Originally published in BSA Society Matters magazine
I am experiencing a real problem writing anything for future publication at the moment. By the time this edition of Society Matters hits the streets, what I write during the eleventh week of lockdown will probably seem hopelessly out of date. Such is the pace at which the world - and the way we live our lives - has changed since the beginning of March.
And yet, I am reminded of the stories told by building society chief executives and recorded in the histories of the sector that this is not the first time we have stared into deeply uncertain futures. A former BSA chair told me of the time he said to his board in 2008 that ‘this was the toughest period the society had ever experienced’, only to be asked in reply, “wasn’t there the First World War, then the Great Depression, and then the Second World War?”. In this current period we should probably add the 1918 Spanish flu epidemic to that list of crises our predecessors have successfully navigated.
A conversation at one of our non-executive director dinners last year (when we could still meet for dinner), turned on that very point. Those of you who know me well will also know that I rail against the continual, and in my view negative, debate about the continued sustainability of the mutual sector. My view is very clear, and remains unchanged in this crisis. A, good board with a good management team, a clear strategy and a deep understanding of what it takes to run a mutual business, will be focused now on how to navigate the stormy waters of pandemic followed by deep recession. They won’t be running for the lifeboats.
The sector entered this crisis in a much stronger position than was the case in 2007/08. The mutual business model, with its long term inter-generational focus, gives us real advantages in weathering storms: lower risk on the way in, less pressure on short term results during the peak of the crisis, and the flexibility to adapt to the new economic environment as we start to come out the other side.
But what of that new economic environment? What will the new normal look like? It was really telling when, at the beginning of May, the Monetary Policy Committee published an “illustrative scenario for the economic outlook” rather than a conventional forecast. Even the Bank’s crystal ball was clouded. So when we hear about “V” shaped, “U” shaped, “L” shaped or even “Bathtub” shaped recoveries, the truth is that no one knows. What we do know is that the economy that emerges from this crisis will be different, probably very different, from the economy we have experienced since 2008, which in turn was very different from the pre-financial crisis economy.
We can start to understand the likely characteristics of that economy: structurally higher levels of state, corporate and personal debt; much higher levels of unemployment; perhaps changes in work patterns. It is more difficult right now to understand what the drivers of the economic recovery will be. Conventionally we tend to talk about investment-led or consumer-led recoveries. The burden of debt and the continuing concerns about personal safety on the one hand, and the lack of opportunities to spend as lockdown restrictions continue on the other, suggest a fairly weak consumer-led influence. The extent to which business investment picks up, having been pretty anaemic in much of the UK for years before this crisis, is equally moot given all the additional borrowing businesses have taken on during the crisis – and the fact that this is a global, not regional, crisis affecting businesses all over the world.
So what is our response? Or perhaps a better question, what are our responsibilities? What positive contribution can we make as a sector to fostering a positive economic recovery in the UK? What role have we got to play in shaping the new economy, rather than being just witnesses or bystanders?
First and foremost, we are agreed on the need to do everything we can to help our existing borrowers navigate the ups and downs of the coming period. The BSA, in common with fellow trade associations and indeed the whole industry, has been at one when it comes to committing to help more than 1.8 million homeowners and landlords who have taken mortgage payment holidays to get back on an even keel. We are absolutely clear about the need for those who can afford to pay their mortgages to do so. We also all appreciate that many households will need further support over the short to medium term where incomes have been hit. And we agree on the real importance of doing everything we can to help those who are really struggling to keep their homes.
We have spoken quite a lot in recent years about how we build new generations of loyal members. Now feels like one of those opportunities. By doing what we have always done - treating members as individuals and acting in their best interests - we have a generational opportunity to increase the already high levels of trust in building societies, and create a new generation of advocates among our members.
Secondly, we need to look after our own staff and their families, so many of whom have performed heroically as key workers throughout this crisis, from the branch and contact centre teams dealing with anxious members, to IT teams performing all sorts of operational gymnastics to get so many of our staff working successfully from home almost overnight. Not only do we need to continue to say thank you to them all, but we need to continue investing in them too.
And thirdly, we need to redouble our efforts within our local communities, many of which will be suffering from the economic fallout from the crisis on top of the tragedies that have affected so many families during the pandemic. So often, it is the younger generation starting out in the workplace, who are most severely hit by recession. Can we maintain and even increase our commitment to financial education in our schools and colleges? Can we think about recruiting locally through the recession, directly from those local schools and colleges, providing valuable work experience?
Tough times ahead, but tough times are when great businesses come to the fore. Our crystal ball may be as clouded as the Bank of England’s, but our values and purpose are absolutely clear and should stand us in good stead as we navigate through the rest of this storm. Stay safe.