In conversation with Alison Rose, Chief Executive of Natwest Group. Clearing Banks and COVID-19: very different from the last crisis?

In conversation with Alison Rose, Chief Executive of Natwest Group. Clearing Banks and COVID-19: very different from the last crisis?

26.06.20

Tulchan Frameworks, hosted by James Harding, Co-founder and Editor, Tortoise Media, in conversation with Alison Rose, Chief Executive of Natwest Group.

On a day overshadowed by forecasts by the OECD that the UK’s economy was set to be the hardest hit by Covid-19 among major nations, the conversation focused on the operation of the existing government rescue package and the longer-term prospects for business.

Rishi Sunak’s emergency measures

Banks have faced an unprecedented challenge in delivering the measures introduced by the Chancellor - the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS). The scale of demand has been phenomenal and forced banks to confront the need to take decisions faster and - inevitably - with a different approach to due diligence.

Competing economic expectations

The state of the equity markets suggests a measure of confidence that the economy will recover comparatively quickly - not least because the sheer scale of government intervention has created so much liquidity. In contrast, economic forecasters are predicting a deep and prolonged recession, prompting many businesses to announce redundancies already. The unpredictability of the virus and of its future impact is so great that the balance of probability lies on the second school of prediction being - broadly speaking - the right one. But the key, for everyone, will be adaptability and a recognition that we are in new terrain.

Horizontal to sectoral

As the first wave of government schemes tapers off, the emphasis will have to shift away from universally-available assistance to targeted help. There are sectors of the economy - including many SMEs that would be perfectly viable in normal circumstances - that will be unable to survive without continued support: hospitality being a notable example of a sector that will not be able to operate at full throttle as long as social distancing remains the norm.

Managing recovery

This is no less important than the management of the lockdown. The objective must be to minimise the long-term impact of the inevitable scarring that will have been inflicted upon the economy - and, in particular, to avoid mass unemployment with all its disastrous economic and social consequences. This will be extremely nuanced. Debt holidays, for instance, may help businesses in the short term - but also land them in serious trouble further down the line as interest rates rise and their liabilities increase. Not all will, or should, survive. Achieving the correct balance will be the heart of the matter.

Working practices

Banks are preparing for a post-Covid landscape that will be very different to the pre-Covid environment. It is inconceivable, for instance, that all employees who have been working from home will now return to offices. The structure of working life will change - perhaps fundamentally.