Lockdown – Reflections at the end of week 23

This week saw a continuation of many of the trends that we have seen emerging through the lockdown period. The announcement by Pret a Manger of significant cuts in its workforce reflects the absence of footfall in city and town centres as large numbers of people continue to work from home and to shop online. Tesco’s announce the creation of 16,000 new jobs is better news but supports the trend since the new posts will be in its online business which has seen what Tesco describes as exceptional growth. In the City of London, the investment bank JP Morgan and Linklaters, a Magic Circle law firm which dates back to 1838, have both announced a move to agile working. Numbers of infections are slowly rising, a matter which is generating both uncertainty and apprehension on many levels. The Prime minister has, in the course of a performance at a press event at a school which put many of us of a certain age in mind of Terry Scott in an advert for the Curly Wurly chocolate bar, invented a new excuse – it wasn’t me, miss, it was the mutant algorithm.

In the wake of all this come press reports of divisions in the Cabinet. Last weekend, it was reported that there was a disagreement between the Chancellor and the Prime Minister about the pensions triple lock which, due to the drop in average wages this year caused by a combination of furlough and agreed reductions, could see state pensions rise in the near future by 7.5% if the expected recovery in average wages takes place post-furlough. The Chancellor is said not to want to spend the money, whilst the Prime Minister is said not to want to lose pensioners’ votes. This morning, it is reported that many in the Cabinet are urging official policy to be of a return to work rather than to work at home to boost city and town centre economies, whilst the Health Secretary is reported as being amongst those who are less keen on the idea. It’s going to be tough going if the government can’t grasp the realities of the post Covid economy and is prepared to sacrifice bold and decisive leadership of the national response to rapidly changing social and economic circumstances and needs on the altar of political expediency.

In amongst all that, in what’s been a relatively quiet news week for the UK, the following have caught my eye as a miscellaneous selection of things which, at first blush at least, you might not necessarily expect

  • Consumer spending in July reached pre lockdown levels notwithstanding wage reductions, job losses or worries about the future. It will be interesting to see if spending is sustained into the autumn, particularly, and I shudder to mention it in August, with Christmas starting to appear on the horizon.
  • The housing market continues to be buoyant notwithstanding the same factors. I suspect that this is not only down to the market being closed for around 3 months or the stamp duty holiday. I wonder, for example, what part a fear about future availability of mortgages is playing.
  • House hunters appear to be looking for larger gardens, reversing the trend of a few years. Sales of gardening equipment and outdoor toys grew during lockdown as we seem to have rediscovered outdoor living, so house hunters are wanting space for the raised beds and the trampoline.
  • Premiership football teams are continuing to spend on transfer fees even though they face a loss in gate money and non-match day income, reflecting the Premiership’s status as a mass appeal global brand and, perhaps, that the economic effects of the pandemic are not being felt so much by the super-rich
  • The Dow Jones index has remained at a high level and briefly exceeded its pre Covid levels yesterday against a background of continuing spread of the virus, the steepest economic drop ever recorded in the US in the April-June 2020 period, over 1m new jobless claims in the week, civil unrest and the looming presidential election. Whilst the rise was an immediate response to an announcement by the Fed on economic stimulus, the high trend seems to be less a reflection of the US economy and more a response of a global investing community looking for homes for its cash in developed economies in which low interest rates are dominant.

The weather forecasters are suggesting that use of the recently purchased outdoor stuff over the weekend may be for the hardy amongst us, but perhaps we should take comfort in the consistency of the Bank Holiday weather. I hope that you enjoy it whatever you’re doing.

Ian Waine leads Prettys’ Corporate Services Team and has advised on a large number of corporate recovery and corporate restructuring cases over the last 30 years. He can be contacted on 07979 498817 or iwaine@prettys.co.uk

Ian Waine
Senior Partner