STILL NO OUTCOME TO BREXIT TALKS AS GRIDLOCK AT PORTS SHOWS POTENTIAL FOR BORDER CHAOS

STILL NO OUTCOME TO BREXIT TALKS AS GRIDLOCK AT PORTS SHOWS POTENTIAL FOR BORDER CHAOS

This week we wait for another final Brexit deadline, same as last week. While we suffer through this especially tedious version of Groundhog Day, it does appear they’re at least making some progress. If you can believe any of the statements being made by either side, it seems rules for state aid and level playing fields appear closer to agreement, whilst the mostly symbolic issue of fishing remains unsolved. This is at least a better situation than last week and puts the chances of a deal being struck a bit higher in our estimation – but if Brexit has taught us anything, it’s to not underestimate the potential of symbolic issues.

Elsewhere the sight of lorries queuing up the M20 and jamming up Holyhead gives us a small taste of what’s to come, but perhaps offers some hope of a silver lining. The main challenges around trade next year comes from a failure to prepare. Stockpiling now might give firms, government and border staff enough breathing room to work through all the inevitable issues without causing the empty shelves that had been threatened.

Retail sales slowed in the UK and US after governments imposed fresh restrictions on business openings and personal movement to try and halt the continued spread of Covid-19. November usually sees retails sales increase in the run up to Christmas (and Thanksgiving in the US), but this year both countries have seen sales fall between October and November. This reverses the month on month growth in retail spending seen since lockdown ended in late spring.

The UK and US economies are both heavily dependent on consumer spending and the lack of consumer confidence and physical ability to spend, if shops are closed, is another barrier to economic recovery. This week the Bank of England, US Federal Reserve and the Bank of Japan all kept interest rates on hold at their policy meetings. All the central banks left their asset purchase schemes unchanged but promised further stimulus if economies deteriorate further.

UK: EMPLOYMENT FALLS AT FASTEST RATE SINCE FINANCIAL CRISIS

Despite the government’s furlough scheme and the financial support available to employers, the UK’s labour market deteriorated sharply over the autumn. The number of people in employment has fallen at is fastest rate since March 2010, while the unemployment rate has increased to 4.9 per cent, up from 3.9 per cent at the beginning of the pandemic, and is now at its highest rate since early 2016. In total, 370,000 people were made redundant between August and October this year, the highest figure on record.

Many of the redundancies have been linked to the government’s initial unwinding of the furlough scheme before it was reinstated in late September as the government increased Covid-19 restrictions. The most recent figures from the Office for National Statistics show that more than 5 million people are still on furlough and this week the chancellor announced the scheme would be extended for another month up to the end of April.

EQUITIES: RESTAURANT GROUP STRUGGLES AS DINERS STAY HOME

The problems facing the restaurant industry are neatly illustrated by the fortunes of The Restaurant Group. Severe restrictions on trading for much of the year have seen revenues evaporate and hospitality businesses are bracing for further lockdowns in the new year as coronavirus cases continue to rise.

Shares in the Restaurant Group (owner of Wagamama, Frankie & Benny’s and Garfunkel’s) are down 58 per cent over the last 12 months. This includes a drop of 5 per cent this week after it issued a trading update which showed the number of its outlets completely closed has increased from 37 in mid-October to 103 in mid-December. The business has been struggling with high debt, changing consumer tastes and fierce competition in the high street for some time – it went into voluntary administration earlier this year as part of a restructure. In contrast, lockdown has seen a boom in home dining. Domino’s, for example, reported a 30 per cent increase in sales in Q2 and its shares are up around 5 per cent in the last 12 months.