Cash & Liquidity ManagementCash ManagementCash ForecastingGovernment has learned from 2008 to help corporates manage cash

Government has learned from 2008 to help corporates manage cash

Support from government has been crucial to businesses’ survival during lockdown

The UK government has shown that it has learned from the Global Financial Crisis (GFC) of 2008 by providing better financial support to businesses during lockdown, according to Ian Kirkpatrick, treasury director of London Stock Exchange.

Kirkpatrick was speaking on a panel at this week’s Cash Management and Business Resilience Week. He was joined on the panel by Kate Curnow, deputy CFO at Honda; Jukka Sallinen, head of cash management at Opus Capita; Ben Walters, deputy treasurer of Compass Group; Carsten Jaekel, partner, global treasury services at EY; and Adrian Burrows, director of finance at Best Western.

At the start of the coronavirus crisis, chancellor Rishi Sunak announced the Coronavirus Business Interruption Loan Scheme (CBILS) which gave firms access to up to £5m with no interest on the first 12 months. Schemes like these have been critical to keep businesses going, said Kirkpatrick.

“I think the government was very good with the support… It’s actually been quite a good thing for us and for the economy that the government has learned from the financial crisis [of 2008] and has tried not to lock things up too much,” he said.

Kirkpatrick tried to see the positives of the economic fall-out from the pandemic, suggesting that it had allowed treasurers to “challenge assumptions” on cash forecasting.

“At the time of the coronavirus crisis, we really had to sharpen our tools on the forecasting processes that we did, and we ran quite a few different iterations, and had a look at the outcomes to see whether they were severe enough. Some very senior people were asking a lot of tough questions of the business and challenging different assumptions.

“I think these sorts of times are quite good for that sort of thing, making you sharpen your tools and really challenge assumptions on quite a few things,” he added.

However, fellow panellist Burrows said that he worried some firms were taking advantage of government generosity.

“The government were very generous in terms of providing the opportunity for financial support for businesses struggling from the impact of the coronavirus. But I think perhaps one of the unintended consequences of some of the schemes they put in place is that some companies who perhaps didn’t need to access that additional funding, took advantage of the funding that was out there. Because in essence, if you look at the CBILS, that’s free cash for 12 months,” he said.

“Which business isn’t going to take advantage of free cash for 12 months to sit on its own balance sheet, with the knowledge that you know you’d only need to access it as a last resort?

This, Burrows suggested, was potentially harming the chances of the businesses that genuinely need the support to get accepted onto the scheme.

“Perhaps a consequence of that is some businesses who are in desperate need of that cash in order to survive, perhaps have not been as successful in terms of trying to access it.”

 

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