Langton Capital – 2021-02-18 – PREMIUM – Critical weeks, reopening, lobbying, Carnival, holidays & other:
Critical weeks, reopening, lobbying, Carnival, holidays & other:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Bit busy today, despite it being half term.
On to the news:
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A CRITICAL FEW WEEKS:
• We are due a roadmap to reopening on 22 Feb and a Budget on 3 March.
• Then Business Rates are meant to come back at the end of March, the moratorium on evictions ends at the same time and VAT on food & soft drinks in pubs & restaurants rises from 5% to 20%.
• The following month, April, the Furlough Scheme is due to end.
• It is pretty much a racing certainty that not all of the above will happen.
The near term.
• It’s a toss up whose mail bag is the fuller, the PM’s or the Chancellor’s.
• The Chancellor took an early lead as the 3 March date has been known for some time. He has been lobbied to keep the furlough, cancel business rates until the end of the year and keep the 5% rate of VAT.
• He has been asked to rekindle Eat Out to Help Out and to extend the lower VAT rate to more UK hospitality goods & services (particularly beer).
• He has been told he must cut beer duty, do more to help businesses, he must protect jobs, maintain consumer spending power and he needs to paint the moon blue.
• But recently, strangely since the 22 Feb date was mentioned, the PM has been mounting a challenge.
• He has received letters telling him that schools are a priority, that non-essential shops are a priority, that pubs & restaurants are a priority and that travel is a priority.
• At that point, he presumably went for a lie down.
• He has been informed that pubs must reopen when non-essential shops reopen. He has been told to mind his language by the travel industry and, we could go on. There is much, much more.
A bit of a side issue:
• It can’t be a comfortable feeling being a supplicant at the court of a king, politician or whatever.
• And that has led to there being more ‘demands’ than ‘requests’ as those asking for ‘favours’ have maybe sought to maintain their dignity.
• That is what it is.
• However, it’s to be hoped that the aforementioned kings or politicians don’t get to enjoy holding audience and being surrounded by beholden industry representatives to whom they can bestow favours when and how they choose
First things first:
• PM Boris Johnson is to update on Monday. School-reopening looks to be nailed on.
• The suggestion that there could then by four-week gaps looks sensible. Hospitality will argue that it should reopen at the same time as non-essential shops but there is a real risk that that will not happen.
• The Budget is likely to smooth the Rates, Furlough, Eviction and VAT cliff edges.
• Just how, remains unknown at this point – but it will likely involve lots of debt, obfuscation etc.
PUBS & RESTAURANTS:
Reopening news (mix of leaks & speculation):
• PM Boris Johnson has said it is “absolutely right” to take a “data not dates” approach to reopening the economy. He says England will move “cautiously”. The comments may disappoint some, who had been looking for a hint that there could be a commitment to an earlier opening.
• Mr Johnson has previously said that he would like to move slowly but ‘irreversibly’ out of the third lockdown. Any further lockdowns could be a threat to his premiership.
• Blaming hospitality.
• Mr Johnson, now in Wales & doing a deal more travelling than 99% of his fellow countrymen, tells the BBC ‘you have to remember from last year that we opened up hospitality fully as one of the last things that we did because there is obviously an extra risk of transmission from hospitality.’
• Some in hospitality (actually in travel and regarding a slightly different statement), have said that ministers should be careful what they say as words have consequences.
• Mr Johnson’s scientific advisors say ‘we want to understand the impact on each step before taking the next steps.’ They say a ‘large gap’ between children going back to school and other sectors of the economy reopening would be required.
• The Daily Mail had earlier suggested that there could be ‘limited’ Easter holidays and that ‘pubs, bars and restaurants will have to wait until early May under the new outline.’ How official the ‘new outline’ is, remains to be seen. The Mail said two households would be allowed to sit together indoors and that the rule of six would apply outside.
• The Mail says the relaxation would be at four-weekly intervals with schools reopening first.
• Sky says it understands that a timetable has been drawn up which ‘suggests a desire to reopen rapidly in the weeks after schools readmit most children next month.’ It says ‘students in higher education and further education could be back in mid-April, and non-essential shops will reopen at the same time.’
• Sky adds ‘then, in late April, hospitality venues, hotels, leisure facilities and some sporting venues will open their doors. Entertainment venues and more sporting facilities would follow in early May.’
• Commenting on media speculation around re-opening for pubs and hospitality, James Calder, SIBA Chief Executive said ‘hospitality has repeatedly and consistently shown it is safe and with the top 9 vaccine groups on track to be vaccinated by mid April there is no reason why pubs cannot re-open, in full, in May.’
• He says ‘if we have to wait until July for a full return to normality, then many hundreds of brewery businesses will not survive these months of sub-optimal trading.’ Mr Calder adds ‘it would be a travesty that after the sector shrank 34% last year, and after all the resilience and adaptability craft brewing has demonstrated that now, as we approach the end, many more businesses fail due to a lack of support and further, unnecessary restrictions.’
• He says ‘craft brewing can and will be part of the engine of recovery, contributing millions to GDP and millions more to the Exchequer. But we cannot do that if businesses fail right at this final hurdle.’
• Observers have pointed that there has been some limited reopening in Europe already. Scotland has also tended to move quicker than England but the signs there, if anything, are in the opposite direction.
Other Covid news:
• A number of hospitality trade associations have joined with CAMRA to write to the Chancellor of the Exchequer saying that ‘all brewers in the UK must get the same support as that offered by Scottish Government to avoid closures and job losses.’
• The letter says ‘UK brewers support over half a million jobs; from the farmers growing malting barley and hops, to the brewers themselves and the landlords of the pubs that play such a vital role in our communities.’ It says ‘with about half of the beer consumed in the UK being sold in the on-trade, brewers have been hit exceptionally hard by the closure of UK pubs during the lockdown. Sales of beer in UK pubs were down by a staggering 56% in 2020 compared with the previous year. We had a thriving brewing scene before the pandemic and we can look forward to a similarly bright future – but only if Governments help us through this crisis.’
• SIBA says ‘two breweries a week are already closing and many more are on the brink of failure. Brewers have had to destroy 83 million pints of beer (worth £341 million) when pubs were closed for the three lockdowns.’ It continues ‘without adequate support, there is a very real threat that hundreds of breweries will close their doors for ever.’ CAMRA adds ‘the Scottish Government recently announced a targeted £1.8 million fund to support Scottish Brewers though the lockdown. This imaginative move will save many Scottish business and jobs. We urge the other Governments in the United Kingdom to introduce similar support for their brewers.’
• A cross-party group of around 40 MPs warns that the night time economy is at risk of “extinction” without extended Government support. Chair of the group Jeff Smith says ‘our world-leading night clubs, pubs, bars, and live music venues are cornerstones of our communities. They drive so much economic activity both locally and nationally, and bring hope, joy and entertainment to millions across the UK.’ He says ‘our findings today reveal this industry is on its knees, in desperate need of additional support from the Government and a concrete plan for reopening.’
• Scientists have reported that infections have dropped by two thirds since lockdown 3.0 started with a drop of 80% in London reports the BBC. However, they warn that one in 200 people still had the disease last week.
• The Resolution Foundation has said that furlough support needs to be wound down gradually in order to prevent a spike in unemployment. It says ‘while the UK’s economic prospects are finally looking up, job insecurity remains high, particularly among those who have spent long periods not working, or who are currently furloughed.’
• The Guardian reports ‘Covid spreading most in children as overall infections show big fall.’
• CGA’s MealMetrics suggests that vegetarian dishes could gain in popularity coming out of lockdown.
• Feed It Back says that ‘visit frequency and brand advocacy go hand-in-hand.’ It has found that ‘the majority of guests who visit venues weekly are promoters (87%) however, less frequent visitors are more likely to be passive.’
HOTELS & LEISURE TRAVEL:
• Carnival’s P&O Cruises Australia has extended its pause on departures until at least 18 June. The company says ‘while we are becoming increasingly confident in the restart of cruising in Australia, we are continuing with the realistic and pragmatic approach we have adopted previously.’
• Brittany Ferries has extended the suspension of some services between the UK, France and Spain.
• Mintel has reported that would-be UK consumers ‘have not lost their appetite to travel’. It says one in three still intend to take an overseas holiday this year. This is, at this stage, an aspiration rather than a certainty.
• Mintel says 66% of respondents plan a holiday in the UK or overseas. Some 21% plan an overseas holiday in Europe and 10% plan a trip further afield. Mintel says ‘Brits have not lost their appetite to travel. Brands can expect a surge in bookings, first when the re-opening date for travel is announced and second when restrictions are lifted.’
• Mintel adds ‘overseas beach holidays are in high demand. Demand is there. Success will mostly depend on how well the UK and overseas countries get the virus under control.’
• Africa holiday specialist Oasis Overland has ceased trading. It says ‘the past 11 months have been extremely tough and the outlook is very bleak for our type of adventure until the world is clear of Covid-19.’
• UK Inbound has written to the chancellor (along with many other trade bodies & companies) to say that it does not find the current rhetoric helpful. It says ‘since the removal of travel corridors and the introduction of quarantine hotels, our members have received hundreds of cancellations for spring 2021, with people moving their trips to later in 2021 and into 2022.’
• UK Inbound adds ‘as long as quarantine is in place, cancellations will continue, and people will be put off booking a trip to the UK this year. Many inbound tourism businesses have taken out loans, but they are beginning to run out of cash reserves and have no idea when they’ll be able to start welcoming back international visitors again.’ It concludes ‘this is why we need the prime minister to publish a roadmap to reopening the tourism sector on February 22.’
• Carnival-owned Costa Cruises intends to resume cruises on 27 March. This appears a little optimistic.
• Business travel only three quarters of ‘normal’ by 2024.
• The Global Business Travel Association says that business travel in western Europe could recover more slowly than elsewhere in the world. It says ‘by 2024 we expect business travel in Western Europe to recover to 78% of 2019 business travel levels ($261 billion). Emerging (eastern) Europe is expected to recover fully by 2024.’ The GBTA’s report says UK business travel will be slower to recover than that in the rest of Europe.
• The BBC quotes one quarantine hotel ‘guest’ as saying that the surroundings are ‘like prison’. Guests perhaps can’t be expected to be happy, but the system is what it is. There are some illogical quirks, however. There is no segregation on the plane or in the airport. Shuttle buses can be ‘packed’ etc. One guest says of the bus ‘it was absolutely packed with people, some from high-risk countries, others from lower risk. It is a frustrating system, it doesn’t follow logic.’
• London-based Ocean Outdoor has secured a deal with BT Sport to broadcast Champions League footage on screens across the country.
FINANCE & MARKETS:
• The ONS reports that CPI rose to an annualised 0.7% in the year to January, up from 0.6% in December. Food prices rose.
• The NIESR says ‘underlying inflation increased to 0.5 per cent in the year to January 2021 from 0.3 per cent in December 2020. It says ‘we expect that continued restrictions to stem coronavirus infections will keep consumer inflation relatively low in the short-term.’
• The NIESR says ‘headline [as opposed to underlying] inflation increased to 0.7 per cent in January, up from 0.6 per cent recorded in December.’ It adds ‘we expect inflation to rise in the latter half of the year as the economic recovery gains pace on the back of a successful vaccination programme and higher producer costs are passed on to consumers, but we still expect inflation to remain below the Bank’s 2 per cent target in the year to January 2022.’
• The ONS says UK house prices rose by 8.5% last year. It says ‘recent price increases may reflect a range of factors including pent-up demand, some possible changes in housing preferences since the pandemic and a response to the changes made to property transaction taxes across the nations.’
• The PM has drafted in unelected former Brexit negotiator Lord David Frost to the Cabinet. Frost, who overlapped at Oxford with the PM, led Brexit negotiations. Labour’s Emily Thornberry tweeted that Mr Frost is ‘someone who has never been elected by anyone in this country, and won’t be accountable in the House of Commons to any of us who have.’
• Sterling mixed at $1.3846 and €1.1495. Oil higher at $65.07. UK 10yr gilt yield down 5bps at 0.57%. World markets mixed yesterday with London set to open around flat.
RETAIL WITH NICK BUBB:
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