Get a bloody move on. That was not, obviously, the wording of the exhortation to banks in Wednesday’s joint letter from the chancellor, the governor of the Bank of England and head of the Financial Conduct Authority. But the gist was clear. The authorities are worried that their emergency measures are not being implemented on the ground by lenders – or, at least, not fast enough.
The regulatory trio said they want to see “all action necessary” and “a willingness to maintain and extend lending”, with the aim of ensuring that “firms whose business models were viable before this crisis remain viable once it is over”.
The language may have been formally polite, but consider the context. It was as recently as Monday this week that the governor and the chairs of six big banks issued a joint “we’re here to help” statement. Relations seemed harmonious at that point; not now.
What’s happened since? It seems the Treasury and the Bank have been bombarded by phone calls from irate business owners and executives who have heard about the Coronavirus Business Interruption Loan Scheme, and suchlike, but say they can’t get their hands on the promised cash.
For their part, the banks (or some of them) resent the idea that they’re not working flat out to get money out of the door. The scheme, they point out, came with eligibility criteria and not every applicant will qualify. They’re also meant to be lending only to businesses that would be viable under normal conditions.
There’s also an under-appreciated gap in the Treasury’s initiatives, say lenders. The scheme is for companies with an annual turnover of less than £45m, but not all firms above that threshold have a credit rating that would allow easy access to the equivalent commercial paper scheme for larger companies. Then there are problems created by self-isolating staff being absent in branches and call centres.
From the outside, it’s hard to tell how serious these tensions are. The Treasury is bound to want instant implementation; lenders will inevitably say the process of distributing loans is not like turning on a tap. The picture could improve.
Yet “monitoring the situation closely” is standard regulatory-speak for a heavy warning. The verbal rocket may be justified. Alternatively, the government wants someone to blame if companies go bust in their droves. Neither interpretation is good.
Through a glass, darkly
Tim Martin’s campaign to make himself the most unpopular business person in the country is going splendidly. In his latest move, the JD Wetherspoon founder has told suppliers they won’t be paid until pubs reopen.
One can – just about – see how Martin might rationalise his hardball stance. If Wetherspoon is not allowed to sell the goods it has ordered, it should be given more time to pay, he may reason.
Yet such a literal-minded view ignores a few business realities. Wetherspoon is a large company with a strong balance sheet and ready access to bank loans. Not all its suppliers are in the same position. Big brewers can look out for themselves, but a cashflow crisis could spin out of control for the smaller food and drink crew. This is a moment for the strong to look out for the weak.
He presumably calculates that customers don’t care enough to change their drinking and eating habits when the doors re-open. He may be right, but one wonders.
Inflation basket case
Consumer price inflation in the UK was 1.7% in February, as if anybody is interested. The reading is from another era.
For what it’s worth, most economists think inflation will soon fall below 1%, which sounds entirely plausible. For starters, the effect of the collapse in the price of oil will be felt in a wide range of goods and services. Food may increase in price (because sterling has fallen) but it’s hard to think of many other major examples.
But will the monthly CPI measure even be helpful in the next few months? How will the statisticians get a handle on the price of an airline ticket or a meal in a restaurant when planes are grounded and eateries are closed? The “typical shopping basket” approach to measuring inflation is not designed for current times.
