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BRITAIN-ECONOMY-BREXIT-BANKING-BUSINESS-RBS
RBS warns no-deal Brexit could spark UK recession
LONDON, Oct 4, 2018 (BSS/AFP) – A no-deal Brexit risks sending the British
economy into recession in 2019, the head of the Royal Bank of Scotland warned
on Thursday.
The lender’s consensus economic forecast for “next year says about 1.0-1.5
growth in the economy if we get an okay Brexit scenario,” chief executive
Ross McEwan told the BBC.
“But if we get a very hard Brexit scenario … it actually will be less
than that.
“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 cautioned.
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,” the boss 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 was becoming more cautious
— while companies were also delaying investment decisions, according to
McEwan.
“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.
“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,” he warned.
McEwan added that small businesses had “no impact on them whatsoever” and
were continuing as normal because they are “very local businesses”.
He added: “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 decision making process they are going through.”
McEwan had already revealed last month that RBS was planning for the worst
amid increasing worries that Britain will exit the European Union in March
without a deal in place with Brussels.
The bank is meanwhile setting up a new European subsidiary in Amsterdam to
serve customers on the continent, and awaiting approval of its licences.
BSS/AFP/HR/1422