- UK unemployment claims surge by 856,500 to 2.1m in April – largest ever month-on-month increase
- Employment was at a record high in three months to March
- Real wages continued to fall
- EasyJet says 9m customers’ details were access as part of cyber attack
- Bank of England to publish names of companies that use emergency Covid-19 funding scheme
- Imperial Brands cuts dividend by a third to pay down £14bn debt
- Russell Lynch: We are plunging headfirst into a winter of jobs discontent
The number of Britons claiming unemployment benefits soared to the highest level since 1996 in April as the coronavirus lockdown devastated the UK labour market.
A measure of total claims based on data from the Department of Work & Pensions soared by 69pc, or 856,500 – its largest-ever one-month jump – the Office for national Statistics said.
The rise put the total number of people claiming Jobseeker’s Allowance or Universal Credit at around 2.1m. The number would have been substantially higher were it not for the Government’s furlough scheme, which has allowed many businesses to avoid or postpone job cuts.
Well that’s it for another day, thanks for following along.
Here’s a quick recap of today…
Europe’s major stock markets mostly retreated as traders banked profits, digested grim data and mulled coronavirus vaccine hopes.
London stocks lost 0.8pc after official data showed a record surge in UK jobless claims during April
In the eurozone, Paris shed 0.9pc on news that European auto sales had collapsed by a record 76.3pc year-on-year in April.
Frankfurt eked into positive territory just before the closing bell.
“It’s early days but markets are prepared to see the glass half full at this stage,” said Markets.com analyst Neil Wilson.
“A vaccine – not treatment – is key of course to resuming life as normal. It’s the holy grail right now and markets are prepared to take a leap of faith.”
What to look forward to tomorrow:
Interim results: Compass
Full-year: Bloomsbury Publishing, Coats, Experian, Great Portland Estates, Marks & Spencer, Ninety One, Severn Trent, Vistry
Economics: Inflation, Andrew Bailey at Treasury select committee (UK); consumer confidence (eurozone); Federal Reserve meeting minutes (US)
Pandemic is wake-up call for change says JP Morgan boss
JP Morgan boss Jamie Dimon said the coronavirus crisis has exposed deep inequality in America and must serve as a “wake-up call” to government.
The longest-serving bank boss on Wall Street told investors ahead of its annual meeting that the last few months “have laid bare the reality that, even before the pandemic hit, far too many people were living on the edge”.
“Unfortunately, low-income communities and people of color are being hit the hardest, exacerbating the health and economic inequities that were already unacceptably pronounced before the virus took over,” he said.
Huge US job losses during the pandemic have forced almost 37m people to claim for unemployment benefits in the past eight weeks.
JP Morgan has funded $30bn (£24bn) worth of loans to more than 250,000 businesses, half of which have fewer than five staff, Mr Dimon said.
Avon Rubber productivity boosted by coronavirus
Bosses and back-office staff being consigned to their homes because of coronavirus and leaving factory workers to get on with the job boosted productivity at Avon Rubber, Alan Tovey writes.
Paul McDonald, chief executive of the FTSE 250 company which supplies gas masks and respirators to armed forces around the world revealed the unexpected lift from the lockdown reported interim figures.
“We stripped staff away from our sites and those who remained increased productivity as a thank you,” he said, though declined to detail the exact increase in output.
Avon, which is based in Wiltshire, has been largely unaffected by the pandemic, with demand holding up and the company managing to secure materials to keep operating.
“We produce products to deal with biological threats and we saw that Covid-19 was such a threat and saw it early,” said Mr McDonald.
The pandemic has generated a small increase in demand for respirators from emergency services.
However, the bulk of the company’s 29pc revenue rise to £95m over the six months to the end March was down to the integration of the Ceradyne body armour business it bought last year, and a multi-year $600m order from the US military.
Pre-tax profit halved to £1.7m because of acquisition, pension and amortisation costs.
Insurers still lagging on gender equality
Women working in the insurance industry continue to face an above average pay gap and major barriers in gaining promotions to senior positions, my colleague Michael O’Dwyer writes.
Almost a third of firms in the London market have no women in senior roles and just 4pc have women filling at least three in 10 senior positions, according to a report published on Tuesday by the London Market Group, an industry body.
Insurers have been attempting to change the culture of an industry that has traditionally been male-dominated and associated with a heavy drinking culture.
Last year Lloyd’s of London gave its security guards new powers to prevent anyone under the influence of alcohol and drugs entering its building in a bid to shed its image as a “meat market” because of the widespread sexual harassment female professionals had to endure.
The London Matters report, which covers both Lloyd’s and non-Lloyd’s players, reveals the industry is also beset by an ageing workforce.
FTSE 100 closes in red
London’s benchmark index closed 0.69pc lower today as traders booked profits from yesterday’s huge gains.
The FTSE 250 however did manage to end in positive territory, up 0.53pc to 16,316.02.
Oil is higher on the day again as optimism in relation to demand has propped up the energy.
David Madden of CMC Markets says: Economies around the global are still being reopened, and hopes remain high for a potential Covid-19 vaccine, but it seems like the bulls have decided to take a breather today. It might transpire that today’s negative move was just a slight retracement before the next leg higher.
France and Germany are backing a €500 billion rescue plan for Europe – which would hand out grants to regions struggling with the Covid-19 crisis. A number of Northern European countries, like the Netherlands, are not keen on the scheme as they would prefer to see loans being issued. While the divisions over the plan continues, sentiment is unlikely to be positive.
Pizza Express to reopen 13 London sites
Via PA: Pizza Express has become the latest restaurant chain to cautiously open its doors again with plans for 13 sites across London to offer delivery services.
The decision to reopen the sites over the next 10 days comes as Wagamama, KFC, McDonald’s, Greggs and Subway are all making similar plans or have started trading again after shutting due to the coronavirus lockdown.
Zoe Bowley, managing director of Pizza Express in the UK and Ireland, said the chain would offer an edited menu from restaurants in “London villages”, including Notting Hill, Balham and Fulham, where demand is highest.
Writing in industry newsletter Propel, she said: “We will do this to test and learn, and then it will enable us to programme the roll-out and ultimately pave the way for dine in the future.”
Shares: (Nearly) red all over
After that mixed start, thing have got gradually worse across European stock markets today: the FTSE 100 is now down about 1.3pc, making it one of the worst performers across the continent. Sticking out like a sore thumb, however, is Spain’s Ibex, which is off more than 3pc after Madrid proposed extending the country’s state of emergency by 14 further days.
Across the main US and European indices, the only climber is Nasdaq – those US tech giants are continuing to outperform.
Follow Sunak live
You can follow the latest updates on Rishi Sunak’s testimony to the Economics Affairs Committee via our politics live blog:
- Politics latest news: Downing Street unable to confirm if schools and businesses will open from 1 June
Sunak effectively turns down calls to keep higher levels of state support for certain sectors – such as hospitality and leisure – “I thought about a sectoral approach and in practice it would be very difficult to implement”
— Richard Partington (@RJPartington) May 19, 2020
Powell says Federal Reserve is ready to use all tools
As Rishi Sunak speaks to the House of Lords, Federal Reserve chair Jerome Powell is making an appearance in front of the Senate Banking Committee across the pond.
It’s the expected stuff from Mr Powell, who has said the central bank is prepared to crack out any of its tools to help soften the impact of coronavirus on the US economy.
Testifying via video link, Mr Powell told senators:
We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response.
European car sales plummet
The impact that coronavirus has had on automotive companies across Europe has been laid out by new figures which show sales are down almost 40pc in the first four months of the year.
My colleague Alan Tovey reports:
Data from the European Automobile Manufacturers’ Association (ACEA) revealed that just 3.35m new cars were sold across the region between January and April, down from 5.49m a year ago.
Lockdowns and the closure of factories and dealerships have caused sales to plunge over the past two months, with an almost total collapse in April.
According to ACEA, of the four of the five biggest markets – the UK, Spain, France and Italy – suffered falls of 89pc and 98pc in April.
Germany, the largest European automotive market, was less badly hit, but sales still declined by 61pc in April.
Overall, the drop across the region in April – the first full month affected by lockdown restrictions – was the biggest since records began.
Sunak: We face a recession ‘the likes of which we haven’t seen’
Chancellor Rishi Sunak is currently giving evidence to the House of Lords Economic Affairs Committee about the impact of Covid-19 on the British economy.
You can follow along live here via the Parliament Live website.
Mr Sunak told peers the UK is “likely to see a severe recession the likes of which we haven’t seen” – confirming what everyone pretty much already knows.
I certainly won’t be able to protect every job and every business… The longer the recession, it is likely the degree of that scarring will be greater.
The Chancellor warned the economic impact of the lockdown could also have health consequences.
George Culmer named new chairman of Aviva
Aviva has announced George Culmer as its new chairman replacing Sir Adrian Montague, who announced his retirement in January after five years in charge at the insurer.
My colleague Michael O’Dwyer reports:
Mr Culmer, who helped steer Lloyds Banking Group back into private ownership during his seven years as its finance boss, will take the reins on Wednesday following Aviva’s annual meeting.
His first major decisions will be whether to back chief executive Maurice Tulloch’s steady-as-she-goes strategy and assessing if a management shake-up is needed.
Investors were left underwhelmed when the British-Canadian dual citizen failed to launch a break-up of the company last year, opting instead to retain its general and life insurance businesses around the world and focus on running the business more efficiently.
A source close to the firm said Mr Culmer is “very supportive” of the need to run Aviva more efficiently.
Mr Culmer, who also sits on the board of Rolls Royce, joined Aviva’s board last September and has served as senior independent director since Glyn Barker stepped down in December. Mr Tulloch’s decision not to explore a break-up in more detail was reported to have been a major factor in his departure.
Outgoing chairman Sir Adrian will formally leave the company at the end of the month. He announced his departure in January, a month after a boardroom row over the decision to ditch the idea of a break-up.
Investors have long speculated that splitting the company would unlock billions in value for shareholders.
Kudlow: White House looking at corporate tax cut
White House economic adviser Larry Kudlow says the Trump administration is looking at cutting corporation tax, adding that the president wants to see a 7.6pc payroll tax cut.
He adds that he does not believe China will sell US debt and unemployment below 9pc is possible this year.
Transaction volumes plunge as dealmaking grinds to a halt
Investment bankers took a £143m cut to fees earned last month for advising companies looking to buy other firms as corporate dealmaking grinds to a halt.
My colleague Vinjeru Mkandawire reports:
A drought in billion-pound transactions saw advisory fees over the course of April slashed by 63pc, as the fallout from the UK’s nationwide lockdown brings mergers and acquisitions to a standstill, according to data from Refinitiv.
The lull in deal activity – which would normally rake in the highest fees for City firms – means investment banking revenues for the month were down by more than a third compared to last year.
The number of companies looking to pursue M&A dried up after the Government announced restrictions at the end of March to limit the spread of the virus.
Deal volumes in April plunged by 87pc compared to last year, while the value of M&A amounted to just £409m, making it the quietest month for transactions in more than three decades.
Overall bankers earned £308m for advising on transactions, as well as for providing counsel on other capital raises including loans, share issues and bonds.
Lower fees secured by firms in the City follows a surge in pay at a number of investment banks last year thanks to a string of mega deals such as London Stock Exchange’s £22bn swoop for Refinitiv.
The acquisition of the data business landed a combined £281m of fees for firms including Goldman Sachs, Morgan Stanley and Robey Warshaw.
Meanwhile, a £6bn private equity-backed takeover of Alton Towers owner Merlin Entertainments landed £20m of fees for Goldman Sachs, Barclays and Citi.
A slow month for transactions mirrors the sluggish start to global dealmaking, which has fallen to its lowest level in seven years. Companies announced more than £520bn in deals in the first four months of this year, down 39pc compared to last year.
German sentiment suggests worst is past
The latest readings from ZEW sentiment surveys show German financial experts showing increasing confidence that conditions will improve in Europe’s biggest economy.
Berenberg’s Florian Hense said expectations could not get much worse after the March and April drops, adding:
We see genuine reasons to be turning more optimistic by the day after months of extreme pessimism and uncertainty.
Still, the mood remains dire, says Oxford Economics’ Katharina Koenz, who said:
The overall picture for the eurozone remains dire in the first half of the year as the bloc suffers a deep recession. With most countries carefully easing the lockdown, activity should partially resume and, as long as there is no second wave of the virus, the low point of the crisis could be behind us.
United Airlines reports 95pc drop in bookings
US carrier United Airlines has has said it expects demand to cover in the second half of the year, after gross bookings fell 95pc in April compared to the year before.
The airline said it “has seen a reduction in customer cancellation rates and a moderate improvement in demand” in recent weeks, but that scheduled capacity for May and June is likely to be down around 90pc, with a 75pc fall expected in July.
The group added it “plans to continue to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand”.
French Connection warns of cash crunch
French Connection has warned of a cash crunch in the coming months if sales do not pick up.
My colleague Laura Onita reports:
The retailer, best-known for its FCUK advertising slogan in 1997, said it has tried and failed to access emergency cash from the Government available to larger firms due to “the tight qualification constraints that have been imposed”.
It is currently looking to raise money, although it did not say how.
“Without securing additional funding and should the current Covid trading levels continue, the company’s cash resources will eventually be eroded in the coming months.”
The loss-making fashion seller has had no lock in finding a buyer before the pandemic.
Founder Stephen Marks runs the business and owns a majority stake, closely followed by Mike Ashley’s Sports Direct, its second-largest shareholder. It made sales of £119m last year.
It has been holding talks with suppliers and landlords to push back payments or pay less for some of the clothes it cannot sell.
The business was forced to shut stores and concessions as the nation went into lockdown. Sales online were up 44pc over the last six weeks.
French Connection had 81 of its own stores and 173 concessions in January. It has put staff on the taxpayer-funded furlough scheme.
Comment: We are plunging headfirst into a winter of jobs discontent
Our Economics Editor Russell Lynch has taken a deeper look at this morning’s jobs figures – including just how bad they are in a historical view. He writes:
Even with the UK’s lingering productivity issues and 10 years of stagnant real terms pay growth since the financial crisis, the fall in unemployment – aided by the rise of the gig economy and a higher pension age for women boosting participation – has always been seen as one of the rare glimmers of light on the domestic economic scene. While business investment flagged, unemployment plunged to its lowest levels since the days of Harold Wilson.
Now thanks to the Covid-19 shutdown, the UK has the worst of both worlds: an under-invested capital-shallow economy and dole queues about to stretch to 1980s proportions, as the Bank of England’s chief economist Andy Haldane suggested in the Telegraph last weekend.
- You can read his full piece here
Luggage brand Antler collapses
Luggage brand Antler has slashed 164 jobs after crashing into administration.
Administrators from KPMG said the company, which operates 18 stores and one concession, has had to make most of the 199 staff redundant after being “profoundly impacted” by the coronavirus pandemic.
The suitcase maker was bought by fashion tycoon Michael Lewis in February from private equity company Endless.
KPMG said sales were solid prior to the pandemic but were hit hard by the closure of stores and travel restrictions.
The company sells products through its website, Amazon and wholesale to large chains across the UK, including John Lewis and Selfridges.
EasyJet boss: We apologise to affected customers
In a statement, easyJet chief executive Johan Lundgren said:
We take the cyber security of our systems very seriously and have robust security measures in place to protect our customers’ personal information. However, this is an evolving threat as cyber attackers get ever more sophisticated.
Since we became aware of the incident, it has become clear that owing to COVID-19 there is heightened concern about personal data being used for online scams. As a result, and on the recommendation of the ICO, we are contacting those customers whose travel information was accessed and we are advising them to be extra vigilant, particularly if they receive unsolicited communications.
Every business must continue to stay agile to stay ahead of the threat. We will continue to invest in protecting our customers, our systems, and our data.
We would like to apologise to those customers who have been affected by this incident.
Details of 9m customers accessed in EasyJet hack
Around 9m easyJet customers have had their email address or travel details accessed as part of a cyber attack, the airline said.
Of those, 2,208 also had credit card details accessed. EasyJet said all those in this subset have been contacted already.
In a statement, the company said the attacked had come from a “highly sophisticated source”. It added:
As soon as we became aware of the attack, we took immediate steps to respond to and manage the incident and engaged leading forensic experts to investigate the issue. We also notified the National Cyber Security Centre and the ICO. We have closed off this unauthorised access.
Our investigation found that the email address and travel details of approximately 9 million customers were accessed. These affected customers will be contacted in the next few days. If you are not contacted then your information has not been accessed. Other than as referenced in the following paragraph, passport details and credit card details of these customers were not accessed.
Our forensic investigation found that, for a very small subset of customers (2,208), credit card details were accessed. Action has already been taken to contact all of these customers and they have been offered support.
There is no evidence that any personal information of any nature has been misused, however, on the recommendation of the ICO, we are communicating with the approximately 9 million customers whose travel details were accessed to advise them of protective steps to minimise any risk of potential phishing. We are advising customers to continue to be alert as they would normally be, especially should they receive any unsolicited communications. We also advise customers to be cautious of any communications purporting to come from easyJet or easyJet Holidays.
Niesr: Pay levels likely to fall further in coming months
The National Institute of Economic and Social Research has crunched this morning’s labour numbers, and warned pay packets are likely to shrink in the coming months as Covid-19 batters companies.
The think tank’s analysis of the data made the following key findings:
- Official labour market statistics are mainly lagging indicators and are only just beginning to show the impact of Covid-19 which started to affect the UK economy from around the middle of March.
- According to new ONS statistics published this morning, employment was at a record high in the first three months of the year and average weekly earnings, excluding bonuses, were growing at an annual rate of 2.7 per cent, or around 1 per cent in real terms.
- But in the final week of March, the total number of hours worked was around 25% smaller than in other weeks within the quarter. This reflects the large number of people being furloughed. Furloughing has helped to limit the rise in unemployment. The unemployment claimant count rose by 850,000 to 2.10 million in April. The number of vacancies fell to 351,000 in April, from 750,000 in March.
- By early May a quarter of paid employees had been furloughed, with 80 per cent of their pay (up to £2,500 per month) being met by the government. This will mean that measured average earnings will fall in the short term, reflecting the lower pay of those who have been furloughed. An early sign of this was that median monthly pay fell by £55 in April to £1789 per month.
Its deputy director, Garry Young, said:
The extent of the economic fallout from Covid-19 is becoming clearer. Many businesses are under severe financial pressure and are only able to retain staff because of the government’s furlough scheme which is currently supporting 7½ million jobs. Despite this, claimant unemployment rose above two million in April, the highest level since 1996, and it is very likely that we will see falls in pay in the months ahead.
Boss hopes for sandwich rebound as Greencore revenues slump
Sandwich-maker Greencore is among the biggest fallers on the FTSE 250 today, dropping around 4pc after reporting weekly demand for its food to go products dropped as much as 70pc year-on-year since the end of March.
Despite a recovery in demand, sales volumes are still about 60pc lower, the company said.
In an update this morning, Greencore said:
The group is managing through this challenging trading environment with three priorities – keeping our people safe, feeding the UK, and protecting our flexible business. The organisation is functioning well in demanding working circumstances, with a resilient supply chain and production network enabling strong levels of customer service in a volatile demand environment.
On a call, its chief executive Patrick Coveney said it expects a strong recovery as offices reopen and homemade lunch ennui drives workers back to shops for more varied victuals.
“Each week for the last five weeks consumer satisfaction with their lunch has fallen,” Mr Coveney told analysts. “In other words, consumers are getting bored and frustrated with the absence of choice.”
Its performance during the six months to the end of March was solid enough, with revenues up 1.6pc, and profit before tax leaping from £5.7m to £27.3m.
Compass shares drop as it raises £2bn through placement
Catering giant Compass Group has pipped Imperial brands to the biggest faller spot on the FTSE 100, after surprising investors with a larger-than-expected placement.
The group said it has gathered enough orders to order all the shares in its £2bn placing, which it said would reduce its leverage, increase liquidity and position it better for recovery.
Announcing the placement this morning, the group said:
The net proceeds of the Placing will be used to strengthen the company’s balance sheet and liquidity position, reducing leverage to deal with the challenging environment and ensure Compass remains resilient in the event of further negative developments in the pandemic. These measures will enable Compass to invest in the business to support long term growth, ensuring it is well positioned for the eventual recovery.
Compass also announced half-year results, saying its organic revenue dropped 20.4pc in March, and 46.1pc in April. It withdrew guidance for the full year, but chief executive Dominic Blackmore said the group remains “excited about the significant structural market opportunity globally”.
Its profit before tax dropped slightly, from £852m to £771m.
Jefferies’ Kean Marden said the placement looked “defensive in tone”, but said the group’s outlook looked better than had been feared.
Shore Capital’s Greg Lawless added:
Although dilutive the balance sheet is now bullet proofed and well positioned to build-on post recovery.
Full report: Bank of England raises bar for companies to access funding
My colleague Tom Rees has a full report on the Bank of England’s udated measures for companies that wish to access funding through the CCFF. He writes:
Companies wishing to access the Covid Corporate Financing Facility (CCFF) beyond May 19 2021 will have to send a letter to the Treasury promising to show “restraint” on remuneration as they repay the debt.
Officials said companies would need to curb payments on dividends and senior pay as they outlined a shake-up of Government help for larger firms.
The CCFF buys short-term debt issued by businesses known as commercial paper to ensure their survival. The Bank said the pay constraints on the CCFF would incentivise companies to repay their borrowings.
Shell shareholders reject resolution on climate goals
Shareholders have rejected a motion calling for Shell to set concrete targets in alignment with the goals of Paris climate agreement.
The oil giant’s board had dismissed as “unnecessary and potentially counterproductive” the motion, which also called for Shell to support a transition to a net-zero emissions system.
On a turnout of about half the group’s shareholders, 85.6pc voted to reject the motion.
Shell’s board has said it is already taking “tangible actions” to tackle to the climate emergency, including announcing plans to become net zero emissions by 2050 or sooner.
You can read more in Shell’s AGM announcement (pages 6 and 7), available here.
- Read more: Shell’s net-zero plan fails to add up
Full report: Unemployment claims soar
My colleague Russell Lynch has a full report on this morning’s labour market data. He writes:
The impact of the shutdown on jobs has been dampened by the Government’s coronavirus jobs retention scheme under which 7.5 million workers have been furloughed. Furloughed workers count as employed in the jobs data.
However, this wage support scheme will be wound up in the autumn and economists warned that May jobs figures could be worse still as UK companies lay off tens of thousands of workers regardless.
Employment minister: We have strong foundation for bounce back
Responding to this morning’s labour data, employment minister Mims Davies has tried to focus on the highlights: i.e. the record-breaking levels of employment before Covid-19 arrived (see &;50am update).
Clearly these figures are behind on our current struggle but the impact of this global health emergency is now starting to show – and we’re doing everything we can to protect jobs and livelihoods.
What these statistics do highlight is that heading into the pandemic, we had built strong foundations in our economy, which will be crucial as we gradually move forward as the lockdown eases and look to bounce back.
“As we stay alert over the coming weeks, we can also look ahead. Because once we beat this virus, we all want to get our country back up and running, at full speed. Together, we can.”
— DWP Press Office (@dwppressoffice) May 19, 2020
IFS: New job openings are often risky or highly skilled
More jobs data, this time from the Institute of Fiscal Studies, where researchers have taken data from a daily census of job adverts posted on Find a Job, a recruitment site run by the DWP.
In a briefing note, they made the following key findings:
- By the time the lockdown was announced, firms had stopped posting new vacancies almost entirely. New postings on 25 March were just 8% of their levels in 2019.
- Vacancies fell across the wage distribution. The fall was sharpest in low-paid occupations directly affected by social distancing measures, but new vacancies for higher-paid jobs in legal and managerial professions also saw falls of over 60% relative to 2019.
- There have been some tentative signs of recovery since mid-April, but this has been entirely driven by vacancies in health and social care. Health and social care vacancies rebounded from half their 2019 levels in the first week of April to 85% of their 2019 levels in the first week of May. In all other occupations, new vacancies in the first week of April were 21% of their 2019 levels, and still only 26% of their 2019 levels in the first week of May.
- Whilst the initial drop in job postings was evenly distributed across more and less deprived areas, the recovery in health and social care vacancies has been concentrated in more affluent areas. New health and social care vacancies in the least deprived fifth of local authorities (measured by their Index of Multiple Deprivation) were 15% lower than their 2019 levels in the first week of May, whilst those in the most deprived fifth still 35% lower.
- The health and social care occupations in which vacancies are recovering pose relatively high health risks. They are relatively difficult to do from home, involving working in close physical proximity to others and are more exposed to disease.
- The new jobs that are emerging require high levels of training. Jobs in health and social care typically require a high level of training, but even outside healthcare, labour demand has recovered more in occupations that require higher levels of preparation. This suggests that workers who have been furloughed or made unemployed are likely to struggle to fill vacancies in areas where labour demand is recovering.
IES: Now six people per job vacancy
More worrying stats from the director of the Institute of Employment Studies:
Using our latest online vacancy data, it’s likely that there’s now 6 (claimant) unemployed people per vacancy, compared with 1.5 pre crisis. This is the toughest jobs market in a generation. We need action on employment support now.
— Tony Wilson (@tonywilsonIES) May 19, 2020
Imperial Brand falls after trimming dividend
Tobacco firm Imperial Brands has slashed its dividend by a third as it seeks to shore up its balance sheet to weather the coronavirus pandemic.
My colleague Simon Foy reports:
The interim dividend was cut to 41.7p a share from 62.56p last year. All savings will be used to pay down Imperial’s £14bn debt pile.
The Lambert & Butler maker expects Covid-19 will have a “more pronounced” impact on trading in the second half of year as its weighs on its travel business and consumer patterns change.
Some customers have already started switching to cheaper cigarette brands as the economic crisis reduces people’s purchasing power, the group said.
It came as Imperial’s pre-tax profits slumped by more than a fifth to £785m for the six months to the end of March.
Revenue from its vaping arm plummeted 44pc to £83m, while tobacco sales were unchanged at £3.5bn.
The announcement has knocked the group’s shares fairly sharply this morning, leaving Imperial as the biggest laggard on the FTSE 100:
OVO and SSE cuts 2,600 jobs after merger
Energy supplier OVO announced deep job cuts and office closures this morning, as lockdown pushes more customer service online and dramatically reduces the need for technicians in the field.
My colleague Ed Clowes reports:
The company, which acquired energy giant SSE in January for £500m, said it was accelerating a three-year restructuring plan in to a matter of months.
The move is likely to stoke anger at the group, where staff who moved over from SSE were promised there would be no job losses.
More than 2,600 jobs are now expected to be eliminated, while offices at Selkirk, Reading and Glasgow will be closed.
The vast majority of roles that are expected to be made redundant are field-based, including smart meter technicians.
European markets mixed
Let’s pivot away from the labour market for now, and take a look at how stocks are doing. It’s been a pretty mixed session for European indices so far, with the FTSE 100 basically flat, Germany’s DAX ever so slightly up, and France’s CAC in the red. Overall, the shifts have left shares across the continent largely unmoved.
The recovery could probe especially hard
Pantheon Macroeconomics’ Samuel Tombs says the claimant figures “show the Covid-19 pain”, warning that the rebound could be far from smooth:
Timelier claimant count data also paint a bleak picture. The number of people claiming benefit due to unemployment jumped by 857K between March 12 and April 9 – the data always refer to the second Thursday of the month – the biggest month-to-month increase since records begin in 1971, both in absolute terms and as a proportion of the workforce. In addition, the 24.8pc year-over-year drop in three-month average measure of job vacancies in April – the steepest since October 2009 – suggests that very few unemployed people will be able to find a job quickly.
Berenberg’s Kallum Pickering said:
The rise in joblessness in April accounts for a little more than a third of our estimated total rise in unemployment from the coronavirus recession. May labour market data could worse still.
ING’s James Smith highlighted the role of the furlough scheme in keeping numbers down:
Whichever way you look at it, these are undoubtedly shocking figures. But they are also in stark contrast to those in the US, where the unemployment rate looks set to reach 22pc in May. This is undoubtedly down to the UK government’s Job Retention (furlough) Scheme, which at the latest count is now paying the wages of 7.5m workers, or around a quarter of total employees.
UK employment: Reaction
Responding to this morning’s labour market data, Nye Cominetti, senior economist at the Resolution Foundation, said:
Today’s figures highlight the speed and scale of Britain’s job crisis. Employee numbers have fallen by nearly half a million in just one month, while the number of vacancies has halved.
These shocking figures would be far worse were it not the Job Retention Scheme, which has so far protected 7.5 million jobs.
But even despite widespread furloughing, Britain could still be facing the highest unemployment levels it has had in over a quarter of the century.
The Institute for Employment Studies notes the most disadvantaged areas have seen the biggest rise in unemployment claims – and has also put the spike in claimants in a longer context:
Confirmation that the most disadv areas have seen largest impacts of crisis. Should be only story today. I’ve shown % point increase in claimant unemployment by decile of u/e pre crisis. 10=highest unemployment areas. Up by 2.5ppts compared with just 1.4 points for lowest. pic.twitter.com/o7tvnHMNNN
— Tony Wilson (@tonywilsonIES) May 19, 2020
I’ve a version of this graph that goes back 100 years too, if you’re really interested. Uses Bank of England records on ‘administrative unemployment’ for pre 1971. There is one precedent for this, which was the deep freeze of Jan/ Feb 1947… pic.twitter.com/afXAjUjGIT
— Tony Wilson (@tonywilsonIES) May 19, 2020
TUC Secretary Frances O’Grady said:
These figures are alarming – but unsurprising. It’s clear we need a solid economic plan for recovery. Extending the job retention scheme was the right first step.
Now we need a job guarantee scheme to stop long-term unemployment, and a plan that puts full employment on decent wages and fair terms at its heart.
Bank of England to publish names of companies that use funding scheme
The Bank of England says it will publish the names of companies that have drawn funds under the Covid Corporate Financing Facility, as well as how much they have borrowed.
Under the CCFF, whcih 230 companies are currently eligible to access, businesses can issues short-term ‘commercial paper’ to ease immediate funding pressures.
The BoE said the CCFF has supported £18.8bn of lending to 55 business and authorised a further £38.8bn to another 68 businesses.
Threadneedle Street offered some updates on the scheme’s today:
- All businesses that wish to draw from the CCFF will be expected to provide a letter to the Treasury “that commits to showing restraint on the payment of dividends and other capital distributions and on senior pay during the period in which their commercial paper is outstanding”
- Businesses that have drawn under the CCFF are now able to repay their drawings early if they choose to do so
In addition, following detailed consideration, HM Treasury and the Bank have decided to publish the names of businesses that have drawn under the CCFF, as well as the amounts borrowed. This change will make the scheme more transparent and enable participating businesses to demonstrate their access to the scheme.
A note of caution
The ONS is keen to emphasise that today’s claimant figures, based on a combination of people requesting Jobseeker’s Allowance and Universal Credit, are experimental. The statistics body noted that changes to the eligibility criteria of UC have “significantly affected” the count, without an underlying change in labour market conditions.
The ONS says:
Consequently, while some of any movement in the Claimant Count would be because of changes in the number of people who become unemployed, a certain amount of the movement will be because of changes in the number of employed people who are eligible for Universal Credit as part of the government response. We are not able to identify to what extent these two factors have affected the numbers.
South-West sees biggest rise as claimant figure jump across UK
Early data from the Depart for Work and Pensions, released by the ONS today, suggests no part of the UK was spared as unemployment claimant numbers surged in April – with the biggest rises in the South-West, Norther Ireland and the South-East.
The West Midlands saw the smallest increase, but claims still jumped by 50.9pc.
Pay fall looms
Here are some more key points for the HMRC/ONS estimate data.
As might be expected, a fall in the actual number of employed people will likely arrive alongside a fall in growth of the number of new employees, which will flip negative for the first time in years.
The data suggests this will go hand-in-hand with a contraction in median pay, and median pay growth flipping negative.
PAYE data suggests looming fall
Experimental early readings based on pay as you earn data suggest the number of paid employees in the UK will drop about 1.6pc month-on-month during April, with the reasonably small drop possibly reflecting widespread uptake of the Government’s furlough scheme. That’s a fall of around 457,000 in real terms.
The ONS notes the data is experimental and not as reliable as it full estimates, and adds that the March 2020 is “purely for graphing purposes”, and not a flash estimate.
Real pay falls again
Despite rising employment, average regular continued to fall, reflecting a downwards trend since December and pushing further below the levels seen before the financial crisis of 2008.
The ONS said:
For March 2020, average regular pay, before tax and other deductions, for employees in Great Britain was estimated at £510 per week in nominal terms. The figure in real terms (constant 2015 prices) is £471 per week, which is £2 (0.5pc) less than the pre-2008 economic downturn peak of £473 per week for March 2008.
The equivalent figures for total pay in real terms are £497 per week in March 2020 and £522 in February 2008, a 5pc difference.
Employment had hit a new record high
Today’s ONS labour data release is to an extent a blast from the past, capturing the UK economy just after lockdown came into effect. It includes what is likely to be the last hurrah for UK employment – for some time at least – which hit a new record high in the three months to the end of March.
The ONS said:
- The UK employment rate in the three months to March 2020 was estimated at a joint-record high of 76.6pc, 0.6 percentage points higher than a year earlier and 0.2 percentage points up on the previous quarter.
- The UK unemployment rate for the three months to March 2020 was estimated at 3.9pc, 0.1 percentage points higher than a year earlier and 0.1 percentage points higher than the previous quarter.
Agenda: Unemployment claims surged in April
Good morning. UK jobless claims surged by 856,500 to 2.1 million in April due to the coronavirus lockdown.
In the three months to March, before the full impact of the crisis was felt, official unemployment increased by 50,000 to 1.35m.
“While only covering the first weeks of restrictions, our figures show COVID-19 is having a major impact on the labour market,” the ONS’s Deputy National Statistician, Jonathan Athow, said.
Separately, the Government has also announced a £30bn tariff cut after Brexit.
5 things to start your day
1) Stock markets jumped on both sides of the Atlantic yesterday amid hopes that a coronavirus vaccine is in sight. Airlines and travel firms led the rally after US biotech company Moderna revealed positive results in early tests for an experimental vaccine that showed signs of creating an immune system response in humans.
2) France and Germany back €500bn fund to help save EU: Under new plans presented by French president Emmanuel Macron and German chancellor Angela Merkel, the 27 EU members would borrow jointly on financial markets to offer grants rather than loans to struggling nations.
3) The bailed-out lender that sponsors England’s cricket team refused to refinance a high interest loan that was crippling the finances of one of the most popular county clubs. Lancashire County Cricket Club chief executive Daniel Gidney said he was forced to turn elsewhere after NatWest balked at the chance to restructure its debts.
4) London skyscrapers face critical fall in demand as workers stay home: Major developments such as 22 Bishopsgate next to the ‘Walkie Talkie’ building in the City are among those affected – putting the brakes on the relentless demand for office space that has spawned modern architectural marvels in the centre of London such as the Shard.
5) Café Rouge owner takes action in battle with landlords. The owner of chains include Café Rouge and Bella Italia employs 6,000 people and is facing legal action by landlords
What happened overnight
Asian shares rose Tuesday on optimism about a potential vaccine for the coronavirus after hopes for a US economic recovery in the second half of the year sent Wall Street into a rebound.
Japan’s benchmark Nikkei 225 added 1.9pc in morning trading to 20,517.42. Australia’s S&P/ASX 200 jumped 2.0pc to 5,569.20. South Korea’s Kospi was up 1.8pc to 1,972.73. Hong Kong’s Hang Seng gained 1.8pc to 24,362.80, while the Shanghai Composite edged up 0.5pc to 2,889.42.
Coming up today
Interim results: Avon Rubber, Imperial Brands, Topps Tiles
Economics: Unemployment, Chancellor at economic affairs committee (UK); ZEW sentiment surveys (Germany); housing starts, Jerome Powell and Steven Mnuchin at Senate banking committee (US