Standard Life boss warns of painful road to recovery
THE boss of one of the UK’s biggest investors, Standard Life Aberdeen, today warned that, far from a V-shaped recovery, surging unemployment and future flare-ups of Covid meant the economy was probably in for a painful “W” future.
Keith Skeoch, outgoing chief executive of the business that manages more than £500 billion of savings, said: “We are looking at a significant rise in structural unemployment and considerable stress in the corporate sector.
“Any recovery will be very slow and the long-term rate of growth is going to drop.”
He warned that many companies were highly indebted and would not be able to raise enough new equity from investors like SLA to survive the crisis.
“The cult of equity died some years ago and the corporate sector needs to have a lot more equity rather than debt on its balance sheet so it can remain resilient.”
While Standard Life would support some companies’ fundraisings, he said: “There are some which are highly leveraged, with not good business models, which will not survive.”
Skeoch was speaking a day after the
Bank of England said the longer-term outlook for economy was worse than it had previously thought.
He predicted people were more likely to save their money than spend it because of worries about the future.
While that would dampen economic growth, it would benefit Standard Life as people looked to invest their cash.
Reaping those benefits will be the job of incoming chief Stephen Bird. A former Citigroup banker, he joins after a tumultuous three-year period that has seen the difficult merger of Standard Life and Aberdeen.
Skeoch was speaking as assets under management at the group came in above expectations at £511.8 billion in the first half of the year as a result of better-than-expected investment performance. It managed to scrape in net inflows of £100 million and pre-tax profits of £195 million.
The profit figure was down sharply — by 30% — largely due to its loss of its business with Lloyds, which pulled its huge asset management contract with the firm last year. But fees also fell as clients switched into less lucrative asset classes like cash during the Covid crisis.
It paid a 7.3p dividend, costing £159 million, with Skeoch saying he could afford it due to its £1.7 billion of excess capital. Shares held steady at 264p, up 0.5p on the day.
Skeoch declined to comment on reports that he was to take over as interim chairman of the audit watchdog, the Financial Reporting Council.
There are some companies which are highly leveraged, with not good business models, which will not survive Keith Skeoch, outgoing chief executive