The UK Treasury has announced a total of GBP4.6bn in grants to businesses after Scotland and England entered a new lockdown last night.
With the government ordering the closure of non-essential shops, restaurants and entertainment and recreational venues, companies in the retail, hospitality and leisure sectors will receive one-off grants of up to GBP9,000 per property to help them through the spring, Chancellor of the Exchequer Rishi Sunak said today.
A discretionary fund of GBP594mln was also made available to support other impacted businesses, as the new restrictions will remain in place at least February 22.
The cash is provided on a per-property basis to support businesses through the latest restrictions and is expected to benefit over 600,000 business properties, worth GBP4bn in total across all nations of the UK.
The new one-off grants come in addition to billions of existing business support, including grants worth up to GBP3,000 for closed firms, and up to GBP2,100 per month for impacted businesses once they reopen.
The government has also provided 100% business rates relief for retail, hospitality and leisure businesses, GBP1.1bn existing discretionary funding for local authorities, the furlough scheme now extended to April and 100% government-backed loans, extended until March.
On Monday night, Prime Minister Boris Johnson told England to “stay home” to ensure that hospitals do not become overwhelmed, after the UK reported a record 58,784 new cases alongside 407 further deaths.
The timeline for the new measures is uncertain beyond the February school half-term date.
A lot will depend on the pace of ongoing vaccination programmes, said economists at Berenberg.
“The restrictions are likely to remain in place until the government has vaccinated the vast majority of the most vulnerable as well as frontline healthcare and social workers (15m), which will significantly reduce the risks to the healthcare system.”
The impact of the lockdown is likely to result in around a 2% quarter-on-quarter decline in UK economic growth in the first quarter, Berenberg calculated, rather than the 3% gain previously forecast.
Analysts at Shore Capital said the PM’s announcement of lockdown 3.0 “has the feel of all of January and perhaps much if not all of February 2021 too… Our central expectation is that ‘the vaccine’ will have a demonstrable impact upon British society in the second quarter of 2021, but possibly towards the end of the first half as its efficacy is assessed and evidence of the virus’ suppression is confirmed.”
“We also point out a scarred society where many people have become much more risk-averse and their behaviours are unlikely to return to whatever normal is any time soon even with full vaccine victory.”
Among the big fallers so far this week, airlines like EasyJet (LON:EZJ), entertainment venue operators such as Rank (LON:RNK), along with pub companies including JD Wetherspoon (LON:JDW) and Mitchells & Butlers (LON:MAB), though some shares were already bouncing back on Tuesday.
“With the vaccines being rolled out, a lot of investors are continuing to ignore the short-term impact of the latest lockdowns, and look forward to more normal times ahead,” said market analyst Fawad Razaqzada at ThinkMarkets, with the Chancellor’s new measures also providing fuel.
For the UK’s food system, the Shore Cap analysts reckon that the continued working-from-home practices will boost suburban food systems and curtails those if central business districts and travel hubs, so companies such as Greggs PLC (LON:GRG) will take another substantial hit.
The food & beverage channel will see “devastation” following ten months of struggle plus a wipe-out Christmas, with hospitality players exposed to central business districts and travel hubs are especially negatively impacted, while community-based operators are expected to be the first and greatest to benefit.
Companies are expected to cut costs and issue more cash calls to survive.
Meanwhile, the British grocery retail sector will see continued strong demand, with larger baskets and fewer transactions persisting and online dominating.
According to analysts at Liberum, the third national lockdown will have similar implication to the second.
Passenger transport volumes are likely to decline, to a lesser degree than in the first lockdown but more than in the second due to schools and universities closing, while home delivery volumes are likely to see their recent strong growth sustained for longer.
“We see clear opportunities in the public transport operators where there is a limited link between volumes and profits in the short term, and where we remain optimistic about long-term recovery potential,” they commented.
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