This week has undoubtedly been a quieter week with a little time off work. However the news cycle continues with the main news (outside of politics) still being economic projections on the impact of lockdown.
- Mortgage, credit card and loan businesses all seem to have struggled during lockdown, with credit card spending down 50% and mortgage lenders tightening criteria… this will likely flow through to impact lender business dynamics longer term, so one to watch
- An interesting story on credit score hotspots in CCR magazine, the best and worst credit scores by area… Oxfordshire and Nottinghamshire if you were wondering
- With all the tough economic news, Coronavirus and Brexit looming, many firms are curtailing investment due to uncertainty… this is when many are also calling for more digital investment… it will be important to make some key decisions in this area… it will be turning points for many businesses I suspect. (in addition preparation for a no-deal Brexit outcome seems to have worsened for many firms too… largely due to COVID19)
- Lastly, it seems it is not just me but, we have all been spending more on tea and biscuits during lockdown… are digestive sales are through the roof?!
This week has however, for me, underlined the importance of taking some time off. I know it can be difficult… especially when it is so easy to cancel, work is hectic with video calls and returning to normal… but taking a bit of time to decompress can be really beneficial… it is definitely not worth cancelling the leave.
Have a good weekend everyone…. @chris_w_tweet
The summer holidays here, restrictions are easing (for now) and there was a sense of making up for lost time this week… a sense of normality is returning… holiday trips being booked, days out with friends and at work investment meetings to get things moving again… it has been quite a remarkable journey so far.
Still some more observations this week.
- This was the week, with all the activity, my bandwidth finally gave out… 3 simultaneous video calls and it was starting to creak… maybe an excuse to revert to audio only?!
- I have been sorting through things these last few months… just found out if you leave stuff in boxes long enough, without getting rid of it, you find out it was actually useful… I think it may be a circular formula… am I destined to never throw anything away again…!
- Workwise, some more grim economic projections this week and everyone is expecting a wave of delinquency volume to flow through. Digital investment is definitely opening-up… and plenty to do before it arrives… more preparedness needs to be underway for sure
Enjoy the upcoming week everyone… we will see what it brings… @chris_w_tweet
A bit of a different tack this week. With all the focus on COVID19 and the lockdown, it has been easy to forget about the other topic…. Brexit. Most of us are tired of the issue and have been quite happy to forget about this for a while. However, at the start of the month, the deadline finalised that the UK could not automatically extend the transition period. As a result, it is increasingly now looking like the game of brinkmanship has returned and we are now definitely looking at deal/no-deal scenario, with a no-deal outcome looking more likely.
This transition period is of course why things have not changed much on the ground in the UK so far. However, with no deal now looking more likely both the UK government and EU are starting to get people ready.
This, of course, has implications for UK businesses, which will then flow-through to the economy and have consequences in financial services and of course collections.
Some of the documentation released this week has been really helpful in starting to lay some of this out. It can help us think about key areas of impact and preparation focus in terms of a no-deal scenario*.
- Data access – UK will become a third country restricting the flow of data from the UK to and from the EU. This could significantly impact software, esp cloud software and storage of data/data access
- UK will now manufacture Non EU parts. UK manufacturing will no longer qualify as EU sourced, meaning parts and components are non-EU. They will now require safety checks for export. This could be significant. With EU sourced parts requirements this could mean that, for example UK manufactured cars, there will be significant barriers to export. Adds pressure to UK manufacturing businesses and loss of competitiveness in major markets
- Delays and costs at border to EU. Goods and people which do go to the EU will be subject to additional customers and immigration checks. (no more blue lane). VAT and duties will also be due on export of goods into the EU impacting cashflow and of course prices and pricing. Puts pressure and additional cost burden on UK businesses.
- Restrictions on Services and right to work in EU. Restrictions on UK firms offering services to the EU, and of course the removal of the right to work for UK nationals in EU countries. Reduces market opportunity for UK businesses
- Non-recognition of UK professional qualifications. UK qualifications and certificates will no longer be automatically recognized in the EU. Restricts market access for businesses from the UK
- Mobile phone data roaming charges. The removal of roam like home guarantees in the EU. Increased expense for data roaming in the EU (and on holiday)
- Media and TV content restrictions. The UK will no longer meet EU origin requirements and have restrictions on broadcast of UK content in the EU. Revenue pressure for media sector
- Outsourcing your business. UK registered businesses will no longer be automatically recognised in the EU and be able to operate without an EU subsidiary. Could impact outsourcing or remote operations processing and processes
- Other. UK driving licences and pet passports no longer automatically valid for travel to EU. Bad news for pet holidays to France and Spain
All of this makes for pretty grim reading and will happen at the end of 2020. Any deal will only nibble at the edges of specific elements and it is unlikely deals will be found globally to replace this volume.
This is likely to provide a further significant shock for many businesses and the UK economy, with flow through to loan performance and implications for the processes servicing them. With 3 in 4 companies reportedly not prepared for the end of the transition period, this needs to be flashing on the radar for preparedness. It is important we are not too distracted by the pandemic to prepare for this.
In other news this week.
- The cut in stamp duty seems to be having the desired effect (in the short term at least), with estate agents now very busy
- Stamp duty also seems to be incentivizing higher LTV mortgages too
- The FCA formalised its extension of the motor finance payment support measures
- The pandemic and subsequent lockdown could result in a 15% jobless rate, with a significant economic impact in the UK and across the EU
- With an increasing focus on local lockdowns, national support measures will also likely be curtailed. This could make the impact, for those impacted, harder too
- Interestingly credit card spending has also declined by 50% during lockdown too. With credit cards and credit being such a large element of revenue in many banks and lenders you wonder what impact this is going to have. This could result in changes to business models, with fintech likely under pressure. (You wonder if this is behind, for example, some of the changes at Monzo and the relaunch of their premium card)
Have a good week everyone…. @chris_w_tweet
* this does not represent formal advice – suitable legal and professional advice is recommended if required