The incoming Bank of England (BoE) Governor Andrew Bailey said that small and medium-sized businesses (SMBs) might need loans from Threadneedle Street and the government to help with supply chain disruptions from the coronavirus outbreak, according to reports on Thursday (March 5).
Bailey, who is currently chief executive at the Financial Conduct Authority (FCA), told MPs on the Treasury committee that the coronavirus is “going to be the first most pressing issue that we face.”
He added that the virus is “evolving very quickly. … I think it is quite reasonable to expect that we are collectively going to have to provide some form of supply chain finance.”
BoE is not ready to implement an emergency rate cut as the U.S. Federal Reserve did, Bailey noted.
“What we need is frankly more evidence than we have at the moment as to how this is feeding through,” he said. “We are still looking at the evidence and the precise sort of balance of what the shock is likely to be.”
Bailey said the coronavirus would be his top priority when he replaces Mark Carney as BoE governor on March 16.
“I am not in any sense reducing the importance of monetary policy, (but) all the focus is on monetary policy,” Bailey told parliament’s Treasury Committee on Wednesday (March 4).
British Finance Minister Rishi Sunak is anticipated to announce a budget statement on March 11. The monetary policy committee (MPC) is scheduled to meet for the first time under Bailey on March 26.
Traders think it is likely that the BoE will cut rates at its next meeting. Over 10 percent of traders think the rate reduction could be as much as 50 basis points (0.5 percentage points).
The conversation surrounding late supplier payments is proliferating as new controversies emerge about the impact of reverse financing on supplier payment practices.
Last month, the U.K. continued its legal fight against late supplier payments with the introduction of a new bill by Labor peer Lord Jonathan Mendelsohn.
The proposed legislation would establish a 30-day limit to pay all invoices while also combating predatory B2B payment practices, empowering the U.K. small business commissioner to issue fines against offenders.