Ashley’s woes a sign of the pain to come

Eleven days is a long time in corona Britain. On Dec 10, buoyed by the lifting of Lockdown 2.0, Mike Ashley’s Frasers Group bullishly raised profit forecasts for the year. “The successful reopening of our stores means we can confidently raise the bottom end of our guidance,” it told the stock market, prompting a 12pc jump in the share price.

And now? The parent of Sports Direct “can no longer commit” to those predictions, it said in a Monday morning profit warning that wiped 9pc off its shares.

So what’s changed? Well, for many companies, everything, since the Prime Minister’s bombshell Saturday night press conference. Frasers is the first high-profile casualty. There will be many more. Tougher rules are devastating for the high street, for hospitality, the airline industry, and for scores of other businesses that will once again have to close their doors, having only just reopened.

A double-dip recession now looks nailed on, leaving markets in a state of blind panic. The FTSE 100 fell more than 200 points, or 3.2pc, the pound tumbled, oil prices sank, and bourses in Germany, France and Italy all plunged around 3pc. Of the top 10 fallers across the broader FTSE 350 index, eight were either retail, travel or leisure stocks, or had significant exposure to those sectors.

Many retailers had filled up the shelves in anticipation of doing a roaring trade over Christmas.

If those goods had a festive theme, they are now effectively worthless unless they can be sold online. But even if they can, digital transactions rarely cushion the lost sales from physical stores.

Others will be forced to send stuff back, leave it to pile up in warehouses or sell it at a steep discount when the opportunity finally arises. On Sunday, footfall was down a massive 40pc in Tier 4 areas from the previous week.

Speaking on BBC Radio 4, Waterstones boss James Daunt likened it to farmers being forced to leave food to rot in the fields during harvest time.

Swathes of the hospitality trade had all but written off Christmas after the introduction of Tier 3 restrictions forced them to cancel December bookings. The option of providing a takeaway service offered some salvation but the tightening of restrictions for many parts of the country, together with the cancellation of the five-day bubble, will dampen demand further.

There will be mountains of food waste as a result, more job losses and permanent closures.

The travel ban means the travel industry is effectively in deep freeze until vaccinations can reach meaningful numbers.

Expect a flurry of profit warnings. As Frasers points out, it’s not just that this is a peak trading period, but the Prime Minister’s announcement means there is a “high likelihood of further rolling lockdowns” in the coming months.

The “stay at home” message for people in Tier 4 means that 18 million citizens in London and the South East are now effectively living under their third lockdown, with the Government warning that tougher rules could last until Easter.

And with the new, more infectious Covid strain clearly causing alarm among ministers and the scientific community, the measures could be made even more punitive, damaging the economy further still.

Throw in the chaos caused to ports from Brexit and there is an overwhelming case for yet more support for struggling companies.

Extending business rates relief for the high street, and furlough more widely, is the least the Government can do but the Chancellor must go further if the country is to avoid further serious economic damage.

America is leading the way, with Congress close to signing off a $900bn (£674bn) coronavirus economic relief package that includes direct payments for struggling families and the unemployed, aid for schools and farmers, support for airlines, airports and the railways, and even a vaccine distribution fund.

Forget investment. Corporate cash piles are dwindling rapidly and the cost of shutting down and reopening again is huge.

There’s the psychological toll, too. Martin Beck of Oxford Economics describes it as “a magnified scarring effect” for small enterprises. Many, I suspect, will close down for good this time.

For once, Ashley has captured the zeitgeist.

‘There will now be mountains of food waste, more job losses and closures’