Stock markets sink on new lockdown fears
Panicked traders wiped more than £50bn off Britain's blue chip companies on Monday as pub and restaurant chiefs begged for more support ahead of a fresh Covid crackdown.
The FTSE 100 dropped 3.4pc, with £51bn knocked off its vale on the index's worst day since mid-June. The fall was part of a market rout across Europe after rising coronavirus cases sparked fears that politicians will impose another round of economically crippling lockdowns.
Airlines, pub chains, housebuilders and banks all fell sharply as investors bet that Britain will be hit by tough new rules to minimise social contact, wrecking a rebound in activity following the deepest recession for decades.
Prime Minister Boris Johnson is expected to order pubs to shut from 10pm each night as part of a package of measures to be announced on Tuesday.
A fortnight-long "circuit break" lockdown could also be introduced in coming days to slow transmission.
Industry chiefs pleaded with the Government to offer fresh help so battered pubs and restaurants can survive. They warned that mass job losses are inevitable without an extension to the taxpayer-funded furlough scheme, which is still supporting 900,000 roles in hospitality.
Kate Nicholls, chief executive of trade body UK Hospitality, said: “We need to have a plan in place to keep business support measures available for the next six months, at least.
"If you have this announcement of restrictions, without an announcement of existing support, you'll start to see redundancy notices going out next week."
British Beer and Pub Association boss Emma McClarkin said that a temporary VAT cut and business rates holiday should also continue.
She said: “These measures will help brewers and pubs work towards a safe and sustainable recovery and will save hundreds of thousands of jobs."
Economists warned that new restrictions could derail an economic rebound and cause another slump in GDP, which collapsed 20.4pc between April and June but has since recovered around half of this lost output. Deutsche Bank said a full blown second wave “would almost certainly put the brakes on the UK recovery”.
George Buckley, of Nomura, said: “There is a risk that you start to see GDP fall again in outright terms.
“If you start to think this will be a recurring thing that requires lockdown after lockdown, then you might well be a bit more reticent to hold onto the staff you had.”
Travel and hospitality stocks were among the worst hit in the market rout on Monday, with British Airways owner IAG the biggest FTSE 100 faller, down 13.7pc to 96.8p, while jet engine maker Rolls-Royce tumbled by a tenth to its lowest level since 2004.
Pub chains Marston’s and Mitchells & Butlers both took a battering, down 15.9pc and 15.4pc respectively, while Wagamama owner The Restaurant Group fell 17.7pc.
Overall the FTSE 100 closed down 3.38pc or 202.76 points at 5,804.29. Across Europe, the French market fell 3.7pc while Frankfurt stocks dropped 4.4pc. Wall Street also opened lower, with the S&P 500 down 2.2pc at 7pm UK time.
Simon Emeny, chief executive of Fuller's, said any enforced closure of pubs, which were forced to close for four months earlier this year, would be “illogical”.
He siad: “I'm really unclear as to what it would achieve... [it] appears to be a relatively unsophisticated game of whack a mole," he said.
Samuel Tombs at Pantheon Macro said another closure of consumer services firms would push GDP down to 15pc below pre-virus levels for as long as it lasted, compared to a 5pc shortfall without new restrictions.
UK Hospitality has said a two-week industry shutdown could equate to £2bn of lost sales.
JPMorgan calculated there would be a 2pc hit to GDP - equivalent to £3.3bn, or £119 per household.
Allan Monks, economist, said: “Given the behavioural change it could trigger, however, the indirect impact might end up being larger or longer lasting – especially if the lockdown were extended or repeated."
Shares in supermarkets and food delivery firms ended the day higher amid the prospect of households spending more time at home, with Tesco, Sainsbury’s and Morrisons all making gains and delivery companies Domino’s and Just Eat Takeaway.com also up.
Shoppers are being urged to shop considerately ahead of the expected restrictions after panic buying emptied supermarket shelves of pasta, toilet roll, tinned food and antibacterial gel at the peak of the crisis.
Grocers including Tesco and Sainsbury’s have stressed they had plenty of capacity online and in-store, and had not seen any signs of bulk-buying.
