UK banks prop up SMEs with £7bn amid coronavirus outbreak

Written by Ruby Hinchliffe
11th March 2020

UK banks are taking a number of measures to help prop up the country’s small and medium-sized enterprises (SMEs) as the coronavirus continues to spread and impact businesses globally.

NatWest has committed a £5 billion fund, whilst Lloyds Banking Group has committed £2 billion in fee-free finance for small businesses with revenues under £25 million.

Aside from the funding, these measures also include deferring customers’ payments on loans and mortgages for up to three months.

“The ongoing uncertainty that the UK’s small and medium sized businesses are experiencing is unprecedented,” says NatWest’s CEO

NatWest says its fund will help businesses “across all sectors and where there is the greatest disruption and need”, whilst Lloyds promises to support those SMEs with disrupted cash-flows as a result of supply chain interruptions and high staff absences.

Currently, NatWest has promised three-month loan and mortgage repayment deferrals, TSB has told borrowers that they can defer mortgage repayments for up to two months, and Lloyds has said “in certain circumstances” repayment holidays will be provided “to those businesses impacted the most”.

Santander also provided some insight on the matter, stating that it has “a team of experts on hand to support customers who have been impacted by the coronavirus” and notes that it will look at options including deferring or reducing payments going forward.

Previously referred to as the Royal Bank of Scotland (RBS) group, NatWest says it will also offer customers temporary emergency loans with no fees, increase credit card limits, offer early access to cash in fixed savings accounts without any charges – which TSB is also doing, and offer increased cash withdrawal limits of up to £500.

Fees on credit card cash advances will also be temporarily scrapped by NatWest, and the bank will carry out “proactive outreach to those SMEs that may be experiencing short-term trading issues”.

“The ongoing uncertainty that the UK’s small and medium-sized businesses are experiencing is unprecedented even by recent standards,” says NatWest’s CEO Alison Rose. “SMEs should not feel like they have to go through these uncertain times alone, we are here to help.”

Lloyds will also be scrapping arrangement fees for new overdrafts, overdraft limit increases, and new or increased invoice discounting and finance facilities.

Business confidence in the UK has taken a serious hit following the virus outbreak, posing fresh questions for the chancellor ahead of the announcement of the government’s budget.

One in five directors are calling the outbreak “a severe threat” to their businesses

“With the prospect of orders drying up and staff in quarantine, some firms will be looking at a potential cash flow crunch and confidence in the economy has taken a knock,” says the Institute of Director’s chief economist ,Tej Parikh, following a survey by the lobby group which found one in five directors calling the outbreak “a severe threat” to their businesses.

“Ideally, we’ll have banks vying to provide the most comprehensive support for small firms in distress,” says Mike Cherry, national chairman of the Federation of Small Business.

“The proof will of course be in the response that small firms receive if they’re forced to ask a bank for help because of coronavirus-linked disruption,” Cherry adds.

NatWest says it will “understand each customer’s situation on a case-by-case basis”, acknowledging that experience will vary from sector to sector.