Chief executive of the Royal Bank of Scotland (LON: RBS) has warned that a no-deal Brexit could result in a recession.
Ross McEwan told the BBC that a “bad Brexit” could lead to negative growth, which would affect RBS share price.
“We are assuming 1-1.5 percent growth for next year but if we get a bad Brexit then that could be zero or negative and that would affect our profitability and our share price,” he said.
UK taxpayers own 64 percent of RBS since the financial crisis in 2008. Following a collapse in its share price, the government part-nationalised the bank in 2008.
McEwan said the bank was becoming more cautious about lending to certain sectors including construction and retail.
“There are some retailers we are having to be a bit more cautious about because they haven’t made the necessary transition from bricks and mortar to digital,” he said.
The retail sector has faced troubling conditions this year, leading to the collapse of Toys R Us, Maplin and Poundworld. In addition, House of Fraser, Debenhams and Carpetright are closing stores.
“The big construction companies are getting very cautious about where they are putting their capital – particularly around London,” he added.
The RBS boss said that lending to large businesses has fallen by about two percent this year as they delayed investment decisions.
“Big businesses are pausing, they are saying that in six months time I’ll have another look at the UK and I might come back, but if it’s really bad I’ll invest elsewhere – that’s the reality of where we are today,” he said.
Smaller and medium-sized businesses are continuing to borrow and invest, he added.
