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UK hospitality and travel shares tumble after hints of second lockdown

Rob Davies and Richard Partington
·4-min read
<span>Photograph: Maureen McLean/Rex/Shutterstock</span>
Photograph: Maureen McLean/Rex/Shutterstock

New “circuit-breaker” restrictions designed to prevent a second wave of Covid-19 in England would have “astronomical” consequences for struggling businesses unless they receive further financial support, the government has been warned.

Boris Johnson is weighing up short-term plans to close pubs and restaurants, while parts of the north of England and the Midlands are already facing 10pm curfews on nightlife and tighter restrictions on socialising from Tuesday.

As shares in airlines, hotel groups and pub chains fell, multiple trade bodies called on the government to clarify its plans and ensure firms are not cut adrift financially.

Hannah Essex, co-executive director of the British Chambers of Commerce (BCC), said: “Uncertainty and speculation around future national restrictions will sap business and consumer confidence at a delicate moment for the economy.

“While protection of public health must be the priority, government should do everything in its power to avoid further national lockdowns that will cripple businesses.

She said any requirement for firms to close or reduce capacity through no fault of their own should be accompanied by a “comprehensive support package”.

Expectations of new restrictions came after the health secretary, Matt Hancock, refused to rule out a two-week nationwide lockdown as the “last line of defence”, hitting shares in some of the UK’s biggest companies.

British Airways owner IAG was the biggest loser on the FTSE 100, down nearly 15%, while easyJet fell by 9% and the aircraft engine maker Rolls-Royce lost 5%.

Pub companies such as JD Wetherspoons and Mitchells & Butlers, along with hotels groups Intercontinental and Whitbread also lost ground, as traders were spooked by the threat of closures.

Shares in NatWest, formerly known as RBS, slipped below £1 for the first time since the pandemic took hold, while Lloyds Banking Group was down by 3%. Both are seen as proxies for the health of the UK economy.

The hospitality sector has been particularly hard hit by coronavirus prevention measures.

A quarter of licensed premises still yet to reopen after the first lockdown and firms have issued dire predictions about the effect of any new curbs.

UK Hospitality boss, Kate Nicholls, said the sector was “on a knife edge”. Unverified rumours about lockdowns and curfews was hitting consumer confidence, she added.

“If lockdowns or restrictions are needed, they need to be formulated carefully, and come with government support, to minimise the damage to business,” she said. “Even relatively minor tweaks like a business having to close at 10pm rather than 11pm has a huge impact.”

Her counterpart at the British Beer and Pubs Association, Emma McClarkin, said: “Shutting down completely even for a short period, would be a monumental task, severely impact livelihoods and would come at an astronomical cost to the trade.”

The BBPA is calling for an extension of the furlough scheme for hospitality firms, as well as an extension of the VAT cut, a business rates holiday and lower beer duty.

Michael Kill, the chief executive of the Night Time Industries Association (NTIA), urged ministers to be cautious about targeting hospitality firms, including struggling pubs, clubs and bars, with Covid-19 curbs.

“Curfews are devastating for our sector,” he said. “We are concerned about the narrative around hospitality being at partial blame for what’s going on. There have been schools and universities going back, illegal parties, households, that have all contributed in different ways.

“If we end at 10pm in the evening, we’ll end up with people looking for those additional hours, whether it’s an illegal event or continuing the party at a household.”

Analysts at the stockbroker IG said the possibility of London being included in lockdown restrictions had sharpened fears among investors.

“While localised restrictions have become somewhat normalised of late, the economic importance of London means we are likely to see a more significant market reaction if the growth in cases leads to significant economic consequences,” said the senior market analyst Joshua Mahony.

“With the growing likeliness of quarantine restrictions being imposed on UK visitors, it comes as no surprise to see the likes of IAG, easyJet, Carnival, Rolls-Royce, and InterContinental Hotels Group heading up the FTSE 350 losers,” he added.