What happens next…

Economic Week In Review | Issue 244 | 1 September 2020

UK news

  • UK tourism | The World Travel and Tourism Council (WTTC) warned that the UK will lose £22bn in spending from international tourism, putting 3m jobs at risk in its worst-case scenario. President and chief executive of the WTTC warned that stop-start quarantine measures and a lack of testing at international entry points have undermined traveler confidence.
  • Retail jobs | Retailers in the UK are cutting jobs at the fastest rate since 2009 due to the twin impacts of the decline of the high street and the pandemic, according to the CBI. Recently Boots, John Lewis, Marks and Spencer, and WHSmith have all announced large job cuts. The balance of employers saying they would reduce their headcount has increased recently.
  • Changing work culture | Linklaters announced it will allow its 5,000+ staff to work remotely for between 20% and 50% of the time, as the pandemic continues to disrupt office culture. Many large law firms have announced similar schemes whilst opening London offices for limited staffing. A survey by Cardiff University and the University of Southampton found that 88% of employees who worked at home during lockdown would like to continue doing so in some capacity, with 47% wanting to do so often or all of the time. Whether the economy or employers will support such a stance is a moot point.

Global news

  • Furlough | Germany has become the latest European country to extend its furlough scheme, following France, Italy, Switzerland, and Austria.
  • Davos 2021 | The World Economic Forum’s landmark Davos forum will be pushed from January 2021 to the summertime due to Covid-19. The last time the meeting was moved was in the wake of the New York attacks in 2001.
  • China’s Belt and Road initiative | A new bill – the China-Pakistan Economic Corridor Authority bill – proposes a new position to be held by a military office to “accelerate the pace” of construction, highlighting the growing influence of the military in Pakistan.
  • Shinzo Abe stepped down as prime minister of Japan due to poor health: he has been Japan’s longest-serving premier. Upon the announcement, the Nikkei and Topix markets fell. Abe will stay in place until a successor is internally voted for.

Commodities and currencies

  • Oil prices increased ahead of hurricane Laura as traders expected supply to be disrupted. However, as most of the US oil infrastructure in Louisiana and Texas was spared, oil prices fell.
  • Iron Ore | Vale has opened a new iron ore grinding hub in China which will process 3 million tonnes a year. The move is supported by robust growth in steel production in China as well as the country’s commitment to reduce the industry’s carbon footprint.
  • Sterling | Currency traders say they are relaxed over the prospect of dropping out of the EU without a trade deal and that the options market suggests sterling faces no big risks in the next six months. Some have questioned whether this suggests confidence or complacency.

Construction and property news

  • Leases | Fashion chain New Look is seeking to achieve steep cuts to its rent, switching to sales-linked leases on 402 of its stores as well as looking to pay no rent on 68 stores for three years as part of a restructuring to protect 10,000 jobs.
  • Brexit | 11 new trade advisory groups have been launched by the government as part of a new business engagement drive to help “inform the government’s negotiating position and deliver key industry asks that benefit the whole UK”. However, there is no group for construction.
  • Construction employment | The Health and Safety Executive (HSE) believes that employment practices in construction leave workers particularly vulnerable to Covid-19 because of the amount of agency, zero-hours, and self-employment in the sector which makes contact tracing difficult. HSE is forming a policy for industries that it will target for Covid-19 spot checks.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 5,963.57 -0.64 -17.26
FTSE 250 17,788.33 1.20 -8.28
Nikkei 22,882.65 -0.45 10.52
CSI 300 4,844.27 1.99 27.49
S&P 500 3,508.01 3.26 19.87
Nasdaq 11,695.63 3.39 46.88
CAC 40 5,002.94 2.18 -8.71
Dax 13,033.20 2.10 9.16
$ per £ 1.3345 1.89 9.64
€ per £ 1.1211 0.78 1.21
Gold £/oz 1,471.85 -0.71 39.31
Brent Oil $/barrel 45.95 3.61 -23.96

Weekly Summary

This week saw the government push for workers to return to the office to help ailing city centres as the CBI warns that they could become “ghost towns” unless staff return to their desks soon, an idea demonstrated by Pret a Manger’s recent jobs announcement. This has brought the debates on home working, the revival of local high streets, as well as housing availability to the fore.

However, as economies increasingly open up, many are closely watching Covid-19 case figures which are increasing in a number of countries.

As we edge closer to the UK’s departure from the EU, it is concerning to see that construction is still not considered high priority in negotiations, despite its reliance on international trade, particularly with the EU.

To look out for

Inflation statistics for the Euro-area are due to be published today, with economists expecting a “tepid” 0.2% in August. Germany, Italy, and Spain have all reported negative inflation rates in August.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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