By Powerscourt on 21/10/2020
Powerscourt Coronavirus Briefing – 21 October 2020
Coronavirus has seriously damaged the relationships between UK’s Westminster government and its nations and regions.
Resentment about the way that regions outside the South East are treated by central government has bubbled under for decades but has found a new focus in the growing rebellion led by Andy Burnham, the Mayor of Manchester, now dubbed “King of the North” by his social media followers.
After a failure to agree a financial package following days of horse-trading, the government unilaterally put Manchester, the commercial capital of the North, into the Tier 3 category, the harshest level of restriction. The move enraged and apparently surprised Burnham, who learned of the decision when a colleague handed him a mobile phone with a headline in the middle of a press conference.
This is just one flashpoint which shows how poor the relationship between Westminster and the regions of the UK has become due to the handling of coronavirus. The Financial Times asks today if the UK as a political unit can survive coronavirus, highlighting numerous instances of growing frictions between central government and the nations and regions due to inconsistency in rules, failure to consult local leaders and the appearance of high-handedness from central government.
Even London is at odds with the government. Mayor Sadiq Khan is seeking a £5 billion settlement to bail out Transport for London, the body which controls the London tube, whose passenger numbers have nosedived since March. Transport Secretary Grant Shapps has warned that any bail-out of Transport for London is dependent on fares being raised in the capital.
Tussles between central government and regions are not isolated to the UK. Madrid, one of the worst-hit cities in Europe, has also become a crucible of resentment against the Spanish government after a state of emergency was imposed on the region.
While the West remains mired in political tussles, several of the world’s faster-growing countries are planning the rollout of immunisation programmes.
A Chinese city, Shaoxing, will offer experimental coronavirus vaccines to its residents, as China broadens an emergency use programme to people in non-priority groups, the city’s health commission said on Tuesday.
Brazil has agreed to use a Chinese-made coronavirus vaccine as part of a national immunisation programme, the BBC reported. If approved by Brazil’s health regulator, CoronaVac – developed by Chinese company Sinovac Biotech – will be one of two vaccines included in Brazil’s immunisation programme, one of the first such planned immunisation programmes.
Not to be outdone, the UK government is backing a project led by Imperial College London which aims to be the first to deliberately infect trial subjects with COVID-19. These sorts of trials are a faster way to test vaccines because you don’t need to wait for people to become infected naturally.
It has become one of the truisms of coronavirus that winners of the lockdown economy were those companies who were already adapted to a world of virtual living, something borne out by the astonishing rises in the share prices of companies which provide online entertainment.
Now Netflix, the poster child for this trend, which benefited hugely from an uptick in subscriber numbers due to restrictions on social lives, is starting to see the shine come off this effect.
Netflix said on Tuesday it had added just 2.2 million subscribers in its third quarter, significantly below the double digit figures it added in the first two quarters of the year, and warned that an expected global recovery in 2021 would likely curb its subscriber growth. While subscriber growth slows, Netflix also faces the prospect that all-important content, the fuel for its extraordinary success, will dry up due to restrictions on production imposed by the crisis.
The figures sent shares tumbling as much as 6% after market.
Asian shares were on the rise again into Wednesday amid renewed hopes for a new round of US stimulus.
WHAT ARE COMPANIES SAYING?
The largest primary silver producer and Mexico’s largest gold producer said in its third quarter production report today that silver production remains in the range of 51 to 56 moz but that gold production is now expected to come in a slightly lower range as a result of the reduced number of mine operators at Herradura due to Covid-19 preventative measures. The company said that it continued to closely monitor the virus and that testing and contract tracing have proven to be successful measures so far. CEO Octavio Alvidrez said “”The health and safety of our people remains our number one priority, in particular during these challenging times in the face of a global pandemic.”
The FTSE 100 miner said in it’s Q3 production report that copper production was in line with expectation for the quarter at 169,600 tonnes, down 4.6% on the previous quarter due to major maintenance work at Los Pelambres. Gold production was down 16.7% against the previous quarter at 38,300 ounces. The company said that Covid-19 infection sin Chile peaked in June but have since fallen to much lower levels and remain stable. It said that while government restrictions were being eased the company was maintaining it’s Covid-19 protocols and would continue to do so for the foreseeable future. CEO Ivan Arriagada said that “Although the rate of infections of COVID-19 in Chile fell during this quarter, we remain vigilant and continue to apply all the health protocols we have put in place.”
Financials & Real Estate
Warehouse and industrial property owner Segro said in a trading update that structural trends within their sector had fuelled demand and outweighed the negative economic impacts of the pandemic. The company signed contracts worth £15.8 million of new headline rent during Q3, compared with £15.3 million for the same period in 2019. The statement also said that the company has completed 695,800 sq m of new developments in 2020, slightly down on last year, which are capable of generating £38 million of headline rent, up on last year. Vacancy rate remains stable at 5.2% and rental collection was strong in the period at 85% of total billed, with a further 13% deferred in agreement with customers.
The high street lender said in a trading update today that it had seen a 1 per cent year-on-year rise in lending for the third quarter and a 10% rise in deposits. The company said the rise was driven by continued government-supported business loans for SMEs, having handed out more than £1.3bn through the Bounce Back Loans scheme to more than 33,000 customers. The bank also highlighted that it’s capital plus MREL remained above the minimum requirement but is below the firms MREL requirements plus buffers. “In a challenging environment, Metro Bank has delivered a good performance with loan growth reflecting our support for government-backed lending schemes,” said chief executive Daniel Frumkin.
Retail & Consumer
The betting and gaming business said in it’s Third Quarter update that performance for the period had been “robust” following the acceleration of the return of live sport and the reopening of the retail estate. Despite seeing online revenue grow by 4% and US revenue by 10%, the group saw overall revenue fall by 9% in the period. The update said that retail had delivered a “good performance” but had been impacted by local lockdowns and stricter conditions in Scotland. The company said that on average the closure of 100 shops for four weeks would reduce EBITDA by 2%, and that at the current time c.10% of its retail estate was located in regions where the Covid-19 alert level was ‘very high’ as defined by the government. The company did also highlight that it is now live in 14 US states, with a new deal with ESPN extending its media digital presence.
The consumer food and drink giant has said that it expects full-year growth to come in at the top of its guided range due to strong household demand for pet food, convenience foods and big-name brands during the pandemic. It saw organic sales growth of 3.5% in the first nine months of the year thanks to high demand for products like Maggi noodles, DiGiorno frozen pizza and Purina pet food. It reported that “trusted brands” were faring particularly well in the pandemic, and that it had also seen a robust demand for dietary supplements made by the company’s health science division. CEO Mark Schneider said “our people have acted in a responsible and prompt manner to mitigate the impact of the global pandemic and have adapted quickly to evolving consumer needs.
The video streaming business said in results yesterday that it has seen a significant reduction in subscriber growth compared with the previous quarters, as lockdown life comes to and end. The company added only 2.2m subscribers in Q3, compared with 16m and 10m in the first and second quarters respectively. It also guided that subscriber additions were “likely to be down” in the first half of next year compared with 2020. The company had warned previously that the boost from the pandemic would be temporary, however shares fell 6% on the news. The company also said that its “need for external financing is diminishing”, with revenues up 23% in Q3. It added that it had made good progress on restarting production.
Leading global cyber security firm Avast said in it’s third quarter update that revenue was up 8.6% on an organic basis, and 2.6% at actual rates. For the year so far, this puts revenue at $659.1 million, up 7.3% organic or 1.9% at actual rates. The company reiterated messages from it’s half year results that user and consumer trends had “normalised” with the easing of lockdowns, which has led to Adjusted Revenue percentage growth overtaking Adjusted Billings percentage growth in Q3. It also highlighted that it’s consumer desktop business has continued to perform well and in-line with pre-pandemic levels. CEO Ondrej Vlcek said “the value of Avast’s services and technologies is reflected in the company’s resilient financial performance, which underpins continued investment in our growth and focus on innovation.”
IN THE NEWS
UK government borrowing reaches record in first half of fiscal year – THE FINANCIAL TIMES
Top adviser rejects a nationwide coronavirus circuit-break in boost for PM – THE TIMES
Restaurants to accept business lunches through Covid loophole – THE TELEGRAPH