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New business confidence data published this morning reflects companies’ hopes that the lifting of remaining coronavirus restrictions across England next Monday will prompt a “summer spending surge” and provide a significant boost to the country’s nascent economic recovery.
The final stage of England’s road map out of lockdown, confirmed by UK prime minister Boris Johnson today, comes at an extremely sensitive moment. Infections are soaring, vaccinations are not yet complete and arguments are still raging about what forms of protection — such as the wearing of masks in crowded places and on public transport — should be kept in place. The UK’s devolved governments in Scotland, Wales and Northern Ireland are taking a more cautious approach.
Although Johnson struck a cautious tone today, emphasising that the pandemic was not yet over, his use of language threatens to confuse matters further. “Government by diktat has been replaced by ministers telling businesses and people what they are ‘expected’ to do on things like masks, Covid certificates and returning to work. I suspect some companies and people would prefer the diktat approach,” said the FT’s political editor George Parker.
As our Big Read explains, many view the lifting of restrictions on July 19 as premature and reckless. “The world is looking at us with disbelief,” said Ravi Gupta, professor of clinical microbiology at Cambridge university. The government admits the move is a gamble, with health minister Sajid Javid saying last week that the daily rate of infections could hit 100,000 this summer.
However, many “lockdown-sceptic” MPs from Johnson’s governing Conservative party fear that delays could mean missing the summer window of opportunity, when hospitals are less busy and schools are on holiday, meaning that final unlocking could be shunted into 2022.
Employers also face the practical problem of staff shortages, as workers will still need to self-isolate if exposed to infection — a rule that is not expected to change until August 16. Businesses have also called for more guidance on working environments and advice on safety measures, such as ventilation, cleaning and Perspex screens, as well as mask wearing.
“Learning to live and work with the virus is the right strategy,” said Tony Danker, head of the CBI business lobby group. “But we need to ensure this is a confident not an anxious transition, otherwise it won’t work.”
As we wrote in Friday’s CBU, the Delta variant of coronavirus has emerged as a key obstacle to global economic recovery and is now causing jitters across Europe. Fears are growing for Spanish tourism and new restrictions are being introduced from the Netherlands to Cyprus. Bullish new economic forecasts from Brussels last week did not factor in the prospect of a new wave of Delta-led infections.
Latin America, the region worst hit by Covid-19, is in urgent need of vaccines from the west to stop its already “catastrophic” death toll worsening, according to a top official. LatAm countries account for 8 per cent of the world’s population but nearly a third of global pandemic deaths and are suffering their worst recession in 120 years.
Average daily vaccinations in India have now fallen for two consecutive weeks because of shortages in free government-provided jabs, although the well-off can pay for inoculation at private hospitals. The government fears the increase in Himalayan tourism could lead to a new surge in infections.
Europcar, the largest listed car hire company, said rental prices would remain high until the global semiconductor shortage was resolved. Providers are finding it difficult to find enough vehicles to cater for the large surge in demand as pandemic restrictions are lifted.
The head of Electrolux, the world’s second-biggest maker of home appliances, told the Financial Times that inflationary pressures would diminish later this year, as demand for consumer goods returns to normal levels. As well as coping with extraordinary demand during the pandemic, appliance manufacturers have also been hit hard by the chip shortage and shipping problems.
The pandemic has not only led to new ways of doing business but has also fundamentally changed the relationship between employee and employer, particularly when negotiating matters such as flexible working. A management writer sums up the problem: “After they figure out the hours, and the days, and the location, what happens to hierarchies, to pay, to communication strategies, to barriers instead of boundaries, to hiring and promotion and retention stats?”
Second-quarter earnings season for US companies kicks off tomorrow, with Wall Street looking forward to huge jumps in profit as corporate America springs back to life. S&P 500 businesses are forecast to report year-on-year earnings per share growth of 63 per cent — the largest increase since the immediate aftermath of the 2008-09 financial crisis.
The rift among Opec members over how much oil they should produce now that the market has recovered from its pandemic depths is a taste of things to come, writes the FT’s energy editor David Sheppard. The heart of the issue, he says, is one that is hanging over the entire sector: the growing belief that we are getting close to peak demand for crude oil.
Veteran investor Mohamed El-Erian examines why sharp drops in bond yields, normally welcomed by investors in stocks, led to an equities sell-off last week. “We are moving irresistibly closer to a critical question for the economy and markets, and not just in the US,” he writes. “Is there still the possibility of an orderly exit from what has been a remarkably long period of uber-loose monetary policies?
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The pandemic-driven shift to “digital nomadism” has caused a jump in landlubbers taking to a life on the waves to escape the rigours of city life. Once the preserve of the ultra rich, #boatlife is now attracting families of more moderate means, reports travel writer Simon Usborne.