Here’s my colleague Phillip Inman on Rishi Sunak’s new package of measures to protect the UK economy from the Covid-19 slump:
The government will slash VAT in hospitality and leisure businesses, introduce a stamp duty holiday and spend up to £9bn rewarding employers that bring back furloughed staff, the chancellor said in his summer statement on Wednesday.
Outlining measures designed to protect existing jobs and create thousands of new ones, Rishi Sunak said he offered all nations of the UK comprehensive proposals to support the economy and help it bounce back from crisis.
Amid concerns that struggling businesses will be forced to sack tens of thousands of furloughed staff as the government’s main jobs subsidy is wound down from next month, Sunak said employers could claim a £1,000 bonus for each one of the 9.4 million staff furloughed since March that return to work.
A cut in VAT from 20% to 5% on hospitality and leisure services – including pubs, restaurants, cafes, zoos and cinemas – until next January would cost the Treasury £4bn, he said and would combine with a 50% discount on eating in restaurants and cafes as part of an “eat out to help out” discount. The VAT cut will not apply to alcohol served in pubs or restaurants.
Bullion is now changing hands at $1,810 per ounce for the first time in eight years, up 1% today.
Joel Kruger, currency strategist at LMAX Group, says it shows investors are concerned about the economic outlook:
“The gold market continues to send a message that the outlook for the global economy is far more distressing than what stock market investors perceive. The yellow metal is trading at its highest levels since 2012 and is now within a stone’s throw of the record high from 2011.
The persistent demand for the yellow metal is reflective of a strong desire to take up exposure to a limited supply, hard asset as a store of value, particularly at a time when central banks have been printing money at unprecedented rates.
Uncertainty around economic recovery in the aftermath of coronavirus should only further fuel demand, with the gold price expected to easily surpass the record high and make its way well up above $2,000 over the coming months.”
Over in parliament, chancellor Rishi Sunak will soon update MPs on his plans to protect the UK economy from the cost of the pandemic.
The City will be watching this “mini-budget” closely, says Connor Campbell of SpreadEx.
Down just 0.1%, the UK index seems to be in anticipation mode, keen to see what kind of measures the Chancellor will unveil in his summer statement.
The pound was similarly anxious, slipping 0.1% against dollar and euro alike, eyeing Sunak’s announcement while keeping an ear to the ground regarding any update on the latest Brexit talks.
We’ll be tracking it all here, in our Politics Live blog:
The gold price is holding steady over $1,800 per ounce, as traders wonder whether it will keep rising.
The all-time high of $1,920 set in 2011 could soon be in sight, if investors continue to protect themselves against inflationary pressures (with interest rates at record lows).
The gold price, in dollars per ounce Photograph: Refinitiv
Steen Jakobsen, chief economist and chief investment officer at Saxo Bank, explains:
Sentiment is strong....
With nominal rates remaining steady and break-even rates moving higher, the inflation expectations are rising which will most likely continue to support the move higher.
Pub operator Mitchells & Butler has lost 6%, as the recent reopening of pubs fails to bring much cheer. Drinks maker AG Barr have dropped 4.4% -- its turnover would also suffer if pubs were forced to close again, or if customers stayed away.
Budget airlines easyJet and Wizz Air have lost 4%, amid concerns that the pandemic will drag on longer, hurting travel demand.
The most astonishing story of the morning is that international investors have apparently bought bonds backed by the crime proceeds of Italy’s most powerful mafia.
The Financial Times has discovered that securities which were partly backed by assets owned by organised crime gangs have been created. They were then sold to legitimate investors such as banks, pension funds and hedge funds.
The trick was to combine these assets with others, including unpaid invoices to Italian public health bodies (which yield a chunky penalty rate), in what the FT delicately calls an ‘exotic debt instrument’.
It looks like an astonishing failure of money-laundering rules, and raises questions about how much scrutiny investors are actually carrying out.
In one case, the bonds — backed in part by front companies charged with working for the Calabrian ’Ndrangheta mafia group — were purchased by one of Europe’s largest private banks, Banca Generali, in a transaction where consulting services were provided by accountancy group EY.
About €1bn of these private bonds were sold to international investors between 2015 and 2019, according to market participants. Some of the bonds were linked to assets later revealed to be created by front companies for the ’Ndrangheta.
The ’Ndrangheta is less well-known outside Italy than the Sicilian mafia but has risen over the past two decades to become one of the wealthiest and most feared criminal groups in the western world, engaging in crimes ranging from industrial-scale cocaine trafficking to money laundering, extortion and arms smuggling.
Obviously the #SummerStatement is crowding out a lot of business/markets news today - but this story in the @FT this morning was a genuine 'toast dropper' as we say in the trade:https://t.co/N06yDvC91s
New figures from the Office for National Statistics confirm that nearly half of UK employees worked from home during the lockdown.
Their latest review of homeworking in the UK found that:
In April 2020, 46.6% of people in employment did some work at home.
Of those who did some work from home, 86.0% did so as a result of the coronavirus (COVID-19) pandemic.
Of those who did some work from home, around one-third worked fewer hours than usual (34.4%), and around one-third worked more hours than usual (30.3%).
Women were slightly more likely to do some work at home than men, 47.5% and 45.7% respectively.
People aged 16 to 24 years were less likely to do some work from home than those in older age groups.
More than half of people living in London (57.2%) did some work at home.
Occupations requiring higher qualifications and more experience were more likely to provide homeworking opportunities than elementary and manual occupations.
The ONS has also found that vacancies have shrivelled, meaning those who have lost their jobs since the pandemic struck face a tough fight:
The ratio of unemployment to vacancies increased between January and April 2020.
Gold did get hammered during the market meltdown in March - as panicking investors were forced to liquidate some assets to cover losses.
But as calm returned, bullion prices started to shoot up - gaining over 20% since, as Bloomberg’s Lisa Abramowicz illustrates:
Gold is at a new post-2011 high, bumping up against the $1,800 level. It has gained more than 22% since this year's low in March. pic.twitter.com/irGD83NWAD
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