Skip to main content

UK Business Live: Markets slide as UK banks cancel dividends and factories slump - business live

Sarah Butler

Sarah Butler
M&S is offering retail staff who carry on working during coronavirus outbreak a 15% bonus.
It says that taking furlough is voluntary, so those with caring commitments or who are feeling more vulnerable are able to stay at home. Any staff member who is furloughed will do so on full pay.
Store staff also being offered personal plastic face shields which they say are better than masks as they can be easily cleaned and don’t need to be adjusted (which can lead to face touching.

In these extraordinary times, the Guardian’s editorial independence has never been more important. Because no one sets our agenda, or edits our editor, we can keep delivering quality, trustworthy, fact-checked journalism each and every day. Free from commercial or political bias, we can report fearlessly on world events and challenge those in power.
Your support protects the Guardian’s independence. We believe every one of us deserves equal access to accurate news and calm explanation. No matter how unpredictable the future feels, we will remain with you, delivering high quality news so we can all make critical decisions about our lives, health and security – based on fact, not fiction.
For as little as $1, you can support us, and it only takes a minute. Thank you.

Economists are alarmed by today’s UK manufacturing PMI report. Here’s some reaction:

Jeremy Thomson Cook, Chief Economist at Equals:

“The UK manufacturing sector has essentially come to a standstill. The shuttering of businesses and the complete dissolution of supply chains means that the sector that accounts for around 1/7th of the UK economy is effectively closed for business. While new orders, as well as delivery times, can reverse quickly as businesses rebuild inventories, the worst decline in employment since July 2009 shows that a recovery will not be quite as instantaneous.”
“There is optimism amongst businesses that output will be higher in a year’s time, which the nation will certainly be hoping is the case.”

Seamus Nevin, Chief Economist at Make UK

“Today may be April Fool’s Day but this result is no joke. A PMI score of 47.8 amidst the ongoing Covid19 outbreak is a sign of just how hard manufacturers have been hit.
“Many firms have had to shut and lots of those that remain open have seen orders or output suffer. Others have switched to making products that are vital to the national attempt to stop the spread of the virus; a testament to why backing manufacturing is so important.
“At the start of this year manufacturing companies reported unprecedented optimism about investment and trade but that had all been swept away by current events. With estimates suggesting up to a fifth of smaller firms could go out of business in the next few months Coronavirus has highlighted the need to maintain and develop our domestic manufacturing base. The Chancellor has rightly intervened to help but even still costs are going up. A 6.2% increase in the national living wage came into effect this morning. With expectations of further restrictions and economic disruption to come Business optimism is that a record low and may continue to worsen in the months ahead”

Neil Birrell, Chief Investment Officer at Premier Miton.

“The economic data coming out of Europe this morning is not comforting, but that’s no surprise. Confidence about the future in Italy and Spain sank to levels not seen before, suggesting worse is to come.
The UK, France and Germany showed similar traits. Equity markets in Europe will be under pressure, compounded by the UK banking sector cancelling dividends.”

Frederik Ducrozet of Pictet Asset Management flags up that the headline PMI number is flattered by delivery problems:

Frederik Ducrozet (@fwred)
Forget about manufacturing PMI for a while indeed. Headline numbers are overstated due to explosion in delivery times. And when the outlook finally improves, shorter delivery times will weigh on the PMI.
April 1, 2020

Details from the game CluedoC1BDR6 Details from the game Cluedo
Manufacturers of puzzles, board games and educational toys should be enjoying a surge in demand.
Sales has soared last month, as people try to enjoy home confinement as best they can (nothing passes the time like a spirited row over who biffed Dr Black in the lounge with the candlestick)
My colleague Sarah Butler reports:
Sales of boardgames and puzzles soared 240% during the lockdown as Brits turned to old favourites including Monopoly, Scrabble, Cluedo while stuck at home according to data from market research firm NPD Group.
Monopoly Classic was the best selling toy with card game Dobble at number three but Lego’s complex construction kits of cars such as a Bugatti and a Land Rover Defender were also among the top-selling toys suggesting that adults were also looking for entertainment to while away the hours.
As parents struggled to entertain kids with something at least partly educational, sales of art and craft gear nearly doubled with slime and dough kits on the shopping list while building set sales were up 59%.
UK toy sales
Photograph: NPD Group

Alarmingly, some UK companies are at risk of collapse because they cannot access the government’s emergency support measures.
My colleague Jasper Jolly explains:
Almost a fifth of small businesses are at risk of collapsing within the next month as they struggle to secure emergency cash meant to support them through the coronavirus lockdown, according to research by an accountancy network.
The chancellor, Rishi Sunak, has pledged unprecedented aid to companies to try to cushion the blow from much of the economy shutting down but businesses and politicians have raised concerns that there are gaps in the schemes.
Some 18% of small and medium-sized enterprises (SMEs) either probably or definitely will not be able to obtain additional cash from the government to survive for a four-week period, according to the Corporate Finance Network.
Its accountancy firm members estimated that almost a third of their 13,000 small-company clients from around the UK would be unable to acquire the cash needed to ride out an extended, three-month lockdown.....

Despite the government’s lockdown, some companies are still encouraging workers into the office.
And the unions aren’t happy, and are demanding much better protection for those who can’t work from home.
TUC general secretary Frances O’Grady fears that some are being exposed to unnecessary Covid-19 risk because their employers are not putting adequate safety measures in place.
The TUC is calling for:
  • Strong new rules from government on the safety measures employers should put in place
  • Every employer that expects workers to come in to work to complete a full formal risk assessment, following government guidance and with the involvement of their staff unions.
  • A new enforcement body, involving employers, unions and the Health and Safety Executive. This body would have the power to issue enforcement notices for immediate compliance and to shut down workplaces if employers fail to comply. Similar arrangements are already in place in Wales, Northern Ireland and Scotland.
  • Protection for workers who refuse to go to work during this period because they are genuinely afraid that they’re being put at avoidable Covid-19 risk

Sam Tombs of Pantheon Economics wins today’s Spotters Prize:
Samuel Tombs (@samueltombs)
Responses to Markit's manufacturing survey received after March 20, when schools were shut and the lockdown began, were unsurprisingly much weaker than those between March 12 and 20 (the dates for the flash reading), and point to a huge 7% slump in manufacturing output:
April 1, 2020

March was grim for UK factories (and their counterparts around the world), but April will surely be worse.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, explains:
“With supply chains crumbling around the world, we can only expect a worsening outlook next month as increasingly necessary lockdown measures squeeze manufacturing production.
Only creative and agile thinking, new products and approaches will see the sector through the turbulence ahead.”

UK factories cut jobs at fastest rate since 2009

More bad news. UK factories are cutting jobs at the fastest rate since the great recession more than a decade ago.
Manufacturers have reported that production contracted sharply last month.
Output and new orders both fell at the fastest rate since July 2012. Factories also suffered transport delays and shortages of raw materials, due to global efforts to combat Covid-19.
Data firm Markit, which compiled the report, says bosses are their most pessimistic since their survey began 28 years ago.
The downturns in output and new orders were widespread, with contractions seen across the consumer, intermediate and investment goods sub-industries.
Manufacturers reported that disruption resulting from the COVID-19 outbreak, lower market confidence and company shutdowns had all contributed to the drops in production and new business. Business sentiment was also affected, falling to a series-record low.
With demand slumping at home, and abroad, many customers cancelled orders. And this has led to sharp job losses.
Markit says:
Employment fell for the eleventh time in the past 12 months in March, and at the fastest rate since July 2009. Where job losses were reported, these were linked to lower levels of production and new orders, in many cases due to the outbreak of COVID-19. Redundancies, workforce restructuring, natural wastage and only replacing essential positions all contributed to lower staff headcount.
This dragged Markit’s UK manufacturing PMI down to a three-month low of 47.8 (showing a contraction).
UK factory PMI
UK factory PMI Photograph: IHS Markit
Confusingly, the real picture is probably worse, as supplier delays and supply shortages boost the PMI (they normally indicate strong economic demand).

UK banks may have acted together last night, but they did so under duress.
City regulators effectively forced the banks to scrap dividends, to strengthen their finances.
As The Times puts it:
The co-ordinated action came after the Prudential Regulation Authority gave banks an 8pm deadline to agree to cancel dividend payments and share buybacks and to make a statement by 9pm. If they did not do so, the PRA warned that it could use its supervisory powers to force banks to comply.

Eurozone factories slash jobs as manufacturing output slumps

Newsflash: European factories had a torrid time in March, particularly in Italy, Greece and France.
Manufacturers have reported that output and new orders slumped last month, due to the impact of Covid-19 shutdowns, forcing a surge in job cuts.
This dragged the Eurozone manufacturing PMI (a survey of purchasing managers) down to just 44.5, from 49.2 in February.
Eurozone manufacturing PMI, March 2020
Photograph: IHS Markit
That’s shows a very sharp contraction (50=stagnation), and is the lowest reading since 2012. It’s also worse than last week’s ‘flash’ reading, showing that conditions worsened during last month.
Manufacturing output, new orders and exports all fell at the fastest rate since the spring of 2009 (when the global economy was in recession).
Markit adds that this forced many bosses to lay staff off:
Manufacturers also cut their employment levels over the month, with the net reduction in staffing numbers the sharpest recorded by the survey in over a decade. Job losses were especially acute in Austria, Germany and Ireland.
Eurozone manufacturing PMI
Photograph: Markit 


Popular posts from this blog

Analysis | The Cybersecurity 202: How the shutdown could make it harder for the government to retain cybersecurity talent

By Joseph Marks 13-17 minutes THE KEY President Trump delivers an address about border security amid a partial government shutdown on Jan. 8. (Carolyn Kaster/AP) The partial government shutdown that's now in its 18th day is putting key cyber policy priorities on hold and leaving vital operations to a bare bones staff. But the far greater long-term danger may be the blow to government cyber defenders' morale, former officials warn. With the prospect of better pay and greater job security in the private sector, more government cyber operators are likely to decamp to industry, those former officials tell me, and the smartest cybersecurity graduates will look to industry rather than government to hone their skills. That’s especially dangerous, they say, considering the government’s struggle to recruit and retain skilled workers amid a nationwide shortage of cybersecurity talent. About 20 percent of staffers are furloughed at the De

Democrats call for investigation into Trump’s iPhone use after a report that China is listening:Analysis | The Daily 202 I The Washington Post. By James Hohmann _________________________________________________________________________________ President Trump and Chinese President Xi Jinping visit the Great Hall of the People in Beijing last November. (Andrew Harnik/AP) With Breanne Deppisch and Joanie Greve THE BIG IDEA: If Democrats win the House in two weeks, it’s a safe bet that one of the oversight hearings they schedule for early next year would focus on President Trump’s use of unsecured cellphones. The matter would not likely be pursued with anywhere near the gusto that congressional Republicans investigated Hillary Clinton’s use of a private email server during her time as secretary of state. Leaders of the minority party have higher priorities . But Democratic lawmakers made clear Thursday morning that they will not ignore a New York Times report that Trump has refused to stop using iPhones in the White House, despite repeated warnings from U.S. intelligence offici

RTTNews: Morning Market Briefing.-Weekly Jobless Claims Edge Down To 444,000. May 13th 2010

Morning Market Briefing Thu May 13 09:01 2010   Commentary May 13, 2010 Stocks Poised For Lackluster Open Amid Mixed Market Sentiment - U.S. Commentary Stocks are on pace for a mixed start to Thursday's session, as a mostly upbeat jobs report continued to relieve the markets while some consternation regarding the European debt crisis remained on traders' minds. The major index futures are little changed, with the Dow futures down by 4 points. Full Article Economic News May 13, 2010 Weekly Jobless Claims Edge Down To 444,000 First-time claims for unemployment benefits showed another modest decrease in the week ended May 8th, according to a report released by the Labor Department on Thursday, although the number of claims exceeded estimates due to an upward revision to the previous week's data. Full Article May 13, 2010 Malaysia's Decade High Growth Triggers Policy Tightening Malaysia's economy grew at the fastest pace in a decade in