Debenhams prepares to bring in administrators as Covid-19 hits – as it happened

Kalyeena Makortoffand Jasper Jolly

from on 2020-04-06 16:51 (#51RRE)

Rolling coverage of business, economics and markets as stock markets gain on hopes coronavirus lockdowns are slowing disease's spread

5.51pm BST

In other news:

5.35pm BST

The S&P 500 could end up recouping about $1 trillion today.

Huge gains are being logged in US stocks, with each of the Dow, S&P 500 and Nasdaq up more than 5%.

5.13pm BST

Grim forecasts from WH Smith, which expects April's revenues to be down 90% year on year.

The newsagent, which depends heavily on stores in travel hubs like airports and train stations for income, issued the trading update alongside documents released for its proposed share placing.

Total group revenue in March 2020 was down 25% year on year. However, as a result of the high number of store closures, in the latest week of trading to 4 April 2020, revenues across the group were down around 85% year on year.

On this basis, in the month of April as a whole, we expect group revenue to be down by approximately 114m (down 90% year on year), with a reduction in operating profit of approximately 39m compared to last year.

4.53pm BST

The UK economy could shrink 6.5% in 2020 in what could be the "biggest recession in a century."

That's according to Deutsche Bank analysts who believe UK GDP could contract by 13% in the second quarter.

4.45pm BST

Perhaps it's no big surprise given the massive market moves in recent weeks, but the London Stock Exchange saw a record number of trades in March.

It logged 44.8m trades for its UK order book alone last month, worth 187.7bn.

As we continue to ensure the orderly functioning of markets and continuity of service to market participants, @LSEplc's order books saw a record number of trades in a month, in March 2020. https://t.co/ANN48hpjBJ pic.twitter.com/O7rcFhBx9j

4.35pm BST

Both the German Dax and FTSE 100 have logged their largest one day gain in two weeks.

That's according to provisional readings at the European market close, which showed:

4.28pm BST

Oil prices are tumbling again.

Brent crude, which was down just 1.8% an hour ago, is now down more than 5.3% at $32.28.

4.14pm BST

Consumer groups are urging any Debenhams shoppers to spend any leftover gift cards and use their credit card for any purchases over 100. It means there's a better chance of getting the money back if the company stops trading and fails to deliver final orders.

Adam French, consumer rights expert at Which?, explains:

While stores remain closed, the retailer is still trading online so your consumer rights in respect of online shopping should be unaffected, however we'd advise anyone with a Debenhams gift card to consider spending it as soon as possible.

It's generally sensible to use a credit card if you are planning to buy anything worth more than 100, so you can make a claim against your credit card company under Section 75 of the Consumer Credit Act if necessary.

4.02pm BST

All 30 stocks on the Dow are trading higher, and Boeing is among the biggest risers:

The coronavirus crisis is taking its toll on the airline industry:
-United is slashing 90% of its schedule to LaGuardia and Newark
-American is cutting daily flights in the NYC-area from 271 to 13
-Boeing is suspending Seattle-area production indefinitelyhttps://t.co/gYhgBI6Aq6 pic.twitter.com/WrIHSxURr9

3.09pm BST

Futures for Brent crude oil are down by 1.8% today to $33.49 per barrel, while futures for West Texas Intermediate, the north American benchmark, are down by 3.6% at $27.31.

For consumers of oil lower prices are a boon, but producers are desperate to shore up revenues, which are collapsing owing to reduced demand across the world's largest economies.

3.01pm BST

Oil ministers from the G20 will meet on Friday as they scramble to prop up oil prices.

Opec+, the oil producers' cartel plus other non-members such as Russia, is due to meet on Thursday. A G20 meeting would also involve the US and Canada in talks - although it is unclear how the US would mandate production cuts if Opec+ asked them to participate.

An emergency meeting of G20 oil ministers will be held this week after a push from Saudi Arabia and the International Energy Agency, as they scramble to find a solution to the collapse in demand caused by the coronavirus pandemic.

Fatih Birol, head of the International Energy Agency, told the Financial Times the meeting aimed to find a way to protect energy markets during the crisis, as millions of jobs and the stability of the global economy is at risk.

2.51pm BST

But before we get too carried away it's perhaps worth noting that Germany's Dax is still far, far below levels hit before the start of the year.

Here's the chart showing the massive fall in market value endured by German blue-chip companies over the course of a miserable 2020.

2.46pm BST

Has the bull market returned already?

The stateside buying optimism appears to have caused a feedback loop across the Atlantic. The Dax, the export-sensitive German benchmark, is now up by 5%. That means it is 20% above the bottom hit in the middle of March.

2.36pm BST

US stocks have gained strongly at the start of their trading week, with optimistic investors clutching at signs that the spread of coronavirus may be slowing.

Here are the opening movements:

2.32pm BST

Countries around the world seem to be competing to offer the biggest stimulus packages.

Hungary is looking to match Japan's aim to point a stimulus equivalent to 20% of GDP at the coronavirus recessions. The country, ruled by Viktor Orban (who has been criticised for an allegedly draconian response to the crisis), is offering subsidised loans to Hungarian companies and funds to preserve jobs.

MOODY'S SAYS EXPECT U.S. FEDERAL DEBT TO RISE TO AROUND 93% OF GDP IN 2020, FROM 79% IN 2019, AND CONTINUE ITS UPWARD PATH TO ABOUT 120% BY 2030

2.12pm BST

Stock markets around the world are gaining - perhaps because investors are taking heart from things happening in their own neighbourhoods.

US stocks on the S&P 500 and the Dow Jones industrial average are both set to rise by 3.75% if futures are any indication shortly before the market open.

Seeing signs of stabilization in New York City is probably the most important thing given the amount of capital that's controlled through managers that live in the area.

It's a tremendous relief for the market (but it's) not to say that we're through the woods yet, because we're going to have a tough week or two ahead.

1.55pm BST

JP Morgan could consider suspending its dividend for the first time ever if the US suffers a severe recession.

Our bank cannot be immune to the effects of this kind of stress.

the board would likely consider suspending the dividend even though it is a rather small claim on our equity capital base. If the board suspended the dividend, it would be out of extreme prudence and based upon continued uncertainty over what the next few years will bring.

1.32pm BST

EasyJet has borrowed 600m under one of the government's coronavirus lending schemes, as the budget airline seeks to boost its access to ready cash.

We remain absolutely focused on ensuring the long-term future of the airline, reducing our costs and preserving jobs, to make sure easyJet is in the best position to resume flying once the pandemic is over.

Our current priority is to safeguard short term liquidity, so we have borrowed from the CCFF and drawn down on our Revolving Credit Facility in order to increase our liquidity in the event of a prolonged grounding of the fleet.

1.18pm BST

GlaxoSmithKline (GSK) and US biotech firm Vir have agreed to collaborate to find vaccines for coronaviruses, with the hope of progressing to testing on Covid-19 sufferers within three to five months.

The UK-listed drug company will invest $250m (204m) in Vir to gain access to its technology, which GSK thinks will help it find compounds that target cells hosting the SARS-CoV-2 virus that causes Covid-19, as well as developing coronavirus vaccines.

Vir's unique antibody platform has precedented success in identifying and developing antibodies as treatments for multiple pathogens, and it is highly complementary with our R&D approach to focus on the science of immunology.

It is becoming increasingly clear that multiple therapeutic approaches, used in combination or in sequence, will be necessary to stop this coronavirus pandemic. It is likely that the current coronavirus outbreak will not be the last.

12.33pm BST

Looking ahead to the US open at 14:30 BST, US stock markets are set to rise strongly, following the lead set by their European counterparts.

S&P 500 futures are up by 3.6%, while Dow Jones industrial average futures have gained 3.5%.

12.27pm BST

Debenhams has said that legal action from suppliers could result in its 142 stores going into liquidation, which is why it intends to appoint an administrator.

The retailer's creditors will be prevented from pursuing legal action for 10 working days while the company tries to secure a rescue deal.

It's not surprising that Debenhams's has to consider a deeper restructuring of its overall cost base.

An administration may provide them with the opportunity to radically rebase themselves and their offering. However, for them and other consumer reliant businesses the future is uncertain.

11.59am BST

The Japanese government is preparing a 108tn (811bn) stimulus package to soften the economic blow caused by coronavirus emergency measures.

Prime Minister Shinzo Abe said the government has decided to launch a stimulus package of about 108 trillion yen, including more than 6 trillion yen for cash payouts to households and small businesses and 26 trillion yen to allow deferred social security and tax payments, Reuters reported.

Japan's proposed economic stimulus measures look likely to be especially large compared to other countries. If the plan goes ahead as reported, the total amount would equate to 16-17% of the country's GDP, dwarfing other schemes, including that of the USA, which is equivalent to 10% of its GDP. The large stimulus package is a very positive step from Prime Minister Abe's government.

The Japanese economy in the first half of 2020 will likely enter a major recession, exceeding the scale of the financial crisis in 2008. However, following the expected containment of COVID-19, the second half of 2020 should see a V-shaped recovery backed by the aggressive fiscal and monetary stimulus measures and the duration of this recession will be much shorter than that of 2008.

11.50am BST

The easyJet founder and main shareholder, Sir Stelios Haji-Ioannou, has relaunched his attack on the airline's management and its order for 107 more "useless" planes from Airbus.

For the avoidance of doubt, I will not inject any fresh equity in easyJet whilst the Airbus liability is in place.

11.46am BST

Volkswagen has been found by the UK's high court to have used "defeat devices" on cars sold in Britain, according to a law firm bringing action on behalf of 91,000 consumers.

The High Court has ruled today in favour of thousands of consumers that Volkswagen used a 'defeat device' on some of its diesel cars which was able to cheat emissions tests. @boz_LD and @shaziayamin represented a group of VW owners https://t.co/ZNBLYFE2pD pic.twitter.com/BXPTwCCbH9

Today's ruling is hugely significant for our clients who have been battling for four years to hold Volkswagen to account. In reaching his decision the judge rejected virtually all of Volkswagen's arguments and found that the vehicles were fitted with illegal defeat devices.

Our clients bought their vehicles in good faith and are fully entitled to expect them to comply with the law. Many of our clients have been horrified to find out that they had been driving vehicles which were much more harmful to the environment than they were led to believe.

11.29am BST

It feels like a while (apart from the aftermath of the Brexit vote) since inflation worries were at the top of the agenda for central bankers.

Using monetary financing would damage credibility on controlling inflation by eroding operational independence. It would also ultimately result in an unsustainable central bank balance sheet and is incompatible with the pursuit of an inflation target by an independent central bank.

11.05am BST

Another administration for Debenhams would put the jobs of 22,000 workers at risk, only a year after it was rescued by its lenders.

The department store's suppliers are reportedly one of the main reasons it intends to appoint administrators: while the process is being carried out they will have some breathing space to try to work out a bailout package.

The firm prospered from the Victorian fashion for family mourning by which widows and other female relatives adhered to a strict code of clothing and etiquette.

10.41am BST

Here's more detail on the Debenhams developments, from Press Association:

Debenhams said it has the support of its lenders to enter administration and is engaging with employees and suppliers over the move.

The majority of its employees in the UK are currently being paid under the Government's furlough scheme, after its stores closed following the shutdown of non-essential stores.

10.37am BST

Debenhams has filed a notice of intent to bring in administrators, as it tries to protect its assets from creditors during the coronavirus lockdown.

In a statement it said:

This move will protect Debenhams from the threat of legal action that could have the effect of pushing the business into liquidation while its 142 UK stores remain closed in line with the government's current advice regarding the Covid-19 pandemic.

The group is making preparations to resume trading its stores once government restrictions are lifted.

10.24am BST

BT has guaranteed staff that they will not lose their jobs or be furloughed - and has given 58,000 frontline workers such as engineers and key workers a 1.5% pay rise - while managers have had their salaries frozen.

No employee will lose their job in the foreseeable future - at least the next three months - as a direct result of changing trading conditions brought about by coronavirus.

10.18am BST

High street challenger Metro Bank has put aside a 2m fund as a "thank you" to frontline workers who aren't able to work from home during the pandemic.

To keep our essential services running for customers who need us, we are relying on some of our colleagues to come into work. We couldn't be more proud of the brilliant job they're doing. pic.twitter.com/yp4OzEvUmU

10.12am BST

Even though construction workers are not banned from going to work there has been a steep impact on the sector, notes Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

It seems that staff protests and the furloughing scheme have persuaded many construction companies to pause projects. The housing index (46.6) was much higher than the commercial (35.7) and civil engineering indices (34.4), though firms commented that they expected housing work to slump ahead, primarily due to measures to counteract the spread of the virus.

Looking ahead, builders were the most pessimistic about the 12-month outlook for demand since October 2008, and in response, they cut headcounts at the fastest rate since September 2010.

At this point Persimmon, Bellway, Taylor Wimpey, Barratt, Cala, Bovis, Redrow & MJ Gleeson have closed sites whilst Berkeley & Crest Nicholson have stated that some sites remain open. #ukconstruction #ukhousing pic.twitter.com/aemOLTpjBB

If, as we expect, banks largely maintain the supply of credit to the economy and the government follows through on its plans for much higher levels of public sector investment, the construction sector should see a much swifter recovery than after the 2008/09 recession, when it took seven years for output to return to its prior peak.

10.03am BST

The construction data - plus weak consumer confidence data overnight - add to the body of evidence that the UK is on course for a once-in-a-lifetime recession, according to Andrew Wishart, UK economist at Capital Economics.

The GfK consumer confidence data, published at 1am this morning, showed the biggest fall in more than 45 years. The index fell to -34 from -9 in its regular survey for March, the biggest on record. A one-off survey later in the month showed the weakest sentiment since February 2009.

And the PMI is pretty much guaranteed to deteriorate further in April as the full effect of the lockdown is captured. Even then, we doubt it will capture the true scale of the loss of economic activity. We are currently forecasting a -15% q/q fall in GDP in Q2 but if anything, it could be larger.

9.51am BST

There is worse to come for Britain's construction industry, experts say.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which sponsors the PMI survey, said:

The brutality of this impact cannot be underestimated, and the sector has not hit rock bottom yet.

With no upturn in sight, and with the fastest level of layoffs since September 2010, the sector is stuck in quicksand and sinking further. Though lower commodity prices will bring some relief for those that can source a limited number of materials amidst disrupted supply chains, this will be cold comfort without sites to work in and staff available as health concerns remain.

The closure of construction sites and lockdown measures will clearly have an even more severe impact on business activity in the coming months. Survey respondents widely commented on doubts about the feasibility of continuing with existing projects as well as starting new work.

Construction supply chains instead are set to largely focus on the provision of essential activities such as infrastructure maintenance, safety-critical remedial work and support for public services in the weeks ahead.

9.37am BST

British construction contracted sharply in March, according to the purchasing managers index (PMI) compiled by IHS Markit.

The reading fell from 46 last in February to only 39.3 in March - far below the 50 mark that indicates an expansion.

9.28am BST

The FTSE 100 has fallen back somewhat, shortly before construction data is released.

Gains for the day are at 1.7%, or 93 points.

9.21am BST

But an interesting (and potentially uplifting) side note: battery electric sales are continuing to soar.

9.12am BST

Car sales showed a steeper fall than during last financial crisis and it was the worst March since the late nineties.

The car industry is now expecting car sales to fall to 1.73m in 2020, 23% lower than its previous expectation.

9.07am BST

UK car sales plunged as the coronavirus lockdowns took hold, according to the Society of Motor Manufacturers and Traders, the industry lobby group.

The performance represented a steeper fall than during the 2009 financial crisis and the worst March since the late nineties when the market changed to the bi-annual plate change system. With lockdowns taking place in many European countries earlier than the UK, even more dramatic falls have been reported elsewhere, with Italy down -85%, France -72% and Spain down -69% in March.

8.45am BST

The publisher of the Daily Mirror, Reach, is putting a fifth of its staff on furlough as it adjusts to the coronavirus crisis.

That means the government will cover 80% of their salaries. All employees are taking 10% pay cuts as well.

NEW: The publisher of the Mirror, Express and Star newspapers is to furlough a fifth of staff, plus all employees to take a 10% pay cut. Reach also scraps dividend, suspends bonuses and top bosses to take 20% pay cut.

8.40am BST

WH Smith is preparing to raise new equity to get it through the coronavirus crisis.

These financing arrangements, coupled with a broad range of mitigating actions to manage the cost base and cash-flow, will provide sufficient liquidity to deal with this most challenging of trading environments.

8.30am BST

Sterling has gained 0.2% against the US dollar and the FTSE 100 has received another leg up after a cabinet minister said he expects Boris Johnson to return from hospital shortly.

Robert Jenrick, the housing minister, told BBC radio that the prime minister should be back at work "shortly".

He'll stay in hospital as long as he needs to do that, but I've heard that he's doing well and I very much look forward to him being back in Number 10 as soon as possible.

This isn't an emergency admission and so I certainly expect that he'll be back at Number 10 shortly.

8.22am BST

All but five of the FTSE 100 have gained so far, and there are some notable movements.

8.09am BST

The FTSE 100 has gained 2.7% in the first few minutes of trading, or 150 points to reach 5,566 points.

Germany's Dax benchmark has gained 4%, while France's Cac 40 has gained 2% and Spain's Ibex rose by 3.3%.

7.57am BST

Good morning, and welcome to our live coverage of business, economics and financial markets.

Stock markets in Asia and Europe have started the week on the front foot, after positive news on the slowing rate of deaths in France and Italy appeared to give investors hope that the coronavirus lockdown measures are bearing fruit.

Overall global new case growth and fatalities are slowing but are they slowing quickly enough to work out when economies can reopen?

WTI and Brent crude oil opens down more than 10% down. The market doesn't like the delay on the OPEC+ meeting and the uncertainty about the Saudi-Russia negotiations | #OOTT #OilPriceWar

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