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Genie

The economic impact of Covid-19

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The true toll of this pandemic will not be known for several years. 

What we're starting to see now is the first big private employers cut their workforce with redundancies.

Mclaren cutting more than a quarter of its workforce

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Iconic UK supercar maker and Formula 1 team McLaren plans to cut more than a quarter of its workforce after the coronavirus crisis hit demand.

The firm employs around 4,000 people but 1,200 of those are to be made redundant, the vast majority in the UK.

Motorsport events have been cancelled around the world by the pandemic, which has shut car plants and closed showrooms.

McLaren said it had been "severely affected" by the crisis.

The company said it had worked hard to cut costs and avoid layoffs.

"But we now have no other choice but to reduce the size of our workforce," McLaren boss Paul Walsh said in a statement.

"This is undoubtedly a challenging time for our company, and particularly our people, but we plan to emerge as an efficient, sustainable business with a clear course for returning to growth."

Rolls Royce cutting 9,000 jobs

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Rolls-Royce has said it will cut 9,000 jobs and warned it will take "several years" for the airline industry to recover from the coronavirus pandemic.

The Derby-based firm, which makes plane engines, said the reduction of nearly a fifth of its workforce would mainly affect its civil aerospace division.

"This is not a crisis of our making. But it is the crisis that we face and must deal with," boss Warren East said.

The bulk of the job cuts are expected to be in the UK at its site in Derby.

Rolls-Royce employs 52,000 people globally and Mr East told the BBC's Today programme that the company had not yet concluded on "exactly" where the job losses would be, due to having to consult with unions.

But he said: "It's fair to say that of our civil aerospace business approximately two-thirds of the total employees are in the UK at the moment and that's probably a good first proxy."

This is the tip of the iceberg I imagine.

Cancellation of major infrastructure project must be on the horizon (HS2?) as well as reductions in civil servants.

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British Airways is reportedly planning to axe thousands of workers and rehire them on half the pay as it pushes through controversial new contract changes.

The airline, which has already confirmed plans to cut up to 12,000 roles, including 1,130 pilots, said it has entered consultation with colleagues.

In a letter sent to staff a fortnight ago, British Airways set out new terms and conditions on the back of the coronavirus pandemic.

It's now emerged that workers are also being sent redundancy notices - which are due to end on June 15.

BA's cabin crew is divided up into three parts - long haul (legacy), short haul (legacy), and a lower-paid, newer 'mixed fleet' who fly both long haul and within Europe.

However, the airline is reportedly now in talks to combine everyone into a single work group at a lower pay.

Senior long haul flight attendants based at London Heathrow will see pay cuts estimated to be between 50% and 75%.

And those who refuse to sign could be laid off.

BA "reportedly" planning to rehire some of the 12,000 recently announced laid off staff on worse terms

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I don’t know the in depth facts and figures so genuine question, is the lockdown worth it? It’s causes a huge economic crash. How many lives did the financial crash cost in 2008? Will the deaths caused by the virus if left to its own devices outweigh the deaths caused by the economic crash in the long run?

I do wonder if the correct approach would have been to accommodate vulnerable people who voluntarily self-isolate to protect themselves but otherwise keep life as normal. Like I said though I don’t know enough about how bad this virus could actually be/have been. 

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14 minutes ago, Spoony said:

I don’t know the in depth facts and figures so genuine question, is the lockdown worth it? It’s causes a huge economic crash. How many lives did the financial crash cost in 2008? Will the deaths caused by the virus if left to its own devices outweigh the deaths caused by the economic crash in the long run?

I do wonder if the correct approach would have been to accommodate vulnerable people who voluntarily self-isolate to protect themselves but otherwise keep life as normal. Like I said though I don’t know enough about how bad this virus could actually be/have been. 

It feels slightly like old ground, but there were loads of unknowns, from mutations to who is vulnerable to a tipping point of the NHS being overwhelmed.

I guess it’s easier to work out if you don’t like your relatives that are over 55 or you have a financial figure in mind for the value of a nurse a pensioner and a kid with other complicating factors. 

Perhaps a more quantifiable question, could we have got track n trace and ppe and all that going earlier and better, rather than rely on just sort of bumbling along and leaving the airports open and allowing Cheltenham.

Perhaps the financial cost is largely down to incompetent emergency planning and a lack of preparedness? Rather than not having locked up the oldies.

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14 minutes ago, Spoony said:

I don’t know the in depth facts and figures so genuine question, is the lockdown worth it? It’s causes a huge economic crash. How many lives did the financial crash cost in 2008? Will the deaths caused by the virus if left to its own devices outweigh the deaths caused by the economic crash in the long run?

I do wonder if the correct approach would have been to accommodate vulnerable people who voluntarily self-isolate to protect themselves but otherwise keep life as normal. Like I said though I don’t know enough about how bad this virus could actually be/have been. 

The first priority had to be making sure the NHS had the capacity to deal with it, which it did in spite of the disastrous way the government dealt with it.  I do think we need to get as much up and running as soon as possible with social distancing measures in place and hope that if and when a second wave comes we deal with it a lot better.  My brother definitely needs to get some money coming in soon.

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I started a thread on this in March. It's going to be much worse than people think. 

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Just now, KenjiOgiwara said:

I started a thread on this in March. It's going to be much worse than people think. 

Yes, I don’t think many businesses have even started to think about steadying the ship financially yet. I expect from now until Christmas it’s going to be a horror show of large scale cutbacks and job losses with several big brands ground to the wall.

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47 minutes ago, Spoony said:

I do wonder if the correct approach would have been to accommodate vulnerable people who voluntarily self-isolate to protect themselves but otherwise keep life as normal.

Life wouldn't have been 'as normal' even if there had been no enforced closures, regulations, &c.

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50 minutes ago, snowychap said:

Life wouldn't have been 'as normal' even if there had been no enforced closures, regulations, &c.

I have a friend who is convinced the extra non-COVID related deaths and economic damage caused by the lockdown is worse than the COVID deaths under lockdown. I keep pointing out the current COVID death toll would likely to be 5 or 10 times higher without a lockdown.

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1 hour ago, brommy said:

I have a friend who is convinced the extra non-COVID related deaths and economic damage caused by the lockdown is worse than the COVID deaths under lockdown. I keep pointing out the current COVID death toll would likely to be 5 or 10 times higher without a lockdown.

It’s difficult to know though because even if the government had not forced people to stay at home by law a significant number would have done so anyway, especially those in vulnerable groups, so it is probably not possible to achieve that ‘worst case scenario‘. In the same vein telling everything to stay open would not have spared the economy because people would have voluntarily stopped going out and spending regardless. 

As noted above the best course of action is for a country to trace the virus with testing and isolate each case when they are found. If you are able to do that (like in South Korea has) you don’t need a lockdown and people don’t fear going out because you know where the infected cases are.

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8 hours ago, Genie said:

Cancellation of major infrastructure project must be on the horizon (HS2?)

Can't see it myself. Big infrastructure projects are what governments do in times of economic downturn, it helps keep jobs and boosts the economy

8 hours ago, Genie said:

as well as reductions in civil servants.

Thats been o the cards for a while but is ideological ("small government") and nothing to do with Covid. In theory they should also be increasing the amount of public workers to boost the economy

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Jaguar Land Rover (JLR) is in talks with the government to secure a loan of more than £1bn, following a drop in sales during the coronavirus pandemic.

According to reports, the carmaker has been in discussions for weeks about a support package.

JLR, which is owned by India's Tata Motors, has seen sales plunge by more than 30% in its most recent quarter.

A spokeswoman said JLR is in "regular discussion with government on a whole range of matters".

She added: "The content of our private discussions remains confidential."

How can the car industry hope to recover?

UK car sales plunge to lowest level since 1946

While the exact size of the loan is not yet clear, JLR said suggestions that the carmaker is seeking as much as £2bn is "inaccurate and speculative".

A spokesman for the Department for Business, Energy and Industrial Strategy said: "The government is in regular contact with the car manufacturing sector to assist them through this crisis. 

"We recognise the challenges facing the industry as a result of coronavirus and firms can draw upon the unprecedented package of measures, including schemes to raise capital, flexibilities with tax bills and financial support for employees."

JLR has taken advantage of the government's Coronavirus Job Retention Scheme and around 18,000 of its UK workers remain furloughed.

The Coventry-based company employs 38,000 people in the UK.

 

BBC Link

Not a huge surprise, hopefully there is a plan for the next couple of years that retains all the current staff (about 7,000 were released last year).

I expect a lot of VTers or their families/friends are reliant on JLR.

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17 hours ago, bickster said:

Can't see it myself. Big infrastructure projects are what governments do in times of economic downturn, it helps keep jobs and boosts the economy

Yep.

It's kinda unchartered territory this though. I wonder if global stagflation might actually become an issue.

Economics is a pretty difficult subject methinks, but some stuff is hard to make anything than what it is. Right now the interest rates get floored. It will worsen the already highly leveraged companies until a point where they can't see any other way out than pay back at an increasing rate. This will obviously affect spending. Less spending means less income for subcontractors and supplies, and there's a potential economic downturn. 

When it comes to the credit markets I think it's all very difficult. We saw in March they got ****. Then governments all around the world stepped up with QE and stimulus. But the notion that this will pan out as planned I'm unsure of. There's little insentive for banks for step up their risky asset plays when the alternative of holding has better value. 

I'm also struggling to understand how it's beneficial to give stupid amounts of financial aid to struggling companies, like for instance Boeing, instead of building up the working class instead. It's basically a company that's leveraged themselves on bonusess and share buybacks. Swear the US system is so broken or I'm too stupid to comprehend it. 

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17 hours ago, LondonLax said:

It’s difficult to know though because even if the government had not forced people to stay at home by law a significant number would have done so anyway, especially those in vulnerable groups, so it is probably not possible to achieve that ‘worst case scenario‘. In the same vein telling everything to stay open would not have spared the economy because people would have voluntarily stopped going out and spending regardless. 

As noted above the best course of action is for a country to trace the virus with testing and isolate each case when they are found. If you are able to do that (like in South Korea has) you don’t need a lockdown and people don’t fear going out because you know where the infected cases are.

Yes, this seems right to me. The only 'cheap' way to solve the crisis was to get the public health response right from minute 1. Once you've **** it - and we did - then there's only costly options left.

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22 hours ago, Spoony said:

I don’t know the in depth facts and figures so genuine question, is the lockdown worth it? It’s causes a huge economic crash. How many lives did the financial crash cost in 2008? Will the deaths caused by the virus if left to its own devices outweigh the deaths caused by the economic crash in the long run?

I do wonder if the correct approach would have been to accommodate vulnerable people who voluntarily self-isolate to protect themselves but otherwise keep life as normal. Like I said though I don’t know enough about how bad this virus could actually be/have been. 

It's a good question. I think a few weeks ago I wrote that to me it's all about minimising (ideally to zero) the number of avoidable deaths. By definition not isolating and clamp-downing etc. leads to avoidable deaths, and also by definition doing lockdowning causes other, (different) deaths. The optimum path has to be to lockdown very early, minimising the number infected, prevent new people coming in to the country, so that it doesn't re-start and re-spread. That's pretty much it. But it's also pretty hard to do - to lock down when there's only a handful of people unwell seems like a massive over-reaction, hence it doesn't tend to get done (though there are exceptions, usually with either a previous history, or with the advantage of remote location that allows them to see what's gone on before, elsewhere.

But an early lockdown, having good preparation in place would absolutely be the best way to deal with it. Not locking down the worst - at least in the short term. We know this much. What we don't know, as you say, is that by leaving it late and therefore having to do it for longer how much further additional damage and thus death is caused. Early lockdown, with only a few cases, once those are either cured or ended through death, you can open up again - so you're looking at a short lockdown, and fewer adverse consequences.

The UK messed up in so many ways, we're getting towards the worst end of both scenarios.

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Nearly 13,000 Boeing workers, mostly in the US, are set to lose their jobs in the coming weeks, as cuts at the American aerospace giant take effect.

More layoffs are expected, some of which may affect the UK.

The reductions had been expected since Boeing revealed plans last month to slash its global workforce by 10% - or roughly 16,000 jobs.

"I wish there were some other way," chief executive Dave Calhoun wrote in an email to staff.

Boeing has been reeling from a drop in demand for aircraft, as travel plunges amid the pandemic and worsens the pressures on the company, which was already in crisis following two fatal crashes of its 737 Max plane and the global grounding of the plane last year.

In April, customers cancelled more than 100 orders for the 737 and the firm said it had received no new reservations.

https://www.bbc.co.uk/news/business-52827377

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In the grand scheme of things, a glorious distraction. Trying to get the First Minister to give us more detail on his throw away line yesterday that there won’t be any chance of any crowds at sporting events this calendar year.

We are literally pinning a lot of hope on a definition of the word crowd.

With a clubhouse that is closed and has no outdoor seating area that’s the majority of our income stream gone.

Playing football behind closed doors simply isn’t viable, if that’s the plan then we close. We get gates of around 350 in a 2,500 seater stadium, we were practising social distancing for years. £8 by 350 punters Per home game pays to get the squad to north Wales every other week. With the bar closed and the gates closed we simply will not be sending a football team to the north Wales coast. 

Currently working out how you get people in the ground without queuing (pre pay / hands free terminal / vehicle gate not turnstile) and whether the rules can be changed for one season to have spectators allowed in front of the barriers.

We also have the potential perfect storm of having qualified for Europe, we will now have to rent someone else’s euro compliant ground, to then play the game behind closed doors. We passed every single criteria last year to host European level football, except one, the ball roll test, which we failed by 250mm. Paid for a revisit and a re test, and failed by 150mm. 

Interesting times.

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I find it alarming that stock prices have pretty much recovered, there was a huge dip in March, but prices are pretty much back to normal.

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On 26/05/2020 at 22:20, bickster said:

Big infrastructure projects are what governments do in times of economic downturn, it helps keep jobs and boosts the economy

that or invade Poland  .. the later option might be cheaper than HS2 and we'd get some decent sausages out of it :)

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20 minutes ago, Davkaus said:

I find it alarming that stock prices have pretty much recovered, there was a huge dip in March, but prices are pretty much back to normal.

Yup. I think the markets are already pricing in solid growth in 2021, and I'm not sure about that personally. Ofc the interest rates are the kicker here, as there's not much alternative, but right not the pricing is pretty bonkers.

What alarms me the most is the amount of dumb money in the market. Younger generations have started options trading like it was as normal as taking a bet on the Saturday match. Reddit subs like WSB and Investing just proves me suspicions. Just an enormous amount of idiots who are in the market gambling.

I could probably quote about 10 different investing legends that will say that's the trade mark of a huge down turn. That's the moment you should be vary. Maybe it doesn't crack in 2020, but you could easily have a collapse much bigger than what we saw this year next year. 

Uncertanties like how Wall Street will be treated by Biden relative to Trump is another huge red flag. There's not all presidents that will view their presidentship based on the market performances. 

Anyone with money to invest now I'd seriously recommend DCA and hold cash for as long as possible. The real wild card however is the interest rates. 

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