A lifeline for small firms crippled by coronavirus: Bank of England and Treasury draw up plan for emergency loans
Plans to provide emergency loans to stop small firms going bust during the coronavirus crisis are being drawn up by officials at the Bank of England and the Treasury.
Andrew Bailey, who takes over as Bank Governor on March 16, told MPs he has discussed ways to help British business grappling with the outbreak with Chancellor of the Exchequer, Rishi Sunak.
Describing Covid-19 as the ‘most pressing issue that we face’, he said he would ‘have to move quickly’ to address the threat of the disease on employers and the wider economy when he takes over from Mark Carney.
Andrew Bailey, who takes over as Bank Governor on March 16, told MPs he has discussed ways to help British business grappling with the outbreak with Chancellor Rishi Sunak (pictured)
The comments came as Bailey was quizzed by MPs on the Treasury committee about his suitability to be Governor.
The 60-year-old, who is chief executive of the Financial Conduct Authority (FCA), said: ‘I think it is quite reasonable to expect that we are collectively going to have to provide some form of supply-chain finance in the not-too-distant future to ensure the shocks from the virus are not too damaging to firms… particularly to small firms.
‘We will have to move very quickly to do that. I have met the Chancellor and we have talked about this.’
Bailey said support could be provided by the Bank, which is drawing up plans, or the Government. He said officials would ‘look closely at evidence’ before launching any emergency package.
A string of companies have warned their supply chains have been hit by Covid-19, which has locked down much of the Chinese economy and is wreaking havoc.
There are fears that small firms in supply chains may run out of cash, and be unable to obtain a loan to keep going.
It is reported that high street banks are already rolling out emergency loans to firms across the UK amid fears that factory disruptions in China are threatening supply chains and cash flow.
Barclays, Santander and Royal Bank of Scotland have begun contacting thousands of business customers to check if they are under financial strain and need overdrafts or short-term loans.
Sunak has promised more help for households and businesses in his first Budget next week, with the Treasury expected to spend billions to manage the impact of the epidemic.
As the Bank of Canada became the latest central bank to slash interest rates, Bailey also refused to rule out an emergency cut, echoing the move by the US Federal Reserve on Tuesday.
The Bank of England’s Monetary Policy committee which sets interest rates is not due to announce its decision until March 26, but can cut rates before then.
The urgency was underlined yesterday by International Monetary Fund boss Kristalina Georgieva who said the rapid spread of coronavirus will wipe out any chance of stronger growth this year.
The Washington-based economic watchdog now expects global growth to fall short of the 2.9pc registered last year. Appearing in front of MPs, Bailey also faced questions over his track record at the FCA.
MPs took turns to criticise the regulator for being slow to protect consumers during a series of scandals including the fall of London Capital & Finance and the implosion of Neil Woodford’s investment empire.
Bailey said the FCA had tackled high-cost consumer credit and launched insider trading cases, which resulted in a conviction.
In a message to his successor, he said the role at the FCA was ‘hellishly tough’. He added: ‘But I don’t regret it for a moment.’