BP job cuts
Weak oil demand
Oil giant BP (BP.) is to cut 10,000 jobs after the oil price plunged amid the coronavirus pandemic. Chief executive Bernard Looney noted in a message to staff that the group was spending much more than it makes. Its net debt thus rose by $6bn (£4.7bn) during the first quarter. He added that BP is aiming to bring down its capital expenditure by a quarter this year. But it currently costs $22bn per year to run the company, with around $8bn in people costs. The planned job cuts are largely office-based.
Construction decline eases
But still downbeat
UK construction companies declined at a softer rate in May than they did during the previous month, but still saw a “sustained downturn in business activity”, according to the latest IHS Markit/CIPS purchasing managers' index (PMI). A reading of 28.9 in May reflected a significant improvement from 8.2 in April – but still represented the second-lowest index figure since February 2009. Any number below 50 implies a contraction in output. Looking ahead, the index providers said that construction companies remain downbeat about their prospects for the next year.
Restaurant Group slims down
125 outlets
The Restaurant Group (RTN) is to axe a chunk of its Frankie & Benny’s stores under plans to trim down its portfolio by 125 outlets and seek rent negotiations elsewhere. It will use a company voluntary arrangement (CVA) to reshape its portfolio, having previously earmarked 90 sites for closure by the end of next year. A review of its estate has identified 210 sites that are underperforming, on poor lease terms, not expected to produce profitable returns, or are affected by a combination of the three factors.
Consumer spending drops
26.7 per cent drop
Consumer spending in the UK fell by more than a quarter (26.7 per cent) in May, according to Barclaycard, but retailers started to see signs of recovery. Spending on essential items improved thanks to warmer weather and VE Day. Specialist food and drink outlets saw the biggest rise since restrictions began. Non-essential spending fell by more than a third year on year, with a 44.5 per cent decline in department stores, but the contraction was less serious than in April. Barclaycard is responsible for nearly half of the nation’s credit and debit card transactions.
Retail sales decline
Better than April
Meanwhile, UK retail sales fell by 5.9 per cent in May. This was the second-worst decline recorded since the British Retail Consortium’s (BRC) monitor started in 1995 – but constituted an improvement on April. Over a three-month period, in-store sales of non-food items fell by a half. By comparison, food sales rose by 5.6 per cent – helped by consumers going to the park when the sun came out. Meanwhile, e-commerce gathered speed, with online non-food sales soaring by 60.2 per cent in May – up from just 4.4 per cent a year earlier.
Astra merger report
Suggesting Gilead tie-up
A weekend report from Bloomberg said that AstraZeneca (AZN) – the UK’s largest listed company – had informally contacted American drug-maker Gilead (US:GILD) about a potential merger last month. The report said that, according to people familiar with the situation, Gilead was not currently interested in a tie-up with another big pharma group, and that the two companies were not in formal talks. The Times subsequently reported that sources had “talked down the prospect of any AstraZeneca interest”.
Huawei’s media campaign
Tensions persist
Chinese group Huawei has launched a media campaign in the UK – saying via an open letter that it is “as committed as ever” to providing “the best equipment”, with new 5G and full-fibre broadband networks helping to improve poor connections. This came after The Sunday Times reported that China’s ambassador to the UK had privately told business leaders that abandoning Huawei could undermine Chinese companies’ involvement in nuclear power plants, as well as the HS2 high-speed rail network. The Telegraph reported that HSBC (HSBA) is concerned about reprisals if the British government bans Huawei from 5G networks.
Average UK prices slipped 0.2 per cent in May on a monthly basis, landing at £236,808, according to the Halifax House Price Index. This reflected a slight improvement on the 0.6 per cent contraction seen in April.
On an annual basis, house prices were 2.6 per cent higher. Limited transaction numbers mean that it is difficult to calculate these figures – and Halifax notes that “increased volatility is to be expected”.
Mid-month lockdown relaxations led to some “advance indicators” of increasing buyer and seller interest.
