The Times - UK (2020-07-31)

the times | Friday July 31 2020 1GM RM 43

Business

Most businesses have reopened but

weak demand continues to weigh on

economic activity, figures suggest.

Data from the Office for National

Statistics shows that 93 per cent of

businesses are operating, up from 86

per cent last month. Although

demand is picking up as the lock-

down eases, economic activity re-

mains far below its pre-crisis levels.

As a result, much of the workforce

remains on furlough. The ONS said

that 19 per cent of workers were being

supported by the job retention

scheme in which the government

pays 80 per cent of salaries up to a

maximum of £2,500 per month.

Although this figure has come

down from more than a quarter last

month, it suggests that businesses are

still struggling with high costs and

weak demand.

The economy grew by just 1.8 per

cent in May after plunging by a

record 20.3 per cent in April.

High frequency indicators, ranging

from energy use to traffic congestion

and online searches, suggest that

activity was still 58 per cent below

pre-coronavirus levels in July.

Economists fear that the country

will experience a big spike in unem-

ployment after the scheme, which

has cost more than £30 billion, closes

in October. According to the Office

for Budget Responsibility, up to 20

per cent of the 9.4 million people on

furlough could be made redundant.

It says that the unemployment rate

could rise from 3.9 per cent to almost

12 per cent.

The chancellor has announced a

package of measures to support jobs

and bolster demand but cautious

consumer behaviour and concerns

about a second spike of the pandemic

could undermine the recovery. Weak

demand will lead to higher unem-

ployment, which in turn will further

weigh on economic demand.

Andy Haldane, the Bank of En-

gland’s chief economist, warned last

month that this “feedback loop” was

the biggest risk facing the economy.

Among businesses that are trading,

just 7 per cent of the workforce

returned from furlough in the past

two weeks. Accommodation and

food service activities had the highest

proportion at 18 per cent, although 43

per cent remain on furlough. At 47

per cent, only the arts, entertainment

and recreation industry had a higher

proportion of workers taking

advantage of the state scheme.

Economy faces squeeze with nearly one in five still on furlough

Gurpreet Narwan

Economics Correspondent
Back to work

Working arrangements

On furlough leave

Working in the last two weeks having returned

from furlough

Working at their normal place of work or remotely

for more than 2 weeks

Accommodation and food service activities

Arts entertainment and recreation

Administrative and support service activities

Transportation and storage

Construction

Manufacturing

Real estate activities

Wholesale and retail trade; motor vehicles repairs

Human health and social work activities

Professional scientific and technical activities

Education

Information and communication

Water management and remediation activities

0% 20 40 60 80 100

Total weekly job adverts index

Mar May Jul Sep Nov

2019 average = 100

150

100

50

0

2019

2020

UK lockdown begins

March 23

Turning unwanted John Lewis and

Waitrose shops into homes, launch-

ing a gardening business and striking

new partnerships are some of the

radical ideas under consideration to

revive the employee-owned retailer.

Dame Sharon White, chairman,

has told the John Lewis Partnership’s

80,000 staff that her transformation

plan should deliver “green shoots

over the next 9-12 months”, while she

gave a longer three to five-year time-

table for profits to recover.

Profits have plunged by a quarter to

£123 million in the past year, prompt-

ing the mutual to close 8 of its 50

department stores and make deep

cuts to its head office staff.

Dame Sharon, 53, suggested that

more shop closures were on the way

in a bold plan to move into housing

that could reshape the high street.

“As we repurpose and potentially

reduce our shop estate, we want to

put our excess space to good social

use,” she said. “We are exploring with

third parties the concept of new

mixed-use affordable housing.”

The partnership’s stores are under

pressure because of the rapid rise of

Britain’s leading lenders are in a

“fragile state” and the Bank of En-

gland’s supervision of the financial

sector has “turned out to be a disaster,

again”, a think tank has said.

The Institute of Economic Affairs

dismissed claims that banks were

strong enough to survive a more

severe financial crisis than the last as

“hogwash”. Oversight of the capital

they hold includes “more holes than a

piece of Swiss cheese”, it claims.

In a report, the institute suggests

banks are so strongly capitalised after

the global financial crisis they could

go through an even worse event and

still emerge in good shape do not hold

water,” the pair say.

Banks’ average market capital rati-

os have fallen from 11.2 per cent before

the financial crisis to 2.3 per cent now,

they note, claiming this implies that “a

loss of 2.3 per cent of their assets

would be enough to wipe out the

market capital of the banking system”.

The Bank did not comment. Its

interim stability report in May found

the core system “resilient”.

Callum Jones

John Lewis plan to turn

empty shops into homes

online shopping, which has acceler-

ated during the pandemic. About

60 per cent of John Lewis sales are

now online and it expects a fifth of

Waitrose sales to follow, compared

with 5 per cent online a year ago.

“Shops will always be crucial to the

brand but they will be in support of

online,” Dame Sharon said, indicat-

ing a radically changed role for the

group’s stores.

The retailer is already conducting a

number of “commercial discussions

and looking at acquisitions” as it

wants to widen the potential for its

Waitrose and John Lewis brands, she

revealed. “We will create partner-

ships with other businesses who re-

spect our ethos and can bring re-

sources or capabilities we don’t

have,” she added.

The Times has previously re-

ported that John Lewis is con-

sidering bringing in an outside

investor to push the company

into non-retail services.

Dame Sharon said that the

business was also exploring ways to

sell Waitrose products “through

other routes”, as well as adding Wait-

rose food halls to John Lewis shops.

It is thought unlikely that Waitrose

products will be available on Ama-

zon, despite the online group signing

up other upmarket grocers such as

Booths, to strengthen its range of

food products for delivery.

John Lewis is also considering a

move into garden centres to build a

new business out of its outdoor, gar-

dening and Leckford Estate ranges.

The group is bringing its two

brands closer together by selling John

Lewis homeware products in Wait-

rose shops, while it is re-

viewing its Never Know-

ingly Undersold price

promise after criticism

that it was meaning-

less because it does

not match online

retailers.

John Lewis is also

considering ways for

customers to rent its

products and sell

used ones through

an online mar-

ketplace.

Ashley Armstrong Retail Editor

Lenders ‘more fragile than before crash’

that British banks are in a weaker

position today than they were on the

eve of the global financial crisis a little

over a decade ago. It highlights the

sharp falls in the share prices of Nat-

west, Lloyds, Barclays, Standard

Chartered and HSBC since market

concerns over the impact of Covid-19

surged earlier this year.

Kevin Dowd and Dean Buckner,

the authors, say acute pressure on

banking stock prices “contradicts”

the central bank’s conclusions that

they are adequately capitalised. “The

Bank of England’s claims that UK

Dame Sharon White’s

transformation plan

should “deliver green

shoots within a year”