Major US stimulus
$2 trillion package
At the time of going to press, Washington had just reached agreement on a $2 trillion (£1.7 trillion) fiscal stimulus package to safeguard the US economy. This followed on from a pledge by the US's Federal Reserve on Monday 23 March to buy an unlimited number of treasury bonds. The Federal Open Market Committee (FOMC) will continue with its asset-purchasing scheme “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy”. The Fed is also buying up corporate bonds.
Airlines slashing capacity
Industry under pressure
Singapore Airlines (SIA) is cutting 96 per cent of its capacity that had originally been scheduled up to the end of April, because of the further tightening of border controls across the globe to tackle the coronavirus outbreak. This means the grounding of around 138 SIA and SilkAir aircraft, out of a total fleet of 147 – “amid the greatest challenge that the SIA group has faced in its existence”. SIA is not alone – operators around the world are under immense strain. Wizz Air (WIZZ) said on 23 March that it had grounded 85 per cent of its fleet.
Restaurants shutting down
One of many sectors hit by new rules
Fulham Shore (FUL) announced on Monday, ahead of the government’s request that all non-essential shops close, that the majority of its Franco Manca and The Real Greek restaurants had shut their doors to the public. The group said that it was reducing its costs to a minimum, including its outlay on staff and property, and has brought down its capital expenditure. Fulham Shore also noted that the government’s present relief plans will not pay out for some weeks, but added that it had “sufficient undrawn facilities available to manage the business through any anticipated period of closure”.
Primark stores close
Significant lost sales
Associated British Foods (ABF) has closed all of its 376 Primark stores in 12 countries until further notice – representing a loss of £650m of net sales per month. The group currently expects to recover around half of total operating costs. To manage Primark stock, it has told suppliers that it will stop placing new orders. The group had net cash of £800m at the half year and a revolving credit facility of “some £1.1bn” – giving total available liquidity of £1.9bn. ABF reiterated that, in aggregate, it has not seen a material impact on its sugar, grocery, ingredients and agriculture businesses.
Contactless limit raised
Preventing disease spread
UK Finance has announced that the limit for contactless card payments will rise from £30 to £45, with a national roll-out starting on 1 April. The changes – which had already been under consideration – were accelerated to help respond to the coronavirus outbreak, helping customers who would prefer to pay without using cash or chip and pin. The decision was taken following consultation between the retail sector and the payments industry. It follows on from similar increases elsewhere in other European countries in recent days.
Olympic Games delayed
Pushed to 2021
After days – even weeks – of speculation and anticipation, Japan and the International Olympic Committee have agreed to postpone the 2020 Olympic and Paralympic summer games until next year. The move was perhaps inevitable – with would-be athletic participants struggling to train during mandatory lockdowns, and spectators unable to know for sure whether they would be able to travel to the games; not to mention general concerns about the health and wellbeing of all participants. The games constituted the latest – and arguably the most major – event to be delayed or cancelled as a consequence of the coronavirus pandemic, with implications for sectors from the likes of insurance to advertising.
Shell freezes buyback
Cuts spending
Royal Dutch Shell (RDSB) has frozen its share buyback programme and will cut spending by around $5bn this year in response to the Covid-19 crisis. The supermajor also said it would cut its operating costs by $3bn-$4bn over the next 12 months, compared with 2019, when its total operating cost was $37.9bn. Shell is almost two-thirds of the way through its $25bn buyback programme, which it said would be finished once conditions improve. Chief executive Ben van Beurden said the spending cuts would protect staff and customers.
The coronavirus outbreak has already hit the UK economy harder than at any time since comparable data was first available more than two decades ago.
That’s according to the latest IHS Markit/CIPS Flash UK Composite Purchasing Managers Index (PMI), which was compiled between 12-20 March 2020.
The composite output index gave a reading of 37.1 for March – a survey-record low, and down from the final reading of 53 given for February. Anything below 50 signals a contraction.
A rapid fall in business activity across the service economy drove the overall downturn.
