very surprised if any of the financial directors of these SME’s remotely understood what they were being sold. Even worse I would doubt that the corporate banker selling this product knew any more about these instruments than the script provided by the investment bank. As swaps are purpose designed for a specific need on a Balance Sheet, who was looking at the SME to define their need, and to ensure their understanding of what was being offered?

I think it is clear that the banks are totally focussed on income generation from wherever it thinks it can be obtained. In too many cases the mavericks are still in control. So how can they generate these much needed profits?

Firstly, and foremost, they cut operating costs. Within investment banks this is most certainly a false economy, but it suits the mavericks. A professional operations director, properly respected by the Board, is the first line of defence to protect the bank from abuse. If we look at the problems over recent years in the likes of UBS, BarCap, SocGen, Deutschebank, JP Morgan Chase, et al, none of these problems could have occurred had a solid operations base been in situ. When I ran operations for various banks there was no possibility that a trading director could override any decisions by me on credit, risk, trading volumes, trade procedure, compliance, discipline, funding, hedging, and systems. My head of settlements, who knew more about the markets than any trader, attended the morning strategy meetings with the traders. If he said that trading could not occur in certain instruments, or specific securities issues, or ticket sizes, this was not a request but an instruction. Trading was not allowed over mobile phones. No dealer could get into the dealing room before 7:30am unless by specific authorisation, and only with a settlement clerk present. Our systems had artificial intelligence monitors on all traders, positions, risk, and credit in real time, monitored by me, head of settlements, and financial controller. Traders did not have autonomous computer systems, yet we always had the most sophisticated trading systems on the street. Our counterparties knew that if they did not confirm a trade with our settlement department during the same trading day then we had the right to void it, so dealers could not hide deals. All funding, own book hedging, and bond borrowing was undertaken by settlements on a book basis to ensure that we were properly covered at minimum cost.

Now the mavericks having taken control of, or suppressed, the operations base, what I see today horrifies me in that there is little or no real control over what many business generation platforms are doing in the name of the bank. They are treated like gods, or at least divas, and anyone who speaks out against what they are doing is destined for unemployment. The senior management have a fixation that if they do not comply with the absurd requests of these people that they will take their ‘skills’ elsewhere (and thus risk their own personal rewards). However, put a senior operations person in place in every bank, and who knows what they are about, make them more powerful than the trading director, and the mavericks have nowhere else to go. Alternatively if they are likely to leave you with a horrible mess to clean up after they depart do you want them in any event?

Having entered investment banking in the mid-1970’s with Citicorp, now CitiGroup, my first job was to find a way of providing Walter Wriston, the Global CEO, with global real-time positions of the bank in all markets. This is before the internet – indeed we created the first global corporate intranet in 1978 to achieve this requirement. With today’s technology this task is not only simple, but should be fundamental if any control is to be placed on banking activities.

What about the banks engaged in corporate business? Again horrific. Many so-called corporate bankers that I have encountered in recent years are no more than information gathers for some faceless people hidden from view in dark places. These faceless people are the arbiters of all activity with corporate clients, yet have never met any of them. Gone are the days when a corporate banker, certainly in the SME arena, can read financials better than the financial director of the company, and actively advise on how the financial position can be improved prior to bank lending. Now it is more akin to lending against security without any consideration as to the quality of the lending instrument – just the level of income that can be achieved. Surely it is in the bank’s interest to have quality people guiding their corporate clients and thus protecting their investment, not merely taking security and destroying people’s lives.

Just as an illustration of how dire the training within banks really is, I went into a large branch of Barclays bank in Holburn in London where their principal client base is likely to be corporate clients. I wanted to send a SWIFT payment in USD. I was told, by their resident corporate banker, that Barclays Bank do not send SWIFT payments. This is a sad reflection on where banking is today, and it needs to change quickly. My next blog will look at the way forward.

What is this role of Facilities Manager – and is such role primarily Strategic or Tactical


What is this role of Facilities Manager – and is such role primarily Strategic or Tactical

The term ‘Facilities Manager’ is a fairly recent addition to the corporate framework, but what is this role, why has it emerged, and what part and at what level does it serve businesses today. Having recently read a number of papers attempting to make the case for the definition and role of a Facilities Manager the only common denominator is that there is little agreement as to definition, or scope of this role. Having overseen and fulfilled this function throughout the World for a number of years under my role as Director of Global Operations for various high profile International banks I have given some thought as to what this role is about, and where it fits into the typical corporate hierarchy.

What attracts me to this subject as someone who has no vested interest in the success or failure of this new (or rebranded?) role is:

  • Why has FM attracted so much attention in academia?
  • What does this role bring to the corporate table?
  • Does the mass corporate marketplace embrace this new role?
  • Why is this role at least 20 years behind the curve of mass global corporate expansion?
  • Is there an accepted definition and relevance of FM?
  • Can FM activists find a legitimate home for this function?

In my role as Director of Global Operations I have encountered a wide variety of problems in pursuit of providing the right environment for bank operating requirements. I will summarise a few examples of some extreme cases, but all of which required time and effort with a broad skill base to resolve.

In Australia, whilst integrating the acquisition of a national bank, I found myself negotiating with a high rank military General in the Ministry of Defence for the installation of high-speed data lines to a satellite up-link to connect into our global networks. Overcoming the paranoia of the potential to export details of Australian citizens outside of their borders (we only wanted to transmit aggregated position information) was a real diplomatic and time consuming experience.

In the Middle-East I was mandated to move our office in Tehran (Iran) to a new office in Manama (Bahrain) as quickly as possible to minimise disruption to business. For anyone who has worked in the Middle-East a foreign entity trying to establish a banking business can expect a lengthy, bureaucratic process of licences and permissions which can take months of patient negotiation. The expectation on me was to have a new banking entity operationally in place, including the transfer of human resources from Tehran, in six weeks. This required a variety of skills at all levels, and I even witnessed moments of total comedy watching a procession of labourers carrying the office furniture precariously balanced above their heads through the busy streets of Manama as the only means to get it delivered on time for us to open for business.

In New York I encountered intransigent Union officials insisting on disrupting the installation of dedicated voice and data lines between our midtown Park Avenue office and our new downtown Water Street office as part of their dispute with Westinghouse, the telephone line operator. This disruption looked (and was) a lengthy affair which would seriously disrupt our business. We solved it by installing a point-to-point laser highway from the top of each building.

The common denominator in all of these cases was an intimate knowledge of the business requirement, and the knowledge and skills to surmount any potential interference with the business need.

In each office location it was common to have a person/department labelled ‘Premises’ under the Operations umbrella, and who provided local knowledge at a tactical level, an operations function in keeping the working environment in good order, and managing the implementation of any required changes in the physical working environment. At no time was this role an independent function within the corporate framework.

Fortunately in my time we were not hampered by over-regulation such as health and safety, environmental (although we took this seriously), and the primary new problem of today – security, both physical and data. Therefore there is probably an argument that a more dedicated support role is required to ensure that such matters do receive the required attention without impeding the essential role of an Operations Director, i.e. support of the income generating functions of the business. However is this just another support function under the Operations Director, a rebranding of an existing role, or a new role in its own right?

Perhaps a comparator of an existing corporate support service which can exist within the Director of Operations role, exclusive of this role, or partially exclusive – the dependency being the type of business – would be useful to construct a template for a Facilities Manager. The obvious such template is the finance function.

The finance function within any business consists of two parts. The role of the Finance Director is primarily to manage the Liabilities side of the Balance Sheet, i.e. the funding of the business. This is very much a strategic role and is fundamental to the management of the cost to do business. Then we have the Chief Accountant/Financial Controller et al, whatever term is used, and manages the Asset side of the Balance Sheet, primarily cash flow management. This is a tactical role. Whereas the Financial Director role is a very specific executive role, the accounting role can either report to the Financial Director, or to the Director of Operations whichever is the most appropriate within the business environment. In smaller businesses the roles are typically combined whereas in banks the Finance Director will typically head the central treasury function, and the accounting function resides within the logical business unit under an Operations Director. The common denominator here is a recognised professional qualification, e.g. Chartered Accountant, for both roles, i.e. the function of the role is universally understood, as is the expected knowledge base. Different countries have different accounting standards and requirements so a multinational would have a local accounting presence tied into their central corporate accounting function.

The strategic aspect of the finance function can be considered as a value added cost centre, whereas the tactical aspect is essentially a pure cost centre and thus measured as a component of the cost to do business.

Whereas the outputs and deliverables of the finance function increase dramatically with the size of the organisation the information flows and contribution are well defined.

If we are prepared to accept this finance function as a reasonable template upon which to define the Facilities Management function as a professional service to an organisation then the principal characteristics could be summarised as follows:

  • The key personnel within the facilities management function will have a clearly defined value-added expertise that is universally recognised;
  • The facilities management function can provide both strategic and tactical capability;
  • The facilities management function must be an integrated part of the business support function; and
  • The deliverables can be defined and valued as a contribution to the well-being of the organisation.

From my readings to date it appears that the facilities management function considers itself the poor relation to the more established professional property related disciplines such as architect, quantity surveyor, M&E consultants, real estate agent, et al. However it should also be apparent that they invariably have what the facilities manager does not have, i.e. a universally accepted accreditation. Before this can be achieved by the facilities manager function a clearly defined expertise must be established that is considered valuable in its own right. Such accreditation cannot be as expansive as some of the definitions that I have read because it will take too long to study, or the knowledge base so thin that it only has superficial value. On the basis that the other property related disciplines are already establish what is it that a facilities management function can bring to the table that can be demonstrated as valuable in its own right and thus worthy of professional status?

Let us also consider how the facilities management function, as it is now known, fits with the conventional Operations Director function. A facilities management function at a strategic (executive) level could be viewed as a dilution of the Operations Director function, and even be a direct conflict. A facilities management function at a tactical level could be seen as a rebranding of the Premises function albeit with an expanding regulatory, security, and compliance brief.

Having experienced the developments in the marketplace over some 30 years I have given some thought to the major changes in corporate behaviour, and the general business environment over recent years that could influence this debate and will comment on some developments that I think are relevant to this paper.

What has developed in leaps and bounds in recent years is the concept that a building should be adapted to the needs of the corporate occupant, rather than the corporate occupant having to adapt to the existing space provided by the landlord. Landlords have been forced by market pressures to allow corporate occupants to make significant changes (even structural) to the building environment to facilitate more effective use of the space. Indeed many new office buildings today are little more than shell and core to allow the fit-out and furbishment to comply with the requirements of the intended corporate occupant. This change of approach would, in itself, require a dedicated resource with an intimate knowledge of the corporate strategy, image, and objectives to oversee the design, contracting and delivery of the required operating space. Such a resource would need to know how to effectively instruct and guide professionals such as architects and interior designers, contractors, fit-out specialists, etc, and would need to understand enough about IT considerations, UPS, back-up power supplies, HVAC requirements, etc in order to delivery an appropriate but cost effective solution. Then there is the need to project manage such external resources to ensure a fluid implementation. However such a role cannot operate in isolation as much co-ordination with other in-house resources is fundamental to success. As such this role is not so much ‘what to deliver’ (strategic) but ‘how to best deliver’ (tactical).

Another relatively new, but significant area of consideration relating to office premises is the security risk, with specific interest in civil riots and terrorism. In cities where the threat of terrorism is now ever present the issue of location changes perspective. Not only is there a need to consider whether the proposed area of location of your office environment is susceptible to attack, but also if there are other corporates in your proposed choice of building that may be the target of specific interest groups as well as terrorists, and the impact any such attack would have on your ability to function and the safety of your staff. Having created office environments in a number of ‘unstable’ places throughout the World, and thus the need for some risk analysis regarding the safety of staff outside of working hours, impact of riots, civil commotion, etc., the required considerations today are far more important in the decision process of location, what type of building, physical presence to potential targets, etc. Thus the need for a greater awareness in the planning process of such impact analysis. Is this the, or one of the anchors of this ‘new’ corporate role?

Much legislation has emerged over recent years and which directly impacts the working space and environment. We have stifling Health & Safety legislation, environment legislation affecting both energy conservation in the workplace and waste recycling. All of this legislation has to be analysed and implemented, and to add pain to existing misery, much of this legislation is still evolving.

Many companies today have a culture revolving around a clear corporate identity. I remember back to the 1990’s during which major corporates were spending fortunes with the likes of Wally Olins, the corporate identity guru, to design a corporate identity to create a specific image of the company around which a companywide ethos and corporate culture was to be embraced by all staff regardless of location. The most memorable was BP who paid millions resulting in just a change in font and a slight change in colour to give BP a ‘softer’ image. A number of corporates took this vogue to extremes ensuring that all of their offices around the world had exactly the same ‘look & feel’ as you enter their offices. Gone were the days when a corporate logo on the building, and another above the reception desk would suffice. This practice not only has survived but is on the increase. To this end a tight control is needed, especially in developing economies, to ensure that the required ‘look & feel’ is exactly correct in all locations. A new office in a new country, or the refit of an acquisition cannot be left to a local person not least because they have they have been indoctrinated into the corporate culture, nor are familiar with the corporate identity requirement. The only real input of local staff in this function is the determination as to whether any of the aspects of the corporate identity would be deemed offensive in this new location – it has never ceased to amaze me how a little, innocuous aspect can cause real offense. Therefore the implementation of the physical aspects of corporate culture and identity need to be controlled from the core of the organisation whether simply the ‘look & feel’ of the reception area, or the ‘full monty’ all the way down to the tea cups. Every aspect, in this case, from building selection, fit-out, security all the way down to stationery and tea cups needs to be managed by someone intimately familiar with the corporate requirement, thus a role for a global facilities manager.

The expansion and contraction of the corporate working space as markets change is far more dynamic today, and the technology considerations even more so. Being able to deliver changes in environment at the speed of the requirement is a necessary skill of any Operations Director who would need capable facilities management skills far beyond what could be expected of someone whose principal responsibility is to support the business flow and expansion. Thus our elevation from a secondary, if not tertiary status of our premises manager to a rebranded front-line tactical facilities manager can be justified within the corporate framework.

If we go back to the proposed model and look at the suggested requirements that would be considered necessary to define a facilities management function we will see that:

  • We have not clearly defined a value-added facilities management expertise that is universally recognised (this is necessary to create professional identity);
  • Whereas we can certainly define a facilities manager as a valuable tactical resource, we cannot make the case for recognition as a separate (from Operations) strategic resource (other than in a few special cases);
  • The case is made that a facilities manager is an integrated part of the business support function; and
  • The deliverables can be defined and valued as a contribution to the well-being of the organisation.

This would suggest that our facilities manager is a required and reasonable promotion of the previously known premises manager, and rebranded as a front-line tactical resource.

If this is the case then where do we place this role in terms of academic achievement? If we look at the underlying base knowledge regarding buildings and building management, and the requirement for an informed intimate knowledge of the needs of a corporate business, we could reasonably nestle this role between a first degree, preferably in a construction or engineering related subject, and an MBA.

Is it possible to define a specific formal qualification for a role as diverse as is necessary to be valuable in this facilities management function? Operating in a sphere already overloaded with professional accreditation, does yet another professional body bring value, or just unnecessary confusion? Let us consider an alternative tactical support role to our finance function. Probably the most important support role in an investment bank is the head of settlements. This role requires a vast range of knowledge and skills to ensure that a diverse range of transactions are properly converted into bottom-line profit, yet there is no formal qualification or even connected professional body. However their performance is fundamental to the success of the institution, and they will earn multiples of the remuneration of the chief financial officer who is required to have a formal recognised qualification and belongs to a professional body.

If we return to our finance function and examine why we have formal qualification and a professional body we essentially need to look outside of the corporate function of such professionals as they not only have a responsibility within the corporate framework, but have an equal responsibility to shareholders, revenue services, banks, investors, pension funds, et al who depend on accurate data based on a known and accepted common platform, and where they are accountable to their professional body who can revoke their licence to practice should they violate their duties to these external but directly interested parties. No such requirement exists for the facilities management function and therefore it could be argued, as with the settlements professionals, that neither a formal academic status, nor a professional body is a ‘must have’. Indeed I would suggest that should facilities managers really consider themselves the poor relation of other connected professions, they could significantly enhance their status by seeking recognition and membership of existing chartered institutions such as RICS in the UK, who are known and respected throughout the world as an institution representing excellence. A facilities manager with a FRICS after their name would certainly not be a poor relation of anyone in the property and construction sector.

I would not be surprised if RICS were to initiate a study of this role utilising the input of the very best of the facilities managers currently in situ to discuss a clear definition of the role that would be acceptable to RICS to justify accredited status, and for RICS to adopt these new professionals. Alternatively a lobby group of the best facilities managers could approach RICS with the same aim. A positive outcome would clearly quickly define the role and its professional accredited status. This would then have the impact of corporate acceptance and credibility.

For the sake of completeness of the status issue I would like to address acceptance of this role outside of the corporate structure. If we look at the task referred to earlier regarding a new office in Bahrain as an example it would not have been possible then, nor today, to gain access to the appropriate people in such countries had I not been a Director of the bank I represented, and with a full mandate to do what had to be done to achieve a result – local protocols need to be observed. It could be argued that the new-style facilities manager would be first into a new territory to explore such a task. However the skills required to secure the consents necessary to engage in any facilities process in such countries go far beyond the scope of a facilities manager, then or now, and thus would remain the executive role of the Director of Operations or equivalent. However I would expect the facilities manager to be resourceful enough to organise the small army of carriers to ensure that the office furniture arrived in time to open the office on the agreed date. Indeed I would strongly suggest that resourcefulness, especially on the global stage, is a pre-requisite requirement of a good facilities manager.

Clearly the silent assumption in much of the above argument is that we are discussing the sharp end of this profession as relates to dynamic corporates who have a growth curve, need to quickly adapt to ever changing market conditions, and typically operate internationally. But what is the population dynamic of this role in terms of both the number of people required for such roles, and the range of competence requirement from the highest to the lowest level of acceptance within the title of facilities manager. If my argument that the facilities manager is a relevant re-branding of the existing premises function for dynamic corporates then it is in the interest of these new professionals to ensure that there is a clear distinction between the role and competence of a facilities manager, and the existing premises function which, within a large number of corporate entities, is perfectly adequate for their needs. So what distinguishes a dynamic corporate from the rest? Do service providers such as large law firms, accountant/audit firms, et al need the same level of competence as banks or other trading environments? Do manufacturing companies need the same level of competence as high street retail chain stores? What type of companies can happily survive without the rebranded facilities manager?

My principal experience is with global financial institutions engaged in trading activities, with some knowledge of support organisations such as law firms, accountant/audit firms. Therefore it would be inappropriate for me to comment on other corporates other than comment on more obvious corporate structures. For example I would reasonably expect that facilities manager in a fast food franchise such as McDonalds to be an exception as the role is unusually strategic because part of the image of McDonalds is that you can walk into any McDonalds restaurant in the world and expect the same experience both in presentation and service. Thus the facilities manager is at the forefront of any new opening as well as ensuring that all existing locations maintain the required image at all times.

The only other comment that I would like to make, albeit instinctive rather than empirical, is that I do not see the argument for such a role in corporates having a normally stable environment. Most manufacturing companies come to mind unless they are managing a sizeable portfolio of properties in which case they probably have the function whether or not it is called facilities management. Therefore I see demand primarily in dynamic private corporates who need to actively respond to market demands in short order such as financial institutions, and in public services such as healthcare, police, etc.

I am sure that there are many ways to argue the case to justify the addition of this facilities management role against the more traditional premises function. However I would like to put on my hat as Director of Global Operations and apply a very simple budget criteria as a starting point. My process starts by attempting to define a job description for a tactical line manager to manage the corporate premises and associated environment (as opposed to an operations premises person) that adds real value to the business, warrants the status as a full-time position, and justifies the additional cost (I would expect the overall fixed costs of a facilities manager to be at least double that of a premises person) and this role would not replace my existing premises staff. My cost comparisons would naturally include the costs of outsourcing specific facilities functions. This is the real test of relevance of this role, and I would expect is the test that most serious corporates would adopt.

Currently the lack of an accepted definition of a facilities manager does not assist this process. Therefore I would need to add an additional parameter to my budget process along the lines of ‘are there anticipated tasks of a regular nature relating to facilities that require tactical expertise and a) would consume too much of my time, b) could not reliably be executed by existing premises staff, and c) the logistics of outsourcing versus in-house favour in-house’, i.e. outsourcing would not significantly reduce my and/or business management involvement. If this litmus test proves positive then I need this resource; but where do I find it?

Clearly my preference would be for someone who has relevant experience and has demonstrated capability in a similar arena, especially if I need this person to travel to other locations and represent me. The lack of professional accreditation does not help this search so I would need a specialist recruiter, or even go to the expense of a head hunter. As a professional manager I know when I have the right person in front of me, regardless of academic background, but educating a recruiter as to how to filter candidates will also be a task that needs some consideration. My overall experience of recruiters, with one or two glowing exceptions, is that very few show any signs of considered candidate analysis and thus possible ideal candidates will be lost in this process. This is where a RISC or equivalent accreditation would significantly help the process. Thus currently this whole process would take much time and thought, so the faster the definition and recognition of this role is established the easier it will be for corporates to engage with it.

In summary I think that I can satisfy myself that there is a case for a tactical support function called ‘facilities management’ albeit not required across the whole corporate spectrum. If my suspicion that such a role is limited to dynamic corporates and some public services then this is advantageous to establishing a definition of this tactical role which is clearly distinctive from the more usual operational premises function. Whether or not academia can provide input into this definition I think it would be very useful to attain accreditation from an established chartered institution such as RICS as this would enable corporates to embrace the role with the understanding of the associated value. Continual debate by academia is probably counterproductive in the establishment of this role.

Whether or not the mass corporate marketplace embraces this role conflicts with whether or not they need this function, or even understand it. Looking through the recruitment ads does reveal that the descriptions of this role are far too broad to recognise it as a defined profession. Some ads that I have read amount to no more than a traditional premises manager.

If the FM activists want to establish this role I would suggest that, in the UK, they encourage RICS to agree a definition of professional status for this role, and thus achieve a recognised accreditation. As in all professions the role will grow with time to its natural height, but the first step is a baseline that all interested parties can agree, and thus embrace.

If I was asked to lay down a marker for a valuable facilities manager it would be based on capable contribution to the delivery of an expanded trading function for a new product in an existing environment. The introduction of the actual capability to trade is time critical and can take no longer than 90 days including trading desks and complete environment support. At the meeting to agree such implementation I would expect a facilities manager to be able to confidently prescribe how the physical delivery of these trading desks could be managed with minimal interference to current trading activity, any safety and security issues that would need attention, and an approximate cost for budget purposes – all without reference to any third party during, or after such meeting. Thus an intimate knowledge of the business needs, and how make a valuable contribution.

The superior nature of Syndicated Insurance for Construction Projects


The superior nature of Syndicated Insurance for Construction Projects

Syndicated Insurance is not so much an insurance solution – more a global comprehensive risk management tool for qualifying construction professionals. The application to major construction projects was developed by myself and John Curran, an expert in construction risks insurance, to provide banks with a quality event risk package in order to facilitate rapid financing at a lower cost to developers. It took 2 years of negotiation, cajoling and proving in whole or part with construction professionals.

It would also be reasonable to acknowledge David Barnes, Executive Director of Construction Risks at Willis in London who championed this product within Willis.

Having been asked to explain Syndicated Insurance I would suggest that this blog is for the spectrum of construction finance professionals as I must assume a reader knowledge of the conventional process of construction finance and construction risks insurance. Thus this blog will outline the features, scope, comprehensive nature, and benefits of Syndicated Insurance for construction projects.

The objective of this approach was to provide a totally comprehensive, all-inclusive insurance package that would include, and commit the lead underwriter to provide all requirements throughout the debt service period regardless of when, in the project timeline, certain requirements need to be activated. This provides security to a lender that all event risk requirements are guaranteed throughout the debt service period. 


The ultimate global comprehensive and integrated insurance solution, designed with project finance specialists to address principal and bank requirements with unparalleled service and risk management delivery

Specifically designed to incorporate all development risk mitigation requirements for the larger contractor, property developer, and construction professional 

Flexible in its application – select what is required in the most applicable form – with consistency in delivery and cover 

Aligned with concepts such as long-term finance initiatives to offer long-term indemnity up to 30 years to satisfy bank finance requirements, and maintain a consistent bank risk profile, even during delays and disputes 

Comprehensive inter-laced cover with a single, major underwriter to emulate the way that bank’s syndicate the debt financing component thus simplifying risk assessment, cover, claims and disputes

A comprehensive solution for the construction professional throughout the world with valuable new features not currently available with any other product

Non-collateralised bonding facilities available to limit unnecessary use of working capital – the financial and security benefits are immediate and considerable 

Many of the difficulties encountered in construction litigation are avoided, significantly reducing the possibility of lengthy disputes, or project delays 

Added value benefits include 3 or 5 year fixed pricing with a share of insurers profit, loss control and evaluation services provided without charge, 24-hour helpline World-wide including collateral warranty advice and claims services. 

Cover Synopsis

Contractors “All Risks”Includes full cover for works, temporary works, materials & plant, whether owned or hired whilst at the contract site, in transit to or from the site, or temporarily stored away from site

Financial Risks – Takes the pressure off the Balance Sheet by avoiding the unnecessary use of working capital and bank bonding – Annual bonding facilities for Performance, Bid/Payment, Maintenance/Retention, Highways Act and other commercial guarantees

Advance ProfitsEmployer and contractor indemnified against consequential losses following contract delay – Exceptionally wide cove including interest on loans and loss of rent

Building DefectsUp to an initial 12 years’ cover with options to roll – initial technical audit uniquely leads to an automatic option to purchase for all projects – electrical and mechanical services can be included – enhanced value to completed construction sites – immediate compliance with requirements such as the Latham report objectives and anticipated EU directives – includes post-development efficacy of new technologies

Professional IndemnityLiability arising from architectural surveying and other agreed professional activities – High premium discount for modest voluntary excess – wide subrogation waiver agreement

Public and Products LiabilityIncludes contractual liability and indemnity to principal – World-wide coverage – optional excess levels

JCT Clause 21.2.1Automatic annual facility – No individual Surveys – No specific contract underwriting

Directors’ and Officers’ LiabilityComprehensive cover for the obligations of Directors and Officers to meet existing legislation, company and employee reimbursement – World-wide coverage – no excess option

Employers’ LiabilityIncludes cover for labour-only sub-contractors, hired or borrowed persons, all other self-employed persons, and authorised work experience schemes. World-wide coverage

Property DamageA wide range of financial protection opportunities for completed off-site properties occupied by you or leased to other parties – consequential loss – contents and other assets

Fidelity GuaranteeNo mandatory system of check – generous discount for voluntary excess options – automatically includes money and goods for first and third party fraud

Motor FleetIncludes courtesy vehicles – third party claims management – automatic repair authorisation – no excess option

Terrorism & Civil CommotionIncludes Terrorism, Riots, Strikes, Civil Commotion and Malicious Damage including fire

Brown FieldIncludes latent defects arising from assuming certified brown field sites for development including asbestos and heavy metals

Environment ImpactIncludes environmental pollution as a direct result of development works

Political RisksFor International projects where the political environment dictates the need for comprehensive cover against Expropriation, War & Terrorism, and Force Majeure



Responds to obligations arising from all standard conditions of contract including:

  • JCT – Joint Contract Works Tribunal
  • ICE – Institute of Civil Engineers
  • GC/Works/1 – General Conditions of Government Contracts
  • Other International contract conditions

Cover is provided in the joint names of the Contractor and/or Principal for unforeseen events causing damage to the works, temporary works and materials, whilst:

  • In transit to, or from, the contract site and while temporarily stored off-site
  • Own plant and hired plant
  • Site huts, Employee’s Tools and Equipment


  • Removal of debris following loss or damage to the contract works
  • Professional fees in connection with reinstatement of the contract works
  • Cover for completed buildings pending sale, including show houses and their contents
  • Cover for loss of or damage to temporary works and other equipment during any maintenance period
  • The cost of recovering immobilised construction plant from any site
  • Cover in respect of the liability to meet loss of income claims made by a plant owner following damage to any plant hire

The Policy will automatically reinstate the sum insured following a loss.



Increasingly developers, banks, investors, local government and private sector employers are demanding the provision of guarantees, which will ensure that, in the event of insolvency, the costs they incur completing a development will be met.


  • The Performance Bond makes available to the employer a sum of money, normally 10% of the contract value in many parts of the World rising to 100% in countries such as the USA, which will facilitate completion of the contract should contractor insolvency occur.
  • Deed or Tender Bond – against withdrawing from a contract and that a Performance Bond is available.
  • Advance Payment Bond – against non-completion of a contract, including repayment of monies advanced by the employer.
  • Retention Bond – replaces the retention fund.
  • Maintenance/Retention Bond – against non-performance of maintenance responsibilities thereby releasing the retention fund.
  • Highways Act Bond – to local authorities against non-completion, to their satisfaction, of roads and sewers within developments.

These bonds can be provided through insurance companies. The advantage over banks, who also issue bonds, is that insurance company bonds are generally unsecured, whereas banks require collateral. Furthermore, bank-bonding facilities form part of a general overdraft facility, which could cause excessive borrowing requirements.

Insurance bonding facilities are off-balance sheet with consequential beneficial impact on statutory accounts.



Contractor and Principals’ loss of:

  • Rent Receivable
  • Interest Receivable on net proceeds of project
  • Interest Payable on project loans
  • Increased Cost of Works

all as a consequence of a delay emanating from an indemnifiable loss under Contractors ‘All Risks’.


Loss of Rent – Rental income which, but for the damage, would have been received during the Indemnity Period.

Interest Receivable – The Interest Payable for outstanding loans in relation to the Project which have to be extended or re-negotiated and/or additional loans which may have to be raised to finance other projects which would have otherwise been funded from the net income of the sale of the Project.

Increased Cost of Working – The additional expenditure necessarily and reasonably incurred for the sole purpose of avoiding or diminishing loss of Rent Receivable and/or Loss of Interest Payable and/or Loss of Interest Receivable which, but for that expenditure, would have taken place during the Indemnity Period in consequence of the damage but not exceeding the loss of Rent Receivable and/or loss of Interest Payable and/or loss of Interest Receivable thereby avoided.

Indemnity Period – The period of delay in the letting (or sale) of the Development in consequence of the damage beginning on the date upon which, but for the damage, rent would have commenced to be earned (or the sale of the Development would have been completed).




Physical loss, destruction of or damage to the property insured. This includes the collapse of the building caused by a fault defect, error or omission in design, materials, components or construction of the building, which remain undiscovered on the day of practical completion.

  • First Party cover. Insurers assume responsibility for immediate rectification thereby avoiding the need to rely for compensation upon litigation against a Third Party.
  • Policy fully assignable for the benefit of future owners, tenants and occupiers.
  • Twelve-year period to comply with legislation such as the Latent Damages Act 1986, automatically extendable for up to 30 years to provide cover throughout various national financing initiatives and bank financing requirements.
  • Technical Auditing carried out by Insurers and included in premium thereby avoiding high cost of appointing independent consulting engineers which has previously made cost of cover prohibitive.
  • Initial Technical Audit leads to a facility for all projects, which avoids the need to audit each project, thereby reducing the cost and greatly simplifying arrangement of cover.


  • Roof, Cladding, waterproof membrane, and underground services.
  • Electrical and mechanical services
  • Loss of rent, loss of profit and the costs of alternative accommodation.
  • Sum Insured includes demolition costs, Professional Fees, Regulatory Compliance and Inflation Provision.
  • Efficacy of new technologies post-completion
  • Premium Instalments



In respect of the Insured’s legal liability for negligence in the conduct and execution of their professional activities and duties involving design or specification, supervision of construction, feasibility study, technical information calculation, always under the direction and control of a qualified architect, engineer or surveyor.

In addition to meeting costs and expenses in respect of damages and defense of a claim or potential claim, the cover may also be extended to meet those expenses which you may incur as a result of any action you take to reduce the cost of a claim or potential claim.


  • Libel and slander
  • Loss of documents
  • Dishonesty of employees



Liability to third parties following accidental bodily injury, loss of or damage to material property or accidental loss of amenities, trespass, and nuisance arising out of your normal business and site operations.


  • Liabilities arising from defective design, specification or workmanship in respect of any structural materials or goods that you supply erect or repair.
  • Liability arising out of the use of mechanically propelled contractors’ plant on site.
  • Contingent liability arising out of employees using their own motor vehicles on company business.
  • Liability for loss or damage to premises which are leased or rented.
  • The Financial Loss Public Liability cover provides for financial losses but only arising out of loss of, or damage to, property. This Extension provides cover for liability in respect of accidental financial losses suffered by third parties where damage to property has not occurred.
  • Automatic Indemnity to Principals
  • Cross liabilities



Loss resulting from damage to property caused by collapse, subsidence, heave, vibration, weakening or removal of support, or lowering of ground water arising out of, and in the course of, carrying out the works.

 As there are various contractual clauses necessitating this cover, it requires each to be considered on an individual basis. This would not stop work on site commencing but it may mean after a risk assessment, that the final terms and conditions will be finalised subsequently.

The period of insurance cover will equate to the contract term.



Protecting Directors and Officers of the Company, and the Company itself, in respect of claims made against them for any wrongful act in their capacity as Director or Officer.

A “Wrongful Act” is defined as breach of contract, breach of duty, act, neglect, error, omission, mis-statement, misleading statement or breach of warranty of authority.


  • Shadow directorship
  • Costs of representation at official investigations into the affairs of the Company or its subsidiaries
  • Outside directorship
  • 12 month discovery period
  • Spouses of the Directors and Officers
  • Pollution defence costs



Provides against the cost of claims for bodily injury or disease, sustained by employees during the course of their employment, for which there is legal liability. Cover includes the actual damages awarded plus the cost and expenses incurred in defending a claim.

 An important feature of the Policy is that “employee” is widely defined and includes:

  • Labour only sub-contractors
  • Any other self-employed person
  • Employees hired or borrowed from another employer
  • Anyone participating in authorised work experience


  • Liability to employees and the public
  • Contractual liabilities and indemnity to Principal
  • Additional liabilities in respect of bodily injury or loss of or damage to property you assume under contract
  • Health and Safety at Work Act (1974), or national equivalent
  • Kidnap and Ransom



Comprehensive cover for all buildings upon Practical Completion. Cover is available for a single building or any number of buildings, with emphasis on flexibility to accommodate a diverse range of properties, resulting in tailoring cover to meet specific requirements. To obtain the optimum level of protection, a number of invaluable extensions are included as standard, removing unnecessary complication and outlay involved in purchasing additional policies, resulting in overlapping or duplication. Conversely, gaps in cover, which may only come to light at the time of a claim, are avoided.

  • Consequential loss – advance rental
  • Property owners & employers’ liability
  • General interests
  • Denial of access
  • Automatic reinstatement
  • Trace and access
  • Capital additions
  • Internal maintenance contracts
  • Loss of metered services
  • Loss of keys
  • Unauthorised use of services
  • Landscaped gardens



Loss of money or goods caused directly by an act of first or Third Party fraud, theft or dishonesty by an employee provided the loss is discovered within two years of the termination of the Policy or the period during which it occurred.

An “employee” is widely defined and includes:

  • A person under a Contract of Service or apprenticeship with the Insured
  • Trainee under work experience schemes
  • Directors under a Contract of Service who have a shareholding in the Company
  • Temporary employees provided by staff agencies excluding computer staff, warehouse staff, drivers and others where special consideration is required
  • Staff retired on a pension still working on a consultancy basis


  • Auditors’ fees in substantiating the amount of claim, or amending or re-writing computer programs or security codes following fraudulent use.
  • No compulsory requirement to prosecute defaulting employees.
  • Defaulting employee not required to be identified if proven loss was caused by an employee.
  • Cover provided on each and every basis not restricted to an aggregate.



All types of vehicles ranging from private cars, commercial vehicles, special type vehicles or motor cycles or hauliers.

This cover can be diverse to include:

  • Normal Commercial Fleets
  • Industrial Fleets
  • High Performance Cars
  • High Net Worth – Collection of valuable vehicles
  • Plant equipment licensed for road use


  • Unlimited third party property damage
  • Unlimited manslaughter defence costs
  • Full cover for trailers whilst attached to vehicle
  • Courtesy vehicles
  • Automatic repair authorisation
  • No Excess Option



Indemnifies the Insured for the Ascertained Net Loss sustained as a result of direct physical damage to or physical destruction of Insured Assets arising directly out of Terrorism, Riots, Strikes, Civil Commotions or Malicious Damage including fire damage and loss by looting. For the purpose of this cover, an act of terrorism means an act, including the use of force or violence, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s), committed for political, religious or ideological purposes including the intention to influence any government and/or to put the public in fear for such purposes.



Provides full indemnity against any latent problems associated with certified brown field sites including asbestos and heavy metals



Provides for cover against environmental impact of accidental spillage or other non-negligent events that cause environmental problems



This is a truly International product and thus, for countries for which such cover is required,  provides a comprehensive Political Risks section that covers the full spectrum of risks such as Expropriation, War & Terrorism, and Force Majeure.


Expropriation – indemnifies the Insured for the Ascertained Net Loss sustained as a direct result of the Insured Events of Expropriation, Selective Discrimination, Forced Abandonment, Forced Divestiture, Cancellation of Concession Agreement, Cancellation of Export Licences or Imposition of Export Embargo

War & Terrorism – indemnifies the Insured for the Ascertained Net Loss sustained as a result of direct physical damage to or physical destruction of Insured Assets arising directly out of the following Insured Events: Political Violence, Civil War, Revolution, Rebellion, Insurrection or any Hostile Act by a Belligerent Power or Terrorism, Riots, Strikes, Civil Commotions or Malicious Damage including fire damage and loss by looting during the occurrence of or following an Insured Event, provided that such physical loss or damage occurs during the Policy Period at the location(s) of the Foreign Enterprise

Force Majeure – indemnifies the Insured for its provable and ascertainable Net Loss resulting from, due to, or in consequence of any cause beyond the reasonable control of the Insured including Business Interruption as a result of emergency partial or total closure of any road or railway line or port of navigable waterway or airport by or under the lawful order of the police, local or national authority or government, or the electricity, water or gas supply authority, and Third Party Blockade (or Quarantine) which means the politically motivated use of military force, or the direct threat thereof, of one or more third party sovereign nations.


 What are the real benefits to a developer of this package?

  1. A single policy, segmented into chapters relating to the various categories of risk, on one common legal platform with one major rated underwriter, and from which qualifying construction professionals can select their requirements safe in the knowledge that there is no expensive crossover cover, nor unforeseen gaps.
  2. Known cover for all aspects of the development (regardless of the date of required cover activation) from the beginning of the project at a known cost, and not subject to any detrimental market changes throughout the development period.
  3. Latent Defect and Advance Profit features not currently available under any known construction development insurance.
  4. Developers can dispense with the need to negotiate lengthy warranties, and to scrutinise the terms of professional appointments.
  5. As the insurance package is not on a “claims made” basis but is, rather, for a fixed duration and level of cover from the outset, there is no need for the developer to concern themselves with the maintenance of insurance cover by professionals and the contractor nor with the continuity of the professional team in existence into the future.
  6. Many of the difficulties inherent in construction litigation (particularly as the apportionment and extent of liability) can be avoided. This substantially reduces the possibility of lengthy disputes.
  7. The sales process is substantially simplified and the need for additional documents and negotiations is kept to a minimum.
  8. Development financing becomes simpler and quicker as the lender does not have the concern of ensuring that all required risks are adequately covered and on what terms as this package provides a fully uniform and inter-laced insurance platform with only one substantial underwriter, and in a language suitable for bank professionals. This makes financing substantially simpler.
  9. The latent defect aspects of this policy provide for a far wider scope than currently available, and cover is available for up to 30 years before new inspections are required making this a significant sales aid.
  10. All of the above and more at a probable lesser cost than could be achieved using conventional insurance with less cover.

How will this insurance package affect the bid process?

Traditionally, as part of the procurement process, each contractor would factor into their bid the cost of obtaining insurance and obtaining any necessary bonding for their obligations. Contractors with fewer claims and who are more reliable would have access to cheaper insurance which, in theory should give them a competitive advantage. Under this policy the developer would be advised of the insurance cost differentials associated with each bidder and the developer would then use this information in assessing any bid. In this way the developer has total control on insurance costs.

What is different about the latent defect cover under this policy?

In its simplest form the latent defect cover addresses what should be available to purchasers, i.e. full rectification of any and all defects for a period up to 30 years without inspection and subject only to a satisfactory claims history. This cover is flexible in that the developer can provide say, 12 years, as part of the purchase contract with the purchaser having the automatic right to continue such cover on an agreed basis thereafter.

Can the insurance premium be broken down into its component parts for allocation purposes?

Apportionment of premium is essentially a mute point to the developer as it is a project cost, whoever initially bears it. The mechanism of this insurance product reduces the overall cost of insurance, and thus project cost. However each risk component can be separately costed for apportionment purposes.


This sophisticated product can only be realistically negotiated, placed with underwriters, and administered by the likes of Willis, Aon, and Marsh. For example Willis, with 300 offices in 74 countries and 14,500 associates serving clients in some 180 countries, have the capacity to provide the following added value services to ensure a quality service to construction professionals:

  • A specialist construction division with staff throughout the World from surveying and/or construction loss adjusting background.
  • Specialist construction claims staff enables a pro-active stance on contentious or complex claims. Integrated computerised systems enables instant access to claims information;
  • Contract conditions – advice on all insurance implications and assistance with negotiating the most effective and beneficial wording for each specific project;
  • Risk Management – advice in compliance with local legislation such as CDM – Health and Safety at Work Act (1974) and general loss control;
  • Production of a service plan which would obligate Willis to implement all elements of service from pre-renewal meetings to site surveys on a specific time scale by way of a detailed bar chart;
  • 24 hour helpline throughout the World including collateral warranty advice and claims services;
  • Dedicated legal services from your usual supplier.

Small Print

  • The very nature of this product means that it is available to qualifying professionals prepared to engage in a technical audit for qualification purposes. This audit is for a developer or main contractor and should only need to be conducted once, irrespective of the number of construction projects.
  • A first time developer is unlikely to qualify if using standard JCT or equivalent contracts. However a non-qualifying developer employing a qualifying main contractor on a full Design and Build basis is likely to qualify.
  • The construction project needs to be agreed by a lender to be commercially viable.

I am happy to address any questions via  ‘leave a comment’ (at top) or by ’email’ (below).

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Is there an alternative quality structured product that can achieve ‘Help to Buy’ without a Government guarantee?


Is there an alternative quality structured product that can achieve ‘Help to Buy’ without a Government guarantee?

We saw in the FT on 13th August an article ‘Ministers deny loan guarantee scheme will cause UK housing bubble’ which challenges the logic of the government providing guarantees for the Help to Buy program.

This got me thinking about the current mortgage lending situation as I am also aware of the dynamics of generating a 20% – 25% deposit to qualify for a mortgage – just saving will not work as annual property inflation keeps moving the goal posts further away whilst wasting valuable cash flow for rent. I have developed an idea that I would like to share with you that removes the need for any government involvement but would achieve the same intent, increase quality lending by banks, and provide a quality product for asset-backed securitisation purposes.

My idea is based on inheritance capital tied in fixed assets, i.e. the parents/family having capital value locked up in a home with little or no mortgage but not enough free liquidity to assist siblings with deposit requirements. Existing equity release products have rightly attracted much distrust.

I have used as a template: first time buyers, couples up-scaling for a family, and moving for career choice purposes, albeit not limited to these. Their parents could be still working, or have retired, but they have more than enough income for their living needs, but not enough liquidity to assist their siblings. Thus the inheritance that would go to their siblings consists mainly of fixed assets in property which can only be realistically liquidated upon the demise of the parents. There is the possibility to create a quality equity release product that might also be very tax efficient for inheritance tax purposes.

The product includes a mortgage extended to the parents for the amount of the deposit required by the siblings. Assuming that this mortgage amount (including any existing mortgage) is significantly less than 50% of the property value and is easily serviced by the parents from their existing income the lending bank have a quality mortgage. Assuming that the couple can easily service the remaining 75% – 80% of the property mortgage that they need then the bank has essentially lent 100% but has 2 or 3 quality assets and income streams to service the debt we have a package that can easily be securitised should the lender need to free capital. This also allows the couple to use whatever capital they do have to furnish their new home without reverting to expensive credit card repayments.

If the financing for the parents is interest only, i.e. the capital amount would be repaid once the mortgaged property is sold as part of the estate liquidation during probate – we have a valuable inheritance tax planning product.

One ideal use of this product would be the situation where 2 young people intend to get married, would like to buy a home to raise a family but cannot afford the 20% – 25% deposit. Both sets of parents own properties of suitable value, but without enough cash assets to help this couple to achieve their dream home, albeit enough income to service a mortgage on their existing properties. Each set of parents could provide 25% between them through a re-mortgage on their own properties and thus give the couple the best wedding present they could wish for. This type of product has great social value as it allows the parents to give a good start to the adult life of their siblings; a concept very much part of the culture in a number of societies around the world.

If all 3 mortgages are tied together as a high quality lending both in terms of debt to equity (asset security value) and debt service capability we have a high quality package for asset-backed securitisation purposes.

If the government wanted to encourage this type of parental support they could give tax relief to the parents on their mortgage interest payments.

Does this make sense as a quality lending product, as it would be less visible than the proposed Help to Buy government scheme (thus removing fears of housing bubbles), and would be a valuable social product.

Bank Trader Bonuses – should they be paid if the bank makes a loss?

Bank Trader Bonuses – should they be paid if the bank makes a loss?

I have been cornered at a number of dinner parties and other discussions in recent years to be grilled on the controversial and sometimes hostile subject about whether or not the traders, and indeed deal originators, within investment banks should be paid substantial bonuses if the bank itself makes a loss. Having signed-off on such bonuses in the past I know what it feels like when you see the size of the number, sometimes staggeringly large, staring at you on the page, (but then most would gulp at our daily turnover of around US$ 3 billion) so I have tried to rationalise the argument ‘for’ or ‘against’.

In the early days of such traders, (latter part of the 1970’s and first half of the 1980’s), it was commonplace that the bank provided the desk, the capital, the prestige name of the bank, and the support operations. Traders were only paid a nominal salary to live on but would be entitled to a flat-rate bonus calculated at up to 10% of the net profits they generated for the bank. These traders were never considered part of the ‘family’ within the bank, and were remote to the culture of the bank. They were commonly referred to as ‘intrapreneurs’. This was a reasonable strategy for the bank in that they did not have the exposure of substantial salaries to people who might not perform, and the modest salary incentivised the trader to make profits. Many types of companies today adopt this attitude, and it is certainly a better business model than the soccer players I refer to below.

A significantly exaggerated example of this, and well recorded in books such as ‘Liars Poker’ by Michael Lewis, was the trading environment of the then Solomon Brothers investment house which was a ruthless production line of traders who performed to required levels of profit, or were discarded and replaced at will.

An analogy could be a comparison with soccer players who have a limited period of productivity (typically 5 – 10 years) who are paid substantial remuneration whilst valuable, but are readily discarded once their star no longer shines. Headhunters in banking play the role of the soccer player’s personal manager in both initiating transfer of traders between banks, and negotiating any settlement required to be paid to the former bank to overcome notice periods, garden leave, poaching costs, etc. Traders do not have a career as such, they have a window of opportunity to make large amounts of money before they burn out, and their general philosophy revolves around this short-term opportunism.

To add to this unitary approach it should also be stressed that there are a number of separate product areas within an investment bank, and they have separate profit centres which become the accumulated profit or loss of the bank. In general there is no interlinking of these profit centres within the bank, nor interdependency on performance. Therefore I suggest that a trader who performs well is entitled to their bonus, irrespective of its size, as it only reflects the quality of the person as a realised income contributor. I must emphasise that the profit against which the bonus is calculated should be fully realised without any future exposure. Accrued profits, e.g. on transactions that still have future potential exposure, is a contentious subject, and needs to be agreed on a transaction-by-transaction basis. If a trader makes losses not only do they not receive a bonus, but usually they lose their trading seat – and possibly their future as a trader.

At a simple level would you expect a car salesperson to forego the commissions due on their sales if the car manufacturer makes a loss? Scale this up to a salesperson who sells a $40 million commercial airliner on which I am led to understand they can earn a commission up to 7% of sales value. And both of these sales people will probably have a far longer career than a trader.

At the end of the day the primary difference between other corporates and investment banks is the scale of the commissions/bonuses. To put this into context an investment bank can easily turnover as much in a few days as a major corporate turns over in a year.

Please note that this blog relates to business income generators, not the fat-cats who sit at the top and mostly still receive bonuses when the bank makes a loss – this is a completely different story.