Deserted British high streets imperil billion-pound bank loans

LONDON: British banks’ hospitality and retail clients are finally about to completely exit lockdown.

If shoppers and diners don’t flock back, the fate of billions of pounds in loans may be in the balance.

Barclays Plc, Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc are heavily exposed to these sectors, which can account for more than a third of their commercial loan book.

Restaurants and pubs will be allowed to open their doors from July 4, three weeks after most shops were allowed to resume normal business following a three-month lockdown.

Grocery stores did booming business staying open during lockdown.

The problems lie in the rest of the high street, as Britons call their shopping districts.

In an environment of shaky consumer confidence, millions are unemployed or furloughed; others remain too fearful of the coronavirus to dine out or travel, and social-distancing restrictions could complicate running a restaurant.

The first few post-lockdown weeks for London’s most iconic retail street haven’t been promising so far, according to serial hospitality entrepreneur Luke Johnson.

“The shops on Oxford Street may have reopened, but it is an absolute desert,” he said in an interview.

“I reckon footfall is probably only about 20% of what it would be normally.”

“Reopening is no magic bullet,” said Helen Dickinson, who heads the British Retail Consortium.

Barclays has £20.4bil lending to hospitality and retail, according to an April presentation, easily the majority of its exposure to vulnerable sectors hit by the lockdown.

For RBS, the equivalent figure is about £19bil.

Lloyds breaks its numbers down further, disclosing £8.4bil in exposure to non-food retail, hotels, leisure, restaurants and bars.

HSBC Holdings Plc doesn’t break out British figures, but has Us$10.5bil of exposure to restaurant, leisure and retail companies across Europe.

Barclays chief executive officer Jes Staley, whose bank is also a major player in credit cards, struck a wary tone about consumer confidence this week.

While spending has somewhat resumed, the prospect of a spike in unemployment is darkening the outlook, he said in an interview with Bloomberg News.

“It’s far too early to assess the full damage,” said Edward Firth, an analyst at Keefe Bruyette & Woods. UK banks are “in the middle of a storm.”— Bloomberg