Operation Yellowhammer ‘has notable implications for dealer finance’

Time 8:30 am, September 23, 2019

THE UK Treasury’s Yellowhammer contingency plan for a no-deal Brexit has notable implications for the motor finance sector because the economic disruption could inevitably affect consumer confidence.

That’s the stark message from Bluestone Credit Management, which specialises in providing credit management support to the motor finance community.

Operation Yellowhammer – the Treasury’s paper on cross-government civil contingency planning – outlines a series of worst-case socio-economic outcomes. But there will still inevitably be some impact while the UK adapts to life after EU membership, regardless of the final exit path, said Bluestone MD Mark Baird.

‘In the immediate future, a no-deal exit from Europe has multiple consequences for motor retailing and financing. Tariffs could see car prices rise, while consumer confidence is likely to be dented with food and utility prices expected to rise, as is the risk of business failures. These impacts bring with them an inevitable risk of a spike in arrears.

Mark Baird

‘As well as the short-term issues such a spike would create, it could also have consequences for customer retention, with an arrears history risking damage to customers’ credit status. Helping customers to manage their finance effectively through the disruption period anticipated by the government will be crucial.’

In the short term, Bluestone expects some tightening in the availability of credit to address creditworthiness concerns.

However, looking further ahead, Baird added: ‘In the face of an unprecedented position, we are seeing lenders looking to increase their capabilities to manage early arrears and especially to address what we have termed “mid-term disrupted” customers.

‘Without a considered strategy to help these people, either internally or with outsourced expertise, short-term distress could have a long-term consequence from what has been a loyal, good-quality cohort of car finance customers.’

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