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Seven Days: 14 August 2020

A round-up of the biggest business stories of the past week
August 13, 2020 and Alex Janiaud

Gloomy economic data

Technical recession

The UK’s gross domestic product (GDP) is estimated to have fallen by a record 20.4 per cent in the second quarter of 2020, meaning that we are now in a technical recession – entailing two consecutive quarters of contraction. Monthly GDP rose by 8.7 per cent in June, but was still 17.2 per cent below February levels. Separate data from the Office for National Statistics (ONS) showed that the UK lost roughly three-quarter of a million jobs between March and July. The fall across May, June and July was the steepest quarterly drop since the same period in 2009. 

 

Biden names running mate

Kamala Harris on ticket

US democratic presidential candidate Joe Biden has named Kamala Harris as his running mate ahead of this year’s elections. Mr Biden said via Twitter that Senator Harris was “a fearless fighter for the little guy, and one of the country’s finest public servants”. She was elected to the US senate in 2016 and is a former Attorney General of California.The senator, whose parents are of Jamaican and Indian heritage, is the first African-American woman on a main US party’s ticket. Biden and Harris will face President Trump and his VP Mike Pence in November.

 

Superdry secures funding

Shares up

Superdry's (SDRY) shares rose after the clothing retailer announced that it had agreed £70m in funding with lenders HSBC and BNP Paribas, extending its arrangement until 2023. A first-quarter trading update revealed that Superdry had beat its trading expectations with a year-on-year sales decline of 24 per cent, while net cash sat at £57.8m at the start of August, compared with £39.8m in May. Around 95 per cent of Superdry’s stores have reopened after coronavirus prompted mass closures.

 

Used car sales halve

Decline is easing

UK used car sales fell by 48.9 per cent in the second quarter to just 1m transactions, according to the Society of Motor Manufacturers and Traders (SMMT). The pace of this decline eased throughout the period from a peak of -74.2 per cent in April to -17.2 per cent in June. “If we’re to re-energise sales and the fleet renewal needed to drive environmental gains, support will be needed for the broader economy in order to bolster business and consumer confidence,” SMMT chief executive Mike Hawes said.

Government extends bus stimulus

England-only

English bus and tram services will receive an additional £256m funding package from the UK government, taking the total level of support beyond £700m since the coronavirus pandemic struck. Bus operators will get up to £218.4m in backing over the next eight weeks, with rolling funding capped at £27.3m per week thereafter. While the bus network has returned service to over 80 per cent normal levels, passenger numbers remain light. Go-Ahead (GOG) and FirstGroup (FGP) welcomed the funding proposals.

 

Asos upgrades

Fewer returns

Asos’s (ASC) shares rose by as much as a tenth after the clothing retailer upgraded its revenue and profit targets for its full year. Changes in shopping habits during the pandemic, which have included a lower-than-expected rate of product returns, have helped drive up revenues by between 17 and 19 per cent, while pre-tax profits are now expected to sit between £130m and £150m. Asos had expected customers to return to normal levels as lockdown measures eased, but this rate of recovery has not materialised.

 

Frasers delays results

Sports Direct owner

Frasers (FRAS) – which owns Sports Direct – has delayed the publication of its annual results until 20th August. The group said that “due to the undoubted scrutiny of our accounts, management and our auditors RSM will take this extra week to robustly review the final accounts and ensure that all necessary disclosures have been completed”. It added that “for the avoidance of doubt we can confirm there are no significant matters to address outside of normal audit completion procedures and the final accounts disclosure review”. Last year, the group’s FY2019 results were also delayed.

 

July saw record inflows of £362m into ESG equity funds, according to data from global funds network Calastone. The period April to July saw combined total inflows of £1.2bn, equivalent to the entire five-year period since Calastone’s Fund Flow Index (FFI) debuted. 

Calastone noted that ESG equities diverged from equity funds overall in July, which lost £240m. Funds centring on UK stocks were particularly badly hit, with outflows of £377m. 

Conversely, global equity funds saw four of the best eight months on record between April and July – helped by the fact that “ESG funds are overwhelmingly global in nature”.