Business / Economy

Britain’s plan to get economy working again doesn’t seem to be working

Bloomberg

The British government’s call to restart the economy may have sounded good, but there’s little evidence the country is taking heed.

In the week when Prime Minister Boris Johnson said it was time to get back to work, some parts of the economy are humming along. What’s less clear is whether his decision to ease lockdown restrictions made much difference.

Activity on construction sites is growing and factories are cranking up output where they see demand. Yet this has been happening gradually for weeks, as businesses devised working practices that avoid spreading the coronavirus. Those still in a state of paralysis — restaurants, pubs and manufacturers whose markets have collapsed — have less reason for optimism.

“The clear guidance to go to work if you cannot work from home is not yet backed up by guidance that makes this possible in many work environments,” said Justin King, the former chief executive of supermarket chain J Sainsbury PLC and a current non-executive director of Marks & Spencer PLC.

With other European governments opening up economies, Britain is trying to follow suit without risking a spike in cases after the country recorded more deaths than anywhere else on the continent. Chancellor of the Exchequer Rishi Sunak said the U.K. is facing a significant recession after the latest data showed the economy shrank almost 6 percent in March.

That balancing act was highlighted when Johnson’s call was followed by Sunak extending stay-at-home salary coverage for millions of workers. The move throws another lifeline to businesses that otherwise risk failing, yet prolongs the dysfunctional status quo.

Manufacturers have little interest in resuming normal production when there’s no market for the goods on offer. The government’s additional help paying salaries of workers stuck at home gives them one less reason to go looking for new customers.

“The extension of the furlough scheme will allow companies to restart more cautiously, stagger production and see what works,” said one automobile executive, who asked not to be identified by name.

Companies have complained of mixed messages, unclear guidance and rules that don’t apply to the entire country. Scotland, for example, is following its own path out of the lockdown and has refused to ditch the “stay home” message for Johnson’s new “stay alert” mantra.

There’s also still no date for opening much of the retail industry, and executives are also asking for more guidance on the use of protective equipment to avoid spreading the coronavirus. Airlines and some manufacturers have warned a planned 14-day quarantine for people arriving into the country risks further crippling their ability to operate.

Government advice issued this week includes a ban on hot desking, an order to open office windows and guidance on carrying out COVID-19 risk assessments. It also hammered home the dangers for any business that moves too fast.

“Employers will not be able to get away with forcing workers to work in workplaces that are not COVID-secure,” Johnson said.

Airlines

Government plans to quarantine visitors have rocked the industry’s hopes of a partial rebound in flying during the crucial summer season. The chief executive of the country’s airlines lobby group said the industry has not been given any details on how the measures would work, what exemptions will be in place or when it would be reviewed.

Ryanair Holdings PLC Chief Executive Officer Michael O’Leary, who plans to restart services in July, was scathing. He blamed the government for “chaos and confusion” in an interview on Wednesday.

The transport secretary is “out there warning that the British government now wants people to return to work, but then they say they want to limit the London underground and commuter trains to 10 percent of the normal capacity,” O’Leary said. “When they get asked how do you propose to do that, they say ‘well we expect the common sense of the British people.’”

Retail and hospitality

The extended furlough payments are keeping shops and restaurants on life support, though many risk bankruptcy due to rent demands. Businesses are working on restarting safely using staggered opening times, crowd control systems and promotion strategies that don’t bring hordes of customers to their door.

Marks & Spencer’s King said there’s still little clarity on when retail can reopen, beside garden centers. “It seems that will happen in phase two in June, or phase three in July,” he said. “The extending of the furlough scheme points towards the latter timing.”

Mobile phone company Vodafone Group PLC is making plans to reopen most of its 411 stores in early June as long as employees can get there without using public transport, a spokesman said. There will be no display devices to touch and stores may have fewer staff.

Some pubs are concerned their businesses have been neglected. Matt Ward, owner of The White Horse in south London, said he’s concerned about retaining workers, like his manager who is from Brazil and has been in the country for 12 years.

Johnson’s announcement “made it sound very up in the air — lots of ifs, buts, maybes,” Ward said. “July 1 was the date given, but very loosely for some areas of hospitality, pubs weren’t even mentioned. I don’t think The White Horse will be open on July 1.”

Autos

Some suppliers restarted work in recent weeks, especially those supplying car factories abroad, according to one industry official. Andy Palmer, CEO of Aston Martin Lagonda Global Holdings PLC, said the company is seeking to restart U.K. plants progressively. Its Gaydon headquarters, where it designs and builds cars including the Vantage model, will take longer to reopen because of the size of the cars and the density of the production line.

Nissan Motor Co. has said it plans to restart Britain’s biggest car plant in early June. The company is “working with very limited visibility on future market conditions, therefore we will manage the restart process very carefully, with our employees’ health and well-being a priority,” said a spokesman for the automaker.

Aerospace

Representatives of Rolls-Royce Holdings PLC and BAE Systems PLC, Europe’s largest defense firm, said the latest guidelines didn’t change things for them because they were already enforcing social distancing at sites.

About a quarter of BAE’s workforce is on site and the rest working from home after it reordered and redesigned production to meet social distancing guidelines. It introduced one-way walkways on sites, brought in shift patterns to reduce the number of staff on site and quarantined goods arriving at plants.

Real estate

Property agents did get a lift this week after the government updated its Housing Market ReStart and Safe Working Charter. Dexters, London’s largest independent estate agent, is reopening its 70 branches and restarting physical viewings for customers.

There’ll be regular checking of employee temperatures and clients visiting branches will be given a face covering and gloves. Agents will open doors, switch on lights and open windows for ventilation so that clients do not need to touch anything.

Utilities

Power station and grid workers have stayed on the job throughout the lockdown using social distancing measures that won’t be eased soon. That includes sending engineers out alone to check infrastructure, moving staff to back up locations and body temperature scans at power stations. Work at Electricite de France SA’s nuclear construction site at Hinkley Point has continued, albeit with only half the regular workforce.

Broadband company BT Group PLC is also working on plans to open stores again, a spokesman said. BT’s Openreach division, which connects homes and businesses to broadband, is going to gradually lift restrictions it had placed on its engineers entering properties from May 18 for the lowest-risk repairs and connections.

Construction

Johnson has targeted builders as one group with the best chance of getting back to work. Much of the industry already has, though. Contractors reported on May 6 that 73 percent of sites were open in England and Wales, up from 69 percent the week before, according to industry group BuildUK. With more guidance on protective equipment and traveling to work, more sites will reopen and productivity will improve, said its CEO, Suzannah Nichol.

Entertainment

Britain’s Vue and Cineworld cinema chains are working toward the possibility of restrictions being lifted as soon as July. A spokeswoman for Vue said it’s working with the government, European officials and its trade group to design ways to make cinemas COVID-19 safe.

Hairdressers

With physical contact inevitable, hairdressers still need clear guidance from the government on what regulations to follow, especially on protective equipment, said Hilary Hall, chief executive of the National Hairdressers Federation. Its members are looking at removing magazines and drink services, and preventing staff from sharing equipment such as scissors and increased cleaning.

There could also be a reduction in services provided. For example, a hair cut may be allowed, but eyelash tinting or any other service where an employee would be in close contact with a client’s eyes, nose or mouth would be temporarily stopped.

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