The scale of the economic wipeout from Covid-19 is truly horrifying.
As the lockdown has spread across the United States, the number of Americans filing jobless claims shot up to 6.65m – almost twice the number of just a week ago, ahead of all forecasts and bringing the two-week total up to 10m people.
On this side of the Atlantic, claims for universal credit have soared to 1m and the numbers of furloughed workers is climbing.
British Airways is suspending 32,000 employees and the ONS is reporting 27 per cent of companies have cut staff levels.
Economic damage: Alarmist forecasts of 10 per cent plus loss of output in Britain and in America in the second quarter, look likely to be a reality
Alarmist forecasts of more than 20m job losses in the US, and a 10 per cent-plus loss of output in Britain and in America in the second quarter, look likely to be a reality.
The impact on the healthy corporate sector is dramatic. The stampede from paying dividends grows apace, with the grand dame of the property sector Landsec cancelling the third quarter payout and BA’s owner IAG stopping the final distribution and placing the money into reserve.
Across the FTSE350 and AIM100 some 120 firms have ditched or suspended dividends over the last four weeks, according to brokers Peel Hunt – at a cost of £11.8billion to investors. Some 40 companies have committed to keep paying distributing £8.5billion.
And there are a further 100 firms which have announced dividends worth £13.6billion but not yet determined if they will proceed.
Over the short haul, fund managers and savers will be hard hit by the loss of an income stream.
Older investors, in particular, rely on the dividends to meet bills. In letter addressed to UK plc, asset manager Schroders argues that, in the current crisis, employees, customers and suppliers need to be prioritised along with keeping enterprises alive – prudence before dividends.
I would add that the same approach must be applied to executive bonuses and pay.
In the interests of getting new capital sorted quickly – employment agency Hays has just raised £200million – Schroders also supports waiving pre-emption rules which require new shares to be offered to all existing investors.
The suddenness and depth of the collapse in jobs, output, earnings and dividends is alarming. The safety nets put in place by the Government – if they can get business lending right – will help.
But the best cure is to restore public transport and ease the lockdown for the young and fully abled as soon as practical.
Tiger balm Hong Kong has never quite been reconciled to the switch of domicile of HSBC to London in 1992 when it came to the rescue of Midland Bank.
The Bank of England insisted regulation and the main share quote shift to London, which seemed sensible enough given the British hand over of the territory to China five years later.
Ever since, there has been a tug-of-war between the City and Hong Kong over domicile. As HSBC became more global, with a series of acquisitions in the noughties, including the disastrous takeover of Household in the US, being in London looked logical.
But when the American ventures went wrong, and it was clear that Hong Kong, China and Asia-Pacific would remain the biggest source of earnings, pressure for a return to Hong Kong returned.
Much of this debate looked to have been settled by the recent once-in-a-generation review of domicile followed by almost a year of violent upheaval on Hong Kong’s streets.
The current cessation of dividend payments, at the behest of the Government amid the Covid-19 trauma, has some Hong Kong-based executives pressing for a rethink.
HSBC has more than 1m shareholders in Hong Kong, many of them private individuals dependent on dividends to pay the rent.
That executives in Hong Kong should be using the current health emergency to press their own agenda is immoral.
But it is my understanding that chairman Mark Tucker is unmoved and will read the riot act.
Animal spirits Never has owning a dog seemed as attractive to me as I see proud owners exercising their hounds in Richmond Park each day.
This is great news for Pets At Home, a refugee from private equity, which is benefiting from soaring sales of animal food and other requisites.
It also has set aside £1million for pet charities and a further £1million for staff and discounts for NHS workers. Whoopee.
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