The FT has finally noticed that business across the UK is failing. In an editorial out today it says:
Despite the good intentions of governments in the US and the UK, many midsized businesses are struggling to access the emergency loan schemes that have been made available. Owners report delays in receiving loan approval. Others say they have been turned down by their banks as they have no borrowing history with them.
Not enough of the rule book has been torn up. Governments have chosen to use commercial banks as the conduits for the rescue funds. This has thrown up the usual caveats associated with commercial lending, such as high interest rates and demands for personal guarantees. These have frustrated progress early on. These schemes are laudable but worth little if companies do not have the tools to access life-saving funds.
And it concludes:
Policymakers need to cut through the bureaucracy and go further in their guarantees. Grants, rather than loans, should be considered. Getting the right support to businesses of all sizes is critical if they are to have any hope of surviving the next few months. Even if the bill for governments looks high, it will be nothing compared with the economic cost of unprecedented mass unemployment and depression that would be inevitable if businesses are not protected in the short term.
The conclusion is right. But there is an issue to consider and that is why is the general level of business comprehension at the FT so low that it has taken them a month to say this when the weaknesses in the government's schemes were apparent the moment that they were announced? They should have done much better than this.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Even if the bill for governments looks high, it will be nothing compared with the economic cost of unprecedented mass unemployment and depression that would be inevitable if businesses are not protected in the short term.
A statement of the bleedin’ obvious.
Why can’t the government see this? Are they that imprisoned by neo-liberal style thinking?
Because like the Government, it sees the Finance Industry as our major business – all the rest can go to hell apparently.
There’s nothing like a good crisis to show people how the world really works.
There is a further problem that I have experienced myself,
access to the grant scheme is being distributed via local councils and dependent on how much you pay in rates.
My company sub-lets our property (as we are a franchise) and we pay rent to a landlord and therefore we do not appear on the councils rates billing.
Therefore no access to grants.
Absurd
Expecting the banks to pull their weight here is a tad naive,it was and is nothing more than a PR job. The gov is offering bank loan help to businesses as per its official advice pages which is patently not there.
My wife is works in corporate banking,her customers are basically calling her and asking for money as promised by the government….it don’t work like that. Basically the banks are not lending to businesses if they are not “investment grade”,which probaly only covered maybe 10 % of businesses before COVID-19, I would reckon that precentage has now dropped to zero.
The only realistic way out is fiscal spending, forget the banks,we will be bailing them out soon enough in any case.
It is pure fantasy to expect the banks to take-on risk. It is not what they do.
Private sector responds to government funding, otherwise the big boys don’t get out of bed. That’s how it works. If Sunak is not making the right guarantees nothing will happen. Current policy ‘initiatives’ are pure widow dressing: a pretence that there is something in the shop.
The FT won’t have noticed because their interest is not in business but in the finance of business. You might just aswell expect the Racing Times to be interested in the horse-meat trade ……