Cineworld confirms UK and US closures; UK car sales hit two-decade low – as it happened

Graeme Wearden

from on 2020-10-05 15:44 (#58T5R)

Rolling coverage of the latest economic and financial news

4.44pm BST

And finally, shares in Cineworld have closed down 36% tonight.

The closure of sites in the UK and US has wiped a third off the company's value.

Cineworld announced extreme measures this morning, the company plans to temporarily close all 127 of its cinemas in the UK and the same goes for all 536 Regal theatres in the US. The news clobbered the share price. The closures of the cinemas could come as early as later this week.

Up to 45,000 employees could be impacted by the decision. The group said it is considering its liquidity options, so it seems that it is fearful it could run out of cash. The fact the latest James Bond movie - No Time to Die - won't be released until April 2021 has made matters worse for the struggling business.

4.28pm BST

Cineworld workers on zero-hours contracts in the UK could be left without pay beyond Thursday after the cinema chain's chief executive said the government's job support scheme would not save 5,500 jobs.

My colleague Jasper Jolly explains:

Mooky Greidinger, the Cineworld chief executive, whose family trust owns a fifth of the company shares, said the job support scheme cannot work for us" because it did not help companies earning no income. The comments were contained in a memo sent to employees seen by the Guardian.

The job support scheme is a central plank in Rishi Sunak's plan for the UK economy as the furlough scheme comes to an end. Under the scheme the government will support a maximum of only 22% of the salaries of workers on reduced hours - significantly less generous than the 80% offered at the start of its predecessor. The new scheme has been criticised by some economists and opposition MPs for not incentivising job retention.

4.15pm BST

Credit rating agency Fitch has downgraded Cineworld to CCC-, a very low rating which indicates the company is likely to default on its loans.

In a statement, Fitch says Cineworld is approaching a short-term liquidity crisis", and could need new funding by the end of this year.

The downgrade reflects the temporary suspension of operations in the US and UK, fast-depleting liquidity and the continued, significant uncertainty on the pace of recovery as a result of the coronavirus pandemic. Lower-than-expected cinema attendance across Cineworld's operating footprint is driving a longer and deeper period of cash burn than we originally anticipated. Our base-case forecasts indicate that, the company's current liquidity levels may only be sufficient until November to December 2020, assuming no revolving credit facility (RCF) extensions.

The pace of Cineworld's recovery is highly dependent on cinema attendance and new film releases. Both factors are not in Cineworld's control and they remain susceptible to the current increase coronavirus cases and the instigation of further lockdown measures. Cineworld's scale and cash- generative business model are supportive of a rapid recovery if sufficient cinema attendance levels were to return. However, they now face insufficient liquidity in the short term.

3.51pm BST

Back in the UK...Amisha Chohan, equity analyst at Quilter Cheviot, warns that Cineworld will face a high price if looks for fresh financial support.

She writes that investors might prefer to back a tech company such as Netflix, rather than a cinema chain:

It seems that there is a vicious circle - with concerns over audience levels, the Studios are unwilling to release their strongest content. And without decent content, audience levels are unlikely to return to cinemas any time soon. Cineworld suffers from high debt, and in our view, management will have to seek additional funding to survive. We believe financing will be expensive as seen with the recent private investment of $250m which was at the cost of 11%.

The cinema industry continues to be disrupted by the rise of premium video on demand (PVOD) services, such as Netflix, which offer a more compelling investment case.

3.12pm BST

Just in: the US services sector continued to grow solidly last month, according to two rival surveys.

Data firm IHS Markit reports there was a solid upturn in U.S. service sector business activity, led by faster rise in new business and a pick-up in overseas demand.

US ISM Non-Mfg PMI Sep: 57.8 (est 56.3; prev 56.9)
- Business Activity Sep: 63.0 (est 61.0; prev 62.4)
- Employment Index Sep: 51.8 (prev 47.9)
- New Orders Index Sep: 61.5 (prev 56.8)
- Prices Paid Sep: 59.0 (prev 64.2)

Friday's federal #jobs data was disappointing, but @ISM Services #Employment Index was in expansion territory (51.8%) in September after six months of contraction. We continue to hire to meet increased demand," a survey respondent wrote. https://t.co/qk5xfiuNxd #ISMPMI #economy

3.03pm BST

Chemicals firm Dow and digger maker Caterpillar are the top risers on the Dow, up over 2.5% each, suggesting Wall Street is more optimistic about economic recovery hopes.

However, soft drinks business Coca-Cola has dipped 0.1%, while credit card operator Visa and sportwear brand Nike are lagging behind, in a sign that consumer spending is weak (a factor behind Cineworld's woes).

2.47pm BST

Donald Trump continues to be criticised for his trip to see supporters outside Walter Reed medical center yesterday, but the appearance seems to have calmed the markets.

Wall Street has opened higher, amid speculation that the president could be discharged soon, three days after being taken in for Covid-19 treatment.

We are still optimistic that he will be able to return to the White House later today."

2.21pm BST

The CEO of the Vue cinema chain, Tim Richards, has warned that small independent picture houses might not survive the pandemic.

He tod Radio 4 this morning today that the absence of major new releases was a blow to the whole industry.

Our problem right now is we have no movies.

This was a big blow for us. We're likely going to make it through, I'm concerned about the independents and the small regional operators right now that are going to really struggle and when they close they may not reopen,"

Following the devastating news that Cineworld is looking to cut 45,000 jobs as it prepares to close its cinemas, Vue boss Tim Richards says it is being forced to look at its options... https://t.co/tSAbDVjzYE

2.01pm BST

Nightclub operator G-A-Y has launched a legal battle against the Department of Health, in an effort to overturn the 10pm curfew on bars, pubs and restaurants.

Amid mounting criticism of the curfew, G-A-Y, which runs the renowned Heaven club at the heart of London's gay nightlife scene, wrote to the health secretary, Matt Hancock, advising him it was preparing to take legal action.

1.51pm BST

Chancellor Rishi Sunak has suggested he could be open to providing more help to the entertainment industry in future, at the appropriate time".

Chancellor Rishi Sunak said he would be interested in helping the entertainment industry recover with a Eat Out To Help Out-style scheme at the right time.

In an interview after his Tory conference speech, Mr Sunak again defended the cut-price meals scheme from claims it could have added to the spread of Covid-19.

1.44pm BST

Here's the latest on Odeon's plans:

1.16pm BST

Time for a quick recap.

Cineworld, Britain's largest cinema chain, has confirmed it is mothballing all its screens in the UK and the US, due the impact of Covid-19 on the industry.

In response to an increasingly challenging theatrical landscape and sustained key market closures due to the COVID-19 pandemic, Cineworld confirms that it will be temporarily suspending operations at all of its 536 Regal theatres in the US and its 127 Cineworld and Picturehouse theatres in the UK from Thursday, 8 October 2020.

We are like a grocery shop with no food. We had to take this decision"

12.52pm BST

Sky News is reporting that Cineworld's lenders are preparing for a debt restructuring, due to the imminent temporary closure of its cinemas in the UK and US.

They say:

Lenders to Cineworld Group have parachuted in advisers for urgent talks on the company's $8bn (6.2bn) debt mountain as it mothballs hundreds of cinemas on both sides of the Atlantic.

Sky News has learnt that a syndicate of banks has appointed FTI Consulting to negotiate with the stricken multiplex operator following a pitch process last week.

Revealed: Lenders to Cineworld, the stricken cinema operator which this morning confirmed the temporary closure of hundreds of multiplexes, have parachuted in financial advisers for crunch talks about the restructuring of its $8bn debt pile. https://t.co/sj3pwRM25a

12.38pm BST

Odeon is to shut a quarter of its cinemas during the week as a dearth of Hollywood blockbusters and the second wave of the pandemic keeps movie-goers at home.

We look forward to reopening full time when the big blockbusters return,"

But in the meantime, we promise to bring you a great choice of big-screen films to enjoy at the weekends."

12.29pm BST

The UK retail sector suffered a drop in customers last week, as new Covid-19 restrictions and a burst of autumnal rain kept people at home.

That's according to analytics firm Springboard, which found that retail footfall dropped most sharply in the evening -- after the government brought in a 10pm closure for pubs and restaurants.

12.12pm BST

Bectu, which represents workers in broadcasting, entertainment, communications and theatre, agrees that major studios must bear the blame for Cineworld's closures:

Philippa Childs, head of Bectu, says:

Confirmation that Cineworld is mothballing all its cinemas will be devastating for everyone who works there.

Cinemas are currently able to operate safely so this decision is entirely the result of distributors choosing to delay the release of blockbusters in the hope of making extra money further down the line. This is short-sighted in the extreme and if other chains follow Cineworld's lead it's hard to see how there will be a fully functioning industry to return to in six months' time.

It is our expectation that Cineworld will continue to fulfil its legal obligations with respect to its employees, retain as many as possible, and that those it has to let go will be done so on as positive terms as possible.

The pandemic continues to highlight those industries which build their considerable success on the back of workers who are paid badly and have zero job security. This is an unsustainable situation that has to change if we are to build any form of resilience into the workforce."

11.54am BST

The boss of Cineworld, Mooky Greidinger, has told Sky News that there was no alternative" to the temporary closure of sites in the UK and US.

From a liquidity point of view, we are bleeding much bigger amounts when we are open than when we are closed.

We are like a grocery shop with no food. We had to take this decision"

People are saying to us that they feel safe in the cinema, so I guess it is a wrong decision by the studios to move the movies in such a way.

11.33am BST

Boris Johnson has told reporters this morning that people should go out to the cinema and support the industry:

PM Johnson encourages people to go to the cinema:

"Cinemas do now have ways of letting their shows go on in a COVID secure way, and I'd encourage people to go out to the cinema, enjoy themselves and support those businesses."

(h/t @PaulBrandITV)

11.15am BST

Here's a full response on Cineworld's closures, from Mike Clancy, General Secretary of the Prospect union:

The decision by Cineworld to mothball its cinemas sadly brings together the inadequacy of employment protection in UK and the failure to provide proper support for the creative sector.

The manner in which this news got out, and the total lack of consultation with staff is appalling and not something that should happen in a mature economy.

11.07am BST

The news that Cineworld was preparing to close its UK cinemas broke yesterday, casting a shadow over the whole sector.

There was so much space. There's barely anyone in the cinema at the moment and it's probably safer than going to the pub....

I like going to cinemas and I want to support the film industry. I don't really drink so it's a social thing for me to meet mates."

I imagine because cinemas are so big, they have massive rent to pay... There's not a market for big cinemas any more."

It is a very rainy day, so what do you do?

We are not regular cinema goers."

It's sad news, but we don't use Cineworld. We go to our local cinema, the Rio."

It's as safe as going on an aeroplane, with social distancing and masks," .

Having the cinema back is a bit of normal life in the same way as going to the pub."

10.52am BST

Mike Clancy, head of the Prospect trade union, fears that Cineworld's closures and job losses will be repeated across the UK this winter, unless ministers provide more support to sectors worst hit by Covid-19.

Cineworld decision sadly brings together the inadequacy of employment protection in UK and the failure to provide proper support for the creative sector. This will be the story of winter unless government acts.

10.34am BST

Peter Bradshaw, our film critic, has got the James Bond producers firmly in his sights this morning.

He writes that the postponement of No Time To Die until spring 2021 has sent a chill through the industry (as well as triggering Cineworld's decision to close screens across the UK and US).

For the first time, everyone in the industry is beginning to entertain the queasy thought: what if our cinema industry is like vaudeville? Or silent movies? Or evensong - that once widespread middle-Britain churchgoing habit wiped out by TV? Is cinemagoing finished? A loss-leader adjunct to the home entertainment industry that's long been vulnerable to infection?

I think the answer is still no. But the other question is: who is to blame for the Cineworld debacle? Big blockbuster movies are routinely nicknamed tentpoles" for a reason. They keep the whole big top upright. The announcement is that the new James Bond film, No Time to Die, will come out next spring (a transparently vague and unreliable promise) having been already delayed from the spring of this year.

10.08am BST

Cineworld's decision to shut its UK and US screens is awful news for around 45,000 staff, who are now out of work, explains my colleague Jasper Jolly:

Shares in Cineworld have plunged after it confirmed it will temporarily close all of its cinemas in the UK and US as it struggles with the pandemic-induced lack of new films to draw in audiences, including the twice-delayed new James Bond instalment.

Some 45,000 employees will be out of work because of the closures, including about 5,500 staff in the UK and 20,000 in the US, as well as contractors such as cleaners and security workers. Staff were informed on Sunday.

10.05am BST

Britain's services companies continued to cut jobs last month, despite growth holding up better than feared.

The latest survey of purchasing managers across UK services firms shows that layoffs continued last month -- a trend that is worsening with Cineworld's closures.

The near-term outlook remains unusually uncertain and firms continued to take an extremely cautious approach to cost management and hiring...

Latest data indicated that employee numbers in the UK service sector continued to fall. Whilst easing to the slowest since March, the rate of job losses was again marked amid evidence of ongoing spare capacity despite some tentative evidence of emerging capacity pressures: backlogs of work increased modestly during September, and for the first time in two years.

Supporting activity was a further increase in levels of incoming new work, also the third in successive months. With the withdrawal of the UK government's Eat Out to Help Out scheme, plus an introduction of some tighter restrictions on activity in September, growth in new business was softer than in August.

A lack of international tourism was also reported to have weighed on foreign business, which overall continued to fall sharply.

9.55am BST

James Fairclough, CEO of AA Cars, says September's drop in car sales is disappointing, as consumers cut back due to the pandemic:

September is traditionally one of the busiest months in the calendar for dealerships because of the introduction of new plates, and so it's a great disappointment that there was no increase in sales at a time which usually sees high demand.

Registrations are down 4.4% on last year, which marks the weakest September since the introduction of the dual number plate system in 1999, and it's clear that the recovery in the latter part of 2020 is likely to be gradual and inconsistent from month to month.

Lots of consumers now have both the funds and the motivation to commit to a big ticket purchase like a new car. Months of lockdown allowed many to save significant chunks of money, whilst evolving working patterns mean buyers are investing in motors that will work for them no matter what changes lay ahead.

The prevailing trend appears to be towards smaller vehicles with an electric fuel source, as reduced mileage (and continuing environmental concerns) factors into recent purchasing decisions. In fact, hybrid/electric vehicle categories were the only ones to see growth in this latest month's figures.

Dealers have been experiencing high levels of enquiries, but consumer interest was partially offset by supply constraints that have affected a number of brands over the past weeks.

With the UK's exit from the EU approaching, we urge the Government to reach a deal which protects the supply of vehicles and parts to the UK."

9.41am BST

Sales of electric and hybrid cars actually rose in September, though, while petrol and diesel demand slumped.

Diesel was particularly out of demand, with registrations falling 38%, while petrol registrations fell by over a fifth.

Battery electric and plug-in hybrid car uptake grew substantially to account for more than one in 10 registrations as new models continue to increase consumer choice. Demand for battery electric vehicles (BEVs) increased by 184.3% compared with September last year, with the month accounting for a third of all 2020's BEV registrations.

Even with this growth, however, meeting accelerated ambitions for uptake of these vehicles will require government to get behind a truly world-class package of incentives - alongside binding targets on infrastructure to reassure consumers that recharging will be as easy as re-filling.

9.25am BST

Mike Hawes, SMMT chief executive, adds:

During a torrid year, the automotive industry has demonstrated incredible resilience, but this is not a recovery. Despite the boost of a new registration plate, new model introductions and attractive offers, this is still the poorest September since the two-plate system was introduced in 1999.

Unless the pandemic is controlled and economy-wide consumer and business confidence rebuilt, the short-term future looks very challenging indeed."

9.25am BST

UK car sales are on track to slump by nearly a third this year, following the tumble in September.

The SMMT warns that rising unemployment, and ongoing pandemic restrictions, will hurt the auto industry:

Consumer and business confidence is threatened by the forthcoming end of the Government's furlough scheme, an expected rise in unemployment and continuing restrictions on society as a result of the pandemic.

With little realistic prospect of recovering the 615,000 registrations lost so far in 2020, the sector now expects an overall -30.6% market decline by the end of the year, equivalent to some 21.2 billion in lost sales.

9.14am BST

Newsflash: Britain's car industry has just experienced its weakest September sales in two decades.

The UK new car market declined -4.4% in September, according to figures published today by the Society of Motor Manufacturers and Traders, with just 328,041 new registrations.

Private registrations fell by -1.1% over the month. Demand from business was also muted, with around 10,000 fewer cars joining larger fleets, representing a -5.8% decline.

9.08am BST

We also have confirmation that the eurozone's service sector struggled last month, as governments imposed new restrictions as Covid-19 cases rose.

The latest Services PMI report, which measures activity in the sector, has slumped into contraction in September.

With the eurozone economy having almost stalled in September, the chances of a renewed downturn in the fourth quarter have clearly risen.

Spain has been especially hard-hit as rising Covid19 case numbers led to further disruptions to daily life. With the exception of the March-to-May period at the height of the first wave of infections, Spain's service sector contraction in September was the largest recorded since November 2012.

France's service sector registered its first contraction in 4 months, with the headline #PMI Business Activity Index slipping to 47.5 in September (Aug: 51.5), amid a fresh decline in new business and a sharp rise in COVID-19 cases. Read more: https://t.co/JnLMvw6biG pic.twitter.com/ks1As8WP9i

Italy Services #PMI pointed to another weak month of activity in September. The Business Activity #Index posted at 48.8 in September (Aug: 47.1) as firms registered a slight drop in new orders and low foreign demand. Read more: https://t.co/KfqssTYcPj pic.twitter.com/wBvtElZeTj

The Spanish Services #PMI showed increasing signs of a 'double-dip' in services activity, with the headline #index tumbling to 42.4 in September (Aug: 47.7). Falling workloads led to the largest round of job losses since June. Read more: https://t.co/2NCQ3sza8w pic.twitter.com/PgovrNt3uI

8.55am BST

While Cineworld's shares have slumped, the broader stock market has opened higher today.

The FTSE 100 has risen by 32 points, or 0.5%, to 5932, which would be its highest closing level in two weeks.

Slightly positive risk tone overnight as Trump is expected to be discharged from the hospital today and there were no news reports of either senior members of the Trump administration or Biden testing positive. The reports on Trump health are a bit confusing - even though his medical staff suggested that he is doing fine, the drugs that he has been given are typically administered to severe cases indicating that his condition may not be as good as suggested. The coming days would see further updates on his health and on the election probabilities.

The last opinion poll, taken before Trump's diagnosis but after the Presidential debate, showed that Biden has taken a 14 point lead vs Trump which puts him in a leading position.

8.10am BST

Shares in Cineworld have more than halved at the start of trading in London, to a new all-time low.

They've slumped by 56% to 17p, as City traders react to the temporary closure of screens across the UK and US - two major markets for the group in better times.

8.02am BST

The closure of Cineworld venues across the UK and US is a huge blow to the beleaguered entertainment industry", says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown:

New infection spikes amid warnings that the virus spreads more quickly indoors, is keeping customers away and with no big names to lure them through the doors this winter, Cineworld has reached this difficult decision in a bid to cut costs and preserve cash. With a vaccine still just out of reach, Cineworld won't put a date on when venues will reopen next year and is now assessing various sources of additional liquidity, including raising cash from shareholders to try and stay afloat.

All operations will be suspended at 536 theatres in the US and 127 Cineworld and Picture house theatres in the UK on Thursday. The news will increase the clamour for more support for the entertainment, recreation and arts industry which still has 51% of workers on furlough.

The new jobs support scheme, which will subsidise wages of part time workers will provide no lifeline for the 5,500 Cineworld UK employees who will lose their jobs this week and many others across the industry are facing a bleak winter on jobseekers benefit, while they begin the difficult search for new positions in the run up to Christmas.''

7.44am BST

Cineworld has also told shareholders that it is considering all options' for new fundraising:

Cineworld's main priorities remain the safety of customers and employees, cash preservation and cost reduction. As noted in its Interim Results announced on 24 September 2020, Cineworld is assessing several sources of additional liquidity and all liquidity raising options are being considered.

7.40am BST

Here's some early reaction to Cineworld's decision:

Cineworld confirms closure of 127 UK cinemas & 536 in US. Cineworld cannot provide customers in both the US and the UK - the company's primary markets - with the breadth of strong commercial films necessary for them to consider coming back to theatres

Cineworld confirms its temporarily closing all its cinemas in the US (536) and in the UK (127) from Thursday, affecting 45,000 employees.

Film studios holding back films, like the new James Bond, might find there are far fewer cinemas around when they do finally release.

7.33am BST

Cineworld took the decision to shutter its UK and US cinemas just a couple of days after No Time to Die, the latest Bond epic, was delayed until next spring.

My colleagues Jim Waterson and Julia Kollewe wrote last night that the lack of blockbuster releases could be devastating for the industry.

He's best known for sweeping in at the last minute to save the day - but James Bond's latest act could be the death knell for many British cinemas.

The announcement that the release of No Time to Die, the 25th film featuring the secret agent, would be delayed again has left cinemas facing financial obliteration because of the absence of other forthcoming blockbuster films.....

7.22am BST

Here's Mooky Greidinger, Cineworld's chief executive, on the decision to shut cinemas in the UK and US:

This is not a decision we made lightly, and we did everything in our power to support safe and sustainable reopenings in all of our markets - including meeting, and often exceeding, local health and safety guidelines in our theatres and working constructively with regulators and industry bodies to restore public confidence in our industry.

Cineworld will continue to monitor the situation closely and will communicate any future plans to resume operations in these markets at the appropriate time, when key markets have more concrete guidance on their reopening status and, in turn, studios are able to bring their pipeline of major releases back to the big screen."

6.45am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

We start with some breaking news - Cinema chain Cineworld has just announced it is temporarily suspending operations at all of its 536 Regal theatres in the US and its 127 Cineworld and Picturehouse theatres in the UK.

As major US. markets, mainly New York, remained closed and without guidance on reopening timing, studios have been reluctant to release their pipeline of new films.

In turn, without these new releases, Cineworld cannot provide customers in both the US and the UK - the company's primary markets - with the breadth of strong commercial films necessary for them to consider coming back to theatres against the backdrop of COVID-19.

Cineworld says it will temporarily shut its UK and US cinemas from October 8 @BBCr4today #R4Today

UK car sales drop in September, normally a bumper month https://t.co/8Bw0IpCTAC pic.twitter.com/eQAMDtgnKF

ASX finished the cash session up 150 points, 2.59%.

All sectors up, energy leading. pic.twitter.com/QkIjN2XU9H

pic.twitter.com/0Bm9W2u1x7

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link	http://feeds.theguardian.com/