Delay to end of lockdown would hold back economic rebound, businesses warn
A delay to the lifting of COVID-19 restrictions later this month would “materially” hamper Britain’s economic recovery, a leading business group has warned.
The British Chambers of Commerce (BCC) has predicted that a consumer spending surge will see GDP grow by 6.8% this year – but said it would reassess the forecast if restrictions are extended.
It comes as doubts are cast over the 21 June lockdown lifting date with ministers stressing caution amid a rise in the number of cases of the Delta coronavirus variant.
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‘Thank goodness’ for recovery – but longer term relatively weak, says BoE governor
Suren Thiru, head of economics at the BCC, said: “The squeeze on activity and the damage to confidence from a marked delay to the full lifting of restrictions or further restrictions to combat COVID variants would materially slow the recovery.”
Official figures on Wednesday showed another 7,540 coronavirus infections were recorded in the latest 24-hour period – the most since 26 February.
The Prime Minister said it was clear that case numbers were going up and the government would be looking at whether the level of vaccine protection had been built up by enough “for us to go ahead to the next stage”.
Britain’s economy suffered its biggest decline for three centuries last year with GDP shrinking by nearly 10%.
Forecasters including the Bank of England expect it will bounce back this year with the strongest annual growth since the Second World War.
The BCC’s latest report predicted a “historically robust short-term outlook” for the UK economy, driven by the strongest growth in spending since 1988.
Trade is expected to drag on the recovery
Mr Thiru said: “The UK economy is in a temporary sweet spot with the boost from the release of pent-up demand, if restrictions ease as planned, and ongoing government support expected to drive a substantial summer revival in economic activity, underpinned by the rapid vaccine rollout.”
Even in this scenario, the recovery is expected to be “uneven”, with manufacturing returning to pre-pandemic levels later this year but hard-hit sectors such as catering and hospitality needing until the middle of 2023 to get back onto their feet.
Trade is also expected to drag on growth in the short-term as a result of post-Brexit disruption and a weak outlook for the eurozone economy weighing on EU demand for UK goods and services.
The BCC forecast predicted quarterly growth at its strongest over the second and third quarters of this year and the overall economy returning to pre-pandemic levels at the start of 2022.
But it said this “assumes that the UK government’s roadmap out of lockdown restrictions proceeds as currently planned”, adding that “another scenario would lead to revisions in the next forecast”.
Business
UBS takeover of Credit Suisse: Embattled bank’s chairman describes ‘historic, sad and very challenging’ day
UBS will take over Credit Suisse in a deal aimed at stemming what was fast becoming a global crisis of confidence.
Credit Suisse, the 167-year-old embattled lender had been brought to the brink of financial calamity last week, despite securing a $54bn (£44bn) credit line from Switzerland’s central bank.
The credit line was agreed upon in a move aimed at reassuring markets and depositors, but it failed to stem a rush of customer withdrawal, prompting a request from the Swiss government for the rival UBS to consider a takeover.
That takeover was announced on Sunday evening – UBS will pay 3bn Swiss francs (£2.6bn) to acquire Credit Suisse, it has agreed to assume up to 5bn francs (£4.4bn) in losses, and 100bn Swiss francs (£88.5bn) in liquidity assistance will be available to both banks.
The deal is expected to be closed by the end of this year.
Colm Kelleher, chairman of UBS Group, said the agreement “represents enormous opportunities”.
He also said that his bank’s long-term aim would be to downsize Credit Suisse’s investment banking business and align it with the “conservative risk culture” of UBS.
Axel Lehmann, chairman of Credit Suisse, described the day as “historic, sad and very challenging” for his bank and the global market.
‘The best available outcome’
Mr Lehmann said: “Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome.
“This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.”
‘Exceptional situation’
In a statement, the Swiss central bank and other officials said that the agreement represented “a solution…to secure financial stability and protect the Swiss economy in this exceptional situation”.
It is also hoped that UBS’s takeover of its old rival will avoid the contagion of the kind seen in the financial crisis of 2008.
Central banks insist systems are resilient
The news was welcomed by central banks in the US, Europe and in the UK.
All three insisted that banking systems within their jurisdiction are strong and resilient.
The Bank of England said: “We have been engaging closely with international counterparts throughout the preparations for today’s announcements and will continue to support their implementation.
“The UK banking system is well capitalised and funded, and remains safe and sound.”
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Credit Suisse rescue: What now for the UK’s banks?
A deal likely to ripple through global markets
Credit Suisse is one of the world’s largest wealth managers and is also one of 30 banks ranked as systemically important, meaning the deal is likely to ripple through global markets on Monday.
It is also one of the largest investment banking employers in the City of London, employing around 5,000 people.
In a memo to employees on Sunday, Credit Suisse said there would be no immediate impact on clients or day-to-day working operations, adding that branches and global offices would remain open.
It comes after a difficult few weeks for the banking sector, with the collapse of US lenders Silicon Valley Bank and Signature Bank.
The UK branch of SVB was rescued by HSBC for £1, but a number of other mid-sized American lenders have also been forced to seek emergency funding.
UBS will take over Credit Suisse in a deal aimed at stemming what was fast becoming a global crisis of confidence.
Credit Suisse, the 167-year-old embattled lender had been brought to the brink of financial calamity last week, despite securing a $54bn (£44bn) credit line from Switzerland’s central bank.
The credit line was agreed in a move aimed at reassuring markets and depositors, but it failed to stem a rush of customer withdrawal, prompting a request from the Swiss government for the rival UBS to consider a takeover.
That takeover was announced on Sunday evening – UBS will pay 3bn Swiss francs (£2.6bn) to acquire Credit Suisse, it has agreed to assume up to 5bn francs (£4.4bn) in losses, and 100bn Swiss francs (£88.5bn) in liquidity assistance will be available to both banks.
The deal is expected to be closed by the end of this year.
Colm Kelleher, chairman of UBS Group, said the agreement “represents enormous opportunities”.
He also said that his bank’s long-term aim would be to downsize Credit Suisse’s investment banking business and align it with the “conservative risk culture” of UBS.
Axel Lehmann, chairman of Credit Suisse, described the day as “historic, sad and very challenging” for his bank and the global market.
‘The best available outcome’
Mr Lehmann said: “Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome.
“This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.”
‘Exceptional situation’
In a statement, the Swiss central bank and other officials said that the agreement represented “a solution…to secure financial stability and protect the Swiss economy in this exceptional situation”.
It is also hoped that UBS’s takeover of its old rival will avoid the contagion of the kind seen in the financial crisis of 2008.
Central banks insist systems are resilient
The news was welcomed by central banks in the US, Europe and in the UK.
All three insisted that banking systems within their jurisdiction are strong and resilient.
The Bank of England said: “We have been engaging closely with international counterparts throughout the preparations for today’s announcements and will continue to support their implementation.
“The UK banking system is well capitalised and funded, and remains safe and sound.”
Please use Chrome browser for a more accessible video player
Credit Suisse rescue: What now for the UK’s banks?
A deal likely to ripple through global markets
Credit Suisse is one of the world’s largest wealth managers and is also one of 30 banks ranked as systemically important, meaning the deal is likely to ripple through global markets on Monday.
It is also one of the largest investment banking employers in the City of London, employing around 5,000 people.
In a memo to employees on Sunday, Credit Suisse said there would be no immediate impact on clients or day-to-day working operations, adding that branches and global offices would remain open.
It comes after a difficult few weeks for the banking sector, with the collapse of US lenders Silicon Valley Bank and Signature Bank.
The UK branch of SVB was rescued by HSBC for £1, but a number of other mid-sized American lenders have also been forced to seek emergency funding.
Business
John Lewis may end 100% staff ownership to raise investment for ‘transformation’ as job losses loom
The retail giant John Lewis may dilute its 100% employee ownership to raise fresh investment.
The change to the partnership model would signal a major departure for the company, which runs the department store chain and Waitrose supermarkets.
The firm warned of job cuts and told staff it will not hand out a bonus for only the second time since 1953 this week after posting an annual loss of £234m as costs soared and sales dipped.
Dame Sharon White, its chairwoman, is in the early stages of exploring a plan to change its mutual structure in an attempt to raise up to £2bn of new investment, according to The Sunday Times.
The group would consider selling only a minority stake and its priority would be to maintain majority employee ownership, the newspaper said.
Any move would have to be voted on by the retailer’s partnership council of about 60 staff.
In the face of tough trading conditions, the firm has been looking to diversify its operations, including a move into the “build to rent” property business.
At the end of last year it signed a £500m deal with Abrdn, a global investment company, that will help it build 1,000 new homes.
The John Lewis Partnership said: “We’ve always said we would seek partnerships to help fund our transformation and exciting growth plans.
“We’ve done this with Ocado in the past and now with Abrdn.
“Our partners, who own the business, will be the first to hear about any developments.”
The business includes 329 Waitrose shops
UK’s largest employee-owned business
The business was founded by John Lewis with a small shop on Oxford Street in 1864.
His son, John Spedan Lewis, created the partnership more than 70 years ago as an experiment into a better way of doing business by including staff in decision-making.
The John Lewis Partnership is the UK’s biggest employee-owned business with around 74,000 staff, known as partners.
The group has 34 John Lewis shops and 329 Waitrose shops, along with its retail websites.
In a letter sent to staff last week, Dame Sharon raised the spectre of job losses as part of efforts “to become more efficient and productive”.
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‘Inflationary pressures’
A loss of £78m was recorded for the financial year which ended in January but when exceptional costs were added this reached £234m.
These included the write-down in value of Waitrose stores.
It represented a slump from a £181m profit in the previous year, with John Lewis blaming “inflationary pressures”.
The update came a day after the group appointed turnaround specialist Nish Kankiwala as its first chief executive, in a shake-up of the leadership structure.
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