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The road to recovery

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News - 20 October 2020

The great 2020 lockdown has ravaged the economy. Unprecedented support from government and lenders has kept many businesses afloat. But there are still tough times ahead, says Andrew Thompson, Head of Risk at ABN AMRO Asset Based Finance UK. To get through them, you need a realistic assessment of where you are; a clear plan that factors in ongoing uncertainties; and open engagement with partners eager to help.

The Covid-19 pandemic and subsequent international lockdown has dealt a devastating blow to businesses across the UK. Leadership teams have had to navigate unprecedented restrictions on their ability to operate, and some have been forced to close their doors altogether.

As someone who has spent their entire career in client-facing positions, I know how hard it can be to run a business when faced with the challenges the world can sometimes throw at you. From the very outset of this crisis, my deal-team colleagues and those of us in our Covid-19 Task Force, have felt a deep personal desire to help companies to the fullest extent of our capabilities.

We have also felt a huge social responsibility – because in helping businesses, we are, of course, also helping the country. For example, where businesses have been supplying the NHS, we have found innovative solutions to support the working capital needs of their critical supply chains. Our focus has been not only on getting clients the appropriate support, but also on being creative with our internal processes to deliver that support quickly. Our role is twofold: get the money to where it needs to be; and alleviate some of the painful uncertainty that so many businesses face.

There is no doubt that the support made available by government, and by lenders, has been extraordinary. Unlike the 2008 global financial crisis, which emanated from within a single sector, Covid-19 has proved punishing for the entire economy, making a state response of real magnitude unavoidable. 

Fortunately, changes made in the wake of the financial crisis mean banks’ balance sheets are stronger – allowing financial institutions to actively seek ways to lend to and support clients. This means, we are able to be part of the solution. Society is looking to us to step up – and it is a challenge that we, at ABN AMRO, have been proud to take on.

As a result of this government and banking response, the majority of companies have been able to access the liquidity they’ve needed to survive a gruelling period. But the reality is that, as those emergency measures begin to unwind, organisations that have been cushioned from the worst excesses of the crisis by cost management measures and generous guaranteed loan schemes, must now prepare themselves for a fresh set of challenges.

 

Preparing for phase two

As we juggle changing lockdown rules, and as government support schemes are eased, business leaders must ask themselves:

  • Have I accurately understood and forecast the working capital I will need to restart my business (if it was closed) or to accelerate operations as recovery beds in?
  • When the government furlough scheme is wound down at the end of October, how will I get staff back on the payroll? How do the numbers on the replacement Job Support Scheme stack up for my business? What about after January?
  • Where I have taken payment holidays or received offers of support from funders, how will I finance a return to historic debt repayment profiles – and potentially service additional debt taken on during lockdown?
  • Where I have received tax relief during lockdown, how will I pay what is now due to HMRC in 2021?

These are significant hurdles to overcome in what is likely to be a challenging economic landscape. Any return to business as usual will take several years and might be, even though it’s become something of a cliché, a ‘new normal’. However, we hope and believe many sectors will be able to bounce back relatively quickly, particularly with the support of a well-capitalised banking sector. Selecting the right partner is key.

 

Getting the right support

ABN AMRO moved quickly to connect with our customers to ensure they were accessing the right help at the right time. We are one of the approved lenders on the CBILS scheme and have helped a number of our clients access these loans. We have also offered payment holidays on loans and increased funding on revolving facilities in order to boost our clients’ liquidity, where required. 

We have tried to ensure our clients are aware of all the relevant government measures available to them and have used our wide network of professional advisers to make sure our clients are able to get the right advice and to help support our own decision making.

Of course, while we have a duty of care to our clients, we are constantly having to balance that with our responsibility to protect our own business and look after our employees. You only need to look back to the financial crisis, to see the potential damage that an unstable banking sector can cause. Establishing long-term viability and sustainability is therefore critical – and extremely challenging in such uncertain times.

 

What we look for?

The sheer number of requests for help in this crisis has been unprecedented – and lending decisions have had to be made at a time when uncertainty prevails. We have had to find new ways to understand how we are able to support our clients in their time of need. This has included assessing:

  • How the business was performing prior to the COVID-19 outbreak.
  • The impact that COVID-19 has had on the business.
  • How the management team has responded to these challenges. (This display of leadership is absolutely critical.)
  • Whether we expect the sector to revitalise when government measures start to ease.

The businesses that are proving the most successful in the current environment are those that have demonstrated the greatest adaptability to deal with uncertain and changing circumstances and an ability to manage cash in order to maintain headroom to react as needed. It has been great to be able to support those organisations that have come to us with a clearly articulated Covid-19 strategy and ideas for how we can help them.

Companies that display that level of flexibility and tenacity are likely to continue to prove resilient in the months and years to come. Whilst we have challenging times ahead, my team and I are proud of the help and support we have given our valued clients so far and are ready to journey with them on that uncertain road to recovery that lays ahead.

 

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