Catastrophe like no other
THE grim takes from the International Monetary Fund’s (IMF) top economist Gita Gopinath continue to flow. The worst recession since the Great Depression, a crisis like no other and the highest public debt as a proportion of world output in history.
The estimate is that vanishing working hours, as a result of the virus globally, are the equivalent of an unimaginable 300m full-time jobs.
There is no comfort to be drawn from the Fund’s midsummer forecast except to note that the UK’s downturn, projected at -10.2pc this year, is no longer the worst among the advanced countries.
Among the G7 countries, France and Italy outpace the UK in terms of the scale of the calamity. The really scary thing is that there is no ‘V’-shaped recovery in 2021 but something which looks more like the Nike tick on my sports shirt.
Scarring from Covid-19, if the IMF is right, will leave the UK with an economy 4pc smaller at the end of 2021 – a catastrophe for a previously resilient jobs market unless interventions are stepped up hugely.
The Chancellor, Rishi Sunak, has gone far CITY EDITOR beyond what anyone could have expected in seeking to cushion the impact of the virus. But could he or should he do more?
Japan leads the world in digging deep. Fiscal packages in April and May amounted to an astonishing 40pc of GDP. That, together with its manufacturing-focused economy, means Tokyo’s downturn could be limited to 5.6pc this year. But it will suffer in 2021 with a less marked recovery.
Critics of the way China handled coronavirus early on will be horrified to learn that the world’s second-largest economy is actually set to grow this year at a very modest 1pc. And it is heading for a massive 8.2pc expansion in 2021.
President Xi Jinping better not shout that from the rooftops.
Cleaning house
DISREGARD for governance rules is a profound error. Public companies need a strong chairman willing to challenge hubristic executives who think delivering on the bottom line (and bonuses) is all that matters.
When Roger Devlin took over as chairman of Persimmon in 2018 the need for change was desperate. Yes, the housebuilder was sitting on £1bn of cash.
But the unrestrained greed of £75m chief executive Jeff Fairburn disgraced the FTSE 100 and his successor Dave Jenkinson, a £40m understudy, carried the same stigma.
Persimmon’s reputation among customers was rock bottom and rival builders feared for the integrity of the industry. Customers reported shoddy houses and an independent study set up by Devlin found that not only were build and customer service culture rotten but some houses lacked fireproofing and were unsafe.
It also was among a clutch of housebuilders selling some homes on long leases with escalating ground rents.
Changes were made and Devlin recognised that Persimmon would only restore respectability if it reached outside for a chief executive.
New boss Dean Finch has a matinee idol name but a duller background at transport group National Express, where infrastructure guru Sir John Armitt is chairman. To the ordinary punter, Finch’s bonus package, with two opportunities for a 200pc salary uplift, will look over-generous.
The best that can be said is that bonuses are partly being tied to customer service. That is a big break with the past and recognition of the broader stakeholder interest.
Devlin has shown the value of an independent chairman willing to take on vested interests. One-man bands, such as Peter Cowgill at JD Sports, might take note.
Lay it down
THE wine trade is perilous with Unwins gone and Oddbins (in and out of administration) among those in difficulty.
Naked Wines struggled when it merged with Majestic and the warehouse chain was pensioned off to Softbank.
Lockdown has delivered handsomely for Naked’s model of online sales, membership options and new producers.
Indeed, demand has been so good that a string of independent vineyards ran dry. Chief executive Nick Devlin delivered 81pc sales growth in lockdown. That might start to slow as pubs and hostelries reopen.
Naked is in the happy position of becoming the Boohoo of claret, chardonnay and champagne with shares popping 70pc this year. Cheers!