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Investec comments on COVID-19 economy

Andrew Woodward, Head of Materials Handling at Investec Asset Finance comments on a COVID-19 economy.

andrew-woodward-investec-asset-finance.jpgI last wrote a column for SHD Logistics back in January. What a difference nine months makes!

I don’t think anyone could have predicted the current crisis, and no one expected the materials handling sector to be put to the test in the way it has since COVID-19 hit UK shores.

Unlike many other areas of the UK economy, downing tools and waiting for the storm to pass simply wasn’t an option – our customers keep the economy moving, and we were duty bound to support them.

It’s certainly been a tricky few months, but we were able to react to the crisis remarkably quickly. We were able to get all our staff fully functional and working from home before lockdown was implemented, and thanks to some sleepless nights from our IT team, this was done without interruption and we are very proud to have continued providing the high levels of service expected from Investec.

In terms of how we dealt with our customers: over the course of the 4 months which followed lockdown, we saw unprecedented requests for financial relief from our customers across the entire portfolio, with the Materials Handling team receiving more than 1,300 requests in this period - we knew that we had a duty to provide quick, positive responses with minimal delays.

If that sounds like a lot of administration, it is: suspending direct debits, liaising with introducers and clients to document the changes and recalculating the new payments - particularly when you consider that all of it was carried out from home, often at the kitchen table!

However, the business took a longer term view: when considering how to deal with financial relief requests, we (like many of our competitors) originally looked at 3 month periods. Instead we decided to extend our offering up to a 6 month payment deferral period, and in retrospect I’m glad we did – as a team we felt that three months may not be long enough for most, and with the benefit of hindsight that does indeed seem to have been the case, as many businesses were not ready to resume regular payments by end of June/early July. While many others funders in the market have had to undertake a second round of financial relief requests, we’ve been able to save our clients and our staff a lot of time and to focus on the increasing levels of new business.

On a positive note, we have been approached by some of our clients in certain sectors who were looking to come out of financial relief early and resume their contractual payments. Although it’s still early days, there are many businesses on our books that are telling us that recent activity levels have exceeded their expectations and they are hopeful that they will not be impacted as badly as they had initially feared. This is very much industry-specific with significant spikes in supermarket requirements, as well as essential sectors such as pharma, food and delivery flourishing. One dealership even reported a record month for sales in June, and for those in a tougher situation, the government support schemes do indeed seem to have helped.

Of course, at the time of writing (in mid September), the threat of a second wave is a significant possibility, and we are speaking to clients to ensure that they are ready for what might come.

Looking back, one thing is clear – the MH sector and readers of SHD logistics can be rightly proud of the role they have played in keeping the UK moving through one of the greatest challenges to hit the country in living memory. Here at Investec we pride ourselves on the service levels provided by our very experienced team. The extremely positive feedback received relating to the way we have dealt with customers and introducers through these unprecedented times has been very pleasing, and testament to the hard work put in by all within our business.  And whatever the next few months might hold, we will be there to support our clients.

UK GDP – Recovery still V-shaped for now

UK GDP rose by 6.6% for July, more or less matching expectations, writes Investec economist Victoria Clarke.

For now, the economy’s trajectory is very much V-shaped, driven of course by the easing of the COVID-related restrictions imposed over the spring. Nonetheless July’s numbers (released in September) leave the economy 11.7% lower than its pre-pandemic peak in February.

Anecdotal evidence – including surveys – seems to suggest that another sharp jump in GDP will be recorded in August, helped by the ‘Eat Out to Help Out’ scheme. Beyond that though, the low-hanging fruit of the unwinding of the various lockdown measures are set to run out.

Indeed, the direction of travel is now in the other direction, as modest new restrictions are introduced to address rising coronavirus cases. On top of that, Chancellor Rishi Sunak still plans to close the CJRS (furlough scheme) at the end of October. While we cannot be sure of the extent, unemployment is set to climb and a consequent weakening in demand will result from a fall in incomes. This outlook continues to leave us with the prospect of a restricted or ‘lop-sided’ V-shaped recovery overall.

One factor which could drive the economy ahead is the availability of a coronavirus vaccine, perhaps early in 2021. This could restrict the need for social distancing, effectively improving the economy’s supply capability, and higher confidence levels among various groups in the population could also provide a boost to demand.

But of course, there are headwinds. A key example is the latest row between the UK and the EU. This concerns the UK’s new Internal Market Bill, where its inconsistency with the terms of the EU Withdrawal Agreement has soured the atmosphere at the trade talks between the two parties. At the very least this serves as a reminder that the risks of ‘no deal’ are very real. The Chancellor has a choice at the Budget this autumn between beginning to address the UK’s adverse fiscal metrics and providing further stimulus to the economy. It is a difficult and unenviable one.

 


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