the times | Friday August 7 2020 1GM 33
Business
Patrick Hosking Financial Editor
The Bank of England has warned
lenders not to be tempted to turn off the
credit taps this autumn, saying busi-
nesses face a £200 billion cash shortfall
and need financial support.
In evidence that Threadneedle
Street is concerned banks might call in
loans or fail to extend credit in order to
conserve capital, the Bank argued it
was in the “collective” best interests of
the sector to keep lending.
If banks individually cut back lending
to strengthen their balance sheets, they
could not only push more firms into
insolvency but tip the entire country
into a “materially worse” slump, it said.
The warning came as the Office for
National Statistics said that 213,285
businesses failed in the first half of
2020, a 14 per cent increase on the same
period last year.
The Bank made the comments in the
latest stability report by the financial
policy committee. This committee is
tasked with managing the resilience of
the financial system and includes senior
Bank staff, including the governor
Andrew Bailey, the bosses of the
Prudential Regulation Authority and
Financial Conduct Authority, and five
external members.
The committee argued that banks
were so strongly capitalised they could
withstand a downturn later this year
twice as bad as envisaged with the un-
employment rate soaring to 15 per cent.
The committee also downgraded its
expectations of cumulative losses that
banks will suffer as firms and individu-
als default on loans and credit card
commodities currencies
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Jul 9 17 27 Aug 4 Jul 9 17 27 Aug 4 Jul 9 17 27 Aug 4 Jul 9 17 27 Aug 4 Jul 9 17 27 Aug 4 Jul 9 17 27 Aug 4Microsoft is exploring the possibility of
buying TikTok’s entire global business
as part of talks about a deal with the
parent company of the popular video-
sharing app.
The software giant has been in talks
with Bytedance, the Chinese owners of
TikTok, to acquire its services in the
US, Canada, Australia and New Zea-
land, but had ruled out anywhere else.
Microsoft exploring global deal for TikTok — with Trump’s approval
Tom Knowles, Simon Duke The discussions emerged after Presi-
dent Trump’s announcement that he
will ban TikTok from the US by the
middle of next month if it is not
acquired by an American company,
owing to national security fears over its
Chinese owners.
Yet there have been growing
concerns about how TikTok users
around the world would be able to in-
teract if the service in certain countries
were owned by different companies. It
would also be difficult to separate back
office functions. As a result Microsoft is
considering buying TikTok’s entire
business, according to a report by the
Financial Times. The deal would not
include China, where TikTok does not
operate and instead Bytedance has a
similar app call Douyin.
Any acquisition by Microsoft re-
mains complex, with multiple share-
holders and two governments to pla-
cate before anything is finalised. Oneperson described the discussions as
being like “multidimensional chess”.
Sources told the FT it could also take
between five and eight years to separate
TikTok’s software from Bytedance’s
technology in China.
TikTok is a video-sharing app that
allows users to create and view short
clips. It has had two billion downloads
and is the first Chinese-owned app to
become a global sensation.
Washington officials have expressedconcern that Bytedance could pass data
on TikTok users to Chinese authorities.
Bytedance has strongly denied this.
Mr Trump has said he does not be-
lieve it makes sense for Microsoft to
buy 30 per cent of the company and
that it is “probably better off buying the
whole thing”.
A source close to TikTok said that
there were “no talks for a global sale”.
Microsoft and Bytedance declined to
comment.Businesses face £200bn shortfall as failures rise
Banks ‘must
lend or risk
worse slump’
obligations. It said banks stood to write
off “somewhat less than £80 billion”.
Three months ago it estimated the
losses at “just over £80 billion.”
Either way, banks are still facing a
wave of defaults not yet provided for. In
the first six months of the year they
booked loan impairments of £18 billion
in aggregate.
The improved outlook for financial
stability came as the Bank’s monetary
policy experts predicted a less severe
downturn this year than forecast in May,
kept base rate unchanged at 0.1 per cent
and left its quantitative easing stimulus
measure unchanged at £745 billion.
As government support for firms
through the furlough scheme is
gradually wound down in the coming
months, businesses are expected to
need more cash to keep afloat.
The Bank calculated that UK busi-
nesses faced a cashflow deficit of “up to
around £200 billion”. Larger companies
would need an extra £125 billion while
smaller firms — those with turnover of
less than £10 million — would need
between £40 and £70 billion.
That is on top of £275 billion of
corporate debt that is due to mature this
year and will need to be rolled over.
Many firms will face cashflow pressures
and there will be an increase in company
failures, the Bank said. “It would... be
costly for them [the banks] and the wider
economy to take defensive actions. It
remains the FPC’s judgment that banks
have the capacity to continue to support
businesses and households through this
period.”
In recessions, banks can be shy about
Continued on page 34, col 5Brothers seek new recipe for Lakeland
Ashley Armstrong Retail EditorThe three brothers who have steered
Lakeland, the seller of banana guards
and shower squeegees, for almost five
decades are retiring and handing over
to family outsiders.
Julian, 57, Sam, 66, and Martin Ray-
ner, 69, are resigning from Lakeland’s
board of directors next month as the
company braces for a shake-up in
strategy, although their families will
retain ownership of the business.
Lakeland — where Mary Berry now
has her own range of cookware — was
founded by their father Alan, an agri-
cultural-feed salesman who plucked
and prepared chickens and sold them in
plastic bags at a market in Kendal,
Cumbria, before the bags started selling
better than the poultry.
He launched Lakeland Plastics in
1964, selling plastic bags, silage
sheeting and plastic coats for
newborn lambs before hand-ing the business to his sons, who pushed
it into selling kitchen equipment. The
group has 67 stores across the country,
employing 1,500 people.
The business is expected to undergo
a restructuring in response to the
coronavirus crisis, which prompted the
closure of its shops for three months
and has led to a heavy slump in sales.
Catherine Nunn, 50, chief executive,
will become deputy chairman while
Steve Knights, commercial director,
will become chief executive.
Sam Rayner said: “In my 46 years at
the helm of Lakeland, I have never beenso grateful to our colleagues who, re-
sponding to the recent unprecedented
events, transformed and changed our
company in just a few days to meet the
challenges we all faced.
“We have learned that certain
elements of the strategy will need to be
delivered much more rapidly than was
originally envisaged, and this includes
the review of our structure, along with
accelerating our plans for the future
running of the business.”
The company’s board is also being
reduced in number with the departure
of Gary Marshall, operations director,
after 16 years.
Lakeland’s last available accounts
reveal sales fell by 8.7 per cent to
£139 million in 2018 while it record-
ed a £2.7 million loss from a profit of
£2.3 million the previous year after
blaming Brexit uncertainty and
store writedowns. The
family took a £600,000
dividend in 2018.Mary Berry has her own range of cookware at Lakeland, which has been run for decades by Julian, Sam and Martin Rayner