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Rishi Sunak’s original winter budget plan didn’t even go past mid-autumn. The Chancellor’s New Jobs Support Package is not so much a modification of the original as a complete rewrite.
A good thing too, of course, because the first version was full of holes, as outsiders saw on the first day. Employers were invited to pay 55% of the salary of someone who worked 33% of normal hours, an offer that would likely never save many part-time jobs, a supposed key objective.
Sunak went too far with his mantra that he can’t save all jobs. As you are now showing through a U-turn, it was always possible to protect many more businesses and jobs, especially in the hospitality industry. His earlier airy talk about “viable” jobs was on the brink of the offensive when the main threat to survival was the government’s own shutdown restrictions.
Sunak seems to veer between altruistic words about a “sacred responsibility” to balance the books for future generations and panic over winter’s rising unemployment. We can all appreciate the tension, but one hopes that a chancellor, even in a pandemic, will find a firmer course.
The 11th hour rollback will come too late for those companies that made employment decisions based on the old stance. Thursday’s plea that events have progressed since the winter plan’s launch last month is simply not cleared up – infection rates were already on the rise four weeks ago.
Let’s not forget, too, that the Treasury’s recent track record with complicated design details is poor. The massive £ 38bn “payback” loan scheme was an essential measure at a key point in the crisis, but it was too crude to build. Protections against fraud were minimal. The National Audit Office has made that point without estimating actual fraud losses, but it is difficult to read their report without concluding that several billion pounds will be unnecessarily lost between the cracks.
Sunak, everyone seems to still agree, he’s had a good crisis. Based on the standards of general incompetence in government management of the pandemic, it can be argued. But the end of the licensing plan was a great test for the chancellor. He failed it the first time, despite taking months to prepare, and his second attempt may still require changes. The halo is gone.
IAG may be heading for a second wave of cost reduction
Sean Doyle, the new chief executive of British Airways, said in a speech last week that the airline used to fly 12 times a day between London and New York, but has now been reduced to just two a day, with fewer than 200 passengers the most days. So no one can be surprised by the latest withdrawal of its parent International Airline Group: the overall group, which also owns Iberia, Aer Lingus and Vueling, will operate at 30% capacity in the last quarter of this year.
It’s also not surprising that the financial figures are horrible. The operating loss from July to September was 1.3 billion euros (1.16 billion pounds sterling), about a third worse than what the city expected. IAG has now formally abandoned its hope, set at the end of July, to break even in cash terms in the last quarter of 2020.
At least the balance now looks solid for a while. This month a capital increase of 2,740 million euros from shareholders was completed. Through a combination of cash and credit facilities, the group estimates that it now has a liquidity of 9.3 billion euros.
However, the problem is flying. Despite noisy lobbying, companies like IAG have failed to secure large relaxations that would seriously encourage more flying. Strong quarantine restrictions remain in place on critical transatlantic routes and the merit of Covid’s pre-flight testing procedures at airports is a dispute with the 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 is a fair analysis. One fears a second wave of cost cuts.
The resilience of multinationals to a pandemic ensures an exceptional quarter
Reckitt Benckiser, Procter & Gamble, Nestlé and now Unilever. All of these large consumer goods companies have enjoyed strong trade recently. In the case of Unilever, with a 4.4% growth in underlying sales in the third quarter, the stars were soap and sanitizers (not surprising) and ice cream (maybe more).
Naturally, all of these companies like to congratulate themselves on the way consumers “trust” their brands, which may be true to some degree. But Unilever was also more candid: Multinationals have stronger supply chains, and therefore a greater ability to get their products to retail shelves in hot weather. All sales count, but the last quarter may have been exceptional.
