(qlmbusinessnews.com via theguardian.com – – Fri, 29th May 2020) London, Uk – –
Exclusive: airline’s proposals also include closing operation at Heathrow Terminal 3
British Airways is proposing to outsource work being done by at least 450 employees it is making redundant.
The Labour party said the proposals were “disturbing news” and called for the government to scrutinise the plans, revealed by the Guardian.
The airline, owned by International Airlines Group (IAG), is also considering closing its operation at Heathrow’s Terminal 3 completely and shrinking its footprint at Terminal 5, the Guardian understands.
Terminal 3 – which operates BA short-haul routes across Europe and long-haul destinations including Cape Town and Miami – carried about 15% of BA’s Heathrow traffic before the pandemic. Terminal 3 has been mothballed during lockdown, with all BA flights running from Terminal 5 on dramatically reduced schedules.
BA, which has received state aid worth hundreds of millions of pounds, proposed cutting as many as 12,000 jobs last month in response to the coronavirus pandemic.
Among the thousands of job cuts, the proposals include plans to make at least 450 workers at Heathrow redundant before outsourcing the work they did, according to a person with knowledge of the proposals.
BA has said job cuts are necessary because passenger numbers are expected to be significantly lower for as long as four years, meaning demand will be lower.
Moody’s Investor Service, the influential credit ratings agency, on Thursday downgraded its rating on IAG and BA debt from investment-grade to junk bond status – meaning it faces higher borrowing costs – underscoring the financial difficulties facing the airline sector with the vast majority of planes still grounded.
However, the proposals to outsource the jobs of furloughed workers performing operations still required by the airline prompted criticism.
Jim McMahon, the shadow transport secretary, said: “The government should have done more to protect these jobs. We cannot see roles which are currently paid through the job retention scheme outsourced.”
Jobs at risk in the outsourcing proposals include ticketing services, returning lost baggage to passengers and planning the balance of weight in the plane, known as centralised load control. Load control is currently carried out by teams in offices in London and Prague. The team in the Czech Republic is run by Air Dispatch, a third party supplier who would become a prime contender for some offshoring work.
The outsourcing and potential offshoring proposals come despite IAG receiving British government support worth hundreds of millions of pounds. IAG has borrowed £300m from the Bank of England’s Covid corporate finance facility. The government is paying 80% of the salaries (up to £2,500 per month) of 30,000 furloughed BA workers, support worth £35m to the company in April alone.
Nadine Houghton, national officer for the GMB union, which represents some BA workers, said: “BA’s actions so far have been deeply cynical and opportunistic. Taking taxpayer money through furlough and Covid loans and then offshoring hundreds of jobs to other countries is about as unpatriotic as you can get. This behaviour from our national flag-carrier is unacceptable.”
A BA spokesman said: “We are acting now to protect as many jobs as possible. The airline industry is facing the deepest structural change in its history, as well as facing a severely weakened global economy.Advertisement
“We are committed to consulting openly with our unions and our people as we prepare for a new future.”
(qlmbusinessnews.com via bbc.co.uk – – Fri, 29th May2020) London, Uk – –
A borrower's credit rating should be marked if they take a further mortgage holiday, the Nationwide has said.
Lenders look at somebody's credit rating when deciding whether to agree to a fresh loan or contract and the interest rate they will charge.
Joe Garner, chief executive of the Nationwide Building Society, said an extension to the mortgage break may signal a borrower was “struggling”.
He made the comment as the UK's largest mutual announced a plunge in profits.
Its statutory pre-tax profit fell to £466m in the year to April, compared with £833m the previous year.
The building society said it had already faced pressure on its profits before it took a £101m hit as a direct result of coronavirus.
Mortgage holidays started in March, allowing people to defer payments without affecting their credit rating.
That respite from payments would end for the first applicants in June, but the Treasury and regulators have said that those who need to will be permitted to defer for another three months. No decision has yet been made on whether this will be reflected on a credit reference used by other lenders.
Mr Garner said that 280,000 of its members had taken a payment break, the vast majority of which were mortgage holders.
“Probably the very first people to apply would be those who are really on top of their financial position and we know there are a lot of people who have taken them as a precaution, and will go back to paying in full at the first opportunity,” he said.
For those who needed a further payment break – which could include people who have continued to be furloughed, on sick pay, or who are self-employed – Mr Garner suggested there should be some kind of temporary notice on their credit rating until mortgage payments returned to normal.
This should not be a “big black mark”, he said, but “a middle way” that would alert lenders with a temporary mark, but not restrict people's ability to remortgage.
“If someone is struggling, and if there is no sign on their credit rating, they could go out and take further and further loans, which would not be in their interest,” he told the BBC.
The rules over whether credit ratings would be immune from further mortgage holidays have yet to be finalised by regulators.
Credit ratings are used widely to inform lenders' decisions on financial products – from granting personal loans to allowing access to mobile phone contracts.
Credit card breaks
The UK banking sector has approved 1.8 million mortgage holidays during the crisis, according to figures from trade body UK Finance.
There have also been 877,800 freezes on credit cards, up 26% since the start of the month, and 608,000 payment holidays on personal loans, up 30% over the same period.
However, in some circumstances, the build-up of interest could risk taking people over a limit which itself would leave a mark on their credit reference.
Millions of people have seen the first £500 of an arranged overdraft made interest-free for three months.
(qlmbusinessnews.com via news.sky.com– Thur, 28th May 2020) London, Uk – –
Debenhams will start to reopen dozens of stores from 15 June but more jobs are expected to be lost.
Debenhams says it has negotiated a deal with landlords allowing it to reopen most stores in June but admits some jobs will be lost as it grapples with administration.
The department store's 142 UK sites are currently closed and it has been only trading online during the coronavirus lockdown.
But a spokesperson for the business told Sky News that the “vast majority” of these stores will reopen on 15 June, as government restrictions are eased.Coronavirus lockdown: Which shops will open in England next month?
They said: “Debenhams' preparations to reopen the vast majority of its stores from 15 June are well under way following the successful conclusion of lease negotiations on 120 stores.
“In the context of a retail industry undergoing profound change, the management team is working on the future shape of the group, with a view to seeking an exit from administration as a going concern.
“With a leaner and more flexible operating model, Debenhams will have the ability to adapt to what are likely to be fundamental shifts in the future trading environment.”
Debenhams stores in England are expected to open first, with Scotland, Wales and Northern Ireland following soon afterwards.
It is understood that hundreds of jobs will be lost from its head office, which employed around 3,000 people before the closures.
Reuters, which first reported the job losses on Thursday, said all staff made redundant are currently furloughed under the government's jobs retention scheme.Ed Conway: GDP was better than expected but the good news ends there
Some jobs based in store could also be axed, as the shops will initially open for shorter hours and with fewer services.
Last month Debenhams, which employs around 20,000 people, formally entered into administration for the second time in a year and announced that its Irish business, with 11 stores, would permanently cease trading.
The latest administration was designed to protect the business from creditors at a time when stores were shuttered because of the coronavirus crisis.
Chief executive Stefaan Vansteenkiste said at the time that it aimed to be “in a position to resume trading from our stores when government restrictions are lifted”.
(qlmbusinessnews.com via uk.reuters.com — Thur, 28th May 2020) London, UK —
EasyJet to cut 4,500 jobs to stay competitive after crisis
LONDON (Reuters) – Britain’s easyJet (EZJ.L) plans to cut up to 4,500 jobs and shrink its fleet to adjust to the smaller travel market which is forecast to emerge from the coronavirus crisis.
EasyJet, which employs more than 15,000 people in eight countries across Europe, is moving later than others in announcing job cuts as a result of the coronavirus pandemic, which has brought airlines across the world to their knees.
Most have been forced to cut jobs, including more than 15,000 in Britain, as they prepare for a market which is not forecast to return to 2019 levels until 2023.
EasyJet, which said on Thursday it would launch a consultation process with staff, also plans to shrink its fleet by 15% to 302 planes by the end of 2021 and to cut costs through deals with airports, maintenance suppliers and in marketing.
Shares in easyJet rose 6% to 751 pence, their highest level since mid-March, before coronavirus grounded its fleet.
“Exactly the kind of overhaul the cost base needs,” Bernstein analyst Daniel Roeska said of easyJet’s cuts, which go deeper than those of Ryanair (RYA.I) and Wizz Air (WIZZ.L), who have said they will lay off 15% and 19% of staff respectively.
EasyJet said it expects to be flying around 30% of its capacity by the fourth quarter, which leaves it trailing Ryanair which is planning to fly 40% in July.
“The leverage to growing market share over the next two years seems to rest with Ryanair and Wizz, who see their cost bases as allowing them to exploit this crisis,” Goodbody analyst Mark Simpson said.
EasyJet Chief Executive Johan Lundgren said that job cuts would ensure easyJet emerges as “a more competitive business”. Around 8,000 of its staff are based in Britain.
Lundgren told reporters that easyJet was talking to the British government about a 14-day quarantine rule which airlines say will further stifle any travel recovery.Slideshow (3 Images)
Over the last six weeks easyJet has also been grappling with an attempt by its biggest shareholder to oust its senior bosses, and the fallout from a cyber attack.
It said talks with lessors interested in acquiring aircraft on a sale and leaseback basis are ongoing and proceeds would now be 500 million pounds to 650 million pounds ($798 million), around 25% higher than expected in April.
(qlmbusinessnews.com via bbc.co.uk – – Wed, 27th May 2020) London, Uk – –
Some 8.4 million workers are now covered by the government's furlough scheme, up from eight million a week earlier, the Treasury has said.
Claims for subsidies filed by employers rose to £15bn from £11.1bn, it added.
The scheme, brought in to mitigate the effects of coronavirus, allows employees to receive 80% of their monthly salary up to £2,500.
A similar scheme for self-employed workers saw 2.3 million claims made worth £6.8bn.
The Self-Employed Income Support Scheme, as it is known, differs from the furlough scheme because it is a grant paid out in a single instalment covering three months and amounting to 80% of average profit.
The furlough scheme, officially called the Coronavirus Job Retention Scheme, was originally intended to last until the end of July, but has now been extended until the end of October.
What does it mean if I've been furloughed by work?
Chancellor Rishi Sunak has confirmed that it will continue to provide the same level of earnings, but has said the government will ask companies to “start sharing” the cost of the scheme from August.
Sources have told the BBC the Treasury still expects to be paying more than half the costs between August and October.
‘I'm one of the people who slipped through the cracks'
Marketing professional Sian Melonie, from Hackney in east London, is one of the many people who, through no fault of their own, are not in a position to benefit from the government's furlough scheme or its help for self-employed workers.
After 12 years in work, she decided to go self-employed last year and began working for a large cinema group.
She was due to start a fixed-term contract from 30 March, but that offer was withdrawn when the pandemic hit.
“l don't qualify for any support. I can't be furloughed and I don't qualify for self-employed benefits, because I'm new to it,” she told the BBC. “I'm one of the people who slipped through the cracks.”
But Sian says she is not angry and is using her savings to tide her over. “However, my concern is how much longer it goes on for, because l am essentially spending what l had saved for my self-assessment tax for later this year.
“I'm hoping things get back to normal and the economy can bounce back.”
Recent figures from the government's independent economic forecaster, the Office for Budget Responsibility, indicate that the cost of the government's efforts to combat the coronavirus pandemic is expected to hit £123.2bn.
The OBR expects annual borrowing to equal 15.2% of the UK economy, which would be the highest since the 22.1% seen at the end of World War Two.
It said it had increased its estimate because of the rising cost of the furlough scheme
(qlmbusinessnews.com via news.sky.com– Tue, 26th May, 2020) London, Uk – –
The PM says outdoor markets and showrooms will be able to start trading again from 1 June – so long as they keep customers safe.
High street shops can start reopening next month, Boris Johnson has said, as he moves to ease lockdown restrictions amid a huge public row over his top adviser.
The prime minister said outdoor markets and showrooms will be able to start trading again in England from 1 June – so long as they keep customers safe.
All other non-essential retailers – including shops selling clothes, shoes, toys, furniture, books, and electronics, plus tailors, auction houses, photography studios, and indoor markets – can follow suit two weeks later, from 15 June.
Employers will face “spot checks” to make sure they are implementing social distancing, and have been told they must complete a risk assessment after consultation with trade unions and workers.
Firms have been told to consider a number of measures to reassure customers and staff, including:
:: Placing a poster in their windows to demonstrate awareness of the guidance
:: Storing returned items for 72 hours before putting them back out on the shop floor
:: Placing protective coverings on large items touched by the public such as beds or sofas
:: Frequently cleaning objects and surfaces that are touched regularly, including self-checkouts, trolleys, coffee machines and betting terminals
Mr Johnson announced the next steps in his plan to “unlock the lockdown” at Monday's Downing Street news briefing, nine weeks since the strict “stay at home” measures began.
But they came as he faced continued questions about his support for Dominic Cummings following controversy over the senior adviser's movements during lockdown.
On Monday, Mr Cummings admitted he travelled from London to Durham at the end of March, and then for a “test drive” to a town 30 miles away to check he was well enough to drive home after he had been suffering from coronavirus.Coronavirus lockdown: What are you allowed to do?
Mr Johnson backed his special adviser after Mr Cummings gave a rare news conference, with the PM saying: “I think he acted reasonably, legally and with integrity”.
The prime minister also hinted he accepted mistakes could have been made about handling the coronavirus outbreak in the UK, which has so far killed 36,914 people.
He said it was “absolute folly” for any government to say “it hasn't learnt anything as it goes along”.
Pressing on with his bid to steer England out of lockdown, Mr Johnson said the loosening of restrictions for non-essential shops is “contingent upon progress” of lowering COVID-19 infection rates and ensuring there will be no second peak.
“These are careful but deliberate steps on the road to rebuilding our country,” he announced.
“And we can only take these steps thanks to what we have so far achieved together.”
The government said the plans had been outlined to the devolved administrations, who will make their own decisions about how to ease lockdown.
All four UK nations are loosening measures to allow people more freedom, but they do differ from each other as they make their own decisions on health.
(qlmbusinessnews.com via uk.reuters.com — Tue, 26th May 2020) London, UK —
LONDON (Reuters) – European travel and leisure stocks soared on Tuesday amid reports Spain and Germany would ease travel restrictions, and no noticeable increase in infections were reported during the re-opening of businesses after a two-month lockdown.
Travel and leisure were among the businesses hardest hit by coronaries lockdown as countries closed borders, leaving airlines grounded, and strict social-distancing rules closed restaurants, cinemas and pubs.
But Germany and Spain’s plan to ease travel restriction for the peak summer holiday season revived their stocks. TUI (TUIT.L), British Airways owner IAG (ICAG.L), easyJet (EZJ.L) and Whitbread (WTB.L) shares jumped 15% to 30%, driving London stock indices higher.
London stocks were top gainers as they played catch-up with continental European stocks, which soared on Monday. The travel and leisure stocks sub-index jumped to its highest levels since April 30.
“There is a lot more hope that travel restrictions across Europe will be eased in time for the summer holidays,” said Neil Wilson, chief market analyst at Markets.com. “If the summer holiday season can be saved, it would be a big plus after most of us wrote it off.”
European airport operators Fraport (FRAG.DE), Aeroports de Paris (ADP.PA) and Aena (AENA.MC) were rising 5% to 10%.
The German government wants to end a travel warning for tourist trips to 31 European countries from June 15 if the coronavirus situation allows, the dpa new agency reported, according to the magazine Focus. Spain urged foreign holiday-makers to return from July.
Pub operator Mitchells & Butlers (MAB.L) and Cineworld (CINE.L) shares jumped more than 20% on re-opening hopes after UK Prime Minister Boris Johnson said thousands of shops would re-open next month in easing of coronavirus lockdown.
(The story is refiled to fix typo in TUI, in third paragraph.)
(qlmbusinessnews.com via bbc.co.uk – – Mon, 25th May 2020) London, Uk – –
Germany's highest civil court has ruled that Volkswagen must pay compensation to a motorist who had bought one of its diesel minivans fitted with emissions-cheating software.
The ruling sets a benchmark for about 60,000 other cases in Germany.
The plaintiff, Herbert Gilbert, will be partially reimbursed for his vehicle, with depreciation taken into account.
VW said it will now offer affected motorists a one-off payment, and the amount will depend on individual cases.
The company has already settled a separate €830m (£743m) class action suit involving 235,000 German car owners.
It has paid out more than €30bn in fines, compensation and buyback schemes worldwide since the scandal first broke in 2015.
VW disclosed at the time that it had used illegal software to manipulate the results of diesel emissions tests.
The company said that about 11 million cars were fitted with the “defeat device”, which alerted diesel engines when they were being tested. The engine would then change its performance in order to improve the result of the test.
Volkswagen has faced a flurry of legal action worldwide, including the UK.
About 90,000 motorists in England and Wales have brought action against VW as well as Audi, Seat and Skoda, which are also owned by Volkswagen Group.
Last month, their case cleared its first hurdle in the High Court, when a judge ruled that the software installed in the cars was indeed a “defeat device” under EU rules.
The carmaker's current and former senior employees are facing criminal charges in Germany.
(qlmbusinessnews.com via theguardian.com – – Mon, 25th May, 2020) London, Uk – –
Firms becoming more inventive to survive, and increasing numbers turning to the e-commerce platform
When the lockdown forced the Pizza Pilgrims chain to close, the company came up with an unusual solution to stay in business.
The company, with restaurants in London and Oxford and run by brothers Thom and James Elliot – who started out selling Neapolitan pizza from the back of a converted Piaggio Ape van – hit on the novel idea of posting pizza kits to customers.
The first 50 of the £15 frying pan pizza kits, which promise to make a pair of “banging” margheritas, sold out in 20 seconds. The company is now packing up to 700 a day and considering opening up a second of its 13 restaurants to satisfy the demand.
Pizza Pilgrims pivoted online almost overnight via Shopify, the Canadian e-commerce platform that sells the digital kit that companies need to build and run a website.
The Ottawa-based firm is challenging Amazon’s dominance by offering brands of all sizes an alternative route online. For a monthly subscription, its software allows companies to manage their stock, payments and logistics under their own domain and brand.
Shopify now has 1m companies on its books, ranging from small UK outfits such as Pizza Pilgrims to celebrities including Kylie Jenner and Kanye West, who use its tech to sell their respective makeup and clothing lines. Shoppers spent nearly £50bn on the platform last year.
The world has tilted towards the internet during the pandemic and there is a growing sense that the shutdown may be permanently changing consumer behaviour. Working from home has been normalised for millions of people, while pensioners have become converts to online grocery shopping.
The closure of big parts of the retail and hospitality trade has forced companies to find new ways to make sales. In the six weeks to 24 April, there was a 70% increase in the number of UK companies opening websites compared with the preceding six weeks, says Shopify.
Pizza Pilgrims had never considered selling online before, Thom says, but was forced to become inventive as the economy collapsed. The “most surreal moment of his life” happened last week when he was invited to join a business brainstorming session with No 10, only to find himself on a Zoom call with Boris Johnson.
Investors are banking on the evolving business model being good news for Shopify, with its share price more than doubling since the start of April. The surge has made it Canada’s most valuable company, worth $86.2bn (£69.4bn) after nosing ahead of the Royal Bank of Canada.
Shopify’s rocketing value has turned the spotlight on its German-born boss, Tobias Lütke, 39, who describes himself on Twitter as “CEO by day, Dad in the evening, hacker at night”.
An avid video gamer, he openly takes days off work to indulge his passion, broadcasting his Fortnite and Starcraft campaigns on the Twitch streaming platform.
Lütke has blogged about his decision to quit school at 16 and become an apprentice computer programmer for Siemens in his home town of Koblenz.
“School was not for me,” he wrote. “To me, computers were so much more interesting. They diagnosed me with all sorts of learning disabilities and started to medicate me. I wanted to leave it all behind. My degree is not recognised in North America so I am technically a high school dropout.”
Lütke met his Canadian wife while snowboarding in Whistler and eventually moved to Canada to be with her, starting the Snowdevil website, selling high-end snowboards, with the entrepreneur Scott Lake. The pair soon realised the software Lütke was writing for the site was actually more valuable, and Shopify was born.
Shopify has made Lütke one of Canada’s wealthiest people, with a $7.1bn fortune, according to Forbes. However, the father-of-three reportedly shuns the workaholism that often comes with business success: “I’m home at 5.30pm every evening. I play video games alone, with my friends and increasingly with my kids. My job is incredible but it is also just a job,” he said on Twitter.Advertisement
He recently announced Shopify’s offices would not reopen until 2021 with remote working set to become a permanent arrangement for most of its 5,000 staff. “Office centricity is over,” he tweeted.
Shopify’s plans for the future include parking its tanks on Amazon’s lawn by building a warehouse and logistics network so that it can also handle shipping on behalf of its sellers.
(qlmbusinessnews.com via theguardian.com – – Fri, 22nd May 2020) London, Uk – –
bout 40 outlets – now shut because of Covid-19 – will close for good, with loss of 1,000 jobs
The billionaire Ranjit Singh Boparan has bought the Carluccio’s brand and 31 restaurants in a deal that rescues more than 800 jobs.
About 40 further outlets of the ailing chain, which called in administrators in March, will be permanently shut, with the loss of 1,000 jobs. All the Carluccio’s outlets are currently closed and its staff are on furlough.
Boparan, 53, has made his fortune in the food business and owns the Giraffe and Ed’s Easy Diner chains as well as Fox’s Biscuits and a vast supermarket chicken empire.
Phil Reynolds, a joint administrator of Carluccio’s and a partner at the corporate restructuring firm FRP, said: “The Covid-19 lockdown has put incredible pressure on businesses across the leisure sector, so it has been important to work as quickly and as decisively as possible in an extremely challenging business environment to secure a sale, which ensures the future of the Carluccio’s brand in the UK casual dining scene.”
The buyout of Carluccio’s marks the latest expansion of Boparan’s empire. He has been labelled the “chicken king” as he is the co-owner and founder of 2 Sisters Food Group, which supplies about a third of the chicken on UK supermarket shelves. The company, which also owns Fox’s Biscuits, was the subject of parliamentary and food watchdog inquiries in 2017 after a Guardian and ITV News undercover investigation into food standards at a 2 Sisters chicken plant.
Boparan’s interests also include the turkey producer Bernard Matthews and the upmarket Cinnamon Club restaurant in London, as well as Boparan Restaurants group, which operates 140 outlets across six chains.
Satnam Leihal, the managing director of Boparan Restaurant Group, said: “This acquisition is in line with our strategy to grow our restaurant group with quality brands. While it is an extremely challenging time for the sector, we believe quality hospitality businesses will recover in the long term as people return to eating out.”
Boparan is extending his empire as restaurants and pubs face intense financial pressure during the coronavirus crisis. UK operators have been closed since the end of March and will not be allowed to open to diners until at least 4 July, when the third step in the government’s lockdown easing plan is due to take place, if progress in tackling the virus allows. Even then, businesses are expected to have to operate with strict physical-distancing rules, which are likely to dramatically affect profits.
Carluccio’s was founded by the late chef Antonio Carluccio in 1999 and was owned by Landmark Group, a Dubai-based retail and hospitality conglomerate.
Restaurants that have been rescued
Beverley Bluewater Bristol, Cribbs Causeway Cambridge Cheshire Oaks Chester Chichester Colchester Derby Kingston, Bentalls Leamington Spa Leeds, Trinity London, Islington Development Kitchen London, Marriott Heathrow London, Marriott Regents Park London, Richmond London, South Kensington London, St Christopher’s Place London, St Pancras Station London, Waterloo Station London, Wimbledon Manchester, Trafford Centre Manchester, Piccadilly Portsmouth Reading Sheffield Solihull Southampton Stratford-upon-Avon Walton-on-Thames Dublin Dawson Street
(qlmbusinessnews.com via bbc.co.uk – – Fri, 22nd May 2020) London, Uk – –
Government borrowing surged to £62bn in April, the highest monthly figure on record, after heavy spending to ease the coronavirus crisis.
It means the deficit – the difference between spending and tax income – was larger last month than forecast for the whole year at the time of the Budget.
The data from the Office for National Statistics revealed the soaring cost of support, such as furlough schemes.
But Chancellor Rishi Sunak said things would be worse without government aid.
The government's independent forecaster, the Office for Budget Responsibility (OBR), has predicted that borrowing for the whole year could reach £298bn, more than five times the estimate at the time of the March Budget.
Jonathan Athow, deputy national statistician at the ONS, described April's figure as “pretty much unprecedented”. It said the cost of furlough schemes alone was £14bn in April.
“Borrowing now is about six times what it was [in April] last year, so we are talking about some really significant changes in the government finances,” Mr Athow told the BBC.
He added it was impossible to forecast the current year's public finances because of the “high amounts of uncertainty”. Tax receipts have fallen heavily, as the Treasury has allowed companies to defer some payments. The amount received from VAT in April was negative, with the government collecting less than was handed back in repayments.
How much does the government spend?
More than £880bn was spent on services such as defence, policing, the NHS, schools and welfare benefits in the last financial year
Most of this comes from taxes, which totalled about £840bn last year
Usually the government spends more money than it has. It borrows money by selling bonds – a promise to repay the money with interest
The total debt has increased over time. It is currently £1.9 trillion – about £28,000 per person in the UK
Although the debt in cash terms has gone up, money raised from taxes has risen too, which means the debt can be manageable
Meanwhile, borrowing by the state in March 2020 has been revised up by £11.7bn to £14.7bn, the ONS said.
It said this was driven by a reduction in previous estimates of tax receipts and National Insurance contributions.
The surge in borrowing comes after Chancellor Rishi Sunak stepped up financial support for businesses and employees after vast areas of the economy were forced to halt due to the coronavirus lockdown.
After publication of the figures, Mr Sunak said that if the government had not provided financial support, the cost to the economy and people's livelihoods would be much worse.
“Our top priority is to support people, jobs and businesses through this crisis and ensure our economic recovery is as strong and as swift as possible,” he said.
“That's why we've taken unprecedented steps to provide lifelines to people and businesses with our furlough scheme, grants, loans and tax cuts.”
Analysis By Dharshini David
Buy now – worry later?
For the past decade, the government had been trying to practise strict financial housekeeping, aiming for position where it could cover day-to-day spending with the money form our taxes and eliminate the deficit.
But then the crisis hit – and as the chancellor claims, the schemes put in place have provided a lifeline to tide millions over, to prevent an even bigger economic disaster. It was worth ripping up the rulebook for, he said.
However the bills are mounting, just as the amount received from taxpayers slumped.
This year's deficit could be the equivalent of the biggest slice of our income since the Second World War – and that hole needs plugging
For the moment, the government has increased its borrowing on financial markets, through bonds, effectively IOUs – but there is a limit to how much it can do so.
Ultimately, economists say taxes will have to rise, or spending cut – the emergency raft will have a price tag which we can't escape
But the chancellor will have to impose those carefully to avoid jeopardising a recovery. And if he opts for tax hikes, he'll risk breaking some election promises
‘Britain is poorer'
The scale of the economic consequences was underlined on Friday in separate retail sales data from the ONS. These showed that High Street sales crashed last month as shops closed for the lockdown.
It was also announced on Friday that a mortgage payment holiday scheme for homeowners in financial difficulty during the pandemic has been extended for another three months.
As a result of the jump in borrowing, total public sector debt rose to £1,888bn at the end of April – £118.4bn higher than April 2019.
Former chancellor George Osborne told the BBC: “We have to come to terms with the fact that Britain is poorer and the economy is smaller than it would have been.”
Asked if the economy would bounce back, he said: “Bounce is the wrong word, but it will recover.”
Ruth Gregory, an economist at Capital Economics, described April's borrowing as “alarmingly high”, but added that a small easing of the lockdown from 13 May probably meant the government would not have to borrow as much this month.
And despite the pressure on public finances, Charlie McCurdy, a researcher at the Resolution Foundation, said there were no signs the government was struggling to raise money on the financial markets.
“Record low interest rates mean the UK's higher debt burden should remain more than manageable,” he said.
(qlmbusinessnews.com via news.sky.com– Thur, 21st May 2020) London, Uk –
The airline announces a cautious restart on some routes from 15 June ahead of an investor vote that could see its CEO forced out.
EasyJet says it plans to resume a small number of flights next month with strict safety protocols for passengers and crew alike.
Top of the measures, the no-frills carrier said, would be the wearing of face masks for all those aboard its aircraft.
The company said it would likely operate domestic flights within the UK and France from 15 June with the only international service being Gatwick to Nice initially.
The UK airports to see the limited domestic services return will be Bristol, Birmingham, Gatwick, Liverpool, Newcastle, Edinburgh, Glasgow, Inverness and Belfast, easyJet added.
Shares were more than 2.5% up in early trading after a plunge of 60% in the year to date.
The airline made its announcement as it faces a series of headaches away from flight operations – largely grounded by COVID-19 since March.
It revealed on Tuesday a hacking of its digital systems that exposed personal details of nine million customers.
The easyJet chief executive and chairman are also facing a fight for their futures as the airline's founder, Sir Stelios Haji-Ioannou, bids to have them removed from their posts in a shareholder vote due on Friday.
Easyjet has furloughed thousands of staff and borrowed £600m under a government-backed financing scheme as it seeks to shield itself from the effects of the coronavirus crisis that has hit the industry hard, with BA, Ryanair and Virgin Atlantic collectively planning 18,000 job losses.
It said that the cautious commencement of flights would only go ahead with a series of measures agreed with regulators and in-line with the advice of national governments.
These steps include:
:: Customers, cabin and ground crew will be required to wear masks
:: Enhanced cleaning and disinfection of easyJet aircraft
:: Availability of disinfectant wipes and hand sanitiser onboard
EasyJet said there would be no onboard food service.
The Luton-based airline looks set to be the second operator to resume flights after Wizz Air restarted services from the town's airport earlier this month.
BA and Ryanair are targeting July.
Johan Lundgren, the easyJet chief executive, said of its plans: “These are small and carefully planned steps that we are taking to gradually resume operations.
“We will continue to closely monitor the situation across Europe so that when more restrictions are lifted the schedule will continue to build over time to match demand, while also ensuring we are operating efficiently and on routes that our customers want.”
(qlmbusinessnews.com via uk.reuters.com — Thur, 21st May, 2020) London, UK —
LONDON (Reuters) – When a payroll glitch left Natalie Gallagher so short of cash this month she couldn’t afford her bus fare to work, she turned to her usual lender Amigo for an emergency top-up loan.
But she was out of luck. Like many of the lenders that thousands of higher-risk borrowers in Britain depend on, Amigo had tightened its criteria for handing out cash in the wake of the coronavirus.
“They approved my top-up but 10 minutes later I got a text saying my reason for the top-up isn’t one they were doing right now,” she said. “Amigo was my only real option.”
While mainstream banks have been obliged to give customers payment holidays on mortgages and discounted three-month overdrafts, less support has been offered to so-called subprime borrowers who often need extra cash just to stay afloat.
Some lenders have closed their doors to new customers while others have been unable to extend cash lifelines to borrowers since lockdown restrictions banned weekly visits by doorstep lending agents to their homes.
According to the Money Advice Service, about 17 million people in Britain have less than 100 pounds in savings to dip into when a crisis strikes and those working in some of the sectors worst hit by the pandemic are particularly vulnerable.
More than 6 million workers in the retail, travel, hospitality and beauty sectors are 25% more likely than people in other industries to have no money to fall back on, the Centre for Social Justice think-tank said last month.
“The bottom line is that there’s nowhere for these people to go,” Roger Gewolb, founder of loan comparison site FairMoney said. “The consumer lending market has come to a standstill.”
Gallagher, 29, from Manchester in northern England, said while past debts with payday lenders such as Wonga had damaged her credit rating, she was surprised to be rejected this month.
“I’d understand if I wanted a new loan or had missed payments but I have never missed a payment,” said Gallagher, who works with offenders.
A spokesman for Amigo said Gallagher’s request was declined because the purpose of the loan wasn’t covered in its current lending criteria, which have been tightened since the pandemic.
“An Amigo loan is intended for considered purchases, rather than day-to-day expenses; this is why the minimum loan we offer is 1,000 pounds ($1,225).”
SHORT OF OPTIONS
While some low-income borrowers just struggle to budget, others have been blacklisted by the mainstream financial system and rely on alternative credit providers such as guarantor or doorstep lenders to make ends meet.
Credit score provider ClearScore, which shows consumers what deals are available based on their circumstances, said subprime borrowers could on average access only 0.17 of loans in a snapshot of the market on May 16. On Jan. 1, the average was 1.
On the same date in May, prime borrowers on average found 1.79 loans available, while those in the middle, or non-prime borrowers, found 0.81 products on average.
Britain’s largest subprime lender, Provident Financial Group, has tightened its underwriting criteria while rival Non-Standard Finance is now only lending to key workers such as doctors, nurses, supermarket staff and delivery drivers.
The subprime credit market had already shrunk in recent years after tighter regulation and interest rate caps pushed a slew of payday lenders out of business.
Without financial safety nets and affordable access to credit, millions of hard-up Britons have sought government welfare payments, with 2.5 million applications for Universal Credit benefits between March 16 and May 5.
Almost 11 million people have missed or expect to miss a bill that could result in bailiff enforcement and even eviction, research from the Citizens Advice Bureau shows.
Debt charities say the absence of government schemes to help indebted Britons at a time when subprime lenders are pulling back from the market has been keenly felt.
“High-cost short-term credit may seem to offer a short-term financial stopgap but too often it can become an expensive repeat trap,” said Sue Anderson at debt charity StepChange.
“It is unlikely to represent a sustainable solution to people’s financial pressures, whereas a well-designed no-interest loan scheme could potentially make a helpful contribution,” she said.
Plans to offer interest-free loans to some struggling borrowers – a policy proposed by former finance minister Philip Hammond in 2018 – have yet to come to fruition.
A Treasury spokesman said it remained committed to working with stakeholders with a view to piloting a scheme to support the most vulnerable and sustainable over the longer term.
Lenders are prohibited from selling credit to anyone they don’t think can pay it back, which is likely to exclude many people who have lost their jobs so far in the pandemic.
That means those employed in industries hit badly, or those who have seen their household income cut whilst on furlough, are finding a dwindling range of options among subprime lenders.
“I would imagine 35% of the population are now in this non-prime or subprime position and there’s more coming,” FairMoney’s Gewolb said. “All they can do is find a guarantor or have a conversation with a guy down the boozer who has friends with baseball bats and no consumer credit licence.”
The England Illegal Money Lending Team, which investigates and prosecutes loan sharks, said it was launching a live website chat on May 26 to give victims another safe way to seek advice and support.
“These unpleasant individuals spell nothing but misery for those who borrow money from them,” team head Tony Quigley said.
Based on data from 2018 and 2019, the organisation said it took an average of 2.75 years for someone targeted by predatory lenders to engage with the authorities, suggesting any spike in loan shark activity now might not be visible until 2023.
Analysts say it is no surprise subprime lenders are acting cautiously. Even in benign market conditions, companies serving subprime customers typically absorb higher defaults than banks who focus on higher-quality borrowers.
In 2019, 13.6% of the loans made by Provident’s subprime credit card business Vanquis turned bad, while the so-called impairment rate for its doorstep lending was 39%.
But for loans made by Royal Bank of Scotland, for example, which tends to lend to people with better credit ratings and focuses on mortgages, the rate was just 0.21%.
With little consensus on the outlook for the British economy, few mainstream lenders say they are prepared to help borrowers who didn’t measure up before the pandemic.
David Duffy, chief executive of Virgin Money, said the bank was prioritising existing clients and had not considered altering its lending criteria to offer credit to subprime borrowers.
A spokesman for the banking trade body UK Finance, said: “Lenders work hard to ensure the balance is right between helping customers to budget effectively and meet their payment needs while lending responsibly and ensuring longer-term affordability.”
Others were more blunt about a subprime shutout.
“It’s almost certain people won’t be able to get credit,” one senior banking executive said. “Clearly if you are in that category, then you are in a much more difficult scenario.”
(qlmbusinessnews.com via bbc.co.uk – – Wed, 20th May 2020) London, Uk – –
Rolls-Royce has said it will cut 9,000 jobs and warned it will take “several years” for the airline industry to recover from the coronavirus pandemic.
The Derby-based firm, which makes plane engines, said the reduction of nearly a fifth of its workforce would mainly affect its civil aerospace division.
“This is not a crisis of our making. But it is the crisis that we face and must deal with,” boss Warren East said.
The bulk of the job cuts are expected to be in the UK at its site in Derby.
Rolls-Royce employs 52,000 people globally and Mr East told the BBC's Today programme that the company had not yet concluded on “exactly” where the job losses would be, due to having to consult with unions.
But he said: “It's fair to say that of our civil aerospace business approximately two-thirds of the total employees are in the UK at the moment and that's probably a good first proxy.”
Rolls-Royce's civil aerospace business has a number of sites in the UK, but the largest plant is in Derby.
The company said it will also carry out a review of its sites but declined to comment on which ones may close.
John, a worker in Rolls-Royce's civil aerospace division who spoke to the BBC on condition of anonymity, said that while he expected there would be job cuts, the eventual 9,000 figure was “a shock”.
“Since the Covid-19 outbreak we knew that business would shrink,” he said.
But he said the scale of the cuts as well as the potential closure of some sites was a surprise.
Unite the union said the decision was “shameful opportunism”.
“This company has accepted public money to furlough thousands of workers,” said Unite's assistant general secretary for manufacturing, Steve Turner.
“Unite and Britain's taxpayers deserve a more responsible approach to a national emergency. We call upon Rolls-Royce to step back from the brink and work with us on a better way through this crisis.”
Rolls-Royce initially furloughed 4,000 workers in the UK last month. Some 3,700 people remain on the Coronavirus Job Retention Scheme though which the government pays 80% of a worker's wage up to £2,500 a month.
But Mr East said: “No government can extend things like furlough schemes for years into the future. We have to look after ourselves and make sure we meet medium term demand.”
Analysis: Domonic O'Connell
Job cuts a heavy blow
This morning's job losses are hardly unexpected – airlines have cut their flying hours by 90% or more, and Airbus and Boeing have slashed their production numbers for the next few years – but they are still a heavy blow to one of the UK's few world-class manufacturing companies.
While the details of where the cuts will fall have not been finalised, it is likely that two-thirds will go in the UK.
The company has already used the government's furlough scheme to help pay the wages of about 4,000 staff, but Warren East, Rolls-Royce's chief executive, said companies could not expect the government to continue such a scheme for several years.
There was also a clear hint this morning that some factories may close – the company said it would review its future manufacturing footprint.
Some questions remain for Roll-Royce. Investors are scratching their head about when the company's revenues – much of which rely on aircraft to be flying for money to flow – will return.
The company has not yet tapped its shareholders for more money – some expect that may eventually come.
Air travel has ground to a virtual standstill since the coronavirus began spreading across the world and many airlines have announced steep job cuts.
Global air traffic is expected to decline by 45% this year, according to investment bank Baird. It also forecasts that airlines are expected to lose $310bn (£253bn) in revenue in 2020.
Rolls-Royce said the impact of the pandemic on the company and the whole of the aviation industry “is unprecedented”.
It added that it is “increasingly clear that activity in the commercial aerospace market will take several years to return to the levels seen just a few months ago”.
As well as the job losses, the company said it would cut costs in areas such as its plants and properties. It expects to make cost savings of £1.3bn.
Paul Everitt, chief executive of ADS, the aerospace industry association, said: “The crisis is having a major impact on aerospace companies who provide high value, long-term jobs in all regions and nations of the UK, putting thousands more jobs at risk now and in the months ahead.”
(qlmbusinessnews.com via theguardian.com – – Wed, 20th May 2020) London, Uk – –
Farmers fear British workers will leave crop-picking jobs when lockdown eases
Farmers are facing an uncertain summer and autumn as industry representatives said they still needed to recruit – and retain – as many as 40,000 British residents to harvest fruit and vegetables.
With the peak picking season just a few weeks away, thousands of British workers are needed to replace the foreign workers who usually travel to the UK to pick crops. There are deep concerns that even if enough workers initially come forward, many will quit as the lockdown eases and they are able to return to their usual employment.
The centrepiece of the recruitment campaign is the government and industry portal Pick for Britain. The site crashed on Tuesday just as the government was urging people to join a “land army”. ITV and Waitrose announced a campaign to support the drive, which will include adverts and a film following new recruits.
Ali Capper, who runs an apple and hops farm in Worcestershire and chairs the British Apples and Pears trade body, said she did not like the land army image.
“I find the rhetoric of the land army unhelpful,” she said. “That’s looking back how things were through rose-tinted spectacles. Our businesses aren’t like that any more. The rhetoric may bring forward large numbers of people but some only want to do the odd day here and there or don’t want to do the hours that are required. That’s very difficult for business. What we want is people who will sign up and commit.”
About 70,000 workers are needed to bring in the British harvest over the spring, summer and autumn.
Tom Bradshaw, vice-president of the National Farmers’ Union, said the level of interest in Pick for Britain had been “overwhelming”. But he added: “The difficulty has been in turning that into pickers that stick – people that are going to turn up day in, day out.”
He said the Pick for Britain site had had well over 100,000 hits from unique users and the latest estimate from April was that 25% to 30% of pickers on farms were British. The figure is usually below 1%.
But Bradshaw added: “We have got 20,000 to 40,000 more workers to find and those are going to be difficult.” He said that farms were still expecting eastern European workers to come to the UK but quarantine rules were creating uncertainty. If the government’s plan to impose two weeks of isolation on new arrivals by air is applied to seasonal workers it could create a “huge shortage”.Advertisement
Jack Ward, CEO of the British Growers Association, said: “We’re OK or OK-ish.” But added that farmers were worried not all workers who have said they will start in June will do so.
“And there’s a nervousness about the rest of the season,” he said. “As we progressively come out of lockdown, some people working on farms will return to their original roles. A lot of growers are sensing they are going to be continually topping up the workforce, recruiting and retraining as the season goes on.”
When the Growers Association carried out a survey of salad and brassica farmers, only about a third said they had all or almost all the workers they needed.
Sarah Boparan, operations director of Hops, one of the UK’s biggest agencies for hiring farm labour, said it had thousands of British applicants for jobs but only about 20% completed interviews. She said the agency and farms have had to change the way they work to be more flexible – offering two-week stints rather than the usual two to six month contracts – to suit British workers.
Doug Robertson, managing director at Florette UK, a leading salad brand, called for more guidance from the government. He said: “Currently we have planted up to the middle of June, with plants being raised which will take us to the end of August but there is huge uncertainty around how much we will actually need to harvest.”
Nick Marston, chairman of the industry body British Summer Fruits, said there were thousands of British people now working on farms. But he warned there could be problems later in the year if they returned to their old jobs.
The Department for Environment, Food and Rural Affairs said the majority of roles for the early part of the harvest season have been filled. A spokesperson said: “The demand for seasonal workers is expected to increase in the coming weeks and months. This is why we are working hard now to ensure our farmers and growers have the support they need ahead of this time.”
(qlmbusinessnews.com via theguardian.com – – Tue, 19th May 2020) London, Uk – –
Rishi Sunak warns UK facing recession ‘the likes of which we haven’t seen’ due to Covid-19 crisis
The chancellor, Rishi Sunak, has warned that Britain is facing a “severe recession, the likes of which we haven’t seen” and lasting economic damage from the coronavirus pandemic.
In a downbeat assessment of the country’s economic prospects after a sharp rise in unemployment benefit claims, the chancellor warned a Lords committee it was “not obvious there will be an immediate bounceback” from recession.
The government’s lockdown controls to limit the spread of the virus brought the economy to an effective standstill, with Sunak saying: “I certainly won’t be able to protect every job and every business, we’re already seeing that in the data, and no doubt there will be more hardship to come.”
The government had been hoping for a V-shaped recovery from the pandemic, but the chancellor said the “jury is out” on the “degree of long-term scarring” on the UK economy. He suggested that the outcome was uncertain because economists were “dealing with something unprecedented so economic forecasting is not as precise as it might normally be”.
Sunak had suggested as recently as last month that Britain could “bounce back” quickly thanks to the government’s support measures and the nation’s “fundamentally sound” economy prior to the crisis.
Speaking at the daily Downing Street press conference in mid-April, he said “we can recover quickly and strongly and get our lives back to normal”.
Referring to relatively weak levels of growth in Europe as lockdown measures were gradually lifted elsewhere, he added: “In all cases it will take a little bit of time for things to get back to normal, even once we’ve reopened currently closed sectors.”
Official figures earlier on Tuesday showed 856,500 people signed up for universal credit and jobseeker’s allowance benefits in April, driving up the overall claimant count by 69% in a single month. Economists said the figures would have been far higher without the Treasury’s furlough wage subsidy scheme.
The emergency financial support unleashed by the Treasury, with a rapidly rising price tag worth tens of billions of pounds every month, is designed to minimise the lasting damage to the economy by helping companies to stay afloat and by keeping people in their jobs.
However, Sunak warned that the depth of the Covid-19 recession and the length of time it could take for business activity to return to normal could hit the country’s productive capacity.
“The longer the depth of the recession, I think everyone would agree – all economic forecasters and economists would agree – it is likely the degree of that scarring will be greater,” he said.Advertisement
About 8m jobs have been protectedthrough the government’s furlough scheme. But with the gradual reopening of the economy as lockdown controls are lifted over the coming months, the chancellor is preparing to scale back the support from the current level of 80% of workers’ wages and pass some of the £14bn-a-month cost of the scheme to employers.
Sunak suggested he would reject requests for the 80% subsidy to be retained longer for sectors due to reopen last – including leisure and hospitality firms such as pubs, theatres and restaurants.
He told the Lords committee: “I thought about a sectoral approach and in practice it would be very difficult to implement.
“There’s an entire supply chain of those companies, which are in practice very hard to start to differentiate between those businesses.”
A union accuses the company of reneging on a promise not to cut jobs as it continues the integration of the SSE brand.
OVO Energy, which bought the household supply business of SSE for £500m just months ago, has announced plans to slash 2,600 jobs.
The company said its integration plans, including a drive for digital and investment in a zero carbon future, had been accelerated by the COVID-19 pandemic.
OVO said it had initially expected the moulding of the two companies to have taken a number of years but it hoped to achieve the cuts through volunteers though it could not rule out compulsory redundancies.
The GMB union accused the company of cutting its way to profitability as the industry suffers the effects of the government's default tariff price cap and falling wholesale energy costs.
Research by price comparison site Uswitch suggested home energy deals had fallen to their lowest since the summer of 2018.
OVO said of the roles affected by its cuts: “As part of the integration, the company will remove complexities and duplication by combining SSE Energy Services and OVO's home services, lettings business, metering, commercial efforts and support functions.
“It will continue to digitise legacy SSE processes and move the business onto a common set of systems to meet the demands of an increasingly digital consumer and a more agile workforce.
“To accommodate these changes, and as part of a move towards more flexible working the Selkirk, Reading and Glasgow Waterloo Street office locations will be closed.
“The employees in these sites will be able to either work from home or at an alternative office.”
The union Unison said plans to offshore a further 700 jobs to South Africa were abandoned by the company.
Stephen Fitzpatrick, OVO's chief executive, said: “Today is a very difficult day. We have a brilliant team here and this news isn't a reflection of anyone's work.
“What should have been a much longer process to digitise the SSE business and integrate it with OVO has been accelerated due to the impact of the coronavirus.
“We are seeing a rapid increase in customers using digital channels to engage with us, and in our experience, once customers start to engage differently they do not go back.
“As a result, we are expecting a permanent reduction in demand for some roles, whilst other field-based roles are also heavily affected.”
The GMB union accused the company of betraying its workforce.
National secretary Justin Bowden said: “Coronavirus outbreak or not, this is a massive betrayal of promises made to workers and politicians that the sale to OVO would not result in job losses.
“The COVID crisis and the SVT cap have affected the whole energy retail market but you cannot just cut your way out of a crisis in search of profit.”
(qlmbusinessnews.com via uk.reuters.com — Mon, 18th May 2020) London, UK —
LONDON (Reuters) – A chorus of comments from top officials at the Bank of England about negative interest rates has revived talk that the British central bank might resort to cutting borrowing costs below zero to cushion the economy from the coronavirus shutdown.
The BoE has cut rates twice as the COVID-19 crisis escalated in March to a record low of 0.1%.
Most economists say its next move will be to add to the firepower of its 645 billion-pound bond-buying programme as soon as June 18, at the end of its next scheduled meeting.
But investors on Monday began to price in the possibility of the BoE overcoming its long-standing reluctance to take rates below zero from the end of 2020 as it contemplates what could be the biggest economic slump in three centuries.
The shift in markets came after the BoE’s chief economist, Andy Haldane, said the central bank was looking more urgently at negative interest rates as well as at buying riskier assets.
“The economy is weaker than a year ago and we are now at the effective lower bound, so in that sense it’s something we’ll need to look at – are looking at – with somewhat greater immediacy,” Haldane told the Daily Telegraph newspaper in an interview published late on Saturday. “How could we not be?”
The comments from Haldane, who is typically one of the BoE’s most outspoken policy-makers, struck a more urgent note than the message from Governor Andrew Bailey.
Last week, Bailey said taking rates below zero “is not something we are currently planning for or contemplating,” but he added it was not wise to rule anything out.
Alan Monks, an economist with JP Morgan, said the comments, along with Deputy Governor Ben Broadbent’s saying on May 12 the BoE needed to keep on weighing up the pros and cons of negative rates, suggested the central bank was reviewing its stance.
“Despite the mixed messaging, it appears the MPC (Monetary Policy Committee) believes this is a debate which is at least worth revisiting,” Monks said in an email to clients.
The departure in March of former governor Mark Carney, who was particularly resistant to going negative, might have created space for fresh discussions, he said.
While the European Central and the Bank of Japan have cut their benchmark rates below zero in a bid to get banks to turn their cash into loans and boost economic growth, the BoE has said it believes such a move would be counterproductive, because it would hurt banks and make them less likely to lend.
But investors have not missed the apparent willingness to contemplate the question anew.
Rob Wood, an economist with BofA Global Research, said the brevity of the recent comments allowed for misunderstandings, but the BoE seemed to be signalling that 0.1% was no longer the floor for rates, and a cut to zero was possible in August.
“We think a policy rate of 0% is easier for the BoE to contemplate and they will need to exhaust other options, which will take time, before taking rates negative,” Wood said.
Going below zero would further weaken sterling, which is already touching two-month lows against the dollar and the euro because of the prospect of failure in London’s post-Brexit trade talks with Brussels.
But saying never to sub-zero borrowing costs no longer made sense, Wood said.
“We see the probability of negative rates higher for 2021 than 2020,” he said. “We can’t rule it out anymore.”
By William Schomberg