Chancellor of the Exchequer Rishi Sunak has looked like the saviour of UK Businesses in recent weeks. The lack of action by banks to follow his instructions however looks like they are already trying to undress the new emperor.
Rishi Sunak enjoyed a very accomplished career as a banker prior to entering government, as such he understands how banks work and what UK businesses now urgently need, instant cashflow.
His strategy to inject liquidity into hospitality businesses that were closed overnight was exactly what was required to start combating the current economic challenge faced by hospitality businesses, and all businesses throughout the UK.
His strategy of course was wholly dependent on banks following his instructions. To make those instructions easy to follow and deploy, and almost devoid of risk, they were underwritten to the tune of 80% by the government.
Like every part of the COVID-19 pandemic the situation changes at a pace previously unseen, the inaction of the banks means that as we write, and you read, businesses are at this very moment facing the point of no return.
The business secretary Alok Sharma appeared on every major UK TV channel a few days ago warning banks that inaction to provide loans to businesses hit by the coronavirus crisis was “completely unacceptable”. He went on to say that banks needed to “repay the favour” from the 2008 financial crisis when the government stepped in to provide a taxpayer-funded bailout for financial institutions.
Mr Sharma also tried to reassure businesses saying: “The chancellor, together with the Bank of England, and the Financial Conduct Authority wrote to the chief executives of the UK banks to urge them to make sure that the benefits of the loan scheme are passed through to businesses and consumers.”
While the government are trying to stimulate the UK business economy, the banks seem to be following their own agenda. As the banks seem to have a very short memory, unable to cast their minds back less than 12 years, maybe it’s time for the government to look to bypass the banks and make payments directly.
Unless something is done, and very soon, Rishi Sunak will be naked.