THE chief executive of state-owned bank RBS, Ross McEwan, has warned that a no-deal Brexit could see the UK economy slide into recession.
The man who has been credited with turning around the ailing Edinburgh-based bank issued his stark warning in a high-profile interview with the BBC, stating that a “bad Brexit” could result in “zero or negative” economic growth.
In turn, he said that would hit RBS’s share price, so it is inconceivable that Chancellor Philip Hammond and the Treasury were not given prior warning of what McEwan was going to say.
He said the bank was becoming careful about lending to the retail and construction sectors which are most likely to suffer in the event of a no-deal Brexit next March.
Some 64% of RBS is owned by the taxpayer following the state bailout 10 years ago. The UK Government has sold off some shares at a loss, but Hammond has stopped the privatisation process.
McEwan said: “We are assuming 1-1.5% growth for next year but if we get a bad Brexit then that could be zero or negative and that would affect our profitability and our share price.”
Commenting on the lending restrictions to retailers, McEwan said: “There are some retailers we are having to be a bit more cautious about because they haven’t made the necessary transition from bricks and mortar to digital.”
Construction was also under scrutiny: “The big construction companies are getting very cautious about where they are putting their capital – particularly around London.”
McEwan pointed to firms delaying decisions on investment until the outcome of the Brexit talks is known – he said the bank’s lending to large businesses was down about 2% this year as they delayed investment decisions.
He added: “Big businesses are pausing, they are saying that in six months time I’ll have another look at the UK and I might come back, but if it’s really bad I’ll invest elsewhere – that’s the reality of where we are today.”
No sooner had McEwan stated his views than the owners of the UK’s largest car factory, Nissan, weighed in with their fears after the Society of Motor Manufacturers and Traders (SMMT) released figures showing that the total number of vehicles registered last month was down 20.5% on September 2017 at 338,834.
The SMMT said manufacturers had struggled with “a raft of upheavals” including adjusting to stricter emissions standards.
Nissan said frictionless trade as part of the EU single market had enabled its plant at Sunderland – ironically the first city to declare for Leave – to become “the biggest factory in the history of the UK car industry, exporting more than half of its production to the EU”.
Nissan added: “Today we are among those companies with major investments in the UK who are still waiting for clarity on what the future trading relationship between the UK and the EU will look like.
“As a sudden change from those rules to the rules of the WTO will have serious implications for British industry, we urge UK and EU negotiators to work collaboratively towards an orderly balanced Brexit that will continue to encourage mutually beneficial trade.”
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