Page 72 Daily Mail, Thursday, August 29, 2019
City Editor: Alex Brummer http://www.thisismoney.co.uk Business Editor: Ruth SunderlandCity Finance
2.9 million
UK households where
no one has a job
- a record low
by Matt OliverBritish car
production
stuck in rut
CAR production in Britain has
fallen for the 14th month in a row.
some 108,239 vehicles rolled off
UK production lines last month,
down 10.6pc on July last year, says
the society of Motor Manufactur-
ers and Traders (sMMT).
For the first seven months of this
year, production has fallen by
18.9pc, to 774,760.
The dip is yet another headache
for car makers ahead of Brexit.
The slump was largely because of
falling exports, with demand weak
in europe and Asia, as well as the
trade war between the Us and
China. eight in every ten cars made
in Britain are exported. One bright
spot was rising production for sales
in the UK, up 10pc, to 21,381 cars.
even this was only because of a
much worse situation last year.
Mike Hawes, the sMMT chief,
said: ‘Another month of decline is a
serious concern. The importance of
maintaining the UK’s global com-
petitiveness has never been more
important so we need a Brexit deal
to unlock investment and safeguard
the long-term future.’$ €Yesterday Yesterday1.1121.1081.1041.1001.0961.2351.2301.2251.2201.215Pound and housebuilders hammered as
Boris suspends Parliament ahead of Brexit
One of the world’s oldest
travel companies has fallen
into Chinese hands, all but
wiping out shareholders’
stakes in the process.
Troubled British giant Tho-
mas Cook, set up in Market
Harborough in 1841, has
reached an agreement with its
lenders and major shareholder
Fosun to bring the company
back from the brink, with
£900m of new funding.
The deal, which is yet to be final-
ised, will see Chinese group Fosun
take control of 75pc of the tour
operator business and 25pc of the
airline, leaving other shareholders
with almost nothing.
The refinancing will come as
good news for holidaymakers who
feared for their bookings as Tho-
mas Cook teetered on the verge of
collapse. And sources close to the
company suggested it will save
Thomas Cook’s 22,000 employees
from redundancy.
But shareholders, including the
individuals who owned around
20pc of the company, will be left
nursing heavy losses as their stock
is now almost worthless.
Fosun, which owns Club Med
and Wolverhampton Wanderers
Football Club, has agreed to put
in £450m. Lenders will cancel the
£1.6bn of debt they are owed and
pump in another £450m.
Around £300m of that is likely to
come from Thomas Cook’s major
lending banks as a loan, and
£150m from key bondholders as
they increase their stake.
in an arrangement one City ana-
lyst called ‘highly unusual’, and
which indicates how desperate
Thomas Cook was, Fosun even
recouped up to £5.4m from the
near-bust travel company to pay
for lawyers and other advisers it
hired to work on the deal.
in return for their £900m, Fosun
and the lenders will get increased
stakes, watering down the value
of shares which current investors
own to virtually nothing.
At the moment Thomas Cook is
worth just £91m, a fraction of the
size of its bailout, after shares fell
93pc over the past year.
it may not even be able to remain
listed on the stock market, leav-
ing the future of small sharehold-
ers in limbo, since it could breach
rules which govern how much
control an investor can have or
how many shares are available to
readily buy and sell.
Thomas Cook, which served 22m
customers last year, is planning to
split in two as part of the rescue.
The tour operator business,
along with Thomas Cook’s 566High street stores, will be spun off
while the listed company will be
left holding the airline.
Fosun will take on at least 75pc
of the tour operator business and
25pc of the airline. Meanwhile
lenders and bondholders will bag
approximately 75pc of the com-
pany holding the airline, and up to
25pc of the tour operator.
The airline business, which owns
104 planes, will probably have to
change its name as the Thomas
Cook brand sails away with the
tour operator. shares fell another16.6pc, or 1.18p, to 5.9p yesterday.
Russ Mould, investment director
at AJ Bell, said: ‘investors are
simply trying to cash out and crys-
tallise any value left in their
investment before the refinanc-
ing, for fear there could be noth-
ing left if they wait.’
Other analysts marvelled that
shares were still worth 5.9p, since
their value will be watered down
so heavily.
Trouble at Thomas Cook started
in earnest last year, after it
reported slipping profitability forthe first half of its financial year, in
May 2018.
The deaths of British couple
John and susan Cooper that sum-
mer, in a Thomas Cook hotel in
egypt, piled on further pressure.
in september, the travel firm
issued a profit warning in which
chief executive Peter Fankhauser
blamed 2018’s unusually hot sum-
mer for knocking bookings.
Just two months later, Thomas
Cook put out another profit warn-
ing and axed its dividend as it said
2018 had been ‘disappointing’.Relief for
holidaymakers
but misery for
shareholders
as 178-year-old
tour operator
is rescued
Chinese
seize control
of Thomas Cook
1841 Thomas Cook
organises a trip from
Leicester to Loughborough1928 Thomas Cook &
Son is sold by Cook’s
grandsons to the French1948 The firm becomes
state owned as part of
British Railways2007 Thomas Cook lists
on the stock market as it
merges with MyTravelAug 2018British
couple John and Susan
Cooper die while staying
in a Thomas Cook hotel
in EgyptSept 2018Thomas
Cook issues the first of
two profit warningsFeb 2019Airline
business put up for saleJuly 2019The group
confirms it is in rescue talks
with Fosun and its lendersBORIS Johnson’s bid to suspend
Parliament before Brexit yes-
terday sent shock waves
through financial markets.
In the minutes after the Prime
Minister’s move was announced,
the pound fell against the euro
and dollar while shares in
housebuilders were battered.
Analysts said the move
increased the chances of a No
Deal Brexit on October 31.
James Smith, an economist at
ING, said: ‘The main implication
is that this will make the legisla-
tive path to blocking a No Deal
Brexit much harder.’
As the pound plunged, shares
in companies whose fortunes
are closely tied to the UK econ-
omy also drifted lower.
Experts and business leaders
have warned that No Deal couldhurt the economy and tip the UK
into a recession.
Housebuilders were the big-
gest losers, with Berkeley Group
falling by 4.8pc, Taylor Wimpey
by 3.6pc, Persimmon by 2.9pc
and Barratt by 3.4pc.
Dr Adam Marshall, director
general of the British Chambers
of Commerce, said: ‘Businesses
feel like Westminster is playing
an endless game of politicalchess, while their futures and
the health of the UK economy
hang in the balance.
‘Out in the real world, continu-
ing political turbulence is taking
a toll on contracts, on invest-
ment decisions, and on business
confidence. Three years on, the
damage continues. The top pri-
ority is still to avoid a messy and
disorderly exit from the EU.’
Despite the turmoil the FTSE100 edged up by 0.4pc. The blue-
chip index was buoyed partly by
BP and Shell, which benefited
from an oil price rally. However
the FTSE 250 index fell 0.7pc.
The pound dipped lower after
reaching a four-week high on
Tuesday. It had been boosted by
fresh optimism that a Brexit
deal could be struck, following
suggestions from France and
Germany that changes could be
made to the Irish backstop.
Those gains were wiped out as
the pound sank to lows of just
under €1.10 and $1.2155. It later
pared its losses slightly.
Andy Scott, at risk advisory firm
JCRA, said: ‘The fact that sterling
is heading towards historic lows
against the US dollar and the
euro reflects not just uncer-
tainty over Brexit but, increas-
ingly, the risk that the UK crashes
out and suffers a significant eco-
nomic shock as a result.’by Lucy White