By Powerscourt on 15/10/2020
Powerscourt Coronavirus Briefing – 15 October 2020
When the UK went into a national lockdown in March, the country was strikingly united in its support for the government, despite entrenched political differences. Shows of national unity, such as the weekly “NHS clap” reflected a spirit of togetherness in the face of national crisis.
Seven months on and after exhausting months of constantly changing rules and deepening economic pain, coronavirus is starting to splinter social and political cohesion on the UK.
The “three tier” coronavirus strategy which the UK government imposed earlier this week, classifying the country’s regions into different levels of coronavirus risk with according restriction levels to curb rising infection rates, is on the point of unravelling. Resentment has grown among leaders in northern England, fuelling threats to defy central government.
The toughest restrictions had been forced onto just one city – Liverpool – with pressure applied on other regional leaders to impose more stringent rules on a local basis. But these leaders, angered by the lack of economic support from central government and the perception of bullying from Westminster, are now in a game of political chicken with Boris Johnson’s government.
There’s no question that Liverpool is facing an acute health crisis, with intensive care beds in the city’s main hospitals almost at capacity due to a surge in coronavirus infection rates. But leaders in the North are angry at the way the issue has been managed and believe the financial support package cobbled together to support people affected by the restrictions doesn’t go far enough.
Andy Burnham, the mayor of Greater Manchester, and leaders of 10 boroughs in the North of England, have said they will resist the government’s attempts to push them to impose the highest state of restrictions on citizens.
Burnham said the government was “passing the buck and passing the bill” to local areas without providing enough economic support. He added: “We are not going to cave in. They will have to impose it.”
Coronavirus is throwing ancient fault lines in the UK into sharper relief: not just the divide between the North and South of England, but between the four nations that make up the union itself.
On Wednesday Northern Ireland announced a four-week lockdown – including the closure of schools for two weeks – while the Welsh first minister Mark Drakesford has demanded that Johnson commit to restricting travel from coronavirus hotspots in England.
Meanwhile London could be heading for a new national lockdown, according to multiple reports on Thursday morning, as virus infection rates climb in the region. Sadiq Khan, the Mayor of London, told health officials in the capital on Wednesday that London would see its threat level escalated within two weeks, according to the Times, with a ban on household mixing likely to be imposed.
Across Europe, economies are beginning to close in on themselves as virus levels surge.
French President Emmanuel Macron has announced a night-time curfew in Paris and eight other cities from Saturday for four weeks, while Germany has announced the closure of bars and restaurants in high risk areas.
Germany, previously thought to have controlled the virus better than most European countries, is seeing infection levels surging, with over 6,000 new cases daily.
A partial shutdown has come into place in the Netherlands, with restaurants closing, while the Czech Republic has shut schools. Ireland has banned household visits from Thursday evening.
Markets have responded to the growing sense of gloom in developed economies: European shares are expected to open lower after Asian shares retreated in early trading.
WHAT ARE COMPANIES SAYING?
Europe’s largest airline Ryanair has released today its revised winter schedule, cutting capacity from 60% to 40% of the previous year. Increased flight restrictions imposed by EU Governments has resulted in weak forward bookings. Despite aiming to maintain up to 65% of its winter route network, flights will run less frequently. If further lockdowns occur this winter, Ryanair’s expected full year traffic of 38m passengers could be revised downwards.
Financials & Real Estate
The bank announced yesterday its third-quarter earnings which exceeded analyst expectations for revenue and profit. Indicating strength and resilience through the coronavirus virus pandemic, companywide revenue grew 30% $10.78 billion.. The firm performed well across its four business segments but results were particularly significant in the trading and asset management division. David Solomon, CEO, said in the release “Our ability to serve clients who are navigating a very uncertain environment drove strong performance across the franchise, building off a strong first half of the year.”
Bank of America Corp
Bank or America reported lower than expected revenue and net interest margins in their third-quarter results. Total revenue dropped 10.8% from a year ago to $20.34 whilst net interest income fell 17% to $10.1 billion. CFO Paul Donofrio said “the past nine months have tested us and I’m proud to say that our teammates have responded extraordinarily well – continuing to deliver for out customers, our communities and our shareholders.”
A disappointing third quarter was reported for Wells Fargo on Wednesday as net interest income fell by 19% to $9.368 billion compared to the previous year. Charles Scharf, CEO commented “the trajectory of the economic recovery remains unclear as the negative impact of COVID continues and further fiscal stimulus is uncertain, but we remain strong with our capital and liquidity levels well above regulatory minimums.”
Retail & Consumer
AO World, a leading European online electrical retailer, reported UK revenue growth of 54%. The growth in demand for online shopping resulting from Covid-19 has resulted in strong sales throughout Q1 and Q2. Revenue in Germany grew significantly by 83% despite the uncertain economic climate. AO Founder and Group Chief Executive John Roberts stated “AO was in good shape coming into this financial year and the global, structural shift in customer behavior to online, accelerated by Covid, emphasised our strengths.”
Domino’s Pizza Group
Domino’s Pizza Group has reported strong Q3 performance with UK & ROI system sales hitting £342.1m, an 18.7% increase from the previous years results. Orders have grown 11.8% with UK online sales up 35.6% The government change of VAT on hot takeaway food in July helped the franchise mitigate costs resulting in significant savings for their customers. Lockdown acclerated digital transformation for the business with online now accounting for 95.1% of all delivery sales.
The British home furnishing retailer has reported a 37% jump in first-quarter sales benefitting from high online demand and successful in-store recovery following the easing of lockdown rules. Digital sales saw a jump of 12% from the previous year indicating the positive impact of people spending “more times in their homes up and down the country” CEO Nick Wilkinson said.
The UK pub group has announced staff lay offs of 2,150 due to stricter government rules within the hospitality industry. Mandatory table service, a 10pm curfew and limits to group sizes has had devastating impact on the ability of the group to continue trading. In the year to the end of October, overall sales hit £821m which was down 30% compared to last year.
Online fashion retailer has reported profits quadrupling after lockdown, having welcomed over three million new customers to their website. Asos made a pre-tax profit of £142 million in the year to the end of August, having increased its global customer base to more than 23.4 million.
Hostelworld, a leading group OTA focused on the hostel market, has seen a modest recovery in domestic bookings in late June. Short haul bookings into Europe have also grown as travel restrictions eased. The business has tracked slightly ahead of the Base Case scenario outlined at the time of equity placing in June.
Nokia announced today an analytics-based thermal detection solution that will help identify potential Covid-19 infections. The solution will provide organisations who operate large facilities with a zero-touch elevated temperature detection solution as well as monitoring mask compliance.
IN THE NEWS
Universities expose uneven playing field on Covid testing – FINANCIAL TIMES
‘Too late’ for half-term coronavirus circuit breaker to work – THE TIMES
London and northern England face harsher Covid restrictions – THE TIMES