Banks make hard Brexit lending plans for business
Bosses will rally round to give vital credit support if Britain crashes out of EU without a settlement
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 Daily Telegraph they were ready to extend vital lines of credit, mitigating a potential cash crunch caused by delays to crossborder shipments and payments following Brexit. Bank lobby group UK Finance said it was prepared to coordinate lenders’ efforts to provide support, as it did after the collapse of Carillion and of Monarch Airlines.
Other areas of concern include the enforceability of billions of pounds 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 an 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 stuff. But banks are in reasonably good shape.”
The source said the chances of a nodeal scenario “may have gone from 1pc to 5pc” 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 no-deal Brexit in recent
‘Extending credit to firms impacted is one thing we’re looking at. It’s a bit Dunkirk spirit type stuff’
weeks, including issues like 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”, Mr Barnier said, adding that there were elements of the Government’s recent White Paper on the matter that he did not understand.
INDEPENDENT chemists face a cash flow crisis if they are required to stockpile medicines for a no-deal Brexit, the president of the Royal Pharmaceutical Society has warned.
Ash Soni said that small community pharmacies cannot afford to purchase and store large amounts of medicines on behalf of the NHS. Mr Soni, who owns three chemists, said a no deal would create problems. “If it sits on my shelf for three months, I will be in a position where I don’t get paid for three months. If I don’t dispense it, I don’t get paid,” he said. “It’s a major problem for cash flow. I am bearing the risk on behalf of the NHS, that seems unfair to me.
“If the NHS wants to stockpile medicines, it should take the responsibility to make sure they’re paid for.” Matt Hancock, the Health Secretary, has said the Government is preparing “for a potential need for stockpiling”.
Mr Soni said: “Some medications, I use around 150 packs a month, so if you want me to store six months’ worth, that’s 1,000 packs.
“Even if the cost is low, just £1 a pack, that’s £1,000. We dispense 8,000 prescriptions a month, which is £50,000 of medicines in each branch every month. If every pharmacy has to do that across England, that’s 12,000 pharmacies, that’s a massive amount of money.” He added that storing so much medication, some of which has a short shelf life, would be an added challenge for small pharmacies.
“We’d also have to find the space to store them – and pharmacies aren’t huge places,” he said. “If they are cold store items, do I have to buy more fridges?” The Brexit Health Alliance estimates that 45m packs are exported to the EU from the UK each month, more than the 37m packs that are imported.
This could also leave the EU exposed to shortages of medicines, according to Martin Sawer, the executive director of the Healthcare Distribution Association.
“The UK exports more packs than it imports – there is trade both ways, so it’s important that there is alignment in the market,” said Mr Sawer.
“Companies are putting extra medicines into the UK already in buffer stocks. The essential medicines, the Government buys and stores them, but that’s not the case here. The supply chain would have to sort it out. Pharmacies need to be told about the plans as soon as possible.”