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British firms take £30bn in lifelines from financial markets since mid-March

hands grasping at pounds
hands grasping at pounds

British firms have taken £30bn in lifelines from financial markets as a blitz of equity and debt is issued to help businesses survive the coronavirus crisis.

Almost 150 companies tapped bond and stock markets to address the cash crunch caused by Covid-19 between mid-March and the end of April, according to analysis by New Financial and BNP Paribas.

Some £25bn has been raised by 50 firms in the corporate bond market, while an additional 100 companies sold £5bn of stock. Premier Inn owner Whitbread, J D Wetherspoon and catering giant Compass are among those turning to share sales to cope with the sudden stop in economic activity.

“The Covid-19 health crisis has hit the economy hard and the capital markets have had to step up to support the economy and society in an urgent and meaningful way,” said Anne Marie Verstraeten, head of the UK at BNP Paribas. “During this time of crisis, a high volume of corporates have been active in the debt and equity capital markets, across a range of sectors.”

The figures, which come as the Treasury is drawing up plans to rescue ailing firms that cannot tap other sources of funding, reveal that capital markets have been crucial in propping up companies alongside unprecedented government help.

Rishi Sunak, the Chancellor, has attempted to support businesses by reducing costs and keeping credit flowing.

Chancellor Rishi Sunak - AFP
Chancellor Rishi Sunak - AFP

The report underscored the importance of capital markets for the largest companies. Nearly half of businesses with annual revenues above £200m are listed on the stock market, while 90pc tap capital markets for funding. The 500 listed companies are worth a combined £2.7 trillion, the report found.

“Given how important capital markets are today to UK companies and the UK economy, they will have to play a vital role in helping support the economy through this crisis and in fuelling an economic recovery,” said William Wright, founder of New Financial.

Markets have calmed since being rocked in March by the rapid spread of the virus. After hitting its lowest level in more than eight years in March, the FTSE 100 has rallied 20pc as countries unveiled huge support for economies.

Simona Gambarini, Capital Economics markets economist, said the recovery in global stocks could continue.

“The stock market often rebounds before the economy,” she said. “Assuming that the virus outbreak is slowly brought under control in the coming months, and economies gradually continue to reopen in that time, the rally in equities may have further to run.”

While stock markets have staged a recovery, investors have been squeezed by shareholder payouts being curbed. Dividend cuts and deferrals during the coronavirus crisis have rocketed past £30bn, according to A J Bell.

Its survey of investors found that half have been hit by dividend cuts, while average income from portfolios has tumbled 27pc. However, it said some 140 companies, including Vodafone and Tesco, had committed to maintaining dividends worth more than £12bn.