By Powerscourt on 02/08/2020
Powerscourt Coronavirus Briefing – 02 August 2020
ANALYSIS
The brakes have been squeezed on the lifting of lockdown – this week we’ll get a better sense of how hard the brakes have been applied to the economy.
The CBI has gone first today with its monthly Growth Indicator to 15 July. The decline in private activity is slowing and the Index’s participants expect further slowing of the decline in distribution, consumer services, and business & professional services in months to come.
Manufacturers anticipate growth, marking the first time that expectations have been positive since lockdown measures were introduced. The CBI’s lead Economist Alpesh Paleja says the findings represent a turning point for the economy but calls for more immediate direct support for firms from government.
BP will reveal on Tuesday whether there will be a dividend for the quarter. The company maintained the first quarter payment in April, but the City is not taking this one for granted, especially after Shell dropped its dividend some months ago and last week reported the largest quarterly loss in its long history.
Thursday will bring the latest Bank of England interest rate decision. Expectations are for a ‘wait and see’ approach with no change to rates. Chief Economist Andy Haldane has said that the economy is experiencing a ‘v-shaped’ recovery but other MPC colleagues are more cautious.
In the US, employment data for July will be scrutinized for the impact of an uptick in Coronavirus cases. Each side in the election campaign will no doubt seek ways to weaponise the figures.
Final numbers for JP Morgan’s Global Manufacturing Purchasing Managers’ Index for July may also be revealing given that the preliminary numbers were announced on 24 July before the announcement of new spikes.
Finally, as the UK government encourages more office workers to consider going back to the workplace, London’s TechHub, a shared workspace and technology industry promoter, has gone into administration. A key player in the creation of Tech City, its tenants raised more than $1bn in funding over the years and helped drive rents in Shoreditch sky-high. Since the pandemic, those tenants have been happy to work from home and TechHub’s landlord was not prepared to negotiate a new rent deal.
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WHAT ARE COMPANIES SAYING?
Industrials & Transport
IAG
British Airways pilots have voted to accept a deal with the company which will see some job losses and pay cuts, in order to avoid more redundancies. British Airline Pilots Association (Balpa) said that there will around 270 compulsory redundancies, as well as temporary pay cuts starting at 20% but reducing over the next two years. BA has proposed 12,000 redundancies, including over 1200 pilots. “Our members have made a pragmatic decision in the circumstances, but the fact that we were unable to persuade BA to avoid all compulsory redundancies is bitterly disappointing,” said Balpa general secretary Brian Strutton.
Financials & Real Estate
Hammerson
Sky News reported yesterday afternoon that the owner of the Bullring in Birmingham is seeking to raise £500-£600m through a rights issue. The company is also understood to be in detailed talks with APG, a Dutch pension fund, about buying its 50% stake in VIA Outlets, which owns shopping destinations in European cities such as Amsterdam, Gothenburg and Prague. The report suggests that in total, the rights issue and disposal could generate proceeds of more than £800.
Canary Wharf Group
The owner of Canary Wharf has asked its own staff to return to offices amid fears that the success of remote working more widely could have a huge impact on the financial services hub. Howard Dauber, Strategy Director at CWG, said to the Telegraph that “We have decided to ask our own office-based staff to plan their return from this week, unless they have particular problems such as shielding or childcare”. Their concerns come as the financial services businesses they provide offices for are appearing to seem reluctant to bring staff back to the office. HSBC has said that just 20pc of its 10,000 London employees will be returning to its headquarters from September, while Thomas Gottstein, the Credit Suisse chief, said 80pc of the Swiss bank’s workforce continued to work from home.
TMT
Apple
The Sunday Times reports that the tech giant is pushing for significant rent reductions of up to 50% at its 38 UK stores. It has also asked landlords for a rent free period, in return for an extension of current leases by a few years. Despite all its stores being forced to close as a result of the pandemic, Apple reported last week that second-quarter sales jumped by 11% to a record $59.7bn (£45.6bn). The company posted a profit of $55.3bn last year. Apple is seeking to bring its rents into line with other retailers, many of which are benefiting from cut-price deals as landlords struggle to keep their shopping centres occupied.
IN THE NEWS
‘The age of presenteeism is over,’ declares boss of PwC – Sunday Times
Coronavirus: can Britain learn from the Swedish model? – Sunday Times
Exclusive: Top WHO disease detective warns against return to national lockdowns – Telegraph
