Background
The Policy and Technical team continues to speak with treasurers to understand what issues they are facing and in what areas the ACT can help. We are also talking with the main banks to understand how they are responding to the COVID-19 crisis. At the same time, we have held a number of conversations with HM Treasury, the Bank of England, the CBI, the City of London Corporation and UK Finance. Through these forums we have been able to ensure that the views of the treasury community are heard by policymakers through a number of different channels.
A list of useful material from the ACT, the Regulators, the Government and Others can be accessed from the ACT Knowledge Hub - here.
Please continue to answer the 3 quick questions in our “temperature check” so that we can share with you the trends week on week. View last week's results here.
General overview
As businesses start to reopen, treasurers have been considering what it means to their organisations and their own teams. For organisations it will become more complicated as different parts re-open at different speeds. In addition managing a robust controls environment may become increasingly complicated if some people work from home and others return to the office.
LIBOR reform and Brexit are moving up the agenda and a number of treasurers are dusting off their no-deal Brexit plans.
Report from the Bank of England - How will the Covid-19 shock affect the cash flows of UK companies?
Internal analysis from The Bank states that:
Large declines in spending, as a result of the Covid-19 pandemic and the public health measures to contain its spread, have led to a material reduction in turnover for many UK companies. We have estimated how companies’ cash flows could evolve.
Our analysis uses accounting data covering 85,000 individual companies to estimate the aggregate ‘cash-flow deficit’ that could result from the Covid-19 shock. This is a mechanical estimate of how much financing UK companies could require to maintain employment, buildings and equipment.
We assume that companies keep paying workers and invest enough to stop property and buildings from depreciating. We also assume that companies continue to pay their interest, tax and trade bills.
We estimate that companies could face an aggregate cash-flow deficit of around £140 billion from Q2 2020 to Q1 2021 (Chart A). In the absence of the fiscal support schemes, we estimate that the aggregate cash-flow deficit of UK companies would be larger, at £190 billion.
The CCFF scheme
Taken from the Bank of England report, the following table provides some interesting insights (https://www.bankofengland.co.uk/markets/bank-of-england-market-operations-guide/results-and-usage-data).
The data shows that only 35% of applicants to the CCFF facility have currently drawn on this facility (up from 33% at 14 June) and whilst the notional sum of drawing capacity has increased from £71,395m (a 7% change), the actual amount currently outstanding has increased from £16,310m (a 14% change).
Details of current borrowers under the facility can be found at https://www.bankofengland.co.uk/-/media/boe/files/markets/covid-corporate-financing-facility/cp-held-by-ccff-by-business.xlsx.
More information on the programme can be found under https://www.bankofengland.co.uk/markets/covid-corporate-financing-facility. Additional detail is available via the related links in the top right-hand corner of this main CCFF web-page.
If you have questions you’d like raised with the Bank of England, please email technical@treasurers.org
We are starting to hear from firms that have been able to access the CCFF programme; we provide anonymised feedback to the Bank of England. If you’d like to share your experiences, please drop an email to technical@treasurers.org.
Other Schemes
The Bank has also made available details of the other schemes being made available (https://www.gov.uk/government/collections/hm-treasury-coronavirus-covid-19-business-loan-scheme-statistics#Coronavirus-Business-Interruption-Loan-Scheme ). The tables below show an extract from this and it shows that:
Update from the UK regulators
Views from across the world
As a member of the International Group of Treasury Associations, and the European Association of Corporate Treasurers and working with our colleagues in the US National Association of Corporate Treasurers we are keeping an eye on developments overseas.
Engaging with the treasury community
We welcome conversations with our members on:
Send an email to technical@treasurers.org and either James Winterton, Naresh Aggarwal or Sarah Boyce will be in touch with you.
If you have found any resources which you feel we should add to our COVID-19 site, please email us with details.
Naresh