The Week UK - 14.03.2020

CITY 49

14 March 2020 THE WEEK

Marketssuccumbedtoafull-onpanic

asfearssurroundingthecoronavirus

collidedwithanoilshock,following

thecollapseoftalksbetweenOpecand

Russia.Amidgrowingfearsofglobal

recession,tradersenduredthebiggest

one-daystock-marketfallsince2008.

TheFTSE 100 hasnowlostaquarterof

itsvaluesincethestartoftheyear.The

rushtohavenssawtheyieldontwo-

yearUKgovernmentbondsfalltominus

0.04%–inductingBritainintotheclubof

nationswithnegative-yieldingdebtfor

thefirsttimeever.TheBankofEngland

respondedwithanemergency“corona

cut”,takinginterestratestoarecordlow

of0.25%.Brexittradetalks,duetostart

on 30 March,werepostponed.

InhisfirstBudget,ChancellorRishi

Sunakunveileda£30bnpackageto

countertheshock.Healsopromisedthe

largestsustainedfiscalboostinnearly

30 years,markingtheendofadecade

ofausterity.Sunakoutlinedaseriesof

measurestohelpbusiness,including

suspendingbusinessratesonshopsand

cafés.Inamorale-booster,dutyonall

typesofalcoholwasfrozenforonlythe

secondtimeintwodecades.

Adidas,theworld’ssecond-largest

sportswear-maker,warnedthatasales

collapseinAsiacouldwipes1.1bnfrom

revenues.Sagasaidthatbookingsinits

touroperatorbusinesswerealready

down20%year-on-year.CathayPacific

reported it expects to take “a substantial

loss” in the first half of the year–other

airlin es are expected to follow suit.

Tesco: retreatfromglobalisation
Withstockmarketsgloballyincarnage,whowasthisweek’sunexpectedwinner?Step
forwardTesco.OnBlackMonday,Britain’slargestgrocer“wasabouttheonlysharein
theFTSE 100 torise”,saidKateBurgessintheFT.Thetrigger?Newsofadealtosellits
SoutheastAsianoperationstoThailand’sbiggestconglomerate,CPGroup,for$10.6bn
includingdebt.Thesale,thoughopportune,“haslittletodowiththecoronavirusorthe
plungeintheoilprice”–and“evenlesstodowithrationingUHTmilkanddriedpasta”.
Itwasessentiallyanexercisein“de-riskingandreturningcashtoinvestors”,underlining
Tesco’sstrategyofretrenchinggloballytofocusonthecoreUKbusiness.Evenhalfa
decadeago,thatwouldhavebeenunthinkable.“Ohhowtimes–andshareholders’
expectations–havechanged.”Doubtlessforthebetter,ifyouhappentobeCPGroup’s
multibillionairechairman,DhaninChearavanont,saidAlexRalphinTheTimes.During
the 1998 Asianfinancialcrisis,cash-strappedChearavanontwasforcedtosellcontrolof
hisgrocerychain,Lotus,toTesco,andspentthenext 2 0yearslamentingthelossof“his
child”.Nowhe’sgotitback–assumingThailand’scompetitionauthoritiesplayball.
Thedealislikelytofaceanti-trusthurdlesbecauseofCP’sotherThaigroceryinterests:
includingthe7-ElevenconveniencestoresandtheSiamMakrocash-and-carrychain.

JohnLewis:asignificantdecline
DameSharonWhitehasannouncedherfirstsetofresultsaschairofJohnLewis,said
HannahUttleyin TheDailyTelegraph. Thenewsfor thedepartment-storechain’s
80,00 0 partnersisn’t good. Their famous staffbonushasbeen slashedfrom3%to2%
ofsalary–“thelowestlevelsince 1953”–followinga“significantdecline”in business,
whichcouldn’t be“offset” byimprovedperformanceatthe group’ssistersupermarket,
Waitrose. Still consideredbysomeanational treasure, the chainnow “risksbeingleft
behind”.JL partnersmaybe missingout,butexecutiveselsewherearealreadyshifting
goalpoststoensuretheygettheir dibs,saidNilsPratleyinTheGuardian.Accordingto
formerRoyalLondoninvestmentchiefRobertTalbut,“some corporatesareaskingfor
theirincentives/bonuses tobe rebasedbecauseofcoronavirus”.Iftrue,that’s“outrag-
eous”–notleastbecauseexecutives never askfor“higherhurdles” when externalevents
aregoingtheirway.“Thewhisper,though,hasaring oftruthaboutit.Neverunderesti-
mateaboardroom’sabilityto plead thatprizesmustbeawardedin allcircumstances.”

Celotex/Saint-Gobain: misleadingtactics?
Anarchitectwhoworkedon theGrenfell Tower refurbishmenthasaccused insulation
manufacturerCelotex ofmisleadingtacticsakinto“masqueradinghorsemeatas beef
lasagne”,saidJimDunton onBuilding.co.uk. Givingevidenceat theinquiry intothefatal
2017 fire,StudioEArchitects’projectleader, NeilCrawford,claimedthatmarketing
literatureprovidedbyCelotex–aBritishfirmownedbytheUSSaint-Gobain
Corporation–led himtobelieve thatitsproductswere “suitableforuseonhigh-rise
buildings”becausethey appeared tomeetthecriterialaidout bytheBR135safety
benchmark.Infact,thematerialused –knownasRS 5000 – “wasakeyenabler ofthe
rapidspreadoffire”.Saint- Gobainisbeingsuedbythefamilies of 6 9ofthe72 people
killed,aswell as177survivors.Theinquirycontinues.

Flybe: out of fuel and felled by avirus

Two months ago, when the Government

devisedasupport package for the troubled

regional airline Flybe, it was seen as a

plank in its much-vaunted “levelling up”

strategy. Well, so much for that, said

Edward Thicknesse in City AM. Last week,

the Exeter-based airline’s “long-running

bid for survival finally ran out of fuel” and

it fell into administration–acoronavirus-

induced slump in demand was the final

straw. “Very sad,” tweeted the Transport

Secretary, Grant Shapps. But for all the

chatter about “connectivity”, this time there

would be no succour for Europe’s largest

regional airline, despite its important role in providing 40% of

domestic British flights.

Some elements of the rescue deal were always “conditional”,

said the Financial Times. Even so, Flybe’s collapse belies the

“more muscular interventionist policy” hinted at by Prime

Minister Boris Johnson, when he described

himself asa“BrexityHezza ”(areference to

the interventionist Tory grandee Michael

Heseltine). The mood across the virus-

battered sector was sombre. “This is the

fourth UK airline to go out of business in

two years,” said Tim Alderslade of the

industry body Airlines UK. He accused

ministers of failing to use “the policy levers

at their disposal” to help.

The Scottish regional airline Loganair

could take onanumberofFlybe’sroutes,

noted The Observer. But more than 2,000

jobs have been lost. And that’s not all, said Patrick Collinson in

The Guardian. “The 1,310 members ofaFlybe pensionfund have

been told that there isahole of up to £80m in their scheme and

no government safety net to protect them, as the fund is based in

the Isle of Man.” Will ministers be watching that unfolding drama

from the sidelines too?

Flybe: coronavirus was the final straw

Sevendaysinthe

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