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The Covid-19 pandemic is continuing to cause major disruption to the UK’s economy and businesses. Our aim during this time is to support our clients and contacts by sharing relevant updates, together with our insights into how the real estate industry will be impacted.
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Andrew Teacher and the Blackstock Consulting Team
DAILY BRIEFING, WEDNESDAY JANUARY 27th, 2021
UK Government Response
The Government has vowed it “will not hesitate” to take further action and strengthen border restrictions to protect the UK from new Covid-19 variants, the Home Secretary told MPs.
New border controls would force all UK arrivals into specially designated quarantine hotels for 10 days, with all meals to be eaten in their rooms, and for a price of at least £1,500, according to City AM.
The policy would be similar to what has been in place in Australia for months, where arrivals are required to quarantine for a minimum of 14 days at a hotel.
Government sources told ITV News that bickering between ministers was only concerning granular details, and the “general policy looks pretty nailed on”.
Speaking at the Downing Street press conference yesterday, Professor Chris Whitty said that although fatality rates are stabilising, they remain at an incredibly high rate.
The UK has officially surpassed 100,000 coronavirus deaths since the pandemic began, according to government figures.
Boris Johnson went on to accept “full responsibility” for the appalling death toll, saying he was “deeply sorry”, The Guardian reports.
The PM also reiterated his desire for schools to open as soon as possible.
The Prime Minister said: “We will want to reopen them, but we must do it in a way that is safe, and we must do it cautiously.”
New Covid variants and rocky vaccine rollouts threaten to limit the global economic recovery, according to the International Monetary Fund (IMF).
The IMF slashed its growth forecasts for the UK and eurozone, while China and the US look set to top the post-pandemic recovery charts.
The lender of last resort lifted its global GDP growth forecast for 2021 by 0.3 percentage points to 5.5 percent but delivered heavy downgrades across Europe as the region battles a seemingly endless wave of infections.
IMF chief economist Gita Gopinath warned that: “Much depends on the outcome of this race between a mutating virus and vaccines”. She added that the global economy was facing “exceptional uncertainty” as output lost to the pandemic between 2020 and 2025 will reach a cumulative $22 trillion (£15.8 trillion).
“If there is going to be a slowdown in vaccine rollouts, and if there’s a premature withdrawal of policy support alongside a mutating virus, then that could certainly lead to worse outcomes,” Ms Gopinath warned as the IMF revealed its latest forecasts in the World Economic Outlook Update.
Britain suffered the deepest recession of all G7 leading nations last year and the economy will not return to pre-pandemic levels until next year, the International Monetary Fund also said.
The UK’s economy is now estimated to have shrunk by 10 percent last year, worse than the 9.8 percent projection in October.
“Recovery paths vary, with the US and Japan projected to regain end-2019 activity levels in the second half of 2021, while in the euro area and the UK activity is expected to remain below end-2019 levels into 2022,” the IMF said in its World Economic Outlook update.
Business leaders have stepped up the pressure on Chancellor Rishi Sunak to extend billions more in support to the economy after redundancies hit a new record high, the Telegraph reports.
A 168,000 rise in the three months to November has pushed redundancies to 395,000, the Office for National Statistics said on Tuesday. The rate of redundancies jumped to 14 per 1000 people, while the unemployment rate also grew to five percent – the highest recorded since 2016.
Matthew Percival at the CBI said businesses faced “difficult decisions” and that: “The prospect of extending lockdown makes it urgent that the Chancellor acts now to extend job and business support. The Job Retention Scheme needs to run to at least the end of June to avoid a cliff-edge.”
It came as a survey revealed that one in 12 SMEs are unsure that they will ultimately survive.
Research from Santander found that 21 percent of small businesses expect they may collapse before any changes in restrictions kick in, and that, of those who will survive, most do not expect to recover to pre-pandemic levels until the summer of next year.
One of the country’s leading think tanks, the Institute for Fiscal Studies (IFS), has called for controversial tax reforms that could increase bills for millions of self-employed workers and business owners.
The IFS’ new report took aim at a tax system which “discourages employment, investment and risk-taking” and criticised the lower rates levied on capital gains, dividends and self-employment income.
Currently, an employee in a £40,000 job generates £3,300 more than a self-employed worker doing the same role, and £4,300 more than someone working through their own company.
The “unfair” treatment explains the rise in self-employment to 5 million while the number of owner-managers has doubled to two million in the past 20 years.
In his annual letter to CEOs, BlackRock’s chief executive Larry Fink said the firm will start pushing companies to disclose their plans to achieve net-zero by 2050.
Fink writes that Covid-19 pandemic had increased the focus on existential climate risks as he urged companies to reveal how they will ensure their business models are “compatible with a net-zero economy”.
“I believe that the pandemic has presented such an existential crisis — such a stark reminder of our fragility — that it has driven us to confront the global threat of climate change more forcefully and to consider how, as the pandemic, it will later affect our lives.
In a separate letter to clients, Blackrock’s executive committee vowed to publish the proportion of assets under management currently aligned to net-zero and that the firm will be announcing an interim target on the proportion of assets under management that will be aligned to net zero in 2030.
Fink also called on firms to adopt a single reporting standard for sustainability, saying the variety of reporting frameworks “creates further complexity for companies.”
Homes England chief executive Nick Walkley has announced he will step down from his position next month.
Walkley said in a statement that “Homes England is well-positioned to support the country’s economic recovery and I wish my colleagues the very best”.
The number of mortgages sold to first-time buyers with small deposits has fallen by more than a third since the pandemic struck, new figures have revealed.
There were 52,527 mortgage sales to borrowers with a five to 10 percent deposit between January and September compared to an average of 74,500 during the same months in 2019, 2018 and 2017.
High street lenders Lloyds, Halifax, TSB, Nationwide and Yorkshire Building Society have restarted lending to small-deposit borrowers in recent months.
Furlough cash has been repaid to the government and its dividend will be reinstated, Crest Nicholson said yesterday, despite reporting an annual loss.
The FTSE 250 housebuilder sold 2,247 homes in the year to the end of October, down 22 percent on the previous year as a result of the disruption caused by the first lockdown.
It swung to a pre-tax loss of £13.5 million from a £102.7 million profit a year earlier, after writing down the value of some of its sites and taking account of restructuring costs.
According to the latest house price index by Zoopla, increasing Covid-19 cases and calls to uphold social distancing appear to have made some would-be home sellers reluctant to list their property for sale.
In the first weeks of 2021, the flow of new homes coming to the market for sale was 12 percent lower than 12 months prior.
Retail, Leisure & Hospitality
Restaurant and bar owners have said they are “devastated” by the news that lockdown restrictions could be in place until July, with many saying they will struggle to remain open if they are not able to serve customers soon.
Pied a Terre’s David Moore said restaurants were already “running on empty” and warned of another wave of closures in the weeks ahead. He also slammed the government’s handling of the situation, describing a “complete lack of informed scheduling”.
High profile restaurants that closed their doors for good last year include The Ledbury, The Greenhouse, Roganic, Alyn Williams at the Westbury, Texture, and The Square.
Meanwhile, the Telegraph revealed that Sir Philip Green’s retail empire collapsed under the weight of debts totalling £750 million.
Reports prepared by Deloitte, who were appointed as Arcadia’s administrator at the end of November, reveal the dire state of the finances of some of the high street’s best-known brands.
Topshop and Topman failed with gross liabilities of more than £550 million. The filings do not indicate how Arcadia’s fall from grace will affect the 9,000 members of its pension scheme or its outstanding obligations to the taxman.
Sandwich maker Greencore revealed a further fall in sales as coronavirus restrictions have continued to hammer trade, as fewer workers commuted to the office.
Greencore, a supplier to major supermarkets such as Tesco and Marks & Spencer, said sales of its food-to-go products fell 22 percent in the 13 weeks to Christmas Day last year.
Two banking chiefs have said that working from home is losing its effectiveness.
Jes Staley, chief executive of Barclays, said: “It’s remarkable it’s working as well as it is, but I don’t think it’s sustainable . . . It will increasingly be a challenge to maintain the culture and collaboration that these large financial institutions seek to have and should have.”
He predicted that more people would come back to offices to work, but with the flexibility to work from home.
Mary Erdoes, who runs asset and wealth management for JP Morgan Chase, the American investment bank, said: “It is fraying. It is hard.” For employees to focus, she noted that “it takes a lot of inner strength and sustainability [without] the energy that you get from being around other people”.
The City of London Corporation has been granted planning permission for an office-led development at 55 Gracechurch Street.
The project, which is located between Monument station and Leadenhall Market, comprises over 365,000 square feet of offices.
There will also be 500 cycle parking spaces, and a free-to-access garden terrace, which the City of London Corporation said offers a “suspended treetop walkway and panoramic views” across the capital.
Hong Kong-based, privately-owned real estate and investment company The Tenacity Group is behind the Gracechurch Street project.
Bam Construct has been awarded a contract to deliver an office project in Whitechapel, east London.
The contract, which is said to be worth £78 million, will see Bam Construct extend the existing office building.
Plans for a new 30-storey skyscraper in London have been approved in the centre of the capital.
The Royal Town Planning Institute has said in a new report that net-zero carbon outcomes should be a prerequisite of new development in the UK.
This would mean developers would not be able to get past the planning stage if they cannot demonstrate their land use planning meets the government’s 2050 net-zero targets.
Transport & Logistics
Freight volumes moving between the United Kingdom and the European Union were down 38 percent in the third week of January, compared with the same week a year ago.
Stockpiling, problems adapting to the post-Brexit customs border, and the impact of coronavirus to the economy have all reduced the flow of goods moving between Britain and the EU.
According to City AM, Transport for London’s (TfL) commissioner, Andy Byford said this morning that a long-term funding package for the beleaguered transport network could help fuel the UK’s post-Covid recovery.
At the moment, the transport operator is currently being propped up by the second of two six-month bailouts worth a combined £3.3 billion from the government.
But come 31 March, TfL will be faced with a new funding blackhole unless a deal can be agreed.
Speaking at a webinar this morning, TfL commissioner Andy Byford said that he was grateful to the government for the packages agreed so far, but that the “hand-to-mouth, begging-bowl approach” had to end.
The World Economic Forum reports that 3,000 scientists from 210 countries have called for governments and businesses to ‘step-up’ adaptation to climate change.
In a statement, which came as the Global Centre on Adaptation and the Dutch government held a joint Climate Adaptation Summit, the scientists wrote: “Unless we step up and adapt now, the results will be increasing poverty, water shortages, agricultural losses and soaring levels of migration”.
Job vacancies in the construction industry are said to have returned to pre-pandemic levels in the last quarter of 2020.
The Guardian reports that shortages of key construction materials could delay UK housebuilding.
The industry also continues to be affected by shortages of power tools, screws and fixings, stemming from congestion at UK ports. Companies now face increased shipping costs because of a global shortage of empty containers. Timber prices are also up by a fifth.
The Builders Merchants Federation (BMF) said if the problems were not resolved it could “have an impact on the number of houses that we are able to build in the UK” as well as cause delays to smaller projects, such as extensions and loft conversions.
Assael Architecture puts best foot forward for little Georgy
Twenty-five Assael Architecture employees have put their best foot forward for the R.E.D (Run Every Day) January challenge. The team have been running and walking every day since New Year’s Day, despite heavy rain, Storm Christoph and snowfall.
The architecture practice is raising money for charity Sport in Mind, as well as Director Tim Chapman-Cavanagh’s best friend’s nephew Georgy, who is battling an ultra-rare form of bone cancer called Ewing’s Sarcoma.
Georgy’s family is raising money for the eight-year-old to undergo a stem cell transplant at a top medical facility in Asia which will cost more than £240,000.
If you or your company can help Georgy, please donate here.
Ikea is set to launch a new trial of selling spare parts in a bid to make furniture more sustainable.
The move is part of Ikea’s drive to make products last longer and prevent customers from seeing furniture as disposable.
A historic pub in Oxford, once frequented by the likes of Lord of the Rings author J.R.R. Tolkien and his friend C.S. Lewis, who wrote The Chronicles of Narnia, is set to close its doors after 450 years.
The Lamb and Flag, which first opened in 1566, has suffered a disastrous loss of revenues since the start of the pandemic.
A group of 31 Metropolitan Police officers are set to be fined after having their haircut while on duty.
Each police officer will be faced with a £200 fixed penalty notice after breaking coronavirus rules in London.