A Covid-19 checklist for Britain’s businesses

Another day, another casualty. After a steady trickle, the coronavirus warnings are coming thick and fast now. Cruise and insurance specialist Saga is the latest to join the emergency ward. No surprise there. There’s a reason cruise ships are called “floating Petri dishes”. What better place for a pandemic that discriminates against the elderly than somewhere where more than a third of the people are typically over the age of 60? No wonder the Government is advising the elderly and people with preexisting health conditions to avoid holidays on the ocean waves.

Unfortunately for Saga, that’s its bread and butter, so it has been forced to suspend its cruise ship operations for the next six weeks at a cost of up to £15m to profits. For a company that had pencilled in pre-tax profit of between £105m and £120m for the year, that’s not an insubstantial number.

Still, at least it’s in good company

– or not, as the case may be. Thursday’s flood of bad news felt like a watershed moment for corporate Britain as it battles the pandemic. The London Stock Exchange spat out shock announcements with abandon.

Cineworld and Tullow Oil led the way with warnings that they could be forced under. Meanwhile, Go-ahead, the train and bus operator; Trainline, the online ticket site; and WH Smith all attempted to quantify the pain – by no means an easy task when the world is in chaos. Housebuilder Berkeley shelved a plan to return cash to shareholders, and Finablr, which owns Travelex, said travel restrictions were squeezing cashflow.

There will be many more similar alerts in the coming days and weeks as bosses scramble to assess the damage and draw up contingency plans. Every business big and small will be affected in some way. That is unavoidable. But it is no longer about what the shortterm disruption is. That’s the easy bit.

The challenge now is to work out which companies will struggle to withstand the shock. Some will be more susceptible than others. If there was a coronavirus health checklist the symptoms would include a stretched balance sheet, lumpy cashflow, and a high fixed cost base. Pray for those that tick all boxes. Only with support from lenders will they make it out the other side.

Consumer-facing companies are in the eye of the storm as the general public rein in travel, shopping, eating out and entertainment – anything that puts them in proximity to crowds.

Airlines in particular are being hammered. The big UK carriers have taken the unprecedented step of asking for government support including taxpayer-backed bridging loans to help weather the storm, an irony that will not be lost on Flybe. The regional carrier was refused a state bailout following intense opposition from the very same names that are now begging for help.

But no sector is immune. Eighteen stocks from the FTSE 100 suffered share price falls of 15pc or more yesterday as investors drew up a list of likely victims. Some, like tour operator Tui, pub and restaurant giant Whitbread and British Airways owner IAG are obviously in the crosshairs. The same for Betfair owner Flutter Entertainment, which generated three-quarters of its £2.1bn turnover from sports betting last year.

But some on the list came as a surprise. Among the worst hit were miners Anglo American and Evraz, a sign that markets expect an economic shock that chokes off demand for commodities. Rolls-royce was among the laggards too, perhaps because of its exposure to the big plane manufacturers like Boeing, but also because global supply chains are strained. And financial stocks including Barclays featured heavily amid fears that the wider financial system will face a huge squeeze.

There will now be a race to implement emergency action. Cost-cutting is the easiest and most obvious move. Norwegian is laying off half its staff. IAG is grounding aircraft. Tullow is planning to slash its workforce by 35pc.

But there are other measures too. Cineworld was quick to point out that it will postpone capital expenditure if its cinemas are suddenly forced to close. Saga has said it will reduce day-to-day spending. But for the weakest, like Flybe, it will be hard to escape a shock of this magnitude.

‘The London Stock Exchange spat out shock updates with abandon’