Martin Gilbert: Coronavirus ‘multiple times worse’ than Black Monday for City
Veteran asset manager Martin Gilbert has warned the economic fallout from the coronavirus pandemic will be “the most dramatic we’ve seen since the 1930s” as he warned of “a long, slow recovery” for certain sectors of the economy.
Speaking to The City View podcast today, Gilbert said that though Black Monday in 1987 was a bigger market shock, the economic consequences of the coronavirus crisis will “surpass that in multiples”.
He singled out cruise lines, airlines and parts of the hospitality industry as areas that “are going to struggle for probably the rest of this year and perhaps into next year.”
Gilbert, who stands down from the board of Standard Life Aberdeen next month – 40 years after founding Aberdeen Asset Management – also warned of tough times ahead for the City.
“Insurance companies could still have significant losses [and] we’re already seeing the effects of the downturn at banks,” he said, adding: “I think banks not paying their dividends was probably the sensible thing to do.”
Martin Gilbert warns against bumper pay packets after coronavirus
He also warned City firms to adopt sensible remuneration policies in the months ahead. Gilbert warned “when unemployment is going to rise it would not be clever to be seen to be overpaying, or to be perceived to be overpaying people”.
“It’s going to be a really tough year ahead [and] no matter how soon we get back to normality confidence is going to be dented,” he added.
Gilbert, who will take on a new role as chairman of fintech giant Revolut, praised the work of City regulators. And he singled out new Bank of England governor Andrew Bailey as “exactly the right guy” to deal with the coronavirus crisis.
He also suggested that regulators have learned the lessons of 2008: “I think they [the FCA and PRA] have done a pretty good job and they’ve done it quickly and more coordinated than they were during the financial crisis.”
Gilbert said the government had “done as well as they could” and said that the chancellor Rishi Sunak had “stopped businesses laying off their staff,”, adding “I think he’s done a pretty good job.”
Gilbert: Banks had to do more on coronavirus loans
But referring to the Coronavirus Business Interruption Loan Scheme he warned that “there are obviously gaps…there are things to iron out”.
Gilbert identified the banks’ traditional SME lending criteria as part of the problem. “The banks have an approach to lending [to SMEs],” he said. “They probably tried to use that approach with this vast number of applications they’ve been inundated with.”
He welcomed the decision of seven major lenders to scrap the requirement to present a business plan or forward revenue projections as part of the loan application, hailing the move as “sensible – otherwise we just won’t get the money out fast enough”.
In the wide-ranging interview, Gilbert:
- Said leaving Standard Life Aberdeen will “be quite emotional” though stressed that it’s the right decision and he has no regrets
- Declared that his interest in asset management from now on would be to focus on “wealth preservation rather than wealth creation” – saying “the world’s wealthy now don’t need to make any more money, they just need to keep what they’ve got.”
- Called for “a change of attitude in fund management to take account of the feeling that people just want to keep what they’ve got – especially when they see volatility.”
- Suggested the economic crisis could lead to a fresh wave of consolidation in the asset management industry
- Spoke of the coming challenge at fintech giant Revolut as it faces the next two years “with reduced income” as a result of the pandemic
- Said he hopes to “have good fun” in another new role as chairman of Toscafund