Fri, Oct 05, 2018 - Page 10 News List

RBS says no-deal Brexit risks sending UK into recession

CAUTIOUS:The lender said large companies are delaying investment due to uncertainty over Brexit, but it sees little impact on small businesses


A no-deal Brexit risks sending the British economy into recession next year, Royal Bank of Scotland (RBS) PLC chief executive Ross McEwan said yesterday.

The lender’s consensus economic forecast for “next year says about 1.0 to 1.5 [percent] growth in the economy if we get an okay Brexit scenario, but if we get a very hard Brexit scenario ... it actually will be less than that,” McEwan told the BBC. “And the economy may well go down to zero or negative growth next year if that Brexit relationship is very, very harsh.”

This would hurt the bank’s profitability and share price, he said.

The technical definition of a recession is two successive quarters of negative economic growth.

“If we don’t get the [economic] growth, that reflects into ... the growth of our business, which may be zero or negative,” he added.

The Edinburgh-based bank remains 62.4 percent owned by the government after it received a vast bailout during the global financial crisis.

In the face of Brexit uncertainty, RBS lending is becoming more cautious — while companies are also delaying investment decisions, McEwan said.

“We are seeing the very large corporates just pausing in their investment into the UK because they are sitting saying: Do we wait for another six months to see what the outcome is? And that is what they are doing,” he said. “And they can say: In six months’ time, we can come back and invest, or if things are really bad we will stay away from investing here. That is the reality of what is happening today.”

McEwan added that small businesses had “no impact on them whatsoever” and were continuing as normal because they are “very local businesses.”

“It’s the larger businesses that are just paused, because — do I invest here, do I invest in Europe or do I invest somewhere else. That’s the decisionmaking process they are going through,” he said.

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