Table of Contents
Where the jobs axe is falling across the UK
My colleague Sophie Smith has updated her list of the Covid-induced jobs cut to include Boots and John Lewis. Read her updated piece here:
Tweet: FCO advises against cruise ship travel
In news that is going to do no favours to companies like Carnival and Saga, the Times’s Ben Clatworthy tweets:
BREAKING: FCO advises against all cruise ship travel. “This is due to the ongoing pandemic and is based on medical advice from Public Health England,” FCO says.
— Ben Clatworthy (@benclatworthy) July 9, 2020
The FCO doesn’t appear to have updated the guidance on its site yet.
West Midlands mayor: closing Birmingham John Lewis would be ‘dreadful mistake’
Andy Street – mayor of the West Midlands, and managing director of John Lewis from 2006 to 2017 – has criticised the group the its decision to close its flagship Birmingham store:
The proposed closure of Birmingham’s John Lewis store risks being a dreadful mistake. My reaction to this morning’s deeply disappointing news: pic.twitter.com/JWLhPHBafw
— Andy Street (@andy4wm) July 9, 2020
Boots UK’s Covid-19 costs hit $2bn
That announcement from Boots comes alongside a pretty grim third-quarter report from its owner, the Walgreens Boots Alliance. It warned the negative sales impact of Covid-19 could be up to $750bn, including a $2bn impairment charge its UK operations:
The adverse impact of COVID-19 on sales in the quarter was approximately $700 million to $750 million, with the majority of the impact related to the Retail Pharmacy International division. This reflected a dramatic reduction in footfall in Boots UK stores – down 85pc in April – as consumers were advised to leave home only for food and medicine.
While most Boots stores remained open throughout the UK lockdown to provide communities with pharmacy and essential healthcare, our largest premium beauty and fragrance counters were effectively closed. More than 100 stores, mainly in high street, station and airport locations, were temporarily closed as were nearly all of the 600 Boots Opticians stores.
On the UK losses, it added:
[Considering] the third quarter operating loss in Boots UK and ongoing uncertainty due to COVID-19, the company reevaluated goodwill and intangibles in Boots UK, resulting in non-cash impairment charges of $2 billion.
Stefano Pessina, WBA’s chief executive, said:
“Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets.
Boots to cut more than 4,000 jobs
Boots plans to cut more than 4,000 job and cut 48 of its Boots Opticians stores in the face of Covid-19.
The high street pharmacy said it has experienced a “significant impact ” from the pandemic, with retail sales across Boots UK crashing 48pc during lockdown.
The cuts, which follow John Lewis’s announcement of 1,300 job cuts earlier this morning, will affect 7pc of Boots’ workforce.
Sebastian James, Boots UK’s managing director, said:
The proposals announced today are decisive actions to accelerate our Transformation Plan, allow Boots to continue its vital role as part of the UK health system, and ensure profitable long-term growth. In doing this, we are building a stronger and more modern Boots for our customers, patients and colleagues.
I am so very grateful to all our colleagues for their dedication during the last few challenging months. They have stepped forward to support their communities, our customers and the NHS during this time, and I am extremely proud to be serving alongside them.
We recognise that today’s proposals will be very difficult for the remarkable people who make up the heart of our business, and we will do everything in our power to provide the fullest support during this time.
Boots said its online sales have jumped during the lockdown period, rising 78pc amid an expansion in home delivery slots.
UK road fuel sales continue to rise
Road fuel demand continued its steady rise last week, but remain well below pre-virus levels.
Sales averaged 13,667 litres per filling station in the week to 5th July, a rise on 3.2pc on the week before.
The Department for Business, Energy and Industrial Strategy, which gathered the data, said:
The data in this release are based on ‘end of the day’ snapshots of petrol and diesel sales from a sample of around 4,500 filling stations across Great Britain. This is around 50 to 60 per cent of total filling stations in Great Britain.
Prosecutors investigating Wirecard over suspected money laundering
Just in from Reuters:
German state prosecutors are investigating Wirecard for suspected money laundering, a spokeswoman for the Munich prosecutor’s office said on Thursday.
“We are investigating suspected money laundering,” the spokeswoman told Reuters, saying the inquiry was directed at individuals from Wirecard. She said it followed a number of criminal complaints this year and last.
Wirecard declined to comment.
Sunak and new OBR chair to face MPs next week
Just in: the Treasury Select Committee has announced two evidence sessions set to take place next week:
Monday, 3:30pm: Richard Hughes, pre-appointment evidence session as new chair of the OBR
Wednesday, 2:30pm: Rishi Sunak
Pound pushes higher against dollar
Sterling have pushed slightly higher against the US dollar today, which appears to be a product moreso of a weakening greenback than any particular shift on the pound side:
Here are some of the day’s top stories from the Telegraph Money team:
Tax decisions may need need to arrive until next year
Here’s more from IFS deputy director Carl Emmerson on the path ahead for public finances:
There is a huge amount of uncertainty around the public finances – but these measures are likely to push the deficit further above £300 billion, which would be easily the highest as a share of national income since the Second World War. Of course this additional borrowing is all currently being borrowed at very low interest rates.
What matters more for the public finances will be the extent to which the economy manages to bounce-back strongly. If – as is likely – the economy does not fully recover then future fiscal events are likely to involve a less pleasant set of announcements over the extent to which taxes need to rise to restore the health of the public finances. But those decisions can – and should – be left for another year.
Stamp duty holiday: A tax cut for Londoners?
My colleague Anna Mikhailova tweets:
Helen Miller of @TheIFS says: ‘stamp duty is a bad tax, it slows down transactions’ and that more signficant overhaul (scrapping it and reforming council tax) should be considered
Also raises concerns of that cut may have come too soon
— Anna Mikhailova (@AVMikhailova) July 9, 2020
IFS: Tax rises are likely once economy returns to normal
The Institute for Fiscal studies has also provided commentary on the Chancellor’s latest spending splurge.
In its analysis (which can be viewed in the video embedded below), the research institute’s deputy director Carl Emmerson said tax rises are “very likely” once the economy returns to normal.
The IFS also predicted the UK’s budget deficit could rise to £350m in light of the newest fiscal commitments.
Carl Emmerson of the Institute for Fiscal Studies says: ‘What we don’t need at the moment is a new set of fiscal rules.’ Says Sunak needs a plan on debt but should ‘not be implemented any time soon’
— Harry Robertson (@harrygrobertson) July 9, 2020
Paul Johnson, its director, said:
I expect the next phase, in the Autumn budget, still to be looking to support a recovery. We will know more then about the progress of both the virus and the economy. This should allow for more targeted support. Perhaps more targeted tax cuts, more thought through investment programmes, more developed job support schemes. And, of course, a spending review.
The time to pay for all this will come. But not this year and not next. Our capacity to do so will depend above all on how the economy recovers.
Eight John Lewis stores will not reopen
Our retail correspondent Laura Onita tweets:
Eight John Lewis shops will never reopen, with 1,300 jobs at risk. Heathrow, St Pancras, Croydon, Newbury, Swindon, Tamworth, Birmingham and Watford.
— Laura Onita (@LauraOnita) July 9, 2020
As she reported last week:
The department store chain has set out a timetable to reopen 32 of its 51 shops, but chairman Dame Sharon White told staff it was highly unlikely the partnership would keep all those still shut amid a scramble to slash costs after lockdown.
Resolution Foundation: Mixed review for Sunak’s ‘mini-Budget’
Rishi Sunak took the headlines yesterday with his ‘mini-Budget’ – up to £30bn aimed primarily at present a labour market crisis prompted by Covid-19.
The Chancellor outlined a range of measures, including a VAT cut for the hospitality industry, stamp duty holiday, restaurant discounts and a suite of measures to boost hiring as part of his mini-Budget.
Policy wonks have had some time to digest the figures overnight, and the reviews are in. Overall, they’re a bit of a mixed bag.
The Resolution Foundation, a think-tank which aims to improve the standard of living of low- and middle-income families, say the statement “was not a Budget, but was still a big deal”.
It highlighted the mixtures of policy selected by the Treasury, including some well-understood policies alongside more innovative approaches. It said:
Kickstart jobs for young people is a tried-and-tested policy, but the new Job Retention Bonus is poorly targeted at the 1 million jobs that are most at risk as the furlough scheme is phased out. It is too small and temporary to have a lasting effect on employment. The lack of further action on jobs leaves the Chancellor risking high unemployment this autumn.
Rightly, the Chancellor focused stimulus measures on (some) of the hardest-hit sectors. The “Eat Out” scheme is far too small to have a major impact, but far more significant (and welcome) is a temporary VAT cut on eating out, accommodation & attractions. This sectoral targeting, though, had a big gap, with no support for the likes of bricks-and-mortar retail.
The think-tank’s calculations suggest borrowing will rise to £350bn:
Its summary concludes:
Having previously taken unprecedented action to protect incomes, the Summer Economic Update provided much more conventional in-scale demand support for the next phase of this crisis. That might be sufficient if the UK has a V-shaped recovery. But, as the virus isn’t going away, HM Treasury should expect to return in the autumn with further measures to support the economy.
Our overnight analysis is available to read and download on our homepage. Further analysis will follow the @OBR_UK fiscal sustainability report on Tuesday 14th (NB – these two big fiscal events really should happen on the same day). https://t.co/fbBnNW1Ush
— Resolution Foundation (@resfoundation) July 9, 2020
Sunak admits furlough bonus will waste money
Rishi Sunak has admitted taxpayer cash will be wasted by giving employers a £1,000 retention bonus for furloughed workers that he announced in his summer statement on Wednesday.
My colleague Russell Lynch reports:
The bonus will be paid to employers in February for every worker brought back from furlough when the job retention scheme ends in October.
Asked whether the funds would be given to companies that would have kept staff on anyway – a so-called “deadweight cost” – the Chancellor told BBC Radio 4’s Today: “That is absolutely a fair point and throughout this crisis I have had the decisions to make, whether to act in a broad way at scale and at speed, or to act in a more targeted and nuanced way.
“In an ideal world, you’re absolutely right, you would minimise that dead weight and do everything in an incredibly targeted fashion. The problem is the severity of what was happening to our economy, the scale of what was happening and indeed the speed it was happening at demanded a different response.”
Jet2 owner Dart takes £108m hit from virus
More coronavirus pain: Jet2 owner Dart Group took a £108.4m loss due to fuel hedges but reported results that drew praise from analysts.
Dart reported a 21pc rise in revenues to £3.6bn for the 12 months to the end of March, with its profits before tax dipping 11pc to £256.1m after the exceptional charge.
Like most airlines, the group suspended its operations in mid-March. Around 80pc of its staff were placed on furloughed as Britain went into lockdown. It asked all staff, including its directors, to take a pay cut for the period from April to the end of the year.
It will recommence flights from July 15th, with most of its short-haul locations on the list of countries exempted from quarantine restrictions.
We still face challenges as a result of the Covid-19 pandemic and therefore maintaining a healthy cash position remains our top priority. We have taken significant actions to improve our available liquidity in the last three months and will continue to do so, to ensure that we are best placed to respond swiftly as UK Government travel restrictions are relaxed and customer confidence recovers.
Stifel’s Mark Irvine-Fortescue said “rebuilding confidence will be key to determining the shape of the industry recovery”, but added:
Measures to boost liquidity should leave Dart well-placed to capitalise on the upturn opportunity, given strong momentum pre-Covid, and apparently good support from customers in managing this crisis.
Rolls-Royce takes £3bn hit due to Covid-19
Jet engine maker Rolls-Royce took a £3bn cash hit in the first half as a result of the aviation shutdown prompted by Covid-19.
The group is leading fallers on the FTSE 100 currently, after warning the shock of the pandemic will hit its results for the next seven years.
Rolls-Royce has moved to shore up its finances by securing a commitment for a five-year loan of £2bn, underwritten by a syndicate of banks and back by a UK Export Finance guarantee.
The group said its restructuring, which includes a swathe of job cuts, was “progressing well”. It expects a reduction of more than 17pc of its workforce, equivalent to 9,000 job worldwide.It added:
Last month we opened voluntary severance in the UK, including an enhanced early retirement scheme. To-date, we have received more than 3,000 expressions of interest for voluntary severance in the UK with approximately two-thirds of these currently expected to leave by the end of August.
Warren East, its chief executive officer, said:
The COVID-19 pandemic has created a historic shock in civil aviation which will take several years to recover…
This means we have had to take the very difficult decision to lose people who have helped us become the company we are and who have been proud to work for Rolls-Royce. It is my first priority to treat everyone – whether they are leaving or staying – with dignity and respect.
Jefferies’ Sandy Morris said “no gloss can be put on the ravages of Covid upon Rolls-Royce or its peers”, but added the possibility of an equity raise in the near future offered “a path to a brighter outlook”.
Workspace reports ‘early signs of a recovery’
Flexible office space provider Workspace has reported signs of a recovery as customers enquiries pick up.
It said demand improved during the three months ending June 2020, with enquiries last month at 765, up from 272 in April. That’s down about a quarter on the monthly average of 1,060 for the same quarter last year.
The group has collected 75pc of rent due for the first quarter, equivalent to 41pc of the total rents before it made deductions. It has received 65pc of rent due for the second quarter so far, compared to 80pc at the same point last year.
Graham Clemett, its chief executive, said:
Activity in the first quarter has been significantly impacted by the lockdown. We offered our business centre customers a 50pc rent reduction for the first quarter ending in June, which was well received…
As our existing customers review their space requirements, we have seen like-for-like occupancy fall by 3pc to 90pc in the quarter and we expect to see continued pressure on occupancy levels in the short-term. However, we are encouraged by the early signs of a recovery in business confidence, with improving levels of enquiries, viewings and lettings.
Stifel’s Sam King said its forecasts assumed Workspace’s occupancy will dip further, to 85pc, but added this will be “slightly offset by move-ins as Workspace looks to capture new demand, particularly from customers not previously occupying flexible space”.
Persimmon climbs on strong order book
Housebuilder Persimmon is leading risers on the FTSE 100 today, after saying its reservations have bounced back strongly since lockdown restrictions eased.
The group said its building programmes had returned to normal levels by June, with net reservations up 30pc year-on-year to an average of 278 over the six weeks since it reopening sales officers. Its total order book is now up 15pc year-on-year.
Dave Jenkinson, its chief executive, said:
Our financial strength and the agility of the business in responding to Covid-19 has ensured Persimmon is in robust health, and fully able to play its part in delivering the new homes the country needs to support the UK’s recovery, in a range of future economic scenarios.
Citi’s Ami Galla said the group’s post-lockdown trading was “impressive”, adding the focus “will remain on the potential to further ramp-up construction capacity in anticipation of strong demand and scope for land market opportunities in the current backdrop”.
Boohoo shares jump after FT reports says no modern slavery offences found
Shares in scandal-hit fast-fashion group Boohoo has jumped more than 20pc this morning, after the FT said UK authorities have found “no evidence of modern slavery offences” during an initial inspection of its Leicester-based suppliers.
The paper reports:
The fast-fashion retailer has lost more than a third of its market value since a Sunday Times investigation exposed longstanding concerns about textile workers in Leicester being paid less than the minimum wage. Ministers also raised fears the cramped, unsafe garment factories helped make the city a hotspot for coronavirus.
But in spite of the concerted government effort to uncover abuses, the Gangmasters and Labour Abuse Authority (GLAA) has admitted that “no enforcement has been used during the visits”. “Officers have not at this stage identified any offences under the Modern Slavery Act,” the agency said.
German exports bounce-back disappoints
German exports jumped less than expected in May.
The country’s exports rose 9pc, below economists’ expectations for a 14pc rise, while imports climbed 3.5pc versus an expected 12.4pc.
That left it trade balance (the difference between exports and imports) at €7.1bn – roughly in line with expectations despite the low overall trade volumes but well below the record highs of more than €25bn.
ING’s Carsten Brzeski said:
Looking ahead, while April was the worst month ever in terms of most economic data releases, the month of May has been one of the best months ever. However, it will need a couple of these ‘best month evers’ to bring the economy back to its pre-crisis level.
Particularily the divergence between domestic and external demand is remarkable. While retail sales surged with the lifting of the lockdown measures, the much more muted improvement of industrial production and exports illustrates that the former growth engines of the German economy will continue to stutter for a while.
European shares edge higher
Following two days of falls, European shares have edged slightly higher at the open today:
Chinese factory deflation slows
The pace of deflation in China’s factories slowed slightly in June, while the pace of increase in consumer prices picked up.
The producer price index eased up from –3.7pc to –3pc, while consumer prices roses 2.5pc compared to 2.4pc in May.
The improved figures show a continued recovery, albeit at a slow pace. The National Bureau of Statistics, which released the data, said the rise was because “international commodity prices picked up, domestic manufacturing steadily recovered, and market demand continued to improve”.
The rise in consumer prices was largely driven by demand for food rather than a wider pickup in buying activity.
Burger King UK could close a tenth of locations
Burger King UK’s boss has warned that up to 1,600 jobs could be lost as a result of the coronavirus pandemic.
Only about 370 of the restaurant chain’s 530 UK stores have reopened since the nation went into lockdown.
Chief executive Alasdair Murdoch told the BBC’s Newscast the economic damage stemming from the crisis could ultimately force the company to permanently close up to 10pc of its stores.
He told Newscast: “We don’t want to lose any (jobs). We try very hard not to, but one’s got to assume somewhere between 5pc and 10pc of the restaurants might not be able to survive.
“It’s not just us – I think this applies to everyone out there in our industry.”
Good morning. The FTSE is set to open a little higher this morning, as surging stocks in China help lift shares across Asia overnight.
Global stocks had a mixed session yesterday, with Wall Street resuming a rally and European bourses retreating, as concerns about fresh spikes in coronavirus infections lifted haven investment gold above $1,800 an ounce for the first time since 2011.
In the UK, businesses continue to dissect Chanellor Rishi Sunak’s mini-Budget yesterday. The Institute for Fiscal Studies will give its verdict later this morning.
5 things to start your day
1) Sunak’s £30bn spending spree set to save 2m jobs: Bonuses are on the way to businesses that take back furloughed staff, hire young workers and hire apprentices
2) Liam Fox is Britain’s candidate for World Trade Organisation top job: Downing Street confirmed that it had nominated Dr Fox, the Conservative MP for North Somerset and a prominent Brexiteer, to replace the Brazilian diplomat Roberto Azevedo as director-general when he leaves the commerce regulator in August.
3) Subsidies to help firms in Northern Ireland cope with post-Brexit red tape: A taxpayer-backed service would fund Northern Irish businesses to seek help from intermediaries with new Brexit paperwork for two years
4) Calls for inquiry after Treasury reveals £15bn cost of PPE: Calls for an inquiry mounted after it emerged the taxpayer has also spent an “eye-watering” £15 billion on PPE amid scrutiny of the Government’s procurement process.
5) Pubs and restaurants left thirsty for more following Sunak’s £4bn giveaway: Chancellor Rishi Sunak slashed VAT from 20pc to 5pc for hospitality and tourism firms as part of an effort to put a rocket under demand and save summer trading in his mini-Budget on Wednesday. The reduction will apply from Jul 15 until Jan 12, 2021.
What happened overnight
Asian equity markets ground higher as investors tried to look past gathering Sino-US tension and renewed coronavirus lockdowns to upcoming company earnings, hoping that global stimulus efforts will yield upbeat outlooks.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6pc and touched a 20-week high as Chinese stocks extended their extraordinary rally.
Japan’s Nikkei edged ahead by 0.2pc.
The Chinese yuan rose to a four-month high of 6.9872 per dollar and the greenback sat near a one-month low against a basket of currencies.
China was hit first and so is emerging first from the Covid-19 pandemic. In addition, fiscal stimulus, heavy government borrowing driving up bond yields, and a state-media editorial extolling strong fundamentals have stoked euphoria.
China’s blue-chip index rose for an eighth straight session in early trade on Thursday, gaining 0.6pc to touch a five-year high. The Shanghai Composite was up by the same margin and at its highest level since early 2018.
The mood lifted Australia’s S&P/ASX 200 1pc, although New Zealand’s benchmark fell nearly 2pc after a Rio Tinto plan to close an aluminium smelter hit energy stocks.
US stock futures eased 0.1pc, following another session of gains on Wall Street overnight.
Coming up today
Interim results: PageGroup
Trading statement: DFS Furniture, Persimmon, Premier Miton, Robert Walters, Rolls-Royce, Vistry, Workspace
Economics: Rics housing survey (UK); inflation (China); eurogroup meeting (eurozone); trade balance (Germany); jobless claims (US)