By Powerscourt on 25/05/2020
The rhetoric in the ongoing war of words between the US and China moved up a notch last night after Robert O’Brien, the US national security adviser, likened China’s handling of the COVID-19 outbreak to the Soviet Union’s cover-up of the Chernobyl meltdown. Chinese Foreign Minister Wang Yi hit back by saying that the US should abandon its “wishful thinking about changing China” and stop pushing the two countries “to the brink of a new Cold War.” The spat came as the World Economic Forum published a paper yesterday which showed that the value of Chinese exports fell by 17.2% year on year in the first two months of 2020, while imports slowed by 4%. China’s blue-chip CSI300 index was down 0.2% in overnight trading, with the Hang Seng falling 1.4% over mounting fears about the implications of China’s move to impose a national security law on Hong Kong.
In the UK, the government’s daily briefing was derailed for the second day running by the ongoing controversy surrounding Dominic Cummings’ flouting of the lockdown rules. Amid growing calls – including from Tory MPs – for Cummings’ resignation, Boris Johnson is maintaining his support for his most senior adviser. “In every respect, he has acted responsibly, legally and with integrity,” he told the press. The confirmation that schools are now set to reopen on a phased basis in England from 1 June was practically a post-script. In a sign of the growing pressure on the PM to take action, the front page today of the usually supportive Daily Mail has a picture of him and Cummings along with the headline “what planet are they on?”.
Elsewhere, this morning’s FT reports that Chancellor Rishi Sunak has authorised a bailout plan entitled “Project Birch” which is aimed at saving “strategically important” companies. The Treasury has told the paper that the scheme will be aimed at viable companies whose failure would “disproportionately harm the economy” and which have exhausted all other options, including government loan schemes. News of the project comes as TheCityUK, the finance sector’s trade group, has published estimates that the value of government-backed loans to companies could climb above £100bn. It had already reached £40bn in the first two months of the bailout measures.
WHAT ARE COMPANIES SAYING?
Consumer and Retail
The Times reported Pizza Express is considering the permanent closure of some of its restaurants “as it battles to secure its long-term future.” The chain is understood to be looking at a company voluntary arrangement, under which loss-making stores would close once the coronavirus pandemic is over. Of its restaurants in the UK, 460 were profitable before Covid-19 struck. All its restaurants have been shut since the end of March and it has furloughed the vast majority of its 20,000 staff.
James Reed, chairman of online jobs site Reed, spoke to The Telegraph over his fears the “labour market is heading towards a day of reckoning” when the support ends. “The worry is what happens when furlough winds up,” he said. “Is there a wave of redundancies coming? The danger is a tsunami of job losses.” Mr Reed added: “Companies I talk to are a half or a quarter of the size they were when they furloughed people, or they are on the verge of going bankrupt.”
Industrials & Transport
Rolls-Royce is threatening to withdraw “support” from suppliers who do not agree to price cuts of up to 15% according to the Financial Times. This month the engineering company wrote to the majority of its 700 global aerospace suppliers demanding price cuts of between 5 and 15%, even as it slashes orders to adjust to reduced demand. The letter came days before RollsRoyce on Thursday announced plans to axe 9,000 jobs.
Sky News reported that Virgin Atlantic’s banks have hired Deloitte to advise them on their exposure to the troubled carrier. The company, which recently announced that it was making almost a third of its workforce redundant, has also placed insolvency practitioners on standby to handle an administration process, if one proves necessary.
Financial Services & Real Estate
Citigroup’s investment banking head, Paco Ybarra, warned the benefits to banks of having their staff work from home will “erode over time”. “I am very cautious about this,” Mr Ybarra said in an interview with the Financial Times. He argued that banks have been able to make the most of remote working because of “capital that we have accumulated before” when people met face-to-face. “At some point, you would see depreciation of that capital and then you would start seeing problems,” he added, pointing potential difficulties with on-the-job learning and people’s ability to relate to each other.
The Financial Times spoke to Naïm Abou-Jaoudé, chief executive of Candriam, one of Europe’s fastest-growing fund managers about coronavirus. The pandemic, he says, “is a wake-up call, a unique opportunity for all of us to rethink our societies and economies to make them more inclusive.” Abou-Jaoudé wants a new social contract, modelled on President Franklin Roosevelt’s New Deal, “where companies are granted state support with green strings attached.”
IN THE NEWS
Dominic Cummings acted like any father, insists Boris Johnson – The Times
Primary schools set to open next week, Johnson confirms – The Times
‘Project Birch’ plan to bail out stricken UK companies – Financial Times
Business urged to avoid ‘destructive’ Covid-19 disputes – Financial Times
Lockdown restrictions to be eased allowing more social contact and shops to reopen – The Telegraph