40 1GM Tuesday July 21 2020 | the times
Business
Insurance companies have been
criticised for comparing the govern-
ment’s lockdown advice during the
Covid-19 outbreak to guidance on
smoking, drinking alcohol and eating
vegetables.
Lawyers for the Financial Conduct
Authority questioned the claims made
by insurers during the first day of a
High Court test case brought by the
City regulator.
The FCA is pursuing the case to
resolve disputes between small firms
and insurers after business interruption
policies failed to pay out for the losses
companies have suffered during the
Covid-19 lockdown.
About 370,000 businesses could be
Shoppers in Oxford Street in central London pass by a shop window display: people remain anxious about spending their money because of fears about job securityHermes has said that it will create
10,500 new jobs in Britain to capitalise
on the shift to online shopping.
The delivery company said that it
would invest £100 million after a surge
in demand during lockdown. The jobs
will include 1,500 full-time roles in its
Leeds head office, warehouse and
delivery network and 9,000 freelance
couriers.
The recruitment drive is in stark con-
trast to the job cuts that companies in
industries such as high street retail and
hospitality have made in response to
the economic fallout from Covid-19.
Martijn de Lange, 42, Hermes’ chief
much of the initial recovery had been
the natural consequence of policy
easing, but she warned that voluntary
social distancing could continue to
undermine growth. Unlike Mr Hal-
dane, she judged demand to have fallen
behind supply in June.
“Spending in many sectors is going to
suffer because of the perceived health
risks,” she said. “This will drag on
accommodation, food and travel, which
will feed into high unemployment and
lower incomes. So there will be spill-
overs into other sectors, causing
second-round factors that will add up.”
She added that people who fell into
long-term unemployment could suffer
“psychological scarring”.Hermes will deliver 10,500 new jobs
executive, said: “The pandemic has
expedited the already phenomenal
growth of online shopping and we see
no sign of this changing. As a result, it is
important that we have the right infra-
structure and people in place to support
this.
“We are pleased to be able to support
the UK economy with so many jobs at
this time. In that first fortnight of lock-
down, we had thousands of applica-
tions from pub staff, chefs, children’s
entertainers, dog walkers, pub singers,
beauticians, hairdressers, pilots and
many others. We look forward to wel-
coming our new recruits over the com-
ing weeks.”
The business expects parcel volumesto almost double in the run up to
Christmas to 3.5 million parcels a day,
despite the strain that the pandemic has
placed on family finances. “Recruit-
ment for all roles is starting now in
advance of the busy peak season,”
Hermes said.
Hermes was founded in 1972 in
Germany, where it is the largest inde-
pendent provider of delivery services.
In 2000, it came to Britain, where it now
has a network of more than 15,000 self-
employed couriers.
The company recently responded to
criticism of the treatment of its free-
lance couriers with a scheme agreed
with the GMB union, with protections
including guaranteed holiday pay.James Hurley
Economy has ‘sharp’ rebound
Continued from page 37
V is a description of the past, not a pre-
diction of the future,” he said. “[But]
there plainly has been a recovery, and a
pretty sharp one. So far it has been a V.
That, of course , doesn’t tell us about
where we might go next and we have
still seen a daily diet of news about
redundancies across industries.”
Silvana Tenreyro, an external
member of the MPC, told MPs that she
was less optimistic. The recovery
would look more like an “interrupted
V-shape” and could be compromised by
rising unemployment, cautious con-
sumer behaviour and continued social
distancing, she said.
Professor Tenreyro, 46, said thatInsurers’ Covid payout queries ‘absurd’
affected by the outcome of the case,
which will test the wording of policies
and is being brought against eight
insurers that have agreed to take part.
In their skeleton arguments, some of
the insurers have drawn comparisons
between the government’s guidance in
March to stay at home and NHS advice
to eat five portions of fruit and vegeta-
bles a day and not to drink more than 14
units of alcohol a week or smoke.
The FCA argues that the stay-at-
home instruction was not voluntary.
Leigh-Ann Mulcahy, QC, a barrister
for the regulator, said that the advice
and guidance “was as much of a restric-
tion as any legislative measures” and “it
was taken and obeyed as mandatory”.
She said that the Covid-19 advice was
“a world away” from guidance on eatingvegetables and that the comparison
was an “attempt to reduce the argu-
ment to the absurd”. Ms Mulcahy added
that the coronavirus guidance “was of a
completely different order” to drinking
and smoking guidelines.
She said: “We all know it, we all lived
it, the UK physically shut down and
that was the reality. And, save for the
essential premises or parts of premises
that remained open, like food shops, for
the insurers to suggest, as they do in
some cases, that there was no preven-
tion of access or closure or similar,
defies any reasonable view of what the
lockdown involved.”
Colin Edelman, QC, also for the FCA,
said: “In times of emergency and crisis,
the public understands the difference
between what the government was tell-ing them to do in March of this year and
exhortations like to eat more fruit and
vegetables and drink less alcohol.”
He argued that in a free society, as op-
posed to police states, people “realise
that freedom comes with social respon-sibility”. Insurance policies “should be
construed and applied in that context”
and not as if they were being “pored
over” by “constitutional and human
rights lawyers”.
The insurance companies takingpart in the case include Hiscox, Ecclesi-
astical Insurance Office and Zurich.
The hearing is expected to last eight
days and is being held by video-
conference because of social distanc-
ing.
The insurance industry has said that
Covid-19 will not be covered by most
business interruption policies. The test
case will examine a sample of 17 policy
wordings and the FCA believes it is the
most efficient way to dispel uncertainty
over business interruption claims.
It is being heard before Lord Justice
Flaux and Mr Justice Butcher. The FCA
said in its skeleton argument, which ran
to more than 320 pages, that it was
seeking “to remove the general ‘road-
blocks’ ” that have been erected by
insurers so that claims can proceed.Ben Martin Senior City Correspondent
370,000
Number of businesses affected by case
FCAPeople are anxious about spending
their money because of fears about job
security, even though the economy is
reopening, according to a survey.
IHS Markit’s household finance
index rose to 41.5 in July, up from 40.7
last month but below the 50 mark that
separates pessimism from optimism.
The improvement in financial well-
being was driven by another fall in
household spending, as people cut back
on credit-fuelled consumption and
built their savings instead. The spend-
ing index reached 41.6 for July, up
slightly from the 37.8 recorded last
month but much lower than anything
registered in the 11 years before the pan-
demic struck.
“Households appeared focused on
reining in debt and supporting their
savings where possible,” the report said.
The index measuring demand for
unsecured credit fell to 49.3 in July,
down from 50.1 in June and the first
negative reading since the survey
began in February 2009.
Large parts of the economy are
returning to normal as lockdown res-
trictions are eased, but policymakers
fear that economic demand will remain
weak as long as consumers are worried
about jobs and incomes. About a quar-
ter of the workforce are on furlough
and economists fear that about 15 per
cent will lose their jobs when the job
retention scheme ends in October.
According to the Bank of England, the
unemployment rate could rise from
3.9 per cent to nearly 10 per cent this
year. The Office for Budget Responsi-
bility is more pessimistic, forecastingthat the rate will hit 11.9 per cent. Al-
most a third of respondents — 31 per
cent — told IHS Markit that they felt
less secure in their jobs than they had
done previously. Nearly four times as
many respondents reported a decline injob security during July as those that in-
dicated an improvement.
Incomes and workplace activity rose
as people returned to work, but opti-
mism about the financial outlook over
the year ahead deteriorated. The sub-index slipped from 45.9 to 42.5 in July.
Tim Moore, a director at IHS Markit,
said the “extremely cautious spending
patterns” shown by the survey reflected
“widespread anxiety about jobs and the
outlook for earnings”.TOBY MELVILLE/REUTERSJob cut fears
holding back
household
spending
Gurpreet Narwan
Economics Correspondent