(Alliance News) - UK government borrowing in August was the third highest of any month on record due to the Covid-19 crisis, figures from the Office for National Statistics showed on Friday.
Public sector net borrowing, excluding public sector banks, is estimated to have been GBP35.9 billion in August, up by GBP30.5 billion on a year ago and the third highest borrowing in any month since records began in 1993.
Central government bodies are estimated to have spent GBP78.5 billion on day-to-day activities in August, being GBP19.5 billion more than in August 2019. This figure includes GBP6.1 billion on the Coronavirus Job Retention Scheme and GBP4.7 billion in Self Employment Income Support Scheme payments.
The Eat Out to Help Out scheme, which ran through August offering diners up to GBP10 off a meal, cost the government GBP500 million.
Borrowing in the first five months of this financial year - April to August - is estimated to have been GBP173.7 billion. This is GBP146.9 billion more than in the same period last year and the highest borrowing in any April to August period since records began.
"The coronavirus lockdown has meant central government tax receipts and National Insurance contributions (combined) in the five months between April and August 2020 were down 13.4% on a year earlier. Over the same period, the government's support for individuals and businesses contributed to an increase of 34.2% in central government's day-to-day spending compared with a year earlier," the ONS explained.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: marginally higher at 5,823.96
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Hang Seng: down 0.3% at 23,243.95
Nikkei 225: closed up 0.5% at 23,204.62
DJIA: closed up 52.31 points, 0.2%, at 26,815.44
S&P 500: closed up 0.3% at 3,246.59
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GBP: up at USD1.2773 (USD1.2713)
EUR: up at USD1.1677 (USD1.1645)
Gold: up at USD1,873.30 per ounce (USD1,859.50)
Oil (Brent): up at USD41.95 a barrel (USD41.52)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday's Key Economic Events still to come
Special EU summit concludes.
0700 BST UK public sector finances
0830 EDT US advance report on durable goods
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A coronavirus contact tracing app has launched across England and Wales at what the Health Secretary has called "a tipping point" in the fight against coronavirus, PA reported. The rollout follows months of delay and questions about its effectiveness in the face of mixed results from other countries which have already deployed such apps. As of Thursday evening, the app had been downloaded more than one million times by Android users, according to the Google Play Store. The total figure is likely to be higher when iPhone downloads are included, but Apple does not provide similar figures for app downloads. Both Scotland and Northern Ireland have already introduced their own individual contact tracing apps, which users can switch to should they visit either country, following the delay of the original NHS software.
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Car production in the UK has continued to fall as the industry is hit by the virus crisis, new figures show. Just over 51,000 vehicles rolled off factory lines in August, down by 44% on the same month last year, said the Society of Motor Manufacturers & Traders. Production for UK buyers fell by 58% in the month to just 7,795 units, while exports declined by 41% with 73,443 vehicles produced. Almost 85% of all cars built in Britain in August were destined for other countries, underlining the importance to the sector and UK economy, said the SMMT. Car production is down by 40% so far this year, representing a loss of 348,821 units, the figures showed.
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UK consumer confidence continued to gradually improve for the fourth consecutive month, but remained well below pre-pandemic levels, data from the Gfk Consumer Confidence index showed. The overall index score came in at minus 25 for September, an improvement from minus 27 in August. In July, the index score was also minus 27, narrowed from minus 30 in June and minus 34 in May. The figure was still down from minus 12 for September 2019.
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Chinese government debt is set to be included on a key global bonds index, AFP reported. The move by FTSE Russell comes as trading in China becomes an increasingly controversial move in Washington as relations between the superpowers grow increasingly fraught. But analysts said the attraction of higher yields – the yield on 10-year Chinese government bonds is 2.4 percentage points higher than US Treasuries – and a relatively stable currency have made the country an attractive prospect for investors. Inclusion in the FTSE World Government Bond index could begin next October if approved. Pan Gongsheng, deputy governor at the People's Bank of China said international investments in the Chinese market had grown more than 40% over the past three years, with CNY2.8 trillion, about USD410 billion, of Chinese bonds currently held by international investors. Goldman Sachs said inclusion could see up to USD140 billion flood into the debt market.
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BROKER RATING CHANGES
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BARCLAYS RESUMES PENNON GROUP WITH 'EQUAL WEIGHT' - TARGET 1060 PENCE
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SOCGEN INITIATES BRITVIC WITH 'BUY' - TARGET 945 PENCE
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RBC REMOVES WILLIAM HILL FROM 'TOP 10 LIST' - 'OUTPERFORM'
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RBC ADDS TT ELECTRONICS TO 'TOP 10 LIST' - 'OUTPERFORM'
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COMPANIES - FTSE 100
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British American Tobacco has priced an offering of USD6.25 billion debt securities. British American Tobacco International Finance priced the offering of USD4.75 billion guaranteed debt securities consisting of USD1.75 billion 2.259% notes due in 2028; USD1.25 billion 2.726% notes due in 2031; USD750.0 million 3.734% notes due 2040; and USD1.00 billion 3.984% notes due in 2050. In addition, the unit has priced an offering of USD1.50 billion 1.668% notes due in 2026. Issuance of the notes is expected to close on Friday. The company intends to use the proceeds for general corporate purposes, including debt refinancing.
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Pennon said it is on track to deliver "resilient" results in line with internal expectations. Ahead of its results for the half-year to September 30, Pennon said the damage from Covid-19 to date has been broadly in line with its initial assumptions for a net revenue hit in the current financial year of GBP10 million. The largest impact of Covid-19 on water usage has been among businesses and commercial customers, Pennon added. The group remains in a "strong" financial position with expected cash and committed facilities well in excess of GBP3 billion at the end of September.
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COMPANIES - FTSE 250
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Wizz Air said it now expects to operate half of last year's capacity in October, as it noted on-going travel restrictions due to Covid-19 and a drop in demand for travel over the winter. "Furthermore, should the level of restrictions remain at the current level, Wizz Air anticipates not to operate at a higher level of capacity during winter than its projection for October," the central and eastern Europe-focused airline said. The protection of its balance sheet and liquidity position, as well as minimising costs, remain Wizz Air's "top priority". The carrier added that it believes it will emerge from the crisis as a "structural winner".
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Shaftesbury said it has decided against a final dividend for its soon-to-end financial year as Covid-19 dissipates footfall and trading in London's West End. The property investor, which owns a portfolio in London's West End, said the Covid-19 pandemic continues to have a "significant impact" on travel, business activity and consumer spend. The West End has seen a gradual recovery in footfall since lockdown measures in the UK began to be relaxed, and most of its 611 restaurants, cafes, pubs and shops have reopened since late June. For the six months to September 30, 41% of rent due has been collected, while 10% is expected to be subject to deferred collection arrangements. Shaftesbury said 23% is being waived and 26% remains outstanding. Shaftesbury added that, in light of the uncertain short-term outlook, the board has decided not to declare a final dividend in respect of the financial year ending on Wednesday. It did not declare an interim dividend either. The firm does, though, plan to resume payouts "as soon as it considers prudent."
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COMPANIES - MAIN MARKET AND AIM
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Online clothing retailer Boohoo laid out a series of changes it plans to make after an independent review found "significant and clearly unacceptable issues" in its supply chain. The review identified "many failings" in the Leicester supply chain and recommended improvements to Boohoo's corporate governance, compliance and monitoring processes. Alison Levitt, who was appointed to run the review, was satisfied that Boohoo did not deliberately allow poor conditions and low pay to exist within its supply chain, however. Levitt is "confident that the adaptations which Boohoo should make involve a relatively easily-achieved realignment of its priorities and governance systems and that the board should not feel discouraged. It has already made a significant start on putting things right."
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COMPANIES - GLOBAL
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US President Donald Trump on Thursday presented the first outlines of his plans for healthcare reform, which he has been talking about for months. However, he provided hardly any details on how they might be implemented. A central question in American healthcare debates is whether it would be possible to obtain health insurance even with pre-existing conditions. This became law with Trump's predecessor Barack Obama's healthcare reforms. However, Trump's government, is trying to overturn the entire "Obamacare" reforms package and if so, protections for people with pre-existing illnesses would be affected. Trump has now signed an executive order declaring guarantees for people with pre-existing conditions to be government policy. It remained unclear, however, how exactly this would affect everyday life after a potential end to "Obamacare". Trump said that he would not sign any laws that did not contain guarantees for people with pre-existing conditions.
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Friday's Shareholder Meetings
Stagecoach Group
Schroder Real Estate Investment Trust
Star Phoenix Group - EGM re director removals
Catenae Innovation
ICG-Longbow Senior Secured UK Property Debt Investments
Marble Point Loan Financing
Fusion Antibodies
Solo Oil
Lekoil
Hydrogen Group - GM re delisting
Okyo Pharma
India Capital Growth Fund
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By Tom Waite; thomaslwaite@alliancenews.com
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