The week’s news included; Summary of UK government’s latest measures to fight coronavirus, Apple fined €1.1 billion in France, US senators under fire for profiting from inside coronavirus knowledge, LVMH & Brewdog start making hand sanitizer
1. UK GOVERNMENT CORONAVIRUS ACTION
The government has announced its most significant measures yet to tackle the coronavirus outbreak. We summarise the key announcements here;
- The government will pay 80% of wages for employees unable to work due to the outbreak, up to £2500 per month. The first grants will be available to businesses within weeks. Businesses will also have access to a total of £330 billion of loan guarantees.
- All food, leisure and entertainment establishments were obliged to close from last Friday. This includes pubs, cafés, restaurants, nightclubs, cinemas and gyms. All such businesses will also receive a full 12-month business rates holiday. Restaurants are permitted to continue takeaway business.
- Businesses with a rateable value of less than £51,000 can receive a £25,000 cash grant. 700,000 of the smallest businesses to receive cash grants of £10,000.
- Homeowners will receive a three-month mortgage payment holiday. This will also be available to those landlords who’s tenants are facing financial difficulty
- Landlords are prohibited from evicting renters from private or social accommodation for 3 months. After this period landlords and tenants will be expected to come to arrangements between themselves.
- Competition laws are relaxed for supermarkets. Stores will be able to cooperate more closely, by providing each other with information on stock levels and, sharing delivery vans and depots. The 5p plastic bag charge will be dropped. Delivery drivers daily driving limits will be increased from 10 to 11 hours to cope with increased demand.
- All UK schools were closed and exams were cancelled indefinitely from last Friday
The economic existential risk posed by the coronavirus outbreak is unprecedented. It comes as no surprise that the government has introduced these huge measures to help stop the spread while mitigating the financial impact on businesses. The UK is keen to avoid reaching an Italy situation, where around 800 people died in a single day from Coronavirus last week. Boris Johnson claims the UK could resolve the situation within 12 weeks if people follow guidance. The situation is changing on a daily basis. Whether these measures will be significant remains to be seen.
2. UK INTEREST RATES CUT AGAIN
The Bank of England has slashed interest rates to 0.1% and introduced quantitative easing. A large economic shock is expected due to shut down of businesses amid the coronavirus outbreak. These fiscal measures are aimed to mitigate the shock but a recession is inevitable. The bank will make £200 billion in bond purchases, pumping the economy full of new cash. At 0.1% this will be the lowest rates since the Bank of England was founded in the 17th century. Andrew Bailey has only been at helm as governor for a week but has a huge task on his hand. Central banks are working hard to determine the best way to manage the economy in this unprecedented time. Following the steps of the US, the UK could give cash directly to individuals to help households stay afloat. The extent of the economic shock however, remains to be seen.
3. APPLE FINED €1.1 BILLION
Apple has been fined a record €1.1 billion by French regulators for anti-competitive agreements. The tech giant struck agreements with two French wholesalers, Tech Data and Ingram Micro to not compete against other and even prevent resellers from promoting competition. The Autorite de la Concurrence found that these wholesalers amongst others received more stock of new products from Apple and left others with insufficient stock. This was also part of wider scheme to limit competition and align prices with wholesalers. Apple said it will appeal the fine. Tech Data was fined €76 million and Ingram Micro was also fined €63 million.
4. LAURA ASHLEY COLLAPSE
Laura Ashley has collapsed into administration due to decreased demand amid the coronavirus outbreak. Like all high street businesses the Covid-19 outbreak has brought a huge decline in footfall. The retailer posted a £4 million loss in the first half of the year but had seen slightly improved trading up until the outbreak but all gains were lost. Last month, Laura Ashley had obtained a £20 million working capital facility in a bid to stay afloat. The outbreak however, forced them to call in the administrators.
5. CARPHONE WAREHOUSE CUTS
Dixons Carphone has announced it will close all 531 UK standalone Carphone Warehouse stores. The decision was driven by changing consumer trends rather than the coronavirus outbreak. Consumers are buying phones less frequently and purchasing more products online than in store. Carphone Warehouse will now only physically operate within 305 larger Currys PC World sites. 2900 employees will be affected but 40% of workers will take new roles in the company. Dixons has been struggling in recent times and is expected to post a huge £90 million loss for the year.
6. US SENATOR FACES CALLS TO RESIGN
Four US senators are facing calls to resign over claims they used inside knowledge about the coronavirus outbreak to profit before stock markets crashed. The senators accused of insider trading are Republicans Richard Burr, Kelly Loeffler, James Inhofe and Democrat Dianne Feinstein. Kelly Loeffler sold up to $3 million of stock the same day as Senate briefing on the coronavirus outbreak. Richard Burr is chairman of Senate Intelligence Committee, receives daily updates on the virus and sold $1.7 million of stocks. He claims decisions to sell his stock last month were entirely based on public information, so this does not constitute insider trading. There will no doubt be further investigation into this case and whether the senators resign remain to be seen.
7. MORRISONS RECUITS 3500 NEW STAFF
Morrisons has revealed plans to take on 3,500 staff to cope with increased demand. The supermarket plans to expand home delivery and provide additional support to existing staff. More delivery slots will be available and a call centre to arrange home deliveries will be launched to help vulnerable people without internet access. This forms part of a wider plan to deal with the unprecedented challenges posed by the outbreak.
Morrisons has been at the forefront of supermarket support for those affected. It provided immediate payments to small suppliers and is setting up a hardship fund for Morrisons’ staff facing financial difficulties. Other practical measures will include provision of hand sanitiser at checkouts and encouraging contactless card payments instead of cash.
8. BUSINESSES SHIFT TO HAND SANITIZER PRODUCTION
Companies not best known for healthcare productions are shifting to make hand sanitizer amid a global shortage. Designer brand conglomerate LVMH and owner of brand Louis Vuitton has announced that it will make hand sanitizer gel for hospitals. The company will use its cosmetics and perfumes production lines to make the gel. It will deliver the gel to France hospitals free of charge due to shortages within the country’s health sector. It will make 12 tonnes of sanitiser a week instead of many of its fragrances such as Christian Dior and Givenchy.
Independent UK brewer Brewdog will also begin producing hand sanitizer in Scotland, dubbing it “punk sanitizer”. It too will give away the product for free to local charities and communities. Other gin makers are also following suit switching from alcoholic drinks to alcohol-based hand sanitizers. HMRC are currently prioritising applications for tax exemptions for those opting to produce denatured alcohol.
9. UBER CANCELS CAR POOLING
Uber has halted all carpool services amid the coronavirus outbreak. Government’s across the globe have encouraged or obliged citizens to avoid all non-essential travel. New York, Illinois and California have gone into total lockdown with residents told not leave their homes except for vital reasons. The US has over 20,000 cases and the virus is spreading fast. Across the globe, countries have already shut down retail and leisure stores, having a huge knock on effect on related industries reliant on footfall. Uber considers the coronavirus outbreak a “material risk to is business”. Uber’s share price plunged 6.8% in response to the news, despite a wider market rebound.
10. CORONAVIRUS DRUG PRICE REVERSAL
US drug marker Rising Pharmaceuticals reversed its 98% price hike for chloroquine phosphate, a potential coronavirus fighting drug. The drug, which is traditionally used to treat malaria has now been identified by President Trump and the US Food and Drugs Administration as a potential treatment for coronavirus. The FDA is looking more closely at the drug although there is no conclusive evidence that the drug is an effective treatment for coronavirus. The sole US producer of the drug however, Rising Pharmaceuticals, raised prices by 97.86% in late January 2020. Rising Pharmaceuticals claims the price rise was coincidental rather than an attempt to profiteer from the outbreak. When the firm realised the potential demand, it cut prices down to 2015 levels due to the potential benefits the drug could have. Rising Pharmaceuticals was fined $3 million last year for conspiring to fix prices for a generic drug.