Rishi Sunak’s original winter economic plan didn’t even make it beyond the middle of autumn. The chancellor’s new jobs support package is not so much a tweak of the original as a complete rewrite.
A good thing too, of course, because the first version was full of holes, as outsiders spotted on day one. Employers were being invited to pay 55% of the wages of someone working 33% of normal hours, an offer that was never likely to save many reduced-hours jobs – a supposed key aim.
Sunak went too far with his mantra that he can’t save every job. As he’s now showing via a U-turn, it was always possible to protect many more businesses and jobs, especially in the hospitality industry. His previous airy talk about “viable” jobs was borderline offensive when the main threat to survival was the government’s own lockdown restrictions.
Sunak seems to veer between high-minded words about a “sacred responsibility” to balance the books for future generations and panic about the winter surge in unemployment. We can all appreciate the tension but one expects a chancellor, even in a pandemic, to find a steadier course.
The 11th-hour reversal will come too late for those companies that made employment decisions on the basis of the old stance. Thursday’s plea that events have moved on since last month’s launch of the winter plan simply doesn’t wash: infection rates were already rising four weeks ago.
Let’s not forget, too, that the Treasury’s recent record with fiddly design details is poor. The enormous £38bn “bounce back” loan scheme was an essential measure at a key point in the crisis, but its construction was too crude. The protections against fraud were minimal. The National Audit Office has made that point without estimating the actual losses to fraud, but it’s hard to read its report without concluding that several billion pounds will be lost unnecessarily between the cracks.
Sunak, everybody still seems to agree, has had a good crisis. By the standards of general incompetence in the government’s management of the pandemic, one can make a case. But the end of the furlough scheme was a big test for the chancellor. He flunked it the first time, despite having months to prepare, and his second attempt may yet require changes. The halo has gone.
IAG may be heading towards a cost-cutting second wave
Sean Doyle, the new chief executive of British Airways, said in a speech last week the airline used to fly 12 times a day between London and New York but was now down to just twice a day, with fewer than 200 passengers most days. So nobody can be surprised by its parent International Airline Group’s latest retreat: the overall group – which also owns Iberia, Aer Lingus and Vueling – will will operate at 30% capacity in the final quarter of this year.
Nor is there any shock that the financial numbers are horrible. The operating loss in July to September was €1.3bn (£1.16bn), about a third worse than the City had expected. IAG has now formally abandoned its hope, set at the end of July, of operating at break-even in cash terms in the final quarter of 2020.
At least the balance sheet now looks solid for a while. A €2.74bn capital increase from shareholders was completed this month. Via a combination of cash and borrowing facilities, the group calculates it now has liquidity of €9.3bn.
The problem, though, is getting airborne. Despite noisy lobbying, the likes of IAG have secured no big relaxations that would seriously encourage more flying. Heavy quarantine restrictions remain in place on critical transatlantic routes and the merit of pre-flight Covid testing procedures at airports is a quarrel with government – and not just in the UK.
The title of Doyle’s speech last week was “beyond the crisis” but the gist of its content was that it’s impossible to look that far. It’s a fair analysis. One fears a second wave of cost-cutting.
Multinationals’ resilience in pandemic secures exceptional quarter
Reckitt Benckiser, Procter & Gamble, Nestlé and now Unilever. All these big consumer goods companies have enjoyed strong recent trading. In Unilever’s case, within a 4.4% growth in underlying sales in the third quarter, the stars were soap and sanitising products (no surprise), and ice-cream (perhaps more so).
Naturally, these companies all like to congratulate themselves on how consumers “trust” their brands, which may be true to up a point. But Unilever was also more candid: multinationals have more resilient supply chains and thus greater ability to get their goods on retailers’ shelves when the heat is on. All sales count, but the last quarter may have been exceptional.
