Restaurant chains predict mass redundancies without government support
An open letter backed by 90 firms was sent to PM Boris Johnson, stating that if social distancing remains in place, they will need support in the form of tax, rent and other rebates, to avoid mass closures and job losses.
The letter was organised by Deliveroo, and was signed by partner restaurants Itsu and Pret A Manger, as well as Wagamama and Pizza Hut (NYSE:YUM). The companies run more than a thousand outlets across the UK between them, and stated that without additional support, the sector faces ‘grave damage’.
The letter reads:
“Without government support to help restaurants to generate revenue and cover costs, tens of thousands of restaurants may be forced to permanently close their doors in the coming months.”
“This crisis is far from over and the potential consequences are deeply concerning. A huge number of restaurants across the country are facing the prospect of bankruptcy.”
The companies are calling for cuts to VAT on restaurant food, as well as the continuation of the Job Retention Scheme for restaurants while social distancing measures remain in place. In addition, the companies are requesting mortgage holidays for landlords, so that this can be passed on in the form of lower rents for business outlets.
UK unemployment: 612,000 dropped from UK payrolls amid Covid crisis
The number of people on UK payrolls has dropped by 612,000 between March-May.
The Office for National Statistics and HM Revenue and Customs have released new figures showing a record low in job vacancies and the extent to which the Coronavirus pandemic has hit the economy.
Between March and May, there were 342,000 job vacancies fewer than the previous quarter – this represents the largest quarterly decrease in job vacancies since records began.
The number of those who have become unemployed since the lockdown has been kept lower due to the government’s furlough scheme, which has sustained employment.
Samuel Tombs, from Pantheon Macroeconomics’ said that whilst the furlough scheme has “succeeded in preventing massive job losses so far,” it is unsure what will happen for unemployment when the scheme ends and that rates were being held in “suspended animation”.
He warned that “a second wave of redundancies remains likely when financial support for employers who furloughed workers is wound down between August and October”.
Tej Parikh, chief economist at the Institute of Directors, also believes the economy and unemployment figures could take a greater hit in October.
“Wage support has given firms some much-needed time to regroup,” he continued. “Despite these efforts, activity will inevitably be below normal for some time as social distancing continues, and employment looks set to take a hefty hit. Salaries and vacancies are also likely to keep falling as businesses aim to keep costs down,” he said.
“As many as a quarter of firms have said they will struggle to pay anything toward furloughed workers’ pay come August. More bad news could be just round the corner, as redundancy consultation periods kick in.”
Economists expect to see the unemployment rate reach 4.7% following the end of the furlough scheme.
Those claiming Universal Credit or Jobseekers Allowance since March has more than doubled to 2.8mn.
Should retailers celebrate a busy high street post lockdown?
With many employees returning from furlough, and with shops opening for the first time in months on Monday, questions are being asked about the ability of high street retailers to pick up steam as lockdown restrictions are loosened.
Offering diverging accounts of the situation for companies post-quarantine were Fortnum and Mason CEO Ewan Venters, and owner of stationary company Ryman, Theo Paphitis. While they agree that a return to ‘normality’ was desirable for both companies and consumers, their visions for the coming months were greatly at odds.
On the one hand, Mr Paphitis lamented the struggles faced by high street retailers in light of the expansion of online shopping and deliveries in recent years. He stated that lockdown had – understandably – put already challenged businesses into an even more difficult spot, and that to make the high street competitive with their online counterparts, the government should either continue their business rates waiver or scrap business rates altogether, on a permanent basis.
With this stance in mind, we can imagine the situation looks pretty bleak for face-to-face shopping outlets, as lockdown has not only seen companies such as Amazon (NASDAQ:AMZN) and Ocado (LON:OCDO) expand their delivery capabilities to meet expanded demand, but has seen many previously sceptical shoppers rely on online retail opportunities for the first time – many of whom will likely seek out the convenience and cost-effectiveness of shopping online in future.
In contrast, Mr Venters was highly optimistic about shops reopening. While fresh produce and supermarket sales are expected to be steady, the main area of concern for many would be the willingness of consumers to resume their regular social habits, by visiting pubs, bars and restaurants.
In response to this, Mr Venters was very positive. He stated that Fortnum and Mason had seen strong demand for its cafe offerings, with a backlog of bookings, following the recent reopening of the company’s popular afternoon tea reservations. Venters was not surprised by this fact, and instead stated that we should expect such activity going forwards. As people gain confidence and as more eating and drinking establishments reopen, he says we can anticipate healthy trading towards the latter end of the summer, as people release their pent-up desire to reconnect with their families and friends, by going for dinner or for drinks.
The optimistic outlook seems more on-the-money so far, as shoppers took to the streets and queued down the roads frantically on Monday, to access high street retailers such as Primark (LON:ABF) and Sports Direct (LON:FRAS). If this post-lockdown trading activity becomes the norm – and people cluster in shopping and recreational outlets – then it’s safe to assume that consumers will find it difficult to observe social distancing. Going forwards, this presents the very real dilemma of a Coronavirus second wave sooner rather than later.
We may be keen to return to our usual service, however our desperation to do so will likely see us back in quarantine before winter. A second lockdown in quick succession may be too much for many high street retailers to survive, and in terms of financial support, we’ll likely learn the hard way that the government’s pockets aren’t bottomless. While the message from many may be ‘go out and support local businesses’, perhaps the best thing we can do is support in moderation. An over-zealous return to normal life could be the death knell for many small businesses.
Travis Perkins to cut 2,500 jobs & 165 stores
Travis Perkins will be closing 165 stores and cutting 2,500 jobs amid the Coronavirus pandemic.
The building materials group announced the decision, putting the closures and job cuts down to an expected weaker demand over the next two years.
“While we have experienced improving trends more recently, we do not expect a return to pre-Covid trading conditions for some time and consequently we have had to take the very difficult decision to begin consultations on the closure of selected branches and to reduce our workforce to ensure we can protect the group as a whole,” said Nick Roberts, the group’s chief executive.
“This is in no way a reflection on those employees impacted and we will do everything we can to support them during this process.”
“The group has a robust balance sheet, strong liquidity position and I am confident that these proposed changes will enable us to trade successfully through this period of uncertainty with a cost base that better reflects the environment we are operating in,” he added.
Travis Perkins said in a statement: “It is evident that the UK is facing a recession and this will have a corresponding impact on the demand for building materials during 2020 and 2021.”
The group has 2,154 branches around the country and owns brands including Wickes and Toolstation. Most of the stores that will be affected will be smaller shops – where profit margins are thin and social distancing measures are hard to ensure.
From Monday, non-essential shops are opening across the UK following the three-month shutdown.
During the course of lockdown, the group kept a third of its branches open. More branches have opened over the last month, with sales about 60% down across the month of May. However, sales have picked up since the end of lockdown.
Shares in Travis Perkins (LON: TPK) are trading down almost 3% at 1,049.00 (1355GMT).
H&M sales halved, shares fall
Sales at Hennes & Mauritz (H&M) have halved in the second quarter of 2020.
The latest figures from the clothing retailer reveal that net sales for the three months to 31 May were £2.45bn – 50% lower than the same period last year.
As H&M was forced to close four-fifths of its global stores during the Coronavirus pandemic, sales plummeted. However, as stores are reopening across the UK on Monday, sales are set to recover.
RBC analyst Richard Chamberlain said: “In many markets we expect to see customers preferring to shop locally and more pressure on urban locations more reliant on tourism and people using public transport.”
Shares in H&M closed 24% down this year on Friday.
Sales across the sector have suffered in the last quarter. Owner of Zara, Inditex (BME: ITX) reported a 44% drop in sales between February and April.
Shares in H&M (STO: HM-B) are trading at 141.75 (1203GMT).
FTSE 100 tumbles as investors fear a second wave
As fears of a second wave of Coronavirus outbreak grow, the FTSE 100 tumbled in Monday’s early trading.
As shops across the UK open for the first time in three months, the index of UK blue-chips fell below 6,000 points whilst the pound also dipped 0.2%.
Investors’ optimism has been dampened amid the news of a spike in Coronavirus cases in Beijing, where authorities closed a food market over the weekend.
“Reports of a new COVID-19 lockdown in Beijing speak directly to market fears that the measures taken to contain the virus so far are not enough,” said Michael McCarthy, the chief market strategist at CMC Markets.
Among the biggest fallers of Monday’s FTSE trading was oil giant BP, which tumbled 5% on opening to 306p.
The oil company said this morning that the pandemic is set to have “an enduring economic impact.”
Bernard Looney, BP’s chief executive, said: “In February we set out to become a net-zero company by 2050 or sooner. Since then we have been in action, developing our strategy to become a more diversified, resilient and lower-carbon company. As part of that process, we have been reviewing our price assumptions over a longer horizon. That work has been informed by the Covid-19 pandemic, which increasingly looks as if it will have an enduring economic impact.”
Global stocks also took a hit on Monday. Japan’s Nikkei was 3% down whilst in Europe, the CAC in Paris, German DAX and Spanish IBEX all fell around 3%.
In the UK, non-essential retailers are opening to re-start the economy. Retailers have introduced strict safety measures and social distancing rules for customers whilst shopping. Prime minister Boris Johnson has told shoppers to “shop with confidence”.
Rishi Sunak – Boris Johnson’s crown jewel or dagger in the back?
Rishi Sunak, a young and charismatic Chancellor, and one of the few members of the government to see their stock rise during the Coronavirus crisis. But why should we be interested in Mr Sunak, and more importantly, should we get used to seeing him on our TV screens?
After six years in politics, he moved into 11 Downing Street and within a few high-profile appearances, cemented himself as a formidable figure on the political mainstage.
Johnson’s jewel or dagger?
I first noticed Sunak as a member of Boris Johnson’s leadership campaign entourage, and again during subsequent appearances, when the Yorkshire MP seemed to shock those in attendance with a level of composure you wouldn’t expect from a young politician. Since then – and since taking the second top job in political office – our early interest in Rishi Sunak has been vindicated. After only weeks in office, Sunak delivered one of the most well-received budgets in recent memory, before completely outclassing the prime minister with a convincing performance in his opening Coronavirus address. So, a talented orator he may be, but does this mean he is necessarily a threat to Boris Johnson? Initially, no. Prior to the challenges posed by Coronavirus, Mr Johnson commanded healthy support, by marrying a clear pro-Brexit message with a fair deal of Jeremy Corbyn’s pro-spending ethos – the careful combination of which made for an intoxicating (and ultimately convincing) aura of hope and nationalist optimism. During these early days of Johnson’s premiership, and even after succeeding Sajid Javid, Sunak resembled a welcome but non-threatening voice of reason to compliment Boris’s light-hearted but empty ‘ramp-up’ and ‘turbo-charge’ rhetoric. The far-reaching impact of Coronavirus, though, has seen the brakes slam on Johnson’s gusto train. An awkward combination of economic shutdown; a slow trickle of advice from his scientific advisors; cross-examining form Kier Starmer; and a sorry defence of the blatantly careless actions of Dominic Cummings; have all seen the PM’s bravado shrivel down to little more than angry grumbles about BLM protests and tweeting about statues. In the meantime, Sunak has grown in stature. Having avoided the (fairly tame but persistent) scrutiny suffered by the likes of Mr Johnson, Matt Hancock et al., Sunak’s attempts to provide financial support to workers – and perhaps even more impressive, the additional support he implemented in response to public criticism – have been on the whole well-received. This week, as Ipsos Mori told the story of Kier Starmer gaining ground on Boris Johnson in the opinion polls, it shouldn’t go unnoticed that Sunak seemed to be acting increasingly like a leader in wait. Not only has he made up the majority of plausible leader-like soundbites from the last few months, but his appearance at John Lewis (helping with the preparations for socially distanced shopping), his letter asking local councils to ban bailiffs being used to punish council tax arrears, and his impressive Zoom call with Conservative MPs, have all seen the Chancellor galvanise both public favour and support within the ranks of his party.What should Sunak do next?
Whether or not you agree with the points I’ve made so far, what most of us should realise is that even if Sunak is not yet a viable leadership candidate, he certainly has the makings of one. Besides, he has just turned forty. If his time hasn’t yet come, he’s a young Chancellor gaining experience in the upper tiers of public office, and will someday, surely, have not only the presence but the acumen necessary to be a successful leader. With this in mind – and plain to many of the pundits looking at Boris’s front bench – Sunak’s mounting reputation for competence will earn him an increasing share of the spotlight. The dilemma he will now be mulling over is whether to stay the course, or distance himself from the challenges that lay ahead. On the one hand, despite what opinion polls and his PMQ performances might suggest, Boris Johnson still commands not just a heathy majority, but an impassioned and hopeful working-class core of voters. By effectively harnessing a narrative of national potential, as well as occupying the hard Brexit ground, Johnson has spoken to and galvanised a large chunk of the electorate who felt their concerns had been ignored by both of the main parties for decades. What this could mean, save for Boris maintaining his recent form, is that the Conservative Party is well-positioned for dominance for some time. Rather than derail or undermine the powerful Boris-Cummings-Geist, Sunak may well choose to overlook recent failing and weather the storm. Should the government opt for an energetic and stimulus-heavy exit to the Coronavirus shut-down, Sunak may still get to enact some of the generous spending promises which piqued the interest of listeners across the political spectrum. In this scenario, his time as Chancellor would be defined by high spending (which is ultimately why he was given the job to begin with), and with all things being well, would stand him in good stead for leadership in the future. The more likely direction of fiscal policy post-lockdown, however, will be a return to retrenchment – spending cuts. This path, the depressing alternative that it is, would see Sunak become the face of the inevitably unglamorous Brexit-Coronavirus economic life support machine. Not only would this go against the brand that he has built for himself so far as Chancellor, but would mean serving under a zealous PM who likely isn’t as cut out for speeches about balancing the books, as he is for those about ambitious projects and big spending. More than anything, though, overseeing cuts would be costly to Sunak’s popularity. While austerity may be understood as necessary by many, I’d challenge anyone to recall the last time they heard someone say they missed seeing George Osbourne’s face in Commons. Now, in Sunak’s case: the switch from his first budget to austerity would be like promising a feast, and then stealing the food from diners’ mouths. I offer this scenario not as a criticism of the Chancellor, but rather as a deflating contrast to the mood after his budget in March. It’s difficult to imagine what we’d do in Sunak’s situation, without knowing what he (hopefully) does about the government’s economic direction coming out of lockdown and into Brexit proceedings. What I can say is that, so far, the majority of Sunak’s onlookers have been impressed; and compared to most of his cabinet peers, he certainly looks impressive. Whether he stays true to Johnson or not, we can hope he lives up to the hype, and that his potential isn’t tarnished either by the failures of others, or the difficult timing of his arrival in office.Why Asia has yet to embrace sustainable investment, and why it should
Sustainable Investment, defined by the Forum for Sustainable and Responsible Investment as “an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact”, is a rapidly growing industry.
A Financial Times article published earlier this year revealed that “$17.5tn out of the $79tn of total assets under management globally are invested in funds applying environmental, social and governance criteria”. An encouraging figure, perhaps, but one which distorts a canyon of regional disparity in the commitment to environmentally and socially sustainable investment.
The same article reported that a mere 5% of East Asian management assets are currently invested in sustainable projects, compared with almost 30% in the USA and Canada.
While the breadth of the discrepancy may come as a shock, it is in keeping with a decades-long trend within the Asian economy: to put the quest towards economic development first, even at the expense of glaring environmental and social consequences. The result is the staggering rate of pollution and worsening inequality across the Asian continent.