UK banks plan no-deal Brexit lending to support businesses
Big banks are preparing to rally in support of businesses if Britain crashes out of the EU without a deal in March, invoking a ‘Dunkirk spirit’ with plans to lend billions to ease the economy through a potential crisis.
As the chances of a ‘no-deal storm’ rise, City bosses told The Telegraph they were ready to extend vital lines of credit, mitigating a potential cash crunch caused by delays to cross-border shipments and payments following Brexit.
Bank lobby group UK Finance said it was prepared to co-ordinate lenders’ efforts to provide support, as it did after the collapse of outsourcing giant Carillion and of Monarch Airlines hit supply chains.
Other areas of concern include the enforceability of billions of pound worth of contracts, access to European payment systems and the transfer of customer data between countries.
Individual lenders are also accelerating their contingency planning.
“We want to make sure we don’t make a bad situation humongously worse. We’re thinking about what to do in a no deal storm,” said one executive at a FTSE 100 bank. “If there are huge queues of lorries at Calais and Dover, what is the banking equivalent of that?
“Extending credit to firms impacted is one thing we’re looking at. It’s a bit Dunkirk spirit type of stuff. But banks are in reasonably good shape and can cope.”
The source said the chances of a no-deal scenario “may have gone from one to five percent” in recent months.
It is understood that officials at the Bank of England’s Prudential Regulation Authority (PRA) have started informal talks with lenders in recent weeks over how they might help the economy cope with a trade crisis. The PRA declined to comment.
Stephen Jones, chief executive of UK Finance, said: “Clearly working capital for businesses in a ‘no deal’ context is likely to be a major source of concern.
“If your delivery is stuck in a 40-mile queue at Calais you are unlikely to get your goods on time and you may not get paid on time. That will create demand for debt and supply chain finance.
“If the industry, the government and the regulator want us to act as a convener of the industry we will of course do that.”
The President of the Royal Pharmaceutical Society has warned that small chemists cannot afford to stockpile medicines, for instance.
Ash Soni called for the government to provide funding as “it’s a major problem for cash flow”.
“I am bearing the risk on behalf of the NHS, that seems unfair to me,” he said.
Ministers have begun discussing planning for a nodeal Brexit in recent weeks, including stockpiling food and medicines.
The government hopes to reach a final agreement on withdrawal terms, transition and the outline of a future trade deal at a crunch EU summit in October. However, comments by Michel Barnier, Europe’s chief negotiator, have cast doubt on the Government’s plans for a negotiated deal.
Prime Minister Theresa May wants to strike an agreement with Brussels that allows Britain to stay inside the EU customs system for goods, with financial services having restricted access to the single market.
The PM’S proposals, which were narrowly backed by Parliament earlier this month, needed to be ‘workable’, Barnier said, adding that there were elements of the government’s White Paper on the matter that he did not understand.
In January, lenders provided £225 million to companies hit by the collapse of contractor Carillion. Banks offered support including loan repayment holidays, help with fees and increases to corporate overdrafts.