NatWest has announced new measures to help squeezed businesses and customers in debt after noticed people are cutting back on food and fuel amid decades-high inflation.
The banking giant, which was majority owned by the UK Government until last March, said it was extending the repayment period for customers who have missed several payments on an unsecured debt, such as a loan or overdraft.
From February, the period that people have to repay their debt will increase from 18 to 24 months.
Dame Alison Rose, chief executive at NatWest said the extension would give customers in financial difficulty “breathing space”.
Haydn Williams, who manages the group’s financial health and support teams, said the bank had noticed behavioural changes among customers looking to cut back.
He said: “Customers are making choices on, for example, whether they buy a big ticket item or not.
“While we are seeing spending increase on debit cards for food and groceries, it is not at the level of inflation, which suggests that they are not buying as much in the average shopping basket as before.”
The lowest earning households continue to be the most affected by the rise in living costs, with more than a million spending at least a tenth of their income on fuel, or at least 30 per cent of their income on their groceries, NatWest said.
However, the level of savings among this group remains 25 per cent higher than they were before Covid, which Mr Williams said reflects people building up savings and paying down debts during the lockdowns.
Furthermore, the lowest earners have been reducing spending in areas like shopping and entertainment, according to NatWest’s own data.
“It is really difficult to forecast what is going to happen in the future, but the economic forecasts show a tougher couple of years ahead”, Mr Williams said.
To prepare for an influx of customers calling the lender over financial concerns, Mr Williams said it had grown its support team by 15 per cent to 20 per cent, and was investing heavily in training staff to deal with anxious and vulnerable customers.
It also provided about 600,000 financial health checks for customers in the last year, and approached about 19 million people via calls, emails, or digital “nudges”, to offer support.
Dame Alison stressed that NatWest has not yet seen any significant increases in defaults or the number of people in arrears, despite inflation reaching a 40-year high of 11.1 per cent in October.
Andrew Harrison, NatWest’s managing director of its business banking arm, said a combination of households having more savings and more people in employment may be cushioning some of the impact of the rising cost of living.
“I think we have got this cushion currently, which is why I don’t think we’ve really seen the impact coming through in terms of more people and businesses getting into financial difficulty.”
“But, of course, if this continues over a prolonged period of time, and the savings cushion reduces and unemployment starts to increase, we could get to a point in the future where it becomes more impactful for families.”
Mr Harrison said there has also not been a sharp increase in the number of businesses getting into financial difficulty, and that levels remain below pre-Covid.
Businesses have received Government support to help mitigate the cost of rising energy bills, and many have been able to pass higher costs on to customers via price rises, he said.
However, business confidence has been dented and many are concerned about what will happen once Government energy support reduces from April.
To help ease cost pressures, NatWest said it was launching a new cashback offer for spending on fuel on electric vehicle charging.
It means that its customers with business credit cards will get between one per cent and three per cent cashback on spending in these categories every month, starting from February 14.
It follows the lender’s move last year to freeze all fees on business current accounts for at least a year.
And to support its own employees through the cost-of-living challenges, the bank said it had made a one-off payment of £1,000 to 59,000 staff in January.
Anna Wise. Press Association