Commercial Broker (NACFB Magazine) June 2020 by NACFB

Issue 80 JUNE 2020

Broker COMMERCIAL

The award-winning magazine for the National Association of Commercial Finance Brokers

18 KEEPING YOU COVERED

20 VALUATION UNCERTAINTY

The impacts of a volatile Professional Indemnity market

How valuers are adapting to social distancing measures

Moving Britain Forward Weâ&#x20AC;&#x2122;ll be with you every step

36 A BRAVE NEW ECONOMY Examining our economic rebuild in a post-COVID world

44 NINE STEPS TO CBILS SUCCESS How brokers can increase the likelihood of CBILS success

Contents

In this June issue NACFB News

Special Features

4 6 8 10-11 12-14

22-23

Note from Norman Chambers Updates from the Association Note from Lloyds Bank Industry news round-up Patron news

Case Study 16

Avamore: Finding our way through COVID-19

MT Finance: Unchanged fundamentals 24-26 NACFB: Moving Britain Forward 28-29 Keystone: Here we go again… 30-31 Ultimate Finance: Beyond CBILS 32 Wesleyan Bank: COVID client support 34-35 Precise Mortgages: Transformation through education

Industry Insight 36-38

40-41

Professor Trevor Williams: A brave new economy Russ Lewis: Controlling the controllable Bibby: The company you keep

Opinion & Commentary 44-46

Independent Banking Consultants: Nine ways to CBILS success 48-49 Haydock: Fuelling the future 50-51 HTB: Into the unknown 52 Commercial Broker Awards 2020: Shortlist revealed 54 Five minutes with: Ajsela Cela, Head of Underwriting – Structured Finance, United Trust Bank

Compliance Update 18-19

28 Further Information KIERAN JONES Editor & Feature Writer

33 Eastcheap | London | EC3M 1DT Kieran.Jones@nacfb.org.uk LAURA MILLS Graphic Designer

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NACFB: Keeping you covered

Ask the Expert 20

Eddisons Taylors: Chris Mitchell ACIB, MRICS, FAVLP – On valuation uncertainty

40 NACFB | 3

Welcome

Norman’s Note W

elcome to your June issue of the NACFB’s Commercial Broker magazine. You may have noticed that we did not run a May issue; this was to enable our SME publishing partners to become accustomed to new working practices. Much like Brexit, the coronavirus pandemic has become the elephant in the room in almost every topic of conversation. It has completely redrawn our social and economic way of life. I hope your business is adjusting to the ‘new normal’ as best it can, please be assured that your trade body is here with you every step. The NACFB has not charged membership fees to Members for the last two months and we will not be doing so until August. This is more than just a supportive gesture; this is our way of demonstrating to you that we understand the financial pressures you and your business are under.

Norman Chambers Managing Director | NACFB

We were thrilled to announce the shortlist for our first ever NACFB Commercial Broker Awards (p.52). The awards were established to recognise broking excellence and celebrate all of the hard work NACFB Members have undertaken. We received over 150 submissions from all sectors and it was an agonising task for our panel of industry experts to whittle the entries down to a shortlist, even with Patron votes to help them. The ceremony was meant to take place in April, but we are working on finding a way to ensure all those nominated, alongside the eventual winners, get to celebrate their achievements in style. Whilst we remain optimistic, there will be future challenges. Be they in the insurance market (see p.18) or within the valuation community (see p.20). We will face these challenges together, for we have strength in numbers. We are firmly standing up for our lending community and have worked tirelessly to champion all your endeavours, in return we ask that you stand by us – the UK’s largest independent trade body for commercial finance brokers. So, here’s to you – the entire NACFB family – and all your efforts towards #MovingBritainForward

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NACFB News

Association updates for June 2020

Together, we are Moving Britain Forward The NACFB will be with you every step

Coronavirus has shifted the lending landscape to new ground, and your trade body will be with you every step. We have outlined below ten ways our team is working to support your brokerage.

1. Moving Britain Forward The NACFB has launched our ‘Moving Britain Forward’ campaign which places our community at the very heart of industry efforts to support coronavirus-stricken SMEs. The campaign will encompass all the Association’s supportive initiatives over the coming months.

2. Waiving membership fees until August The NACFB has guaranteed free membership for all existing Members until August. We will not be running direct debits for membership fees from April through to July, nor will we seek to latterly accrue payment.

3. Knocking on the right doors The Association has written a series of letters to HM Treasury, the FCA, the BBB, lenders and select MPs lobbying on your behalf. Our requests have had some early positive impacts and helped steer changes to CBILS as well as the introduction of BBLS.

4. Promoting the intermediary-led route

6. Supplying the latest documents To support all Members triaging CBILS funding applications for clients, the NACFB compliance team have created a bespoke CBILS Terms of Business Agreement template document. The form enables you to standardise your terms in line with the criteria of the CBILS loan scheme.

7. Sourcing funding enquiries The NACFB findsmefinance platform continues to receive a record number of enquiries from UK SMEs seeking critical business funding. The Association has shared the first of what will be quarterly reports analysing site traffic, total advertising investment and the number of leads generated.

8. Sharing industry updates Receiving accurate and up-to-date information in a regular and timely manner has never been more important. We will continue to run our daily NACFB Morning Briefing as usual, further positioning it as the go-to platform for the very latest lender news releases, sector updates and government guidance.

9. Working to keep you covered

The NACFB launched a survey last month which returned with findings that a UK SME is 33% more likely to successfully receive critical CBILS funding via an intermediary than approaching a lender directly. We will continue to promote this figure directly to UK businesses.

With the Professional Indemnity Insurance market currently at its most volatile, the NACFB has been proactive in seeking solutions for brokers. Both the Association and our insurance broker are carrying out extensive work to identify any new insurance providers which could help improve the situation.

5. Maintaining industry standards

10. Providing sector analysis

The NACFB has shared revised guidelines and expectations for processing government-backed funding applications during the crisis. These guidelines were issued to protect the reputation of all Members and the Association itself.

The complete Commercial Broker magazine archive is now available to download and read offline for free. The archive hosts hundreds of articles and thought-leadership features from Patron lenders, Member brokers, and industry leaders.

6 | NACFB

With you every step nacfb.org

#MovingBritainForward

Note from our Sponsor

Slowing the rate of cashflow burn Brokers should react quickly to help businesses preserve cash and reduce costs

Martin Flint Director, Working Capital Lloyds Bank

flow and financial forecast will be an important element of any discussion for external support. • Look at ways of reducing cost and cash outflows – Consider all ways of preserving cash within the business and prioritise these actions based on their impact:

he outbreak of COVID-19 and its impact on our lives and the wider trading environment has placed extraordinary pressures on businesses in the UK.

• Review your debtor ledger and ensure you collect all invoices due now;

Whilst government support for business is available, businesses can implement several actions themselves to preserve cash and minimise potential funding requirements in this uncertain environment. A requirement of any funding request may include the need to demonstrate the actions the business has already implemented as well as other potential levers available if the outbreak continues in the longer term. We know from our clients, that businesses are experiencing delayed payments from their customers and, as a result, are delaying payments to their own suppliers. The tightening of liquidity then causes challenges throughout supply chains as cash conversion cycles lengthen. The ability to act quickly with some cash preserving and cost reduction measures, will allow further time to understand more fully the impact on businesses and plan accordingly. Buying additional planning time may delay the need for more extreme measures and will enable more time for communication with lenders, customers and suppliers; all of whom will be critical in this period. There are some key things that you and your clients can do: •

Understand your cash position – Prepare a simple receipts and payments cash flow forecast covering the next 13 or even 17 weeks. You will gain a greater insight into the drivers behind cash inflows and outflows of the business. A robust cash

8 | NACFB

• Review any contractual terms to ensure you do not pay any suppliers earlier than agreed; •

More drastic actions may include deferring other cash outflows, including reducing operations, VAT deferrals, other time to pay arrangements with HMRC, business rate holidays and any lease payments.

• Scenario planning – Ensure the business maintains an up-to-date view of its cash forecast as this will determine when to implement any of the prioritised list of mitigating actions. •

Understand your responsibilities as directors – It is important to have clear decision making in fast changing situations. Seek expert advice throughout this crisis to understand legal duties and responsibilities.

We encourage clients and brokers whose clients have cash flow challenges presented by COVID-19 to contact us quickly. The sooner we are engaged to consider fee-free payment holidays and new or increased invoice finance facilities the better. We can also look at any other cost mitigation activities that may help slow down the rate of cashflow burn. If your clients need urgent support, talk to your relationship manager as soon as possible.

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Industry News

1 1. Index slump prompts recession warning The coronavirus crisis may be driving the UK toward the worst recession in living memory, with concerns raised after a closely watched survey revealed the dominant services sector contracted at the fastest pace on record. The latest IHS Markit/Cips composite purchasing managers’ index for the UK fell to 13.8 in May, representing the lowest score in over two decades on an index where anything below 50 represents decline.

3. Government pays 23% of worker wages

5. FCA warns against pressuring companies for extra fees

Figures show that the government is paying the wages for nearly a quarter of UK jobs via the support scheme rolled out during the coronavirus crisis. The job retention scheme, which funds 80% of workers’ wages up to £2,500 a month, has seen 6.3 millon claims, a figure representing 23% of the employed workforce. HMRC says about 800,000 employers have reported furloughing workers since the programme started.

The Financial Conduct Authority has warned lenders not to abuse their relationships with clients to pressure firms seeking debt finance into paying unnecessary fees for share issues. The FCA said: “Tying clients to take additional services, or demanding fees for services not provided, is not in the best interests of those clients, distorts competition, undermines market confidence and calls into question firms’ and individuals’ integrity.”

4. Business rates revaluation postponed Communities Secretary Robert Jenrick has confirmed that a business rates revaluation has been postponed, as the government seeks to provide more clarity to businesses affected by coronavirus lockdown restrictions. Kate Nicholls, chief executive of UKHospitality, remarked: “Delaying is a pragmatic move at such a demanding time for businesses.”

10 | NACFB

The Competition and Markets Authority (CMA) has vowed to get tough with firms failing to give refunds to customers for cancelled events or accommodation because of the COVID-19 pandemic. The CMA said it will move to court action ‘where there is a strong reason to do so’. The competition watchdog said complaints about cancellations and refunds account for four out of five of those received by its coronavirus taskforce. 7. Pandemic may prompt higher taxes

2. We need less than a week to restart, SMEs say A survey by the British Chambers of Commerce (BCC) reveals that Britain’s smallest businesses would need less than a week’s notice to restart operations. Only 3% of businesses said they would need more than three weeks’ notice to get back up and running once lockdown restrictions are eased, the BCC’s coronavirus business impact tracker found.

6. CMA to act on stalled refunds

Experts believe the Chancellor will have little choice but to increase taxes in the autumn Budget. Rishi Sunak may have to U-turn on a manifesto pledge to not increase income tax, National Insurance and VAT in a bid to balance the books due to the spending rolled out to ease pressure brought about by the coronavirus pandemic. This comes with calculations suggesting government spending will break the £1 trillion mark for the first time.

8. UK car production plunges The Society of Motor Manufacturers and Traders has said that just 78,767 vehicles left factory gates in March, some 47,428 fewer than the same period in the previous year. This marks a decline of 37.6%. Combined, Britain’s car industry lost 140 days of production during the month, with analysis suggesting that if plants stay closed until the middle of June, it will cost UK carmakers £8.2 billion. 9. Two million taking mortgage holidays

Analysis by Capital Economics shows that around two million home-owners are on mortgage holidays. This equates to almost a fifth of mortgage holders in the UK and is 400,000 more than the last official figure of 1.6 million. The analysis looked at data from the five biggest banks and scaled up for the wider industry, including building societies.

10. Government preparing new business guidelines to ensure workplace safety Business Secretary Alok Sharma is preparing to produce ‘workplace by workplace’ guidance on how Britain can safely return to work and reopen the economy once the lockdown is eased. The guidance is expected to advise workplaces to curb access to communal areas such as canteens, to prevent employees from working face-to-face and to greatly increase the use of hand sanitiser.

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Patron News

NACFB Patrons step-up to support COVID-19 stricken SMEs Lenders providing government-backed support Dozens of NACFB Patrons have been successfully accredited by the British Business Bank as lenders within the Coronavirus Business Interruption Loan Scheme (CBILS). Currently, the following NACFB Patrons have signed-up to the scheme: 1PM, Aldermore Asset Finance, Arkle Finance, Assetz Capital, Atom Bank, Barclays, Bibby Financial Services, Business Enterprise Fund, Close Brothers, Clydesdale Bank, Cynergy Bank, Fleximize, Funding Circle, Haydock Finance, Investec, iwoca, Liberis, Lloyds Bank, MarketFinance, Metro Bank, NatWest, Newable, Paragon Bank, RBS, Santander, Shawbrook Bank, Secure Trust Bank, ThinCats, Ultimate Finance, White Oak UK, and Yorkshire Bank. The CBIL scheme is one of three initiatives launched by Chancellor Rishi Sunak to support businesses impacted by the COVID-19 pandemic. Whilst the scheme was met with initial criticism, enhancements have been made to ensure greater access. The Treasury has had to change its criteria to get money out more quickly to businesses which may otherwise fail to survive the lockdown. It has banned personal guarantees that put business owners’ property at risk and scrapped a controversial requirement for banks to offer loans at commercial interest rates – some as high as 12% – to any eligible businesses before offering a CBILS application. At the time of going to print, UK businesses have so far benefited from over £14 billion in loans and guarantees. This figure includes 12 | NACFB

268,000 Bounce Back Loans (BBLS) totalling £8.3 billion, 36,000 loans worth over £6 billion drawn down through the CBILS, and over £359 million through the Coronavirus Large Business Interruption Loan Scheme (CLBILS). Additionally, the latest figures showed nearly £18 billion had been loaned through the COVID Corporate Financing Facility (CCFF), the separate Bank of England scheme which buys short-term commercial paper. NACFB Chair, Paul Goodman, shared his gratitude to CBILS accredited Patrons: “The Association’s Patrons have a well-established record of partnering with the intermediary community and NACFB Members. “We look forward to maintaining this relationship through the course of the government loan scheme. The ability for them to offer additional funding through CBILS is a welcome addition to the toolkit of support that NACFB Members are providing to borrowers across the UK.” UK Finance chief, Stephen Jones, said: “The banking and finance industry is determined to play its part in helping businesses of all sizes get through these tough times. “It’s important to remember that any lending provided under government-backed schemes is a debt not a grant, and so firms should carefully consider their ability to repay before applying.”

Patron News

Patron News Aldermore: SMEs prepare for COVID fightback

NatWest shares ‘unprecedented’ regional PMI figures

Research from NACFB Patron Aldermore, reveals that the COVID-19 pandemic has led to a 34% loss in business income for millions of the UK’s SMEs.

NACFB Patron, NatWest, has shared a summary of the Purchasing Managers’ Index reports for April 2020. The report shows in April there were record decreases in business activity seen across all UK regions.

Despite this, many business owners are fighting back against the impact of the outbreak on their bottom lines by reacting quickly and adjusting their business plans.

The UK manufacturing Purchasing Manager’s Index fell to 32.6 in April, NatWest revealed. It was a steeper decline than the predicted ‘flash’ reading for the month, which had projected an April score of 32.9. A PMI reading below 50 represents a contracting market, with anything over 50 indicating a growing market economy. The manufacturing PMI recorded for March was 47.8.

Many SMEs are reporting significant losses due to COVID-19, with one in four (25%) seeing a decrease of more than 70% of their income. With business owners facing significant losses in income, many are now adapting their businesses in order to survive. Two out of five (39%) SMEs have adjusted their business plans to reflect the ‘new normal’, whilst 7% of UK SMEs have pivoted to an entirely new market to drive business. Tim Boag, group managing director, business finance at Aldermore, said: “Businesses are having to survive in an environment which has never been more challenging or uncertain. The situation is continuously changing, and many SME business owners are having to swiftly adapt by finding ways to diversify their products and services, as well as cutting costs, managing supply chain arrangements, and furloughing staff in order to survive.” 14 | NACFB

Sebastian Burnside, NatWest chief economist, commented: “The disruption to business activity that we’ve seen in April is unprecedented. Firms across the UK have suffered immensely from the coronavirus pandemic and resulting lockdown, with April’s results revealing the full scale of the economic fallout.” Sebastian added: “The PMI data helps us identify the areas that have suffered the most in terms of the loss of economic output and jobs during the crisis, and in the months to come they will provide valuable insight into which areas are bouncing back the fastest – and those that have more permanent scars.”

Case Study

Finding a way COVID-19 presents new challenges, but together we can overcome them

Amit Majithia Principal Avamore Capital

he COVID-19 crisis has plunged the development finance market into a great deal of uncertainty. Whilst it is difficult to predict when we will return to normality, we can be certain that restrictions will be in place during an extended phase-out period. The market will need to remain agile and flexible around operational changes the government is likely to dictate. There are already a few factors to consider during these unprecedented times: social distancing on construction sites, desktop valuations replacing physical visits and virtual viewings were but a few new practices that are being introduced. We expect that these factors will continue to some degree with the possibility of other industry specific restrictions also being implemented. From a lending perspective, this ‘new normal’ will feed into how projects are funded in the remainder of 2020. There are no doubt challenges that we must overcome. We recently closed a £500,000 refurbishment scheme in Fazeley; the deal was completed shortly after the Easter bank holiday despite the practical restrictions. The former Victorian Methodist church which sits on a canal-side location will be converted into five apartments comprised of a single one-bedroom and four two-bedroom units. Careful consideration had to be applied to the term and the implications as construction has been and may continue to be delayed in the months ahead. Both the borrower meeting and site visit were conducted via video call, something which we have not done before and in a similar way Avamore allowed the borrower to receive its independent legal advice, which is normally conducted face to face, via a video link under Mercury rules. A further difficulty 16 | NACFB

came from not being able to receive original signed documents ahead of completion, a usual requirement for the lender which was waived and replaced by solicitor certified copies that would allow for registration. The successful completion of the loan demonstrates a real agility in the current market combined with a commitment to continue lending and supporting the broker market in the months ahead. Whilst evolving operational procedures were key to getting this deal done, it will also be important to think carefully about potential scenarios over the life of further loans. Until there is a vaccine for COVID-19, the possibility of lockdown re-occurring will always remain. The practical challenges this could bring to the progression of a scheme’s build is something that lenders and borrowers will need to think about carefully for all development projects. It is expected that many other lenders and service providers will take a similar approach in the months to come and it will be a collective effort to keep the market moving.

“

Until there is a vaccine for COVID-19, the possibility of lockdown re-occurring will always remain

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Compliance

Taking cover Meeting the challenges of a PII market in flux Ann Walsh Business Development Manager NACFB

rofessional Indemnity Insurance (PII) is designed for professionals who provide advice or a service to their clients. It has long-since protected brokers against legal costs and damage claims by third parties arising out of an act, omission or breach of professional duty while financing a deal. Even before the COVID-19 outbreak, many finance intermediaries were experiencing a rise in PII premiums, with insurers reacting to events such as the Grenfell tragedy.

Market volatility Many of you will be aware that in addition to the challenges posed by the government’s current measures, the PII market remains somewhat erratic. This volatility began in 2018, and the situation has continued to deteriorate. This has been caused, in large part, by several insurers reducing or withdrawing capacity. This has been further exacerbated by concerns over the defined benefit transfer market which has resulted in many insurers turning their backs on advisers and pulling out of the market altogether, leaving advisers only a handful of insurers from which to choose. Currently, only a very small number of insurers are willing to offer PII to commercial finance brokers. Additionally, the market turbulence around coronavirus could make these underlying factors more acute, resulting in an impact for brokers at renewal as insurers themselves struggle to cope or the capital available to PI insurers as investors could see them seek to de-risk. Compounding yet further, it has been a full year since the Financial Ombudsman Service (FOS) compensation limit increased 18 | NACFB

to £350,000 – a move which some have blamed for the hardening of the PII market.

Ahead of PII renewals The NACFB has historically utilised our bulk-buying power to negotiate preferential rates with our insurance services partner. It is through this provider that many of our Members hold their PII policy. As PII remains a requirement of NACFB membership, we thought it best to take the opportunity to inform you of changes in the wider insurance market to better prepare you and your organisation for the renewal process.

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The market turbulence around coronavirus could make these underlying factors more acute, resulting in an impact for brokers at renewal as insurers themselves struggle to cope

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This volatility began in 2018, and the situation has continued to deteriorate. This has been caused, in large part, by several insurers reducing or withdrawing capacity

The NACFB’s current insurance broker, Towergate, has for many years been providing PII through Beazley on a binding scheme. Unfortunately, Beazley withdrew from the sector earlier this year. This is having knock-on consequences which some NACFB Members will now be experiencing. Towergate continue to arrange PII on behalf of our Members, but this is proving much more challenging than usual, in several respects:

proposal form late adds more pressure as the number of last-minute demands increases; •

New insurers may be asking more questions and requesting greater detail than you may have previously provided. Again, if you can respond to these questions early it helps insurers to provide quotes in good time;

• Premiums are increasing;

•

Where your premiums are likely to increase or where quotes will be issued very late, ensure your provider is doing everything possible to keep you informed. This is a challenging time for brokers, but unfortunately it is a market-wide problem.

• Insurers are asking for more information than in previous years; •

The very small number of insurers which are still in the market are being inundated with enquiries meaning that they are struggling to deal with requests and meet deadlines. Very often, terms are only being issued one to two days in advance of a renewal date. These difficulties have been compounded by the measures currently in force to deal with COVID-19.

Mitigating challenges Brokers can though do several things to help PII providers manage this situation and ensure the best chance of providing every Member with a PII quote in good time: • Return your proposal forms quickly. Whilst insurers are struggling to deal with the volume of enquiries, returning your

For some additional context, the FCA recently shared that they will not be relaxing rules that compel financial advisers to have mandatory PII, despite concerns that the coronavirus pandemic has limited the ability of companies to renew policies. The regulator has held their ground and reaffirmed their stance that cover is still available in the market for advisers and is therefore still a requirement. Meanwhile, the NACFB continues to keep all options under review. Both the Association and our insurance broker are carrying out extensive work to identify any new insurance providers which could help improve the situation and we will of course continue to keep you updated on the latest developments.

NACFB | 19

Ask the Expert

Valuation challenges: adapting to new practices

Q Chris Mitchell ACIB, MRICS, FAVLP Chartered Surveyor & Registered Valuer Eddisons Taylors

How has the valuation process changed since the outbreak?

Whilst there have been some changes to inspection protocols as a result of government and RICS advice and guidance, it is still very much ‘business as usual’ although it is fair to say that lenders and valuers have tended to adopt different approaches. The more pragmatic mainstream and challenger banks are now requesting a combination of desktops, drive-bys, external-only and virtual inspections, with property visits often but not always being required later on, once the current crisis is over and certainly pre-loan drawdown. We are also in a period of material uncertainty, where valuations may well be subject to wider than normal tolerance levels.

How are valuers adapting to the social restrictions?

Generally, this varies; however, safeguarding and distancing are key factors. Valuers will also usually wish to ensure that a property is vacant at inspection (this is often very difficult to achieve in respect of multi-let units/HMOs); in addition, some types of trading business premises, such as healthcare and childcare (at least internally), are currently pretty 20 | NACFB

much off-limits, whilst other sectors such as convenience stores and pharmacies are generally booming, with owners not permitting internal access for health reasons. The leisure/hospitality sector is, however, more amenable as such businesses are often closed at the present time.

that might affect value, and which are unlikely to be covered by a mode. For example, the accounting information for virtually all trading businesses will be relatively worthless for most of 2020 and a valuer’s opinion of the potential ‘Fair Maintainable Trade’ will be vital for lenders in considering such loan applications.

How is the valuation community working with lenders and brokers to overcome challenges?

What will the ‘new normal’ look like for valuers?

Regular and ongoing communication, together with swift action and keeping clients informed about access and reporting delays are key factors. Deals are still being done but many proposals are at least temporarily on hold. All involved parties wish to see the market return to a degree of normality as soon as possible; as professional advisers, however, we are adaptable and able to be proactive in terms of responding to our clients’ specific requirements.

What are the limitations of AVMs?

AVMs tend to predominate in the homogenous residential market but do not really work for commercial and business valuations as each property or enterprise tends to be unique, with the analysis of comparable evidence much more complicated. There could also be issues concerning the condition of a property and any special circumstances surrounding a sale or refinance proposal. In addition, with specific regard to trade-related properties, there are too many variables and factors

Whilst current workload levels and those in the short-term are likely to be relatively limited, prospects for later in the year appear much more positive, not least once lenders return to ‘new business’; there is also perceived to be a build-up of latent demand which is not as yet being satisfied. The market could well bounce-back relatively quickly. One of the main issues for valuers and lenders moving forward will be a lack of meaningful comparable evidence of transactions, which, until the post-COVID market starts to transact, will leave all parties considering whether pre-crisis sale prices and values are still realistic. All valuation reports will, however, continue to incorporate material uncertainty clauses for the foreseeable future. We may not, however, see a return to a ‘normal’ market for perhaps at least 12 months, subject to a potential second wave. Sadly, during that period and perhaps even in the short-term, the pool of available valuers is likely to be reduced, not least due to greatly increasing PII premium costs which will likely put some out of business, with some lending panels also likely to be reviewed.

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Special Feature

Advertising Feature

Rest assured, market fundamentals have not changed But what’s next for property investors? Gareth Lewis Commercial Director MT Finance

obody could have predicted the world as we know it right now. In just a few short weeks, coronavirus has thrown us all into unknown territory and every industry the world over is reconfiguring their business to adapt. The housing market especially has been significantly impacted by COVID-19. Figures from the Land Registry and the ONS showed property prices decreasing in February following January’s buoyant performance on the back of the Boris Bounce. By February, people were starting to look at the wider landscape and worry about the news coming out of China. The figures for March and April continued to show a distinct change in values as the volume of transactions dried up, which is a much more useful measure of market health than property prices anyhow.

A lender’s perspective House-price fluctuations are not something we can control – what we can control is how our business responds to these testing times. The door to our London office in Holborn may be shut for now but MT Finance remains firmly open for business. Thankfully, our commitment to technology in the early stages of our growth means we are well-equipped to enable our teams to work remotely. Cloud-based platforms facilitate remote access and our detailed business continuity plan has been invaluable. Subsequently, we have 22 | NACFB

not seen any disruption to any of our operations; it really is ‘business as usual’ in as far as we can make it. The one issue we have is shared by all lenders – a limited ability to conduct physical valuations. We are trying to be creative, working with existing valuations that have taken place within the past three months, alongside an audit from one of our panel valuers. We are lending at sensible loan-to-values to enable each transaction to work where possible and safeguarding against further potential market changes. That means a maximum 65% on residential and semi-commercial for first and second charges, and up to 55% against commercial properties on a first-charge basis only. Working hard for clients, brokers and introducers, remains our top priority. We know times are tough for everyone and we want to minimise disruption as much as possible.

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Some lenders have let borrowers and brokers down – either they have had their funding pulled, or their potential capacity to lend has been limited

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As a lender, you must be confident in your ability to underwrite, confident in the market and confident that the government will sustain it and bring it back to life

From a lender’s perspective though, activity has not fallen off a cliff. At MT Finance, we are still busy, and transactions are still being done and completions are happening. We are finding that property investors are far more bullish than homeowners because they tend to take calculated risks better and have a portfolio of property so are prepared to be speculative. They may take the view that once the world goes back to ‘normal’ and the government props up the economy, there will be a reasonable bounce back. It is different for homeowners as they represent a more nervous side of the market – for example, if lockdown goes on for longer, people will worry about maintaining their jobs. As far as the wider lending market is concerned, if coronavirus does not make lenders more sensible, then nothing will. Some lenders have let borrowers and brokers down – either they have had their funding pulled, or their potential capacity to lend has been limited as borrowers have applied for mortgage holidays, or a combination of both. They are unsure about the market in the coming year or so and are not willing to take a risk. As a lender, you must be confident in your ability to underwrite, confident in the market and confident that

the government will sustain it and bring it back to life. In the past, we have seen some lenders chase the market and chase volumes – either going low on rate or high on loan-to-value. They have focussed on making money in the short-term but in the long-term that approach may cost people their jobs and that is not fair. As a lender you have a responsibility to your funding lines, your staff and your borrowers.

The ‘new normal’ When we get back to ‘normal’, some lenders will return with loan-to-values of 70 or 80% and above. That is just the nature of things. Banks still have money to lend and will want market share. Some lessons will be learned, others forgotten. Some lenders will no longer be around, others will come back. If COVID-19 teaches lenders anything, it is that we lenders must operate with transparency and honesty. This should stand us all in good stead for when the tide turns. While there is so much uncertainty around, the market fundamentals have not changed, which is reassuring. NACFB | 23

Special Feature

Moving Britain Forward There can be no simple trade-off between our economy and our health Norman Chambers Managing Director NACFB

eriods of great upheaval are always times of radical change. Some will have you believe the pandemic is a once-in-a-generation chance to remake society and build a better future. Others fear it may make things worse; either way, we are now presented with the rarest of opportunities: the chance to steer our industry in a new direction. You will read in this issue insight from an array of sector experts. Each reflecting on the coronavirus and its impact on finance, from its bearing on lending conditions and its influences over market certainty, to tales of working resilience and process adaptation. Realistically though, before we can cast our gaze too confidently onto what any form of future funding may look like, it is vital we assess the conditions, viability and direction of the road that will take us there. We make no apology for not using these pages to analyse the success, or otherwise, of government-backed loan schemes. In truth, we share plenty of daily insight through our NACFB Morning Briefing that are, to the minute, up to date and can more accurately relay day-to-day developments and analysis. Whilst the CBILS and BBLS initiatives will help in part to ventilate an economy in hibernation, we

have elected to instead examine the practical measures that must be in place before the freeze of lockdown can begin to thaw. In short, it is too early to focus on an as yet unfixed destination, we are at the start of a long and uncharted journey – one which must carefully balance the needs of the economy with safeguarding human lives.

Taking stock “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” How often we turn to well-trodden Churchillian rhetoric in times of crisis, and now is no different. June has seen the country lurch into its fourth month of social distancing. Whilst some restrictions have eased, and the country’s flagship NHS Nightingale hospitals have long since discharged their last patients, the reality of what lies ahead is beginning to dawn on us. Talk of curve flattening has subsided, in its place a collective presiding over a prolonged exit strategy that seeks to minimise any chance of a second wave. At this point, most of us are itching to return to work, keen to pick-up where we left off and move forward but doing so too quickly is likely to undo months of patient societal and economic protectionism. At the time of writing, the best estimate for the proportion of the UK population infected, and potentially those with immunity, stands at just 4%. Or to put it another way, more than 63 million people are still vulnerable to infection. If we were to entirely lift the lockdown, then another explosive outbreak would be inevitable. The fundamentals of the virus itself have not changed either. One person infected will, without any form of lockdown, spread it – on average – to three others. Cutting those infections by 60-70% is what it takes to keep cases down, which currently means cutting our

human contact by roughly the same amount.

R we there yet? For the foreseeable future, life as we know it is at the mercy of something called R0, pronounced ‘R-naught’, or the R number. It stands for ‘effective reproduction number’ and, put simply, is a way of measuring how a disease spreads through a population. It tells us how many people will be infected for every one person who gets ill. If the R number is two, then one infected person carries a statistical likelihood of making two others sick. If it is three, then it is likely three people will be infected, and so on. This is how coronavirus spreads. With a vaccine or cure likely still many months away, the R number steers every decision the government makes. Before the lockdown was brought in to reduce the spread of COVID-19, its R number was between two and three, which is why the disease spread so quickly. The aim now is to bring the R number down to less than one, and to keep it there. Although even when R is less than one, we cannot

“

At the time of writing, the best estimate for the proportion of the UK population infected, and potentially those with immunity, stands at just 4%

NACFB | 25

“

Unfortunately, it will only be in hindsight that the contours of the new world we are entering become clear

Perhaps most strikingly, at its peak, the government was paying 23% of all UK worker wages. The Treasury’s official forecaster, the Office for Budget Responsibility, predicts UK GDP to fall by a staggering 35% in Q2. That would make it the worst slump in over 300 years – since the Great Frost of 1709, when UK temperatures plummeted to -10C. Privately, Sunak will be pinning all hopes on a ‘V-shaped’ slump; one that rises sharply out of the mire once trading resumes – although the latest Bank of England growth forecasts suggests a far more subdued output ascent.

Scorched earth simply revert to how things used to be. Each lifted restriction directly impacts the R number, some more than others, and it remains unclear by how much. This butterfly effect means the slightest of tweaks to measures now, could steer us onto an entirely new path altogether.

Just as behind each number in the daily death toll there is a grieving family, behind each crippled enterprise there is a dashed hope and livelihood. Any economic exit strategy will be bound tightly to our old friend, the R number. The government is under no illusions; economic survival is firmly tethered to our own.

Muddying the waters

Disasters and emergencies do not just throw light and clarity on the world as it is. They also rip open the very fabric of normality. Through the hole that opens, we glimpse tantalising possibilities of other futures. When we think of unfolding disasters, we tend to focus on all that could go wrong. The more optimistic of us frame crises, not just in terms of what we lose, but also of what might be gained. Every disaster is different, of course, and it is never just one or the other: loss and gain always coexist.

There still lingers the very real possibility that the UK will face a still higher death toll or indeed a second lockdown. The simple fact is that, for the easing of restrictions to work, two things needed to have been sufficiently established during the lockdown: collective trust and individual discipline. Neither was. The lockdown was always seen by large portions of the population – even among those who grudgingly complied – as an imposition. As a result, we never got critical mass buy-in of people thinking the government imposed the right measures at the right time. Some thought it went too far; with others believing it did not go far enough. The former will see any relaxation as license to party. The latter, as being pushed into mortal danger. Such is the binary nature and ‘footballification’ of modern political discourse – an unhelpful Brexit hangover.

Road to recovery Rishi Sunak had been faced with an unenviable task. Trying to balance an economy-wide cash crunch with what the government’s purse can withstand, against a background of the most shocking economic charts seen by any Chancellor for well over a century. 26 | NACFB

Our now altered path to a new destination, hopefully one of renewed prosperity, is fraught with tremendous uncertainty. Unfortunately, it will only be in hindsight that the contours of the new world we are entering become clear. Informed and dynamic commercial finance brokers – championed by a strong and independent trade body that is with them every step – will have a vital role to play in ensuring we keep Moving Britain Forward.

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Special Feature

Here we go again… Why this crisis is quite unlike the last David Whittaker Chief Executive Officer Keystone Property Finance

was a broker in 2008, and I am now a lender in 2020 – unlikely I know, but true. Our industry has found itself having to weather two ‘one in a generation’ crises. But the coronavirus pandemic is quite different from the crash of 2008, and I am keen to reflect on the ways in which it differs, the approaches that are being undertaken, and the lessons we can learn from both the last crash and from our new-found ways of working. Hopefully, by the time this goes to print, we will have greater clarity on what will happen in the summer of 2020 and beyond.

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Technology has been promised as a golden dawn for the last three years – perhaps everyone working remotely has finally forced some elements to come together

How does the lending activity during this crisis compare with 2008?

What lessons can the lending community learn from new processes?

In the autumn of 2008, there were two major factors that impacted the banking sector. We had reached an asset bubble that collided with a sustained period of relaxed credit; both within financial institutions themselves but also the way that money was then lent too generously to some borrowers. This was particularly felt in the USA, with both the banks and capital markets massively affected. The phrase of when the USA sneezes the rest of the world catches a cold, was coined with no consideration as to whether the UK was any different.

Technology has been promised as a golden dawn for the last three years – perhaps everyone working remotely has finally forced some elements to come together. We have certainly accelerated new processes which will not be rolled back in a future world. Independent legal advice for directors using Skype is an easy win, working from scanned documents is keeping completions happening on schedule and using Webex, Teams, and Zoom happens regularly each day. This video technology could continue to be an effective resource for BDM and broker communications for the foreseeable future.

Some will recall lenders pulling mortgage offers, withdrawing products day after day and mortgage applications moving in bulk to the next lender – until that lender then collapsed under the pressure. In 2008, the Buy-to-Let market went from 39 lenders with some 2,000 products to a low point of just five lenders with 98 products. In contrast this time there were 48 BTL lenders with 1,846 products on 16th March – at the end of April, there were 42 lenders with 768 products with three lenders stating that they will re-enter the market at some point in the future. 28 | NACFB

How can we future proof the valuation process for further lockdowns? AVMs have re-surfaced but are viewed cautiously by risk professionals as memories of 2008 have not yet fully faded. If deployed alongside limited physical valuations (new build and genuinely empty properties) then we already have building blocks in place. Remote valuations with enhanced technology, including

Land Registry and Geosat locked photo imagery from within a property by the occupier. These are currently being tested and may form the final part of a solution with prolonged distancing and property access issues.

How has the crisis impacted BTL portfolios? Whilst landlords can seek Mortgage Payment Holidays (MPH) if their tenants are struggling to pay rent, we have seen little signs of payment pressure in their businesses where rent cover to interest can be as high as 250%, when it comes to those with HMOs. Brokers and landlord bodies have been quick to caution landlords from seeking MPH – simply because they can with some lenders – as there will likely be a lookback on future financing exercises to see what landlords did in Q2. Buy-to-Let currently accounts for 15% of new lending within the residential UK mortgage market, so the key driver will be the willingness and capacity of homeowners to pick themselves up and move forward in latter months of 2020. Some adjustment this year is inevitable, but the key will be how quickly it is recouped in early 2021, by a combination of low interest rates and government incentives such as a temporary lowering of SDLT.

How has the crisis changed the lender/broker dynamic? There has, though, been a beacon of light in the darkness – all parties are working together to keep pipeline transactions moving and because we know there is a future, albeit different, world not far away we all recognise that the mortgage market must be a part of the recovery solution and not part of the problem. I really hope we can enhance and continue this collaborative spirit in the second half of 2020.

What can we learn from international versions of COVID-19 lending schemes? We have a newly appointed Chancellor with some world beating ideas that others are now mimicking. We should not be above

importing initiatives deployed by governments in Australia, Japan and America (dare I even mention that the EU also has an asset purchase programme – but we left that club) to keep our capital markets open to ensure the smooth flow of money that will be needed in the years ahead.

What more can be done to incentivise entrepreneurialism in a post-COVID world? Remote working is here to stay, but technology needs to advance faster so businesses should be tax incentivised to invest further and lenders must finally grasp the task of integration with other distribution platforms wholeheartedly. Where necessary, we should incentivise brokers to use these routes above others. And whilst we enjoy clearer skies and less pollution let us also produce mortgages that reward properties with better green credentials; both in new build and even on older properties – incentivising better EPC ratings by way of margin pricing.

“

Buy-to-Let currently accounts for 15% of new lending within the residential UK mortgage market, so the key driver will be the willingness and capacity of homeowners to pick themselves up and move forward in latter months of 2020

NACFB | 29

Special Feature

Looking beyond CBILS The coronavirus crisis is an opportunity to strengthen ties

Josh Levy Chief Executive Officer Ultimate Finance

e are facing a historic inflection point in the relationship between SMEs and the use of debt, with many businesses having to use outside funding for the first time. Indeed, BDRC’s SME Finance Monitor found that only 45% of all SMEs used external finance in 2019, most of which consisted of bank overdrafts and credit cards. The wave of government support measures has quite rightly been the focus of attention since lockdown restrictions were introduced and the economy was consigned to hibernation. The Coronavirus Business Interruption Loan Scheme (CBILS) has been what most lenders and brokers have been getting to grips with – how to access, whether to apply for accreditation, and how to help clients. We launched our CBILS term loan in early May. Figures for Q2 will show an economic downturn as sharp and sudden as any previous contraction, and saying that conditions are tough for businesses would be the understatement of the decade. It is important to recognise that these conditions extend to both lenders and brokers. Whether it is trying to adapt to new ways of working, handling payment holiday requests, or working with struggling clients, we are all feeling pain in some way. Despite this, the recovery phase of this crisis has the potential to transform the lending landscape. Businesses that have never used debt before have been forcibly converted and will require less convincing about the merits of finance to support their needs and ambitions. Through the current period and beyond, lenders and brokers need to work together in genuine partnership to provide the service, funding and advice that will allow SMEs to move beyond COVID-19. We share a common goal to help UK businesses succeed and we must utilise this opportunity to strengthen ties. Whilst it takes a long time to build a reputation it only takes a moment to ruin it. The industry should be proud of the way it has rallied around to support each other, and we must take this approach moving forward. How we behave through tough times defines us, and at Ultimate Finance we have continued to provide new funding when many have stopped, and we have tried to provide maximum transparency to our brokers about criteria changes. Our own research has told us what brokers value most in lenders – speed, communication and consistency. Working together to achieve the best result for all parties, especially the borrower, will require this to be a two-way feature of true partnerships.

support to help many companies survive, we must encourage businesses to look beyond this, however hard that may be at times. The working capital challenge that comes with a slow return to more normal trading patterns will be significant. This is where asset-based lending fits in and we have a collective responsibility to educate the business community about the benefits of such funding. The industry has been static for several years. According to UK Finance’s statistics, total ABL advances in the final quarter of 2019 were flat on the final quarter of 2016 and the overall number of ABL clients has fallen slightly in this time to just 39,000. This is despite further moves away from the SME market by traditional lenders over the same period. There are legacy misconceptions that we must change about finance in general, and ABL specifically. There are lenders like us who can overcome traditional barriers to businesses seeking finance, such as previous rejections by their bank, and the expected time and hassle of lending processes. We pride ourselves on high-quality personal service supported by technology, as we seek to be held as trusted partners to brokers and borrowers. Whilst there is a lack of awareness or understanding about the benefits of a product such as Invoice Finance, it will arguably be the most effective means of overcoming the barriers to recovery, notably the working capital gap as sales grow and debtor books build again, turning what is often the largest asset on the balance sheet into cash, financial resilience and liquidity. Invoice Finance can be the fuel to rebuild SMEs, but we must prioritise education of the benefits. This forms the basis of our CBILS revival through to recovery proposition of term loans alongside an Invoice Finance facility. There is no better solution than ABL for combining quick access to flexible funding that grows in line with turnover with personal relationship support. This is where lenders and brokers must work together more than ever with a unified voice. Impartial and professional advice from brokers and introducers is of immense value to businesses seeking funding, particularly those new to the process. As a service-led, solution-driven asset-based lender we stand ready to play.

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The industry should be proud of the way it has rallied around to support each other, and we must take this approach moving forward

Whilst CBILS-backed term loans will provide the short-term cashflow NACFB | 31

Special Feature

Support through unprecedented times Providing sound advice amidst the coronavirus storm Simon Welling Director of Sales and Marketing Wesleyan Bank

s the world succumbs to the COVID-19 pandemic, the business landscape has changed quicker than we have ever seen before. No company is untouched as business plans and forecasts become almost meaningless and companies deal with the government’s lockdown and the restrictions this places on trading. JP Morgan has shared that the average SMEs cash buffer is just 27 days, so the impact of a prolonged lockdown makes the protection of working capital paramount. At times like this, businesses value the guidance brokers can offer, in helping them manage their financial position, as well as meeting their fiduciary and duty of care responsibilities. It is important that both you and your customers have a clear view of where their business stands. Whatever pressures they feel, decisions must be taken with relevant information to address their short, medium and long-term needs. This requires a true understanding of the business’s financial position by: • Ensuring cashflow forecasts are up-to-date and reviewed daily; • Reviewing all fixed costs, identifying non-essential overheads and other discretionary expenses; • Chasing all overdue invoices; • Reviewing which aspects of business interruption are covered in insurance policies. The government has indicated that 32 | NACFB

disruption caused by COVID-19 could include policies for both pandemic and government ordered closures. They also need to know of any operational issues that may affect the business generating cashflow. This means: •

Knowing the impacts of absences and working from home practices. Could adapting, or temporarily revising, their business allow them to continue to deliver their products or services?

• Being aware of any supplier-related business continuity challenges, they have, or can foresee, so that interruptions can be planned for; • Informing customers of their situation and any production or service delivery problems. Be sure they have communicated the steps being taken to minimise COVID-19’s impact; • Reviewing all supplier and customer contracts to ensure obligations are understood should unexpected situations arise, so any breach can be mitigated. Having this comprehensive financial and operational view may have already encouraged them to take advantage of the government schemes available. To ensure deals can still be turned around quickly, speak to your funders to ascertain whether they remain open for new business. It is likely that many lenders will have introduced changes to their criteria or revised terms on specific products. You should also find out what incremental support they can offer your existing customers, including payment holidays and other forms of forbearance, in addition to providing increased administrative and credit capacity for streamlined processes. Funders have been quick to respond to the changing needs of brokers and customers alike. They share the common desire to get through these unusual times and for business to bounce back as quickly as possible.

Special Feature

Advertising Feature

Transformation through education We are here to help you keep going Liza Campion Head of Key Accounts Precise Mortgages

hilst there is no doubt that we are living through some tough times, the team here at Precise Mortgages is more committed than ever to help you keep going. It’s important to point out that, unlike the crash of 2008, this is not a credit crunch; it’s a service crunch due to a number of factors, including limitations on physical property valuations, an increase in the number of people out of work, reduced income and demand for payment holidays. Social distancing meant that customers were unable to move home, with people and businesses unable to carry out their normal day-to-day functions due to the measures that have been brought in by the government. Due to the restrictions and guidance that have been imposed to help fight the spread of COVID-19, many of your customers will have been embracing technology, whether it’s to help them work from home or to stay in touch with family, friends and colleagues. Technology opens up a raft of new ways for you to engage and interact with your customers. You can share documentation with them, videos, sales-aids, graphs, images… the list is endless. If you are ready to embrace technology and take another look at how you and your business operate, the possibilities are endless. 34 | NACFB

In short, what I’m saying is that you could be wisely using this time to transform your business and ensure your doors are well and truly open to customers, both new and existing. This is a great opportunity for you to take the time to ensure that you’re business-ready and your customer engagement strategy is firmly in place. For example, if a landlord contacted you tomorrow asking you what is the best way to purchase additional Buy-to-Let properties that they’ve been holding back on, would you be confident in your response? Ask yourself a few questions. Am I up-to-date with the new legislation that’s already been introduced in 2020, such as the minimum energy performance certificate rating which came into force for all rental properties on 1st April, or those yet to be introduced, for example the Tenant Fees Act being extended to all applicable tenancies from 1st June? Have I spoken with the existing landlords in my database and checked they’re aware of the changes? Have I done everything I can to demonstrate my expertise about these changes to ensure they

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If you are ready to embrace technology and take another look at how you and your business operate, the possibilities are endless

come to me with any future borrowing needs? If a landlord wants to convert their current terraced property and let it out as an HMO, am I confident in the advice I can provide? Can I talk them through Permitted Development Rights and how being in an area covered by Article 4 can affect them? If youâ&#x20AC;&#x2122;re not confident that you could answer these questions, nowâ&#x20AC;&#x2122;s the time to dig deep and work on broadening your understanding of the options that are available to landlords.

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NACFB | 35

Industry Insight

The economy after the pandemic What will the lasting effects be?

â&#x20AC;&#x2039;Trevor Williams Professor University of Derby

ne in a hundred year events are supposed to be rare, but we have had two within the last ten years. The first was the global financial crisis in 2008/09. The second is now the global pandemic. It means they are happening with more frequency, and as a result, we should be expecting another one within the next decade or so. The reason for the rising frequency of this type of event is increasing globalisation. The lockdown, which is occurring around the world, incorporates countries which account for more than 90% of global GDP. Some 170 countries will experience some form of contraction this year. The result is that the impact on global growth will be more significant than in previous downturns; of course, we must be clear this is a deliberate act of policy. The lockdown is meant to save lives. In saving lives, it saves the economy. There is no trade-off between saving lives and saving the economy. In that sense, the economic downturn that the world is experiencing cannot be compared to 36 | NACFB

previous economic downturns. This is not the result of an excessive economic expansion creating inflation bubbles in the economy, which had to be counteracted by a classic tightening of fiscal and monetary policy. Whilst the damage in terms of loss of income, increases in unemployment, falls in output, and company liquidations is still the same, government actions have been swift. Increased public

â&#x20AC;&#x153;

The one sector showing a definite increase compared to its baseline is, of course, the health and social services sector

spending and sharp cuts in interest rates and a general loosening of monetary policy have occurred.

The global impact To give a sense of the hit to the global economy from the virus: China has announced a 6.8% drop in its Q1 GDP growth in 2020, its first decline in quarterly GDP since 1976. However, China has not announced a meaningful loosening of fiscal or monetary policy. Partly as a result of this lack of policy action from the second-largest economy in the world after the US, global GDP growth is expected to decline by 3% this year according to International Monetary Fund (IMF) forecasts. IMF forecasts – and that of the consensus – show global GDP at around 4% in 2021 after the 3% drop this year, making up for the plunge this year in percentage terms. But not, of course, in terms of the level of GDP, or where the economy would have been if the crisis had not occurred. It is likely that this loss of output will never be recovered. And all of this, of course, assumes that the exit strategy works. That is to say that there is not a second wave of infections that causes a second lockdown and so further damage to the economy.

What is an exit strategy? Firstly, it consists of a gradual return to work of critical workers in crucial sectors, keeping social distance in place as much as possible in the workplace. Secondly, the ability to do the latter could influence which firms open, in which sectors and in what order. Thirdly, the need to ensure that the pandemic does not return by a close

examination of the epidemiological data. That the infection rate of each person is less than one. That, in turn, will depend on the fourth criteria, testing, follow up, tracing and rapid isolation of those infected so that the virus does not spread anew. In the end, only a vaccine and ‛herd immunity’ can likely prevent further outbreaks but in the interim these measures ease the lockdown.

The UK The path of the UK’s recovery pretty much mirrors that which the IMF has projected for other economies. The Office for Budget Responsibility (OBR) have released their latest update for UK economic and fiscal projections for the next few years. It makes grim reading on the impact of the pandemic on the UK economy. It depicts a total decline of 35% in GDP in Q2. In the construction sector, which is 6.1% of the economy, output is down 70% relative to its benchmark and contributes 4.3 percentage points to the decline in total GDP. For manufacturing – 10.2% of the economy – output is down 55% relative to its baseline, taking 5.6 percentage points off growth in Q2. It is worth noting that real estate output is down 20% compared to its baseline, taking 2.8 percentage points off GDP when its 14% share of the economy is accounted for. The fortunes of this sector are, of course, closely linked to the construction sector, which implies that the hit to the housing sector in the UK has been immense (7.1 percent off GDP). It is going to be an area of huge debate after this crisis is over: which is what happens to those at the lower end of the housing ladder? Many of those that are now known as ‛essential NACFB | 37

workers’ fall into that category. The one sector showing a definite increase compared to its baseline is, of course, the health and social services sector which has borne the brunt of ensuring that the virus does not take an even more enormous toll on human life, with output up by 50%.

The long-term impact By far the most enduring effect of the pandemic is expected to show up in the UK’s fiscal arithmetic. All of the progress made in reducing the budget deficit during the past decade of austerity will be wiped out in the year ahead. The budget deficit effectively climbs from around 2% of GDP – or £40 billion or so – to a staggering 14% of GDP or approximately £240 billion of extra borrowing. This takes the outstanding level of debt to around 100% of GDP. Even after growth resumes in 2021, it only drops back to about 93% of GDP. It almost begs the question of what the austerity – and the damage it caused – was for? Of course, the answer could be that without reducing the deficit to current levels then the increase in the fiscal deficit would have been even bigger. Nevertheless, the pandemic will be felt in greater pressure on the public finances in the years ahead, and this means tough decisions will have to be made about prioritising what the most critical aspects of public expenditure are. Tax increases seem inevitable, but on what and to what effect on incentives and productivity? How long can interest rates stay at 0.1%, given the big increase in money supply from funding the fiscal deficit via the banking system and increased QE, and what happens when they rise? 38 | NACFB

Thus, the coronavirus has sharpened the focus on several issues, such as how to fund the NHS and how to treat the societal costs of caring for the elderly. Other questions – on how to solve the social housing crisis and provide a better standard of living for ‘essential workers’ loom large, as does negotiating trade deals for the UK’s future outside of the EU. All this may be occurring at a time of increasing protectionism and a new cold war. Let us hope it is not a repeat of the ‘roaring 20s’ of a century ago, with economic nationalism, ‘beggar thy neighbour’ trade policies and misguided domestic policy actions.

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All of the progress made in reducing the budget deficit during the past decade of austerity will be wiped out in the year ahead

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Industry Insight

Control the controllable Knowing what sits inside your sphere of influence Russell D. Lewis MC Specialist Director NACFB

uring times of high stress or pressure, it’s often easy to focus our attentions or energy in the wrong direction. Most of us have done it or will do it at some point. We fixate. We fixate on the wrong things. We fixate on things that are completely out of our control or ability to influence. It’s easily done. When faced with conflicting and confusing information we start battling factors that are not going to change; no matter how much energy we put into them. Sometimes we must accept the things that are out of our control and move on; but that is often easier said than done. During my military career I often found myself under significant pressure. Mostly the pressure to make decisions and to start moving the situation forward, but often it was just pressure. Good old-fashioned pressure. The kind that clouds your judgement, induces panic and frankly makes you wish it were someone else’s turn to be making the decisions or to be in charge. The British Army trains you very well. It teaches you to stop, take stock of the situation, gather information and start formulating a plan. Critically, it teaches you to evaluate the information you are receiving objectively. Suspend your pre-conceived ideas, suspend personal emotion and judgement. Look at things as they actually are; not as you wish they were. Many members of the NACFB will be under pressure at the moment. If not now they probably will be over the next few months. There is a lot of uncertainty and that does not look like it will change for a while. This makes decision making that much harder but also that much more important. 40 | NACFB

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There is a lot of uncertainty and that does not look like it will change for a while. This makes decision making that much harder but also that much more important

I find the diagram overleaf incredibly useful. It is old and it is simple but like a lot of old and simple things it works. Factors are broken down in to three areas: things I can control, things I can influence and things I cannot control or influence (you will often see this model called C.I.A – Control, Influence, Accept). At the most simplistic level I can control myself. I can control my reactions and behaviours. There may be other factors I can control – my team for example – but at its heart all you can really control is yourself. How you chose to react to events and situations is ultimately up to you, no one else. Surrounding control is influence. If it is outside of my sphere of control I might be able to influence it. I might be able to turn things in the way that I want them, so that ultimately I get what I want, or as close as possible. This will involve understanding the situation and the competing dynamics. It will probably involve understanding other people’s perspectives and to some extent trying to convince them to change their minds; or compromising. So often, good leadership is all about influence – convincing people to do things that they may not want to do.

Things I cannot control or influence

Things I can influence

Things I can control

If I cannot control it, or influence it, all I can really do is accept it. Accept the situation for what it really is and start focussing on what I can control and can influence. That, unfortunately, is often the hardest thing to do. It’s all too easy to obsess on the wrong things. There are many things going on at the moment that are completely out of our control or ability to influence. Take a moment to step back and calmly look at your situation. Ask yourself the following questions: • Where am I focussing the bulk of my energy at the moment? Is that the right area to be focussed on? • Are there factors that I should just be accepting? • What can I really control? What should I be controlling?

The government’s message is that this is going to be a marathon, not a sprint. That being the case control the controllable, identify what you can influence, try to accept the rest. That way we will all get to the finish line.

“

So often, good leadership is all about influence – convincing people to do things that they may not want to do

• What or who should I be influencing? Why and to what end? NACFB | 41

Industry Insight

The company you keep Supporting SMEs through the pandemic, together Dave Golding UK Sales Director Bibby Financial Services

OVID-19 is continuing to have a significant impact on the business and commercial lending communities alike, and there is no disputing the fact these are challenging times.

Since the outbreak of the pandemic in the UK, SMEs have been faced with growing challenges. Our latest research highlighted how severely the pandemic is affecting how businesses operate and manage costs. Worryingly, almost a third of SMEs are saying they will be unable to cover their running costs by the end of July, and almost two-fifths have ceased operations for the time being. Additionally, a quarter of the SMEs have experienced bad debt, and more than three-quarters have seen sales decline since the outbreak began. Cashflow challenges have been exacerbated by late payments, with over a third of SMEs seeing customers taking longer to pay than usual. While measures introduced by the government are positively impacting some businesses, there are still many SMEs that have not accessed the support they need, and a significant proportion are still unclear as to whether their business is eligible for support. It is vital during these uncertain times that SMEs can access the right type of financial support for their business, quickly. By working in partnership with brokers and introducers we can help SMEs access the funding they require to get through the pandemic and thrive in the future. At BFS we responded to the crisis swiftly, ensuring that we remain open for business and ready to work with brokers and introducers to provide vital support for SMEs. As a funder of almost 40-years, we have supported businesses through various economic climates. Our global funding capability exceeds ÂŁ1.2 billion and we are on 42 | NACFB

hand and ready to help; endeavouring to make funding decisions for new applications within 24-hours. We have the capacity to support businesses who have experienced cashflow pressures due to impacts to supply chains, those requiring additional working capital or asset finance, importers and exporters, and businesses needing support with managing currency volatility. Specialist support for SMEs in the construction sector, including financing against contracts, framework agreements and applications for payment, is also available to ease the impact on subcontractors. We are committed to protecting our people and with 100% of our workforce now working remotely, we are equipped to continue our support for both businesses and the broker community. Our dedicated teams help businesses in a range of scenarios, even in the most complex situations, to unlock the working capital they need to operate and grow. This includes cashflow funding, new equipment purchase, growth and expansion, management buy ins and buy outs, refinancing, corporate restructuring and mergers and acquisitions. By working in partnership with an intermediary network of finance brokers, accountants, IPs and financial advisors, together we can support SMEs now and in the future.

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Worryingly, almost a third of SMEs are saying they will be unable to cover their running costs by the end of July, and almost two-fifths have ceased operations for the time being

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Broker Voice

Nine ways to increase your CBILS success Guidance for Members completing government loan scheme applications

Russell Snowdon Managing Director Independent Banking Consultants Ltd

here has been much comment recently about businesses struggling to access the Coronavirus Business Interruption Loan Scheme (CBILS) – mostly pointing the finger at lenders. I think this is a little unfair. From what I have seen already in helping businesses with their applications, there are things that borrowers can do differently, and things they need to be aware of, in order to help the lenders do their jobs and thus speed-up the application process. I am not saying lenders are perfect by any means; I’m just trying to inject a little more balance into the discussion and help with a few pointers. So here goes:

1. Firstly, it is crucial that borrowers understand what the scheme

is for, its rules, and what they need to do to make a successful application. I am regularly speaking with lenders who are tearing their hair out because borrowers do not properly understand the scheme and are getting their applications hopelessly wrong. Many hold the mistaken belief that lenders are merely doling out government money, so all they must do is ask. This is just not the case. They are loans, not grants, and lenders are mandated to follow the scheme rules: so, if an application does not ‘tick all the right boxes’ then the applicant will not be able to get a loan.

2. Moreover, a CBILS facility is for working capital only. The easiest way to think of it is as a working capital facility but with up to six years to repay it.

3. Time is short for many businesses and those applying under CBILS maybe need to be a bit more realistic about their options. The key issue for many is simply getting the money. If, instead of a CBIL, your lender offers you a loan on normal commercial terms, it is because the rules say they must. No one is entitled to a CBIL; you either qualify or you do not.

4. CBILS is not a ‘one size fits all’ scheme either. It has set rules and

guidelines but within that there are matters for each lender to decide – such as whether the business is ‘viable’. So first off, an applicant must convince the lender that they are. If they cannot do that, their lender cannot approve it. They must convince the lender that their business was viable before the crisis and that it has the ability to be viable after it.

5. As well as the question of viability, there are other important areas

• Show clearly how your difficulties are due to the pandemic; •

Demonstrate that the loan will be used for business critical payments (this is not the same as ‘business as usual’ – and inevitably there are grey areas as to what constitutes business critical and what does not). To coin a COVID analogy; it is to cover the costs of keeping a business’s ventilator running whilst part of – or even the entire business – is mothballed;

• Demonstrate that you can repay the loan and explain clearly and concisely your reasoning and assumptions; • Explain how you will get up and running when restrictions are lifted, and how you will recover and generate profits after that.

6. Another point to stress is that applications need to be as succinct

and easy to follow as possible. I know that is not easy but remember that demand for this scheme is unprecedented and lenders simply do not have the time to wade through pages of expansive text: nor do they have the resources to correct applications themselves. It is worth spending a few days to think about an application and get it right because it will go through much quicker. For example: I submitted an application recently for a client, which took three days to prepare. I submitted it on a Wednesday, there were a couple of questions on Thursday, and the client received a call on Friday to confirm that the loan had been approved. Rushed and incomplete applications are likely to just get bogged down in the system and take much longer; or worse still, may be declined.

“ If, instead of a CBIL, your lender offers you a loan on normal commercial terms, it is because the rules say they must. No one is entitled to a CBIL; you either qualify or you do not

that I would urge borrowers to really focus on in their applications: • Show that you have already used all other forms of reliefs applicable and available to you (furloughing employees, VAT deferment, rates relief etc);

NACFB | 45

Broker Voice

7. To digress slightly there is some history between lenders and

the government that is worth mentioning. This is anecdotal but I have heard it many times when speaking with lenders over the years. There are similarities between CBILS and the Enterprise Finance Guarantee (EFG) scheme that was launched in response to the 2008 ‘Credit Crunch’. The EFG scheme incorporated a government guarantee similar to the CBILS guarantee. However, lenders complain that back then, when they called for payment under the guarantees, it was very difficult to get the government to pay up. I understand that unless lenders could show they had followed the EFG rules to the letter, the guarantee would be voided. If that is in any way true, then you must expect that lenders will apply the CBILS rules carefully this time round. Now, that is not to say that lenders were blameless before; without doubt some of them used the EFG scheme inappropriately. However, it is perhaps another reason for borrowers to make sure their CBILS applications are right before submitting them.

8. At this point it might be helpful if I said a few words about security. • Where there is enough security available, it is likely that the lender will take it in support of a CBILS facility; • However, someone’s home cannot be taken as security; • For loans below £250,000 lenders will not take personal guarantees; • Above £250,000, personal guarantees are at the lender’s discretion; • The amount recoverable under a guarantee is capped at 20% of the outstanding balance of the CBILS facility, after the proceeds of business assets have been taken in reduction; 46 | NACFB

•

From that last point I interpret this to mean that, where a lender takes personal security from someone in support of their guarantee, the amount secured by it is still capped at 20% as stated above.

9. Currently, an added difficulty is that, at the time of writing, some

banks are not accepting applications from new customers because they are trying first to deal with their existing customers. So, for customers of banks, I cannot stress enough how important it is for them to get their applications right because there is limited ability to shop around right now. As I said earlier, apart from anything else, the better the application is, the quicker it should go through. This will also free up more time for lenders to deal with other cases, so it is in everyone’s interest to get them right.

“

Rushed and incomplete applications are likely to just get bogged down in the system and take much longer; or worse still, may be declined

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Opinion

Priming the pump Standing shoulder to shoulder with the broker community Andy Taylor Sales Director Haydock Finance Ltd

t is mid-September 2019, and it is my first day with Haydock Finance Ltd, how could I have envisaged what was about to unfold?

Picture the scene in March 2020; Haydock Finance Ltd has over 3000 agreements where our customers are experiencing real difficulties in paying us back, our office is closed, all of our staff are relocated to work from home, we are having daily virtual COBRA board meetings, our most successful quarter in our 40 year history had abruptly ended and we have got sales people who have been reinvented as underwriters and collection agents, yes honestly. In addition the tragedy of thousands of fatalities worldwide and at home, over a million people are infected, countries closed, leisure facilities are now no go areas, and there is lockdown in more than one fifth of the world â&#x20AC;&#x201C; but at least our NHS and emergency services are finally getting the credit they so richly deserve. 48 | NACFB

That is where we have found ourselves. No, it is not a horror film, it is a reality that was completely unpredictable and has demonstrated several elements that confirm our adaptability, versatility and sheer will to survive. To use an analogy we will all understand, SMEs are the transport companies of our economy and the brokers and funders are the filling stations that power them. Never has this fuel and supply been more important.

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SMEs are the transport companies of our economy and the brokers and funders are the filling stations that power them

“

There is another section of equally viable customers who need a far wider solution that only brokers and specialist funders can provide

Looking back to Q1 2020, each of our customers having trouble still had perfectly viable business propositions, they could not though have predicted the tsunami that was about to engulf the world. It was our duty, as with the other banks and independent funders to do our best to help them survive. Was that easy? Was that straightforward? Could it be done quickly? In the case of Haydock Finance, no, not really, in fact not at all, but we got there. It was difficult due to the sheer numbers in play. This, coupled with other ongoing complexities, had to be balanced with another key objective: keeping ourselves in business. We needed to be confident that we would be able to call upon our wholesale funders after the crisis and continue to support our brokers and SMEs for the next 40 years. HM Treasury did what they thought would help us out in this difficult time. They announced CBILS. What that meant for us at Haydock was that our customers could enjoy interest free loans for 12 months on a hire purchase or lease agreement on a new purchase if they were affected by COVID-19. The British Business Bank’s (BBB) eligibility criteria stated this as criteria number one. Just think about that phrase for a moment? At the time of writing Haydock has been granted CBILS for refinance, which is much more appropriate for the crisis as it should free up

cash if the SME has unencumbered assets. We had to delay this much needed help for SMEs until we had addressed our existing customers. We simply cannot help new customers until we have helped existing ones, that is just common sense and courtesy. As we hopefully head towards the end of the crisis and return to some level of normality, whatever that now is, it is clear that broker-led asset finance has a major part to play in the gradual resurgence of the British economy. Throughout the crisis brokers continually helped customers, as did the funders. What we must learn, I believe, is that we can only achieve by helping each other and sticking together and understanding the differences between us all. Some SMEs are highly profitable, credit worthy customers who have a home with a tier one funder, these are often met with the best rate and normally the quickest and easiest decision. There are more challenging businesses who need to take more time over a funding decision – which is reflected in the rate. Finally, there is another section of equally viable customers who need a far wider solution that only brokers and specialist funders can provide. None of these are more relevant than the other, each example is as equally important to the UK economy. As brokers and funders, we must strive to continue to support them now and long beyond this crisis and through potentially many others. NACFB | 49

Opinion

Into the unknown Communication is key to navigating an uncertain landscape and unlocking opportunity

Charles McDowell Managing Director Specialist Mortgages Hampshire Trust Bank

very day brings a new headline which seems to heap uncertainty on top of already shaky foundations. But there is one thing we can be sure of, uncertainty begets uncertainty. But we need to look through the gloom, roll our sleeves up and find solutions. Although the going may not be as good as it has been, the property market is still turning, there are still opportunities and it is still a market for specialists. All industries have their fair share of jargon, buzzwords and spin. However, during a challenging period when the tides are changing all the time, keeping messages simple should be a priority. No one has a crystal ball, so communicating clearly about what everyone is doing and why they are doing it, gives us all the chance to navigate through this uncertainty. Property valuation is one of these areas where clarity of decision making is key. It is often said that this is as much an art as it is a science, but a key element of any valuation is suitable comparable transactions and the truth is that there won’t be comparable transactions for a number of months in some cases. Which is why, as a prudent lender, until we have more clarity around the actual performance of property prices post COVID-19, we have reduced our 50 | NACFB

maximum LTV. But no one knows what is going to happen, by the time these words appear in print we may have changed our position again but one thing I can promise is that when we change our view, we will communicate that change quickly and clearly to everyone. Of course, once the market is back to a regular position, we will lend up to 75%. The post lockdown economy is anyone’s guess. We have never been here before. What is clear is that the UK economy will take a hit this year (latest estimates vary from a 6% drop to a 13% drop in annual

“

The post lockdown economy is anyone’s guess. We have never been here before. What is clear is that the UK economy will take a hit this year

GDP) and there will be a bounce back. What is unclear is how quick the bounce will be and how do we pay for it. I am reasonably positive, but I could easily see property prices coming off by 5% to 10% just because of the reduction in transactions. Although we should never welcome a drop in property prices, this may present a good opportunity for those investors looking to build their portfolio. Despite the impacts of the coronavirus, the UK housing market is still a resilient investment, and probably always will be. As a prudent lender, backed by the strength of a bank, we have been able to continue lending during these uncertain times. Sure, our volumes are not what they were a few months

ago but they havenâ&#x20AC;&#x2122;t fallen off a cliff and we are still completing deals and issuing offers every single day to the drum beat of the property market â&#x20AC;&#x201C; from purchases for foreign investors or offshore companies to refinances of large multi-unit blocks and HMOs. The key is having a team of expert underwriters who can sensibly assess both valuations and affordability. At HTB we are dedicated to supporting our brokers and their clients, both new and existing, through this pandemic. Our specialist mortgages team has the skills, experience and tools to help our brokers navigate the current challenges and deal with any client enquiries.

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NACFB | 51

Awards 2020

NACFB Commercial Broker Awards 2020 – shortlist revealed RECOGNISING BROKING EXCELLENCE

he shortlist for the inaugural NACFB Commercial Broker Awards 2020, has now been unveiled. The NACFB received over 150 entries to our first ever broker awards. This longlist was then whittled down to the shortlist by a panel of judges, incorporating votes from our complete Patron panel.

• • • • •

We took the decision of postponing April’s awards, due to be held at the Edgbaston Cricket Ground in Birmingham, at the start of the outbreak. We are working to schedule a new date when restrictions have eased. Here we shall celebrate all the extraordinary efforts our community is presently undertaking to ensure SMEs receive critical business funding – with brokers playing a vital role in #MovingBritainForward

Deal of the Year

Asset Finance Broker of the Year

Buy-to-Let Broker of the Year

• • • • •

• • • • • •

Associated Commercial Finance Ltd Charles & Dean Halo Corporate Finance Portman Asset Finance Ltd Radar Finance & Leasing Ltd

Bridging Broker of the Year • • • • • •

Arc & Co. Finance 4 Business Knox Capital Solutions Ltd Ramsay & White Vantage Finance VIBE Financial Services

Broker Innovation Award • • • • •

Beta Commercial Finance Ltd Rangewell Ltd South West Business Finance Synergi Partner Finance Ltd The Property Finance Guy

52 | NACFB

First Union Mortgages Ltd Jonathan Smith & Partners Sanctuary Financial Planning TBMC (The Business Mortgage Company) Vantage Finance VIBE Financial Services

Cashflow Broker of the Year • Agama & Associates Ltd • Choice Business Loans • Christie Finance • Hilton-Baird Financial Solutions • Reach Commercial Finance • South West Business Finance

Commercial Mortgage Broker of the Year • Arc & Co. • Bespoke Business Finance LLP

• • • • • • •

Crystal Specialist Finance Finance 4 Business Largemortgageloans.com Ltd Mantra Consultancy & Capital Ltd Vantage Finance

Bespoke Business Finance LLP Bridgedevelopment Property Finance Ltd Empire Finance Ltd Finance 4 Business Ignition Credit Plc PIA Financial Group Reservoir Finance

Development Broker of the Year • • • • • •

Adapt Finance Arc & Co. Finance 4 Business Mantra Consultancy & Capital Ltd Positive Commercial Finance Sirius Property Finance

Factor & Invoice Discounting Broker of the Year • • • • •

Beacon Finance Ltd Claratus Commercial Finance Ltd Go-Factor Ltd Hilton-Baird Financial Solutions Reach Commercial Finance

Leasing Broker of the Year • • • •

Bluestone Leasing Ltd Halo Corporate Finance Landlord Smart Ltd Portman Asset Finance Ltd

Motor Finance Broker of the Year • Charles & Dean • Oracle Asset Finance Ltd • Radar Finance & Leasing Ltd

SME Champion Award • • • •

Claratus Commercial Finance Ltd Christie Finance FTA Finance Ltd Reach Commercial Finance

Sole Trader of the Year • • • •

Bridgedevelopment Property Finance Ltd Icthus Consultants Next Step Asset Finance Ltd Xander Wealth Ltd

Young Broker of the Year • • • • •

George Dunn, Approved Business Finance Jake Baker, Peritus Corporate Finance Jordan McBriar, Adapt Finance Nick Neophytou, Mantra Consultancy & Capital Ltd Tom Savill, Arc & Co.

Despite an independent judging panel compiling the shortlist, the NACFB Board took the decision not to submit any entries to help maintain the integrity of the new awards.

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Five Minutes With

ive F Minutes with: Ajsela Cela Ajsela Cela Head of Underwriting – Structured Finance United Trust Bank Describe your role in ten words or less? I ensure deals complete. It is fast paced, vibrant and gratifying.

What advice do you have for the modern commercial finance broker? Ask questions of your clients, explore the answers and avoid making assumptions. When everyone is acting with integrity, honesty and openness we can deal with potential problems and barriers before they arise. Be professional and remain focussed on delivering the best outcome for your client.

What are the key elements to maintaining a strong lender /broker dynamic? Regular contact with a balanced degree of professionalism and friendship. In a comfortable and relaxed environment everyone communicates better and there are no hindrances. However, given the nature of the business we are in, it is paramount that any communication is compliant hence the balance between professionalism and friendship. 54 | NACFB

If you were to start your own small business, what would it sell?

units and the co-working space mirrors the quirkiness of the surrounding area.

Something that has been somehow eroded by the virtual world and is closer to humanity.

What was the last great book you read?

What recent professional accomplishment are you most proud of? I recently won the 2019 UTB Values Award for Tenacity. Every year UTB recognises members of staff who exemplify the Bank’s core values of teamwork, service, integrity and tenacity. I took this as a great honour and befitting my tenacious personality!

What is your favourite SME success story? A residential/co-working scheme in London completed by one of our clients in 2019. I worked closely with our client on this transaction and it was amazing to see the transformation over a short period of time. The interior design of both the residential

‘One Hundred Years of Solitude’ by Gabriel Garcia Marquez. It was a second time read as I first read this book together with Marquez’s other classic ‘Love in the Time of Cholera’ when I was only 16 and not very appreciative of the classic literature. Fast forward over two years and I now (embarrassingly) understand why Marquez won the Nobel Prize for Literature. It’s because of his outstanding ability to bring out the mythical, the reality, the humanity, the poverty and many other metaphors and plots flowing beautifully within one book.

What’s happening now, that in 20 years people will look back on and laugh about? The endless types of reality shows and the fascination with the celebrity status.

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