The Times - UK (2020-06-29)

34 1GM Monday June 29 2020 | the times

Business

Almost three-quarters of manufac-
turers are considering cutting jobs
this year as they battle for survival.
The prospect of huge job losses
came as Make UK, the industry
lobby group, said that the sector
would take at least two years to re-
cover from the pandemic.
Manufacturers have seen sales of
cars, heavy machinery and other
parts nosedive during the lockdown
as customers cancelled orders.
Make UK said 25 per cent of com-
panies were planning to make
people redundant this year, while a
further 44 per cent were consider-
ing job cuts.
“History has shown us that a
strong industrial base provides the
foundations needed to create a
prosperous society,” said Stephen
Phipson, chief executive of Make
UK. “However, the UK has unfor-
tunately become culturally tone
deaf to the idea that manufactur-
ing matters and can provide solu-
tions to the challenges that we
face, something the sector has am-
ply shown during this crisis.”
Some of the UK’s best-known
manufacturers have already an-

nounced huge redundancy pro-

grammes in response to the coro-

navirus outbreak.

Rolls-Royce, the jet engine

maker, said in May that it was look-

ing to axe 9,000 jobs across its

global operations. Aston Martin,

the carmaker, confirmed earlier

this month that it would be cutting

500 staff as part of cost-saving

plans introduced by its new chief

executive, Tobias Moers.

British manufacturing is in its

worst slump since records began

almost 30 years ago, with the pur-

chasing managers’ index, a gauge

of activity, coming in at 40.7 for

May. Anything below 50 indicates

that the industry is contracting.

Make UK has calculated that the

value of goods made in Britain

could be as much as £16.5 billion

lower in 2022 than it would have

been without the pandemic. This

year it expects a £35.7 billion hit to

the industry, while investment into

the sector could drop by almost 10

per cent.

Carmakers and other transport

groups are expected to be worst-

hit after the pandemic, although

pharmaceutical companies are

likely to benefit from increased de-

mand for medical equipment and a

Large listed companies in the UK

have seen their pension deficits

bulge by £45 billion to £210 billion

since the start of the year because

of the recent adverse swings in

markets, according to an analysis.

That has put the chances of buy-

out — handing responsibility for

pension payments to an insurer —

out of reach for many companies.

At the worst of the market crisis

in late March the aggregate deficits

of FTSE 350 companies worsened

by £63 billion to £228 billion, ac-

cording to the pension consultants

A third of adults are planning a trip

to the pub when they reopen at the

weekend in a much-needed boost

for landlords, new research pre-

dicts.

Takings in English pubs are set

to reach £210 million over the

July 4 weekend, about 72 per cent

higher than the average weekend

turnover, according to the Centre

for Economics and Business Re-

search (CEBR).

After more than three months

stuck at home, drinkers are expect-

ed to “loosen their purse strings

significantly”, the think tank said.

Though a majority of the popu-

lation remains cautious about re-

turning to crowded establish-

ments, some 35 per cent will visit

pubs within a week of being per-

mitted.

The CEBR expects some 6.5 mil-

lion pub trips over the weekend —

1.5 million more than normal.

The long-term picture is cloudi-

er. The easing of the social distanc-

ing regime, replacing the two-

metre rule with the new “one

-metre plus” recommendation,

means that more pubs will be able

to reopen. However it will remain a

“considerable restriction for

others”, the CEBR added.

Capacity will remain capped at

about 70 per cent of pre-crisis

levels, meaning fewer customers

and slimmer profit margins. Aver-

age profits for those that do reopen

will be just 46 per cent of previous

earnings, it predicted.

With a quarter of pubs unable to

reopen, the sector’s profitability

will be down about 75 per cent on

what it was before the rules were

put in place. The CEBR said this

“posed a considerable threat to the

industry as a whole”.

“So long as lingering fears

around the virus continue to

thwart consumer confidence, even

Dutch courage won’t be enough to

fuel spending beyond the initial re-

opening,” it added.

Separate research shows that

the number of pubs vanishing from

towns and cities has slowed down

despite the coronavirus.

An analysis of government data

by Altus Group revealed that the

decline had “stabilised” over the

past half-year. The total number of

pubs in England and Wales fell by

just 228 to 40,835.

Ru sh to b ar

likely when

pubs reopen

their doors

Manufacturers warn of jobs bloodbath

jump in government spending.

Make UK said that the pace of

the sector’s recovery would be de-

termined by how quickly compa-

nies could get their factories work-

ing to maximum output again,

with most operating at between 25

to 50 per cent of their full capacity

at the minute.

However, the survey suggested

that a third of manufacturers were

bracing themselves for a “signifi-

cant number” of their employees

to refuse to return to work,

even with additional health and

safety procedures and equipment

in place.

Conditions at Ford’s Dagenham plant have changed but many firms fear staff will not return to work over health and safety fears

FTSE pension deficits soar by £45bn

Barnett Waddingham (BW). Falls

in equity values, which hit the asset

side of pension funds, and sliding

gilt yields, which are used to deter-

mine future liabilities, have had

the effect of worsening shortfalls,

or deficits, for many schemes.

Simon Taylor, a partner at BW,

said: “If you have a deficit you are

now further away from closing it.”

He said the current surge in buy-

outs was down to the sponsors of

many schemes already rejigging

their portfolios in anticipation of

doing a buy-out, usually through

additional bond purchases or

swaps — derivatives that hedge

against interest rate changes.

Those that had not already made

that adjustment were now less

likely to secure a buy-out, Mr Talor

said. Under a buy-out, an insurer

takes responsibility for all future li-

abilities for scheme members.

The BW study found that in

March, aggregate deficits of FTSE

350 companies exceeded 17 per

cent of their market capitalisation,

double the proportion at the start

of the year. Mr Taylor said that

while falling inflation expectations

would provide some respite for

companies, many would have to

rethink their funding plans.

Tom Howard

PA

Simon Duke

Patrick Hosking Financial Editor

Business and trade union leaders

have called on the government to

use the coronavirus pandemic as a

springboard to build a “stronger,

fairer and greener” economy.

More than 350 leaders, includ-

ing Frances O’Grady, the general

secretary of the TUC, and Dame

Carolyn Fairbairn, director-gener-

al of the CBI, have set out what

they want the government to pri-

oritise over the coming months

and years as policymakers attempt

to kick start the economy.

The heads of other organisa-

tions such as Oxfam, Greenpeace

Recovery must lead to ‘greener, fairer’ economy

Business leaders said sectors like

solar power needed more support

Tom Howard and the Federation of Small Busi-

nesses have also put their names to

the petition.

The group has urged the govern-

ment to commit to improving the

NHS and other public services; to

tackle the inequalities on which

the virus has shone a light; and to

create sustainable jobs, particular-

ly for young people.

The leaders also want a greater

focus on protecting the planet,

with further investment in renew-

able energy sources such as solar

and wind farms.

“This crisis has exposed huge

inequalities in our labour market,

with those in low-paid and inse-

cure work forced to shoulder the

most risk,” said Frances O’Grady,

the general secretary of the TUC.

“That is not right. We can’t af-

ford another race to the bottom on

pay and employment standards.

We need a new economic settle-

ment that creates decent jobs

across the UK.”

Dame Carolyn, who has previ-

ously worked at McKinsey and

ITV, said: “The last few months

have taken a heavy toll on the eco-

nomy and it’s now more important

than ever that the country finds a

way through Covid-19 which pri-

orities jobs and training, for the

young especially.”