Powerscourt

By Powerscourt on 13/12/2020

Powerscourt Coronavirus Briefing – 13 December 2020

ANALYSIS

With a no-deal Brexit pretty much agreed, 2021 could give 2020 a run for its money.

One year to the day since Boris Johnson was elected UK Prime Minister, he faces the likelihood of a no-deal exit from the EU, angry Tory MPs, and a questionable response to an international pandemic as his achievements so far.

With the Brexit deadline looming and no joy on an EU trade deal, it’s likely the effects of a no-deal Brexit will not only long outlast the impact of the coronavirus pandemic, but also be amplified by it.

Businesses already dealing with losses from temporary closures and interrupted supply chains will now need to get to grips with added changes to things like declarations and tariffs, not to mention a spike in prices of goods imported from the EU. Not an exciting prospect for those dealing with sick loved ones, laid-off staff and lower demand for their products and services.

We will find out today if the talks between the UK and EU will continue or not but judging by a statement released by a government source last night it’s not looking probable. The statement said “Talks are continuing overnight, but as things stand the offer on the table from the EU remains unacceptable. The Prime Minister will leave no stone unturned, but he is absolutely clear: any agreement must be fair and respect the fundamental position that the UK will be a sovereign nation in three weeks’ time.”

The prospect of entering 2021 with a double crisis has caused anger amongst Johnson’s MPs, with some calling for the talks to resume no matter what. Considering the PM’s arguably lacklustre response to the Covid-19 outbreak, there is fear that come January 1st there will be no robust strategy to minimise the damage from a no-deal Brexit, regardless of how much of a sovereign nation the UK is.

In the US, Pfizer is to start shipping its vaccine across the country today – the first dose could be administered as early as tomorrow.

In Asia, South Korea is in the midst of its third wave of Covid-19 cases with no sign of a curb anytime soon. South Korea which impressed the world with its speedy action at the beginning of the outbreak, has now reported a second day in a row of record high new cases. The country had great success in containing and flattening the outbreak at first, however cases have been slowly rising over the last week with a steep spike in the last few days, reporting 1,030 new cases yesterday.

Prime Minister Chung Sye-kyun said yesterday that if the spread continues, further social distancing rules will be inevitable, signalling the possibility of the country’s first lockdown.

 

WHAT ARE COMPANIES SAYING?

Consumer & Retail

AstraZeneca plc
The British-Swedish multinational pharmaceutical and biopharmaceutical company has seized on its vaccine success to seal a $39bn (£31.5bn) acquisition of Alexion Pharmaceuticals, a specialist tackling devastating rare diseases caused by rogue immune responses. More than half of the purchase price will be paid in shares, allowing Astra to capitalise on a rise of more than 30pc in its market valuation since its shares nosedived early in the pandemic. The FTSE 100 firm, which has partnered with the University of Oxford to develop a prospective Covid-19 vaccine, will hand Alexion investors $60 in cash and 2.12 AstraZeneca shares for every Alexion share they hold, valuing the company at $175 a share.

AstraZeneca plc
The British-Swedish multinational pharmaceutical and biopharmaceutical company’s acquisition of Alexion Pharmaceuticals follows months of speculation that AstraZeneca’s Soriot was hunting for a large target, to take advantage of the firm’s soaring share price that has seen the drugmaker become one of the largest listed businesses on the UK’s blue chip index. It’s the largest deal for AstraZeneca since it was founded in a 1999 combination of British and Swedish companies, and would entrench its position among the world’s 10 biggest drugmakers. It’s also the biggest pharmaceutical and biotechnology takeover this year, as well as the fourth-largest transaction globally across all sectors, according to data compiled by Bloomberg.

AMC Entertainment Holdings
The world’s largest movie theatre operator has secured $100m (£76m) in emergency funds – but warned the money will only help it through another month. The firm, owner of the UK’s Odeon Cinemas, said attendance has dropped 92% in the US and 86% internationally. It is burning through $125m a month as concerns about Covid-19 shut some cinemas and keep audiences away. Even after reopening, it said the growth of streaming posed a challenge. AMC said to remain “viable” through 2021 it would need to raise at least $750m – and possibly more. The $100m emergency loan comes from Mudrick Capital Management, a US-based investor focused on distressed debt. The company already holds some of AMC’s roughly $5.5bn in debt, $100m of which Mudrick will convert into company shares as part of the deal.

 

Financial & Real Estate 

BDO Global
The international network of public accounting, tax, consulting and business advisory firms has done a U-turn and will now pay back £4.1m of furlough money after uproar over payouts to its partners. Paul Eagland, the managing partner, said the board had a change of heart after seeing the reaction. “I don’t want this to fester,” he said. “The money will go back to HMRC by Christmas.” BDO took £4.1m of cash from the coronavirus job retention scheme early in the pandemic, arguing that it had helped save 700 jobs. The U-turn will mean that BDO partners will, on average, have their profit share cut by £15,500 to just over £502,000, with the most senior figures, such as Eagland, taking a bigger pay cut. While most of the profit share has already been paid, some is deferred until next year.

Bank of England
The central bank of the United Kingdom stated yesterday that UK banks are prepared for serious economic shocks and can continue to lend during the pandemic. Banks have built up strong capital buffers since the financial crisis more than a decade ago, the Bank said in its latest financial stability report. Most risks to the UK’s financial stability posed by a no-deal Brexit have been mitigated, it said. But it warned that “some disruption to financial services could arise”. Businesses, with the support of government guarantees, have borrowed £80bn so far this year, compared with £20bn by this time last year, according to the Bank. It said the major UK banks could absorb credit losses in the order of £200bn, but that would involve “incredibly severe” shocks that were unlikely to occur.

 

IN THE NEWS

Covid: More tier 3 areas to get mass testing from Monday – BBC

Why London could be facing Tier 3 lockdown restrictions – The Telegraph

NHS bosses: Relaxing Covid rules at Christmas will cause third wave – The Times




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