Virgin Money UK awarded £35m grant from Capability and Innovation Fund

Virgin Money UK has been awarded a £35m grant following its successful application to the Capability and Innovation Fund, as part of the Royal Bank of Scotland Alternative Remedies Package. The grant means that businesses across the country will benefit from the development and enhancement of Virgin Money’s proposition, including scaling its successful regional franchise, more time with relationship managers and access to new digital technologies and services.

This award will support growth in the Group’s market share of cost-effective SME deposits and higher-yielding SME assets, while reducing cost-to-serve.

The Group presented an innovative proposition, ‘Working Capital Health’, which will transform its existing business current account offering into a financial wellness tracker for SMEs and combine dynamic views across an SME’s working capital cycle, with a set of working capital solutions, all backed up by proactive relationship management and a unique ecosystem of capability partners.

Virgin Money Business is due to launch in 2021 and the arrival of the Virgin brand into the business current account market for the first time, alongside additional large-scale investment, will enable the Group to become a true disruptor in the SME banking market and offer UK customers a meaningful alternative to the incumbent banks.

The Group has committed to a number of investments and growth targets, including:

  • Launching ‘Working Capital Health’ for SMEs in 2021.
  • Attracting 100,000 new SME customers by the end of 2025 (including 20,000 by the end of 2022)
  • Increasing net lending to SMEs by an extra £2.2bn by the end of 2025 (including £0.5bn by the end of 2022) with more than £100m of new lending to customers pursuing environmental, social and governance aims.
  • Investing an additional 150,000 hours of Relationship Manager time per annum from the end of 2022, enabled through an investment in data infrastructure, process digitisation and working capital analytics from the business current account.
  • Developing a new partner ecosystem of relevant services for SMEs, incorporating proprietary and third-party functionality, to deliver services to help SME customers manage and grow their businesses.
  • More than 80% of new customers to be based outside of London.
  • Ensuring that diversity and inclusion is at the heart of our culture for both business customers and colleagues. The Group aims to ensure alignment between business growth and diversity of the people and communities we serve, and commits to maintaining over 40% of senior roles being filled by women.
  • Grant funding to be matched pound-for-pound with investment by Virgin Money.

Gavin Opperman, Group Business Banking Director at Virgin Money commented:
“This grant award is an endorsement of the Group’s potential to shake up SME banking and a vote of confidence in our ability to invest in new capabilities. The grant will be used to accelerate our existing ambitious growth plans – we are investing in disruptive new capabilities and offering customers the best and most digitally-advanced business bank across the country alongside the globally iconic Virgin brand that’s synonymous with entrepreneurship and business growth.

“This award will transform our business current account into a financial wellness tracker, combining dynamic views across an SME’s working capital cycle, with a set of working capital solutions. It will all be backed up by an unparalleled ecosystem of FinTech partners and proactive support from our first-class team of experienced relationship managers, enabling us to fulfil our ambition to help business owners realise their potential and achieve their dreams”.

Working Capital Health

It is estimated that more than £600bn of excess working capital is tied up on the UK’s balance sheets across SMEs, mid-caps and corporates, with working capital efficiency working in favour of larger organisations at the expense of SMEs. Margin will be key for SMEs as the economy recovers and working capital management has a proven direct link between profitability and financing.

Gavin Opperman added:
“Working Capital Health will support SMEs with the wave of challenges they are facing, going beyond lending to improve their working capital and encouraging more efficient use of cash to maintain sufficient liquidity to operate. We are evolving the business current account to become the working capital wellness tracker that SMEs need, combining historical, current and future views of liquidity and working capital across the whole business cycle. It will provide working capital solutions to help SMEs optimise their cashflows and returns, as well as access to a suite of products, both provided by the Bank and from a newly-created marketplace of providers”.