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UK hospitality and travel shares tumble after hints of second lockdown UK hospitality and travel shares tumble after hints of second lockdown
(about 5 hours later)
British Airways owner down 11% as hospitality sector makes grim prediction for pubs and clubsBritish Airways owner down 11% as hospitality sector makes grim prediction for pubs and clubs
Shares in airlines, hotel groups and pub companies have tumbled, after it emerged that the government is weighing up tough new “circuit break” restrictions to avert a second wave of Covid-19 infections. New “circuit-breaker” restrictions designed to prevent a second wave of Covid-19 in England would have “astronomical” consequences for struggling businesses unless they receive further financial support, the government has been warned.
International Airlines Group, which owns British Airways, was the biggest loser on the FTSE 100, down 10%, while easyJet fell nearly 7% and the aircraft engine maker Rolls-Royce lost 5%. Boris Johnson is weighing up short-term plans to close pubs and restaurants, while parts of the north of England and the Midlands are already facing 10pm curfews on nightlife and tighter restrictions on socialising from Tuesday.
Pub companies such as JD Wetherspoons and Mitchells & Butlers, along with hotels groups Intercontinental and Whitbread, suffered losses of between 3% to 5% as traders were spooked by the threat of curbs on hospitality. As shares in airlines, hotel groups and pub chains fell, multiple trade bodies called on the government to clarify its plans and ensure firms are not cut adrift financially.
Hannah Essex, co-executive director of the British Chambers of Commerce (BCC), said: “Uncertainty and speculation around future national restrictions will sap business and consumer confidence at a delicate moment for the economy.
“While protection of public health must be the priority, government should do everything in its power to avoid further national lockdowns that will cripple businesses.
She said any requirement for firms to close or reduce capacity through no fault of their own should be accompanied by a “comprehensive support package”.
Expectations of new restrictions came after the health secretary, Matt Hancock, refused to rule out a two-week nationwide lockdown as the “last line of defence”, hitting shares in some of the UK’s biggest companies.
British Airways owner IAG was the biggest loser on the FTSE 100, down nearly 15%, while easyJet fell by 9% and the aircraft engine maker Rolls-Royce lost 5%.
Pub companies such as JD Wetherspoons and Mitchells & Butlers, along with hotels groups Intercontinental and Whitbread also lost ground, as traders were spooked by the threat of closures.
Shares in NatWest, formerly known as RBS, slipped below £1 for the first time since the pandemic took hold, while Lloyds Banking Group was down by 3%. Both are seen as proxies for the health of the UK economy.Shares in NatWest, formerly known as RBS, slipped below £1 for the first time since the pandemic took hold, while Lloyds Banking Group was down by 3%. Both are seen as proxies for the health of the UK economy.
As stocks fell, the hospitality sector issued grim forecasts about the prospect for pubs, bars and clubs, which are still reeling from the first lockdown, if a second was imposed or curfews – already expected in the north east – were imposed nationwide. The hospitality sector has been particularly hard hit by coronavirus prevention measures.
Michael Kill, the chief executive of the Night Time Industries Association, warned that targeting hospitality venues could backfire. A quarter of licensed premises still yet to reopen after the first lockdown and firms have issued dire predictions about the effect of any new curbs.
“Curfews are devastating for our sector,” he said. “We are concerned about the narrative around hospitality being at partial blame for what’s going on. There have been schools and universities going back, illegal parties, households, that have all contributed to this in different ways. UK Hospitality boss, Kate Nicholls, said the sector was “on a knife edge”. Unverified rumours about lockdowns and curfews was hitting consumer confidence, she added.
“If lockdowns or restrictions are needed, they need to be formulated carefully, and come with government support, to minimise the damage to business,” she said. “Even relatively minor tweaks like a business having to close at 10pm rather than 11pm has a huge impact.”
Her counterpart at the British Beer and Pubs Association, Emma McClarkin, said: “Shutting down completely even for a short period, would be a monumental task, severely impact livelihoods and would come at an astronomical cost to the trade.”
The BBPA is calling for an extension of the furlough scheme for hospitality firms, as well as an extension of the VAT cut, a business rates holiday and lower beer duty.
Michael Kill, the chief executive of the Night Time Industries Association (NTIA), urged ministers to be cautious about targeting hospitality firms, including struggling pubs, clubs and bars, with Covid-19 curbs.
“Curfews are devastating for our sector,” he said. “We are concerned about the narrative around hospitality being at partial blame for what’s going on. There have been schools and universities going back, illegal parties, households, that have all contributed in different ways.
“If we end at 10pm in the evening, we’ll end up with people looking for those additional hours, whether it’s an illegal event or continuing the party at a household.”“If we end at 10pm in the evening, we’ll end up with people looking for those additional hours, whether it’s an illegal event or continuing the party at a household.”
Kill said other countries such as Germany had avoided such drastic measures by putting efficient test-and-trace systems in place.
Dave Mountford, a publican, said many pubs would close for good if they were forced to close again at short notice with no extra financial support.
“Unless we know there’s a package in place to support us, this is going to be quite devastating and I don’t envisage a lot of pubs reopening., said Mountford, who is spokesman for the Forum of British Pubs.
He said pubs would be left with stock they could not use and predicted that those in city centres would be hardest hit, as well as those that did not serve food and therefore, had not benefitted from either the VAT cut on meals or the eat out to help out scheme.
Mountford said many publicans were now faced with huge bills from large pub companies that had deferred rents during the first lockdown but were now collecting the delayed payments on top of monthly rents.
Expectations of new restrictions came after the health secretary, Matt Hancock, refused to rule out a two-week nationwide lockdown as the “last line of defence” against rising rates of Covid-19 infection.
Curbs akin to those that were in place throughout the summer would severely reduce international travel and could also mean pubs, bars, restaurants and hotels would be forced to shut their doors again, just months after they were allowed to reopen.
Analysts at the stockbroker IG said the possibility of London being included in lockdown restrictions had sharpened fears among investors.Analysts at the stockbroker IG said the possibility of London being included in lockdown restrictions had sharpened fears among investors.
“While localised restrictions have become somewhat normalised of late, the economic importance of London means we are likely to see a more significant market reaction if the growth in cases leads to significant economic consequences,” said the senior market analyst Joshua Mahony.“While localised restrictions have become somewhat normalised of late, the economic importance of London means we are likely to see a more significant market reaction if the growth in cases leads to significant economic consequences,” said the senior market analyst Joshua Mahony.
“From a tourism perspective, the rise in Covid cases in the UK does little to help boost sentiment around travel stocks. While we have become accustomed to the UK imposing quarantine restrictions on visitors from specific countries, the prospect of quarantines on UK tourists holidaying abroad would put a major stake in heart of the travel industry,” Mahony said. “With the growing likeliness of quarantine restrictions being imposed on UK visitors, it comes as no surprise to see the likes of IAG, easyJet, Carnival, Rolls-Royce, and InterContinental Hotels Group heading up the FTSE 350 losers,” he added.
“With the growing likeliness of quarantine restrictions being imposed on UK visitors, it comes as no surprise to see the likes of IAG, easyJet, Carnival, Rolls-Royce, and InterContinental Hotels Group heading up the FTSE 350 losers.”