UK industry welcomes rescue package, but concerns remain

Katharine Hidalgo
19 March 2020

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PE players have welcomed Chancellor Rishi Sunak's ТЃ350bn package for the UK economy to mitigate the effects of the coronavirus pandemic, but concerns remain.

The package includes £330bn in loans and £20bn in other aid, in addition to a postponement of business rates, and grants for retailers and pubs.

Josh Featherby, investment director for private investments at Cambridge Associates, said: "The current rescue package is much-needed damage limitation. Without it, things would have been disastrous. However, we should remember that these are loans, not gifts, and so arguably it just delays cash flow problems to further down the line."

Uncertainty appears to be the main concern for most GPs, with it currently being unclear how banks are going to lend the money, which companies they will prioritise, and when the funding will be made available.

Andrew Ducker, a founding partner at Elaghmore said: "What's important about the government response is that it's clear and accessible. Banks will need to respond very quickly, much faster than normal. The ability to execute on this is vital."

In addition to the loans made available, shops, pubs, theatres, music venues and restaurants will not pay business rates for the next 12 months. Cash grants of £25,000 are also expected to be made to retail, leisure and hospitality firms, while small companies in all sectors can seek grants worth £10,000.

One concern some market participants had was whether funding will only be made available to certain sectors, such as retail, thus benefiting only a portion of portfolio companies.

Other market participants questioned whether enough money had been dedicated to the cause.

Ducker said: "A big missing link in the package is on the employee side. Other governments have clearly given assurances that companies won't have to lay people off."

Currently, the support offered for individuals by the package amounts to the announcement of a mortgage holiday of three months.

Featherby said: "I think these packages will have assuaged some concerns of employees, but if you're an employee on a zero-hours contract, or work in particularly vulnerable sectors, or you're paying rent, you could be forgiven for still having significant concerns."

Many market participants said they were willing to support their portfolio companies with fresh equity where required.

Ducker said: "We've got to be able to carry the businesses through because we don't want to lay off people who have got the skills the company's need."

Other market participants said that lay offs had to be an option in a period of market uncertainty.