The Times - UK (2020-10-14)

the times | Wednesday October 14 2020 2GM 35

Business

Britain will still be borrowing nearly

£100 billion a year and debt will be on a

perilous upward spiral at the end of the

present parliament as the state shoul-

ders the cost of rebuilding the economy

after the pandemic, the International

Monetary Fund has warned.

In its latest World Economic Outlook,

the organisation upgraded UK growth

this year but set out a stark longer-term

forecast for the public finances.

In 2025, Britain will still be borrowing

4.4 per cent of GDP, equivalent to

£95 billion. The debt will have jumped

from 85 per cent of national income in

2019 to 107 per cent, a level not seen

since the end of the 1950s. The next

general election is expected to be held

in 2024.

The IMF set out the cost of the

pandemic in uncompromising terms.

Living standards will suffer lasting

damage across the world and a second

wave threatens to undo much of the

progress so far, Gita Gopinath, the

fund’s chief economist, said.

The cumulative loss to global output

relative to pre-virus forecasts will

amount to $11 trillion this year and will

total $28 trillion by 2025. “This repre-

sents a severe setback to the improve-

ment in average living standards across

all country groups,” Ms Gopinath said.

The global economy will shrink by

4.4 per cent this year, making it the

deepest recession since the Great

Depression.

“The virus is resurging with localised

lockdowns being reinstituted,” she said.

“If this worsens and prospects for treat-

commodities currencies

$

Brent crude (6pm)

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world markets (Change on the day)

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Gold

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FTSE 100

5,969.71 (-31.67)

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1.125

1.100

1.075

1.050

¤

£/$

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£/€

€1.1049 (-0.0015)

Dow Jones

28,679.81 (-157.71)

commodities currencies

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Sept 15 23 Oct 1 9 Sept 15 23 Oct 1 9 Sept 15 23 Oct 1 9 Sept 15 23 Oct 1 9 Sept 15 23 Oct 1 9

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Industry leaders have accused the gov-

ernment of initiating an “outrageous”

blame game over Brexit after a minister

claimed that many companies had

adopted a “head in the sand” approach

in preparing for it.

Lord Agnew of Oulton prompted a

backlash by sending what he called a

“shot over traders’ bows”, warning: “It is

their businesses that are at stake from

Anger as peer accuses industry of failing to prepare for Brexit

Callum Jones Trade Correspondent the 1st of January and they really must
engage in a more energetic way.”
He made his comments a day after
Alok Sharma, the business secretary,
declared in a letter to hundreds of thou-
sands of companies that they have “no
time to waste”. However, with fewer
than 80 days left of the transition
period, businesses still have questions
about how they will trade with the bloc.
Lord Agnew, a Cabinet Office and
Treasury minister working on Brexit

preparedness, said yesterday that

businesses were “not as ready as they

should be” for the new terms of trade on

January 1. “There has been a head in the

sand approach by traders,” he told the

Treasury select committee. The peer

described “a lack of urgency on the part

of too many traders”, but insisted he was

not seeking to apportion blame.

His intervention caused frustration

among industry figures. “They’re right

that business is not ready, but let’s not

just blame business,” Sir Mike Rake,

the former BT, Easyjet and Worldpay

chairman and CBI president, said.

“Let’s recognise that business organisa-

tions have been warning the govern-

ment for months and the government

hasn’t been listening to their warnings.”

Negotiators seeking to hammer out a

trade deal have yet to finalise an agree-

ment. Talks resumed on Monday in

preparation for tomorrow’s summit of

EU leaders. The government set up an

awareness campaign with the strapline

“check, change, go” in the summer, but

many industry figures have said the

government must provide more details.

David Thomson, of the Food and

Drink Federation, said “tens of ques-

tions”needed answering. He said Lord

Agnew’s remarks were “outrageous”.

Allie Renison, of the Institute of Direc-

tors, said the government’s “default an-

swer” to many of her questions was “we

can’t share that with you at present”.

IAN GAVAN/GETTY IMAGES

Spiralling debt will weigh on UK public finances

IMF warns

of long road

to recovery

Philip Aldrick Economics Editor
ments and vaccines deteriorate, the toll
on economic activity would be severe,
and likely amplified by severe financial
market turmoil.”
The latest outlook for the year was
marginally better than the previous
forecast in June, when a decline of
5.2 per cent for the world economy was
projected. The upgrade was attributed
to “less dire outcomes in the second
quarter, as well as signs of a stronger
recovery in the third quarter”.
The recession in Britain will not be as
deep as feared, with a contraction of
9.8 per cent this year, compared with
the June forecast of a 10.2 per cent fall.
Of the G7 nations, only Italy fares
worse, with a 10.6 per cent decline.
Britain is expected to recover with
5.9 per cent growth next year, a little
slower than previously forecast, but
unemployment is forecast to rise from
5.4 per cent this year to 7.4 per cent,
equating to a million lost jobs.
Andrew Bailey, the Bank of England
governor, yesterday also raised the
prospect of long-term joblessness and
“scarring” that limits growth and living
standards for years to come. He told the
House of Lords’ economic affairs com-
mittee: “What we know from history is
that one of the most damaging things
we can have in the economy is this
long-term scarring and the fact that
people become detached from the
labour market for long periods of time.”
Borrowing this year is projected to hit
a peacetime record of 16.5 per cent of
GDP and to remain near financial crisis
levels in 2021 at 9.2 per cent of GDP.
Governor’s warning, page 40
Markets are ‘overvalued’, page 41

Final act? The world’s largest cinema chain has warned it could run out of money this year if attendance does not recover.

AMC said it would require “additional liquidity or increases in attendance levels” to meet its financial obligations. The

release of blockbuster films has largely dried up since March, when Mulan was pulled from cinemas after its premiere

Metro suspends new business accounts

Katherine Griffiths, Ben Martin

Metro Bank has become the latest len-

der to stop opening new accounts for

businesses, despite the Bank of Eng-

land calling for credit to keep flowing.

Metro suspended openings because

of a deluge in demand from businesses

seeking government-backed bounce

back loans, for which borrowers must

have a current account.

Other banks have stopped opening

new business accounts, including

HSBC. Lloyds, Natwest and Santander

put openings on hold at the start of the

pandemic and there is a delay of a few

weeks for Barclays business accounts.

HSBC, Lloyds, Natwest and Barclays

dominate business lending, but Metro

has ambitions to grow its share. It has

about 151,000 business current ac-

counts and has lent more than £1 billion

in government-backed loans. It has

received thousands of requests for

accounts in the past months.

The bank received £120 million from

Banking Competition Remedies, the

official body that hands out grants paid

for by Royal Bank of Scotland to

expand into business banking, but had

to return £50 million in February when

it fell to a £131 million annual loss.

Regulators have eased capital buffers

to ensure that lending continues and

are likely to consider credit flows when

deciding if banks can restart dividends.

Banks have lent record amounts

since March, with £38 billion extended

in bounce back loans and billions lent

directly by banks on commercial terms.

There are fears that many bounce back

loans have been fraudulent because of

the minimal checks to ensure that small

firms could have quick access to funds.

One way for banks to curb the fraud is

to stop new openings.

A Metro spokeswoman said the sus-

pension of new business account open-

ings was a result of a “surge in demand”.

It suspended account openings on

Friday and aims to reopen next year.

HSBC stopped taking on small busi-

ness banking customers last month. A

spokeswoman denied that it was being

targeted by fraudsters and said that it

was simply focusing resources on exist-

ing applications. It plans to resume its

account opening service for small busi-

nesses on December 14.

Patrick Hosking, page 37