Britain’s Lockdown Recession Is Worst in Europe and North America: Live Updates
Britain’s Lockdown Recession Is Worst in Europe and North America: Live Updates
The British economy sunk into its deepest recession on record in the second quarter, taking it back to the size it was in 2003. Official statistics showed gross domestic product dropped by 20.4 percent between April and June, compared with the previous quarter.
The pandemic-induced collapse was harsher in Britain than other large economies in Europe and North America. The second-quarter fall in economic output was twice as deep in Britain as in the United States.
Britain has the challenge of getting out of a much deeper hole because of the length of the lockdown imposed to restrict the spread of the coronavirus. The Office for National Statistics said lockdown measures were in place in Britain for a larger part of this three-month period than they were for other economies. Britain was relatively slow in introducing a national lockdown compared with most of its European neighbors. It started in earnest in late March and the government didn’t begin lifting the broadest restrictions until mid-June. Its lockdowns also affected a greater share of the population for a longer period of time than the state-by-state shutdowns in the United States.
A monthly breakdown showed the British economy did pick up in June, climbing 8.7 percent from May as construction activity resumed and consumer spending rebounded. Still, the Bank of England said last week it didn’t expect the recovery to be complete until the end of 2021.
In an effort to keep the recovery from stalling, the government is encouraging people to return to work in offices and it is planning for schools to reopen next month. The Treasury also spent more than 53 million pounds ($69 million) last week as part of a stimulus plan paying for discounts for meals eaten in restaurants and pubs on Mondays, Tuesdays and Wednesdays this month.
The cost of Britain’s late and long lockdown in response to the pandemic is an economic recession deeper than any other reported by a European and North American country in the second quarter.
The British economy contracted by a fifth in the second quarter, compared with the first three months of the year. It’s the deepest recession since the government started keeping such records, in 1955.
Some of the severity of Britain’s recession can be explained by the economy’s high dependence on consumer spending, which was brought to a near-standstill by the closure of shops, restaurants, and places like movie theaters and hotels, according to Samuel Tombs, an economist at Pantheon Macroeconomics.
But it was the government’s slow response to the pandemic in March which led to a longer lockdown in the second quarter, that was “at the root of the economy’s underperformance,” he wrote in a research note.
The nationwide lockdown began in late March and only started to be lifted in mid-June.
By starting later — Britain’s pubs and restaurants were open a week or more longer than those in other European countries — the virus had more time to spread around the country, and so the lockdown needed to be tighter and last longer. An Oxford University index on the strictness of government responses, including school and workplace closures and travel bans, showed that Britain’s lockdown was more strict in the second quarter than in Italy, Germany, Spain and the United States.
Stocks on Wall Street rose on Wednesday, resuming a rally that had stalled for a day, and headed back toward a record high.
The S&P 500 climbed nearly 1 percent and recouped its losses from the day before. Shares in Europe were slightly higher.
Though the gains lately have been small, the S&P 500 has edged closer and closer to its record reached in February, before the fast-spreading coronavirus triggered a massive decline in stock prices. The index, up about 50 percent from its lowest point this year, is within 1 percent of that record.
Those gains have been fueled by a number of factors, from government spending to prop up the economy to a rally in shares of huge technology companies that have an outsize influence over the broader market.
But the market has also overlooked a number of risks that lie ahead. Most prominent among them this week is the inability of lawmakers in Washington to reach any consensus about another economic aid package. On Tuesday, stocks reversed their gains after the Senate majority leader, Mitch McConnell, said that talks over a new plan for unemployment benefits and other spending had “stalled.”
Still, the rally resumed despite little indication that anything had changed overnight. August is typically quiet on Capitol Hill, and there were no evident efforts to find a way back to the bargaining table.
The cost of the pandemic was on display in Britain, where the government released data showing the economy shrank by more than 20 percent in the April to June quarter, when the economy was in the grips of a lockdown to curb the virus’s spread. That was not only the steepest fall on record for Britain, but the worst second-quarter collapse among European and North American countries.
There was a glimmer of good news: Economic activity in Britain grew more than 8 percent in June, as construction activity resumed and consumer spending rebounded.
Tencent, the Chinese company that owns the messaging app WeChat targeted by President Trump, reported on Wednesday that net profit rose 37 percent for the second quarter. Revenue from online games jumped 40 percent jump as the pandemic lockdowns kept people indoors. The company is preparing for a U.S. ban on WeChat.
Tesla shares traded higher after announcing Tuesday that its board had approved a five-for-one split in its soaring stock. The company’s share price has risen more than 500 percent over the last year, making Tesla one of the most highly valued car companies in the world, even though it sells far fewer vehicles than its industry peers. Tesla’s shares closed at $1,374.39 on Tuesday and jumped more than 6 percent in extended trading.
The corporate restructuring at WarnerMedia continued with layoffs in its DC Entertainment division, home of DC Comics and the DC Universe streaming platform, part of an overhaul that will reduce head count by 600. Nearly 50 people at DC Comics were laid off, said two people with knowledge of the decision who spoke on condition of anonymity because it had not been announced publicly. DC Direct, the company’s division devoted to collectibles, will be shuttered in November, these people said. The move comes after the ouster of three top executives on Friday in a shake-up by WarnerMedia’s new chief executive, Jason Kilar, who is realigning the company to put a greater focus on HBO Max, its new streaming service. WarnerMedia, a division of AT&T, began a significant round of layoffs on Monday.
Sumner M. Redstone, the billionaire entrepreneur who saw business as combat and his advancing years as no obstacle in building a media empire that encompassed CBS and Viacom, died on Tuesday. He was 97.
His death was announced in a statement from National Amusements, the private theater chain company founded by his father.
Mr. Redstone had vowed never to give up the reins of his sprawling conglomerate, but in February 2016 he stepped away from managing it, and his daughter, Shari E. Redstone, with whom he had a contentious relationship, took control of day-to-day affairs.
Beginning with a modest chain of drive-in movie theaters, Mr. Redstone negotiated, sued and otherwise fought to amass holdings that over time included CBS, the Paramount film and television studios, the publisher Simon & Schuster, the video retail giant Blockbuster and a host of cable channels, including MTV, Comedy Central and Nickelodeon. At their peak, the businesses he controlled were worth more than $80 billion.
Toward the end of his life, he controlled about 80 percent of the voting stock in Viacom and CBS, presiding over both through National Amusements. And almost to the end, his grip was tight and his enthusiasm undiminished.
A venture backed by the owner of Barneys New York has won a bid to buy Brooks Brothers, America’s oldest apparel company, for $325 million.
Sparc Group, a venture including Authentic Brands, the new owner of Barneys, and Simon Property, the biggest mall operator in the United States, will save at least 125 Brooks Brothers stores as part of the agreement. Brooks Brothers, a 200-year-old men’s wear retailer, filed for bankruptcy protection last month. It has struggled with declining sales in recent years as many in the corporate world have opted for a more casual look.
The brand was among several high-profile retailers, including J.C. Penney, Neiman Marcus and J. Crew, whose businesses were unable to weather the sales slump resulting from the coronavirus pandemic.
A court hearing to approve the sale is scheduled for Friday, Brooks Brothers in a statement on Tuesday, and the deal is expected to be completed by the end of this month.
Authentic and Simon initially made a “stalking horse” offer of $305 million, setting a price floor for bids in the bankruptcy auction.
In the heart of Manhattan, national chains including J.C. Penney, Kate Spade, Subway and Le Pain Quotidien have shuttered branches for good. Many other large brands, like Victoria’s Secret and the Gap, have kept their high-profile locations closed in Manhattan, while reopening in other states.
Even as the city has contained the virus and slowly reopens, there are ominous signs that some national brands are starting to abandon New York. The city is home to many flagship stores, chains and high-profile restaurants that tolerated astronomical rents and other costs because of New York’s global cachet and the reliable onslaught of tourists and commuters.
For four months, the Victoria’s Secret flagship store at Herald Square in Manhattan has been closed and not paying its $937,000 monthly rent. “It will be years before retail has even a chance of returning to New York City in its pre-Covid form,” the retailer’s parent company recently told its landlord in a legal document.
Some popular chains, like Shake Shack and Chipotle, report that their stores in New York were performing worse than others elsewhere, investment analysts said.
Michael Weinstein, the chief executive of Ark Restaurants, who owns Bryant Park Grill & Cafe and 19 other restaurants, said he will never open another restaurant in New York.
“There’s no reason to do business in New York,” Mr. Weinstein said. “I can do the same volume in Florida in the same square feet as I would have in New York, with my expenses being much less. The idea was that branding and locations were important, but the expense of being in this city has overtaken the marketing group that says you have to be there.”