Time for a recap.

Hotel and restaurant group Whitbread has become the latest UK company to announce sweeping job cuts due to the Covid-19 pandemic. It plans to lose 18% of its workforce, with demand still weak - particularly for business travel in cities.

Analysts warned that Whitbread, which runs Premier Inn, Beefeater and Brewers Fayre, faces a tough future - especially with new restrictions announced today.

The Bank of England has insisted it isn’t close to introducing negative interest rates in the UK. Governor Andrew Bailey also warned that the jump in infections would hurt the economic recovery, and rowed away from his support for ending the UK’s furlough scheme.

Pub bosses have heavily criticised the government’s plan for a 10pm closing time, and table service only at pubs. Wetherspoon’s CEO Tim Martin claimed Boris Johnson wasn’t up to the job, while Fuller’s Tim Emeny warned that the move would cost jobs and force pubs to close.

Business have called for more support, following the introduction of new restrictions and a u-turn on office working. The CBI warned that a second national lockdown would be devastating for the UK economy.

Barclays staff are heading home again after barely renewing their acquaintance with the coffee machine.

Economists have warned that the clampdown risks pushing the UK into a deeper recession.

European stock markets have posted small gains, after their worst day in three months yesterday.

But the pound has weakened to a two-month low against the US dollar, which is strengthening today:

The latest economic news was mixed:

• US existing home sales hit a 14-year high
• Eurozone consumer confidence inched higher
• UK factories reported a drop in orders

Here’s our latest news story on the Covid-19 restrictions:

And here’s the UK news liveblog:

Goodnight! GW

After a turbulent session on Monday, the FTSE 100 has reached the finish line today in somewhat better shape.

The blue-chip index has closed 25 points higher at 5829, a rise of 0.4%. That lifts it from last night’s two-week low, when the index shed 202 points or £51bn

Retail group Kingfisher was the top riser, surging 9.8% after reporting strong sales in recent weeks as people improved their homes. This trend may continue, with many office workers now facing another six months at home...

Oil producer Shell (+3.1%) and bank Natwest (+3.3%) were also among the risers, with arline IAG also ending the day up nearly 5% (having hit an eight-year low this morning).

The pound’s weakness against the US dollar also helped multinational stocks rise.

But Whitbread ended the day down 2.8%, after issuing a gloomy outlook alongside the grim news that 6,000 jobs will be cut.

European markets also ended the day higher (partly because the euro has dropped against the dollar too), with the Stoxx 600 finishing 0.5% higher.

David Madden of CMC Markets sums up the day:

There was some indecision in the first few hours of trading as stocks got off to a strong start, before giving up some of their gains, but the positive momentum continued throughout the session.

The FTSE 100 was the most volatile European index today as the UK government announced tighter restrictions in a bid to tackle the health crisis. The London market gained ground in the wake of the update as the rules weren’t as tough as some originally feared.

The restrictions have more to do with social distancing and health precautions, and the economic impact is unlikely to be as bad as initially thought. European stocks took a beating yesterday and it seems the bargain hunters have been out in force today.

Britain’s economy is heading for a prolonged recession lasting until next spring as the number of coronavirus infections climbs and tougher restrictions are introduced to contain the virus.

As a Covid-19 second wave spreads and the government launches fresh measures to restrict business and social life, City economists warned that the fightback from the deepest recession in history begun this summer was running out of steam.

Dashing hopes that the Covid recession could be among the shortest downturns in history, analysts from Bank of America said growth in gross domestic product (GDP) would probably stall in the fourth quarter and the first three months of 2021.

Robert Wood, the chief UK economist at the bank, said: “We struggle to see how the economy can grow in the fourth quarter with escalating lockdown measures, fading stimulus and Brexit risks.”

Sales of existing US homes have hit their highest level in 14 years, in a sign that wealthier Americans are shaking off the impact of Covid-19.

The National Association of Realtors reports that existing home sales (ie, ignoring new builds) increased 2.4% in August to an annual rate of 6 million units. That’s the highest level since December 2006, up from 5.86m in July.

The average price paid for a home has also risen, to a new record high. That’s partly because supply is weak - with around 18% fewer homes on the market than a year ago.

But it’s also due to record low interest rates, which make large mortgages more affordable.

The US stock market has followed Europe’s lead, and opened a little higher after Monday’s selloff.

• Dow Jones industrial average: up 78 points or 0.3% at 27,226
• S&P 500: up 14 points or 0.4% at 3,295
• Nasdaq: up 66 points or 0.6% at 10,845

UK business leaders are urging the government to provide financial support to help companies keep trading through the latest Covid-19 restrictions just announced.

BCC director general Adam Marshall says:

“Businesses understand that further restrictions are necessary to tackle the rising number of Coronavirus cases, but these measures will impact business and consumer confidence at a delicate time for the economy.

“Businesses, their employees and customers need to see a clear road map for the existing restrictions and those that may be introduced in the future. This must include transparent trigger points, and clarity about the support available to protect jobs and livelihoods.”

“The government should waste no time in setting out a comprehensive support package for firms forced to close or reduce capacity through no fault of their own.”

Dame Carolyn Fairbairn, CBI Director-General, is calling for a business support plan, and progress on testing.

A second national lockdown would be devastating for our economy, so it’s right to prioritise bringing infections under control.

“But there can be no avoiding the crushing blow new measures bring for thousands of firms, particularly in city centres and for our hospitality sector employing over 4 million people. It is vital that all announcements of restrictions go hand in hand with clarity on the business support that protects jobs.

“A clear timetable is welcome, but six months will come as a shock to many. Every possible step should now be taken to bring that horizon forward. This requires a turbo charged testing regime to help control the virus quickly.”

Dame Carolyn also points out that the new advice to work from home where possible will hurt companies who rely on commuters:

“Renewed advice to work from home where possible will keep our town and city centres under great economic pressure, just as people were starting to make their way back. While action is necessary, it comes at a serious price.

“Remote working has brought real benefits to people and businesses, but we also lose a lot from missed human connections in the workplace.

“Businesses have bent over backwards to make their workplaces COVID-secure and are ready to welcome staff back as soon as allowed.”

The Institute of Directors has a five-point plan for Boris Johnson:

• Extend emergency business interruption loan schemes allowing viable firms to borrow.
• Reduce employment costs by cutting Employers’ NICs, while looking to adjust the furlough scheme so it can support businesses directly impacted by lockdown measures.
• Extend emergency insolvency measures to remove the threat of liability for so-called ‘wrongful trading’ from those struggling firms who seek finance.
• Ensure Local Authorities have the flexibility and funding to allocate local discretionary grants to support more businesses.
• Provide tax incentives to support SMEs to adopt digital practices and technology.

The IoD’s director of policy, Roger Barker, adds that the u-turn on going back to the office will cause frustration among businesses, saying:

“These new measures will inevitably put the brakes on the economic recovery somewhat, but businesses will hope they prevent stricter measures down the road. With the return of more restrictions, the onus is squarely on the Government to set out the next phase of its support.

The Food and Drink Federation warns that some companies could be broken by the new rules. FDF chief executive, Ian Wright CBE, says the furlough scheme should be extended for vulnerable sectors:

“These new restrictions on the UK’s fragile hospitality and food service sector are a potentially fatal blow to manufacturers who specialise in supplying the hospitality sector. Many pubs and coffee shops will not be able to trade profitably under these new rules and will have to close again, with further threats from enforced closure due to local or national lockdowns. Those businesses and their suppliers also now face losing their furlough lifeline.

“We encourage government to heed the recommendations of the Treasury Select Committee and consider a targeted extension of the Coronavirus Job Retention Scheme for the hospitality sector and its manufacturing supply chain.

Over in parliament, Boris Johnson has just announced the government’s new curbs to prevent the Covid-19 pandemic getting out of control.

The measures include early closing times and table service for pubs (despite the industry’s anger), and a new push for home working (despite the government’s recent efforts to get people back to their desks).

My colleague Andrew Sparrow has summarised the key points:

1. Office workers are being asked to work from home if possible
2. From Thursday pubs and restaurants will have to offer table service, except for takeaways. And they will close from 10pm.
3. Staff in retail and indoor hospitality will have to wear masks. And they will be needed in taxis.
4. Covid-secure workplace rules will become a legal obligation.
5. The rule of six will be amended so that only 15 people can attend weddings from Monday.
6. The plan to ease the rules for sports events at the start of October, letting fans back into stadiums in a phased manner, will be suspended.

The PM also warns that these rules could stay in place for six months, unless there is progress in reducing the spread of Covid-19, adding:

I must emphasize that if all our actions fail to bring the R (number) below one, then we reserve the right to deploy greater fire power with significantly greater restrictions.

More details here:

After a dire session yesterday, Europe’s stock markets have staged a small, nervy recovery today.

All the main bourses are higher, with the Europe-wide Stoxx 600 index of top companies up 0.75%. That only makes a small dent in Monday’s 3.2% slump, but it does suggest the initial panic about Covid-19 restrictions has eased.

Germany’s DAX, which fell over 4% yesterday, is up 1.2% so far today, followed by Italy’s FTSE MIB (+1%), and France’s CAC (+0.7%).

But London’s market is lagging, with the FTSE 100 is up 22 points or 0.4% at 5823.

Insurance companies are still down, after the FCA proposed banning them from giving loyal customers worse deals.

Ian Mason, financial services partner at Gowling WLG, says the regulator is right to act:

“The FCA’s proposals should offer a better deal to loyal customers. It will no longer be a case of ‘renewal by inertia’, and it will also be easier for customers to switch to other firms.

The FCA is taking a more interventionist approach”.

Stocks vulnerable to new Covid-19 lockdowns are among the fallers, including Rolls-Royce (-2.1%), betting firm Flutter (-2.1%) and airline IAG (-1.2%).

But the risers just have the upper hand, with Kingfisher now up 8.6% after reporting a surge in DIY sales. BP and Royal Dutch Shell are also up more than 2%, following a recovery in the oil price today.

Sterling is up against the euro and the US dollar today, after Bank of England governor Andrew Bailey insisted Britain isn’t about to try negative interest rates.

The pound has gained over a third of a euro cent to €1.093, away from the six-month low hit earlier this month.

It’s also gained a third of a cent today to $1.285, having slumped as low as $1.272 (a two-month low) just before Bailey insisted negative rates weren’t close.

Bailey also pointed out that negative interest rates have had ‘mixed’ results (they certainly haven’t lifted inflation in the eurozone!).

My colleague Richard Partington explains:

Speaking at a British Chambers of Commerce virtual event, Bailey said the Bank was ready to do everything it could to support the economy but played down expectations it could use negative interest rates to protect jobs and growth.

Used by other central banks around the world, including the European Central Bank and the Bank of Japan, to stimulate growth, negative rates involve central banks charging commercial banks interest on their deposits, with the aim of encouraging lending to businesses and households.

Bailey said the use of negative rates around the world had achieved “mixed” results and that the effectiveness of the policy depended on the timing of the move and the structure of a country’s banking system.

While saying the policy remained in the Bank’s toolbox for tackling a more severe downturn, he cooled expectations that the policy could be used soon. Threadneedle Street had suggested last week that it could cut interest rates to below zero next year, after officials said preparations were under way to allow the central bank to support the economy with lower borrowing costs.

Incidentally, cutting Bank Rate from 0.1% to below zero wouldn’t necessarily mean savers were charged at their bank.

The BoE sets bank funding costs, so negative rates would effectively penalise commercial banks who didn’t lend money out. Those commercial banks would need to decide whether to pass this onto savers - as has happened with some wealthy clients:

Factory order books weakened in September as Britain’s manufacturing industry suffered its first slowdown in future work since May, according to the CBI’s monthly barometer.

The balance of manufacturers reporting weaker order books, rather than stronger, deteriorated slightly to -48% from -44% in August. That’s a disappointing drop, after the order balance improved slowly in June, July and August.

Total order books slumped in April and have stayed well below the long run average of -14% ever since.

The manufacturing industry’s output also suffered a fifth month of declining output after a drop in the number of cars, vans and lorries rolling off production lines dragged down the average across all sectors.

Output volumes in the three months to September fell at a slower pace than in August, according to a balance of firms that reduced from -46% last month to -20% this month.

Amid growing concern that the UK’s manufacturing base will emerge from the pandemic in a much diminished state, the CBI said the majority of the 277 respondents to its survey said they anticipate output will continue to fall over the next three months.

On Monday, the Make UK/BDO manufacturing outlook survey for the third quarter, showed the balance on investment intentions fell to -32 from -26 in the three months to June, meaning many firms plan to cut investment rather than increase it.

Manufacturers, many of which have taken out government loans to survive the last six months, are also among the sectors to signal significant job cuts when the government’s furlough scheme ends at the end of October.

Make UK, which represents 20,000 companies of all sizes in engineering, manufacturing, technology and the wider industrial sector, said it believed an extension to the furlough scheme would help to avoid a fresh wave of redundancies after October.

More than two-fifths of companies said they had already cut jobs, and a further third of firms said they intended to make workers redundant in the next six months. In a survey also released on Monday, the business advisory firm BDO found that more than half of medium-sized businesses were planning job cuts once the furlough scheme ends.

Anna Leach, CBI deputy chief economist, said she also believed a replacement for the furlough scheme was needed to protect the industry.

“While it’s good to see that output volumes once again fell at a slower pace this month compared to August, it is disappointing to see the modest improvements in order books stall, with demand at a still weak level.

“As manufacturing firms continue to battle against headwinds from a resurgence of the virus, weak global demand and uncertainty over our trading relationships, the Government must step up its support.

“As the Job Retention Scheme comes to an end, a successor must be found, while a deal with the EU will help underpin businesses’ resilience.”

Tom Crotty, group director at INEOS and chair of the CBI manufacturing council, said:

“Firms across the country are facing considerable uncertainty as the end of the Job Retention Scheme nears, and concerns about the potential for a no-deal Brexit have escalated as negotiations remain in stalemate.

“A solution to avoid a JRS cliff-edge would be a welcome boost to manufacturers continuing to deal with the impact of Covid-19. It is also crucial that a deal is agreed with the EU, as it is essential to support the economic recovery across the UK.”

Here’s the Financial Times’ take on Andrew Bailey’s speech this morning - and his insistence that negative interest rates aren’t close

Andrew Bailey made it clear on Tuesday that the Bank of England was not about to push interest rates below zero in the near future.

Speaking on a British Chambers of Commerce webinar, the BoE governor said the central bank needed to be sure it could set a negative rate, but that did not mean it was about to use the policy.

The governor said: “Yes it’s in the tool bag, but that does not imply anything about the probability of us using negative interest rates at the moment.”

Bailey’s words have helped the pound to recover from a two-month low against the US dollar this morning.

As explained earlier, the BoE set the negative rate hare running last week, by revealing its monetary policy committee had been briefed on the Bank’s plans “to explore how a negative Bank Rate could be implemented effectively.

Today, though, governor Bailey insisted that the Bank was merely checking that negative rates could be used.

It would be a cardinal sin if we stated we had a tool in the box, which in practice we didn’t think we could operationally use . . . So it is no surprise we’re going to do this work.

It’s going to take time because there’s quite a lot of technical complexity.”

The bosses of two of the UK’s biggest pub chains have blasted the government’s plan to make them close at 10pm, and to encourage people to work from home again.

Speaking on Sky News, Simon Emeny, CEO of Fullers, says it’s “completely unjust” to single out the pub sector, as less than 5% of infections have occurred there.

Emeny argues that the government should encourage ‘responsible socialising’ in pubs, rather than forcing customers to socialise in the street or in other people’s houses.

Sales in the North East of England are down around 50% in the last four days since a 10pm closing time was introduced, Emeny suggests.

That would be “absolutely crippling” to the industry, and an enormous hit to consumer confidence.

Emeny adds that he’s more concerned about lost jobs and livelihoods, and his employees’ mental health, rather than lost sales.

I think this will be devastating for the industry, and it will be devastating for so many people who will be cut adrift, predominantly people who are under 30, who will lose their jobs as a result of some completely incoherent and inconsistent government strategies to deal with this virus.

Fullers is now rethinking its plans to reopen its remaining closed pubs, and fears that sites in London and other city centres will be worst hit by the move back to home working.

With 900,000 hospitality jobs still furloughed, the government must extend the furlough period for the hospitality industry and provide extra VAT support too, Emeny adds.

JD Wetherspoon’s boss Tim Martin is even blunter, calling the 10pm closing time “utterly stupid”, as there have been few infections in pubs.

He tells Sky there are currently 3.2 million hospitality workers trying to enforce social distancing rules. The government is now “making those people redundant at 10pm or so in the evening”, and turning people out into the streets.

Asked about the “contradictory signs’ from the government, following the success of Eat Out to Help Out last month, Martin says:

The whole thing is nuts.

I’m fairly certain the government hasn’t got a clue what it’s doing. The most important thing in our democracy is for parliament to take control of this matter.

Martin adds:

A bunch of colleagues, many of whom haven’t been elected, are imposing rule by degree.

Martin wants the government to heed experts, such as Oxford University professor Carl Heneghan, who argue that the government should introduce ‘targeted protection’ for those most vulnerable rather than new national restrictions.

Parliament should now take a week to debate lockdowns, argues Martin, who reckons MPs would conclude that lockdowns don’t work.

He also warns that extending the furlough scheme would only be a ‘sticking plaster’, and that tax revenues will suffer if pubs are closed again.

The problem is these jokers are ruining the country.

Martin also savages Boris Johnson’s handling of the crisis, saying that “at the moment, he’s definitely not up to the job”.

Like someone running a business, the prime minister should “listen to experts, decide what should happen, and steer a sensible path, listening at all times.”

We need leadership and common sense and good economics....

The economy is being ruined fast

The governor of the Bank of England has warned that the rise in Covid-19 cases “reinforces the downside risks” facing the UK economy.

Speaking to the British Chambers of Commerce, Bailey said that the UK recovery had been quite rapid and quite substantial - but labour demand is still weak, and unemployment higher than the official data.

Bailey said the recent increase in Covid-19 cases was “very unfortunate”, warning:

“Obviously that does reinforce the downside risks.”

With new curbs looming, Bailey says the Bank will do “everything it can” to protect the economy as it faces the “hard yards” ahead.

But, Bailey has also tried to cool speculation that the Bank could introduce negative interest rates. Last week, it revealed that it had “begin structured engagement” with regulators about how such a move would work, which the City took as a clear hint.

Bailey, though, insists that the Bank wasn’t giving a signal last week:

“It doesn’t imply anything about the possibility of us using negative instruments.”

Pub chain JD Wetherspoons has just warned that it could cut up to 450 jobs at six pubs based at UK airports.

The proposed redundancies are at Gatwick, Heathrow, Stansted, Birmingham, Edinburgh and Glasgow airports, where the slump in business travel and holidays has hurt takings this year.

Wetherspoon chief executive John Hutson explains:

“The company has written to 1,000 people employed in its pubs at six airports (Gatwick, Heathrow, Stansted, Birmingham, Edinburgh and Glasgow) to inform them that a possible 400 to 450 positions are at risk of redundancy.

The decision is mainly a result of a downturn in trade in these pubs, linked with the large reduction in passenger numbers using the airports.

We should emphasise that no firm decisions have been made at this stage.

The company will listen to suggestions from staff to help avoid or reduce the number of compulsory redundancies which are required.

Wetherspoon is proposing to collectively consult with employees through an employment representative committee, which will be established for this purpose.”

After yesterday’s rout, European stock markets have opened a little higher this morning.

The FTSE 100 is up 29 points, or 0.5%, at 5833, rising from last night’s two-week low. Germany’s DAX rose 0.6% in early trading, with France’s CAC 0.5% higher.

But companies vulnerable to Covid-19 restrictions are still under pressures.

Land Securities, the property firm, has dropped 2% - following Michael Gove’s comments that people should work from home where possible.

IAG, which owns British Airways, has dropped by 1.5% to a new eight-year low. Cruise operator Carnival is also weak, down 3% at a seven-week low.

Housebuilders Barratt and Persimmon are also down 1%.

Whitbread has also warned that demand for hotels in major cities is still weak, which is forcing the 6,000 job cuts announced this morning.

The company was closed its doors from late March to early July. It’s seen strong demand at tourist sites since reopening, but not in metropolitan areas -- probably because so few people are going on business trips.

Sales improved in August, but even then were almost 40% lower than a year ago.

It says:

Since reopening, total UK accommodation sales growth was ahead of the market, benefitting from the fast reopening, the strength of the Premier Inn brand and our leading customer proposition. Demand was strong in seaside & tourist locations, with occupancy levels of almost 80% during August in those locations. However, demand remained subdued across the rest of the hotel market, particularly in London and metropolitan areas.

Across our entire UK estate, overall occupancy levels steadily improved on a weekly basis, averaging 51% in August with year-on-year accommodation sales recovering to -47.3%, while UK Restaurant performance was boosted by the positive impact of the Eat Out to Help Out scheme.

Total UK sales (accommodation and food and beverage) improved to -38.5% in August.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

We start with bad news from the UK - Whitbread, the hotel and restaurant chain, is cutting up to 6,000 jobs. It’s the latest in a string of firms across the leisure sector to cut headcount since the pandemic began.

Whitbread, which owns the Premier Inns hotel chains, is cutting its workforce by 18%. It suffered a slump in trading compared with a year ago, and fears that demand will remain weak.

Chief executive Alison Brittain told the City:

With demand for travel remaining subdued, we are now having to make some very difficult decisions, and it is with great regret that today we are announcing our intention to enter into a consultation process that could result in up to 6,000 redundancies in the UK, of which it is hoped that a significant proportion can be achieved voluntarily.

In line with our longstanding values of treating our people fairly, our priority is now to ensure that this process is clear and transparent for all colleagues and that everyone impacted is supported throughout.

Like-for-like sales in the first half of Whitbread’s financial year, from March-August. slumped by over 77% - as many of its outlets were closed during the lockdown.

Whitbread is also close to cutting 15% to 20% of jobs at its head office, which we understand is another 150 positions.

The cuts come as the UK government prepares to announce that pubs and restaurants must close at 10pm, in an attempt to slow the spread of Covid-19.

Those restrictions would hit Whitbread’s Beefeater, Brewers Fayre and Bar & Block steakhouses.

Boris Johnson is expected to lay out details of the plan today, after the UK’s Covid-19 alert level was raised to four, meaning the virus is “high or rising exponentially”.

Also coming up today

World markets reeled from the threat of new Covid-19 restrictions yesterday, with Britain’s FTSE 100 suffering the worst fall in three months. More than £50bn was wiped off the blue-chip index, with airlines, banks, and pub chains worst hit.

The US market also suffered big losses, with the Dow Jones industrial average sinking to a seven-week low.

Federal Reserve chair Jerome Powell tried to calm nerves last night, in prepared testimony to Congress.

Powell pledged:

“We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy,”

European stock markets are expected to rise a little this morning, ahead of a Swedish interest rate decision, a healthcheck on UK factories, and the latest eurozone consumer confidence report.

The agenda

• 8.30am BST: Sweden’s Riksbank announces interest rate decision
• 8.30am BST: Bank of England governor Andrew Bailey speaks on a British Chambers of Commerce webinar
• 11am BST: CBI’s survey of UK industrial trends orders
• 3pm BST: Eurozone consumer confidence for September
• 3.30pm BST: Federal Reserve chair Jerome Powell testifies to Congress