VICTORIA BISCHOFF: A mortgage break could be a very costly ‘holiday’

VICTORIA BISCHOFF: A mortgage ‘holiday’ might not affect your credit scores but it could still have costly consequences

As the pandemic tore through the nation’s finances in the spring, the promise of a mortgage holiday seemed like a vital financial lifeline for millions of hard-pressed families.

But how many of those who jumped at the chance will come to regret it?

When Chancellor Rishi Sunak first pledged mortgage support in March, ministers were at pains to reassure borrowers that their credit scores would not be affected if they took a payment break.

Even a three-month mortgage holiday can have lasting and costly consequences on your personal finances

Even the phrase ‘mortgage holiday’ sounded harmless. Yet it’s now becoming clear that, far from a carefree break, even a three-month hiatus can have lasting and costly consequences.

Most homeowners assumed that if a payment break wasn’t recorded on their credit file, it would have no impact on their ability to borrow in the future. But, disgracefully, this isn’t the full story.

Lenders have other ways of finding out about it. They can demand that borrowers declare it on applications, or see it via bank statements — and many banks and building societies won’t like the extra risk they associate with it.

Some firms say it is not the mortgage holiday itself that acts as a red flag, but the reason behind it, such as a pay cut.

And while it is right that firms don’t lend to customers who cannot afford to repay debt, more should have been done to warn the nearly two million borrowers who have taken payment holidays since March of potential repercussions.

Struggling to cope with a flood of requests, banks initially took borrowers at their word when they said they needed to halt repayments due to the pandemic.

But it’s clear now that not everyone who took a break really needed one. Some took one as a precaution in case they were later furloughed or lost their job. Others saw the scheme as a chance to save a bit of cash so they could finally do up their house or garden.

Banks have become wise to this and are now clamping down. But it’s a balancing act. Lenders may be right to take a tougher stance, but as we reveal on Page 44, it means that some who really are in need are also being turned away.

Anyone contemplating a mortgage break must remember they are not being given a holiday from interest charges.

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These continue to accrue over the break and are added to your debt, which can mean you will pay thousands of pounds extra over the loan’s lifetime. It’s crucial you resume your repayments as soon as possible and, if you can, clear the interest that has built up.

Mortgage holidays are proving a crucial aid for many — but they should be a last resort. Above all, desperate families who followed the Chancellor’s guidance must not be penalised in future by banks who never take a holiday from trying to screw every last penny out of their customers.

Savvy spenders

My favourite local Italian restaurant closed its doors last week. Like so many new small businesses, it just didn’t have the cash reserves to survive Covid-19.

It is a bitter blow for our local high street — one that is being echoed up and down the country as shops, pubs and restaurants face going to the wall. Money Mail will always promote thrift — but if you can, now is the time to loosen the purse strings a little.

As we have previously reported, many people are better off than ever thanks to lockdown. And while you shouldn’t abandon your new savings habit, spending a little extra could help save businesses.

The launch of Dishy Rishi’s Eat Out To Help Out scheme this week means you don’t even have to spend that much.

Book a table at a participating restaurant Monday to Wednesday and you’ll get 50 per cent off your meal, up to £10 per person. You don’t need a code or coupon — the money is automatically deducted from your bill.

I understand that many people are nervous about venturing out, or put off by the idea of waiters in masks, but if we don’t support our High Streets now, they may not survive to celebrate the end of social distancing with us when that time finally comes.

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MAGGIE PAGANO: UK manufacturing needs a boost

It is too early to bring out the champagne, but a big slice of British industry is back in business. 

Factory output rose in July at its fastest rate since November 2017, giving fresh hope the economy is moving towards a V-shaped recovery. 

Pollster YouGov’s consumer confidence indicator has also shot up into positive territory for the first time since before the crisis struck. 

Back to work: Factory output rose in July at its fastest rate since November 2017, giving fresh hope the economy is moving towards a V-shaped recovery

But it’s the IHS Markit’s purchasing managers’ index which is the crucial guide to what is happening on the ground. 

The latest figures show that manufacturing activity rose from 50.1 in June to 53.3 in July. Any score above 50 indicates growth, so we now have two months above the neutral line. Admittedly, the bounce back is from a low base as industry was more or less closed down or in deep freeze between March and May. 

Even so, the PMI index shows the sharpest rise in new order volumes since the end of 2018. Business sentiment is also at its highest in 28 months. 

There was further heartening news from across the Channel where manufacturers across Spain, France, Germany and Italy also all recorded growth in July. The average eurozone PMI was 51.8, showing that industry is finding its feet although not at as fast a pace as the UK. Among the brighter spots were energy, chemicals and pharmaceuticals and, despite the hospitality lockdown, the food and drink industry. 

By far the worst sectors hit were the aerospace, automotive and steel industries, which have suffered catastrophic losses because of the pandemic. 

To put the crisis into context, global air traffic is forecast to fall by 45 per cent this year while airlines are likely to lose around £250billion in revenue. 

But there were some interesting trade-offs too. Many factories showed remarkable ingenuity by switching production to the new essentials such as PPE. Yet while the July data is cause for optimism, we are not out of the woods. 

There are still swathes of British manufacturing set to shed tens of thousands of jobs once staff come off their furlough schemes. 

The impact will be felt at every level of industry, and is already hurting the young. 

Apprenticeship starts in May were down 60 per cent compared to the same month last year, while starts for learners aged 16-18 fell by 79 per cent. Industrialists are preparing for the worst, and have learnt from past crises. 

Make UK, the manufacturers’ trade body, was so worried by the 3,000 job losses at Rolls-Royce that it approached the Government to set up a National Skills Task Force to help people retrain. 

Make UK now wants to work with employers and unions to ensure that skills are not lost, while helping those who have lost their jobs to learn new skills. Not surprisingly, one potential boom area is digital technology. Like it or not, Zoom is here to stay. Five-year plans to introduce augmented reality and AI into corporate life have been catapulted into action in five months of lockdown. 

Talks between Make UK and the Government are ongoing about setting up a national task force. It’s an excellent idea, and you have to ask why it is not up and running already. Britain’s manufacturing may be only 10 per cent of the economy but it’s a vital part, accounting for £191billion of output, two thirds of all R&D spending and 2.7m largely well paid jobs. With a little nudge, industry could provide thousands more.

Bond thriller 

Who needs a James Bond movie when you have the story of Petropavlovsk? 

In the hot seat is the co-founder, the swashbuckling gold bug, Peter Hambro, who has returned as chairman to sort out this thriller of a tale. He is at odds with Russian oligarch, Konstantin Strukov. Both want control of gold mines in the far east of Russia. 

The battle is on a knife-edge, and it’s private investors, with about 15 per cent of the shares, who get to decide who comes out the winner at next Monday’s meeting. Strukov’s camp has 38 per cent. Prosperity Capital Management, other institutions and the board have about the same. 

Investors – and I declare an interest with a handful of shares – should back the existing management and vote in favour of motions one to six and against the rest. 

They need to move fast to get their votes in as proxies close this Friday. Hambro was always cut out to be a Bond hero.

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RUTH SUNDERLAND: Does Boris have a grip on Covid economics?

RUTH SUNDERLAND: One hopes that alongside his medical advisers, PM Boris Johnson is also listening to those at the sharp end of the economic emergency

  • The Big Four banks have lent like there is no tomorrow to keep their customers afloat 
  • Joblessness could be worse than the Boys from the Black Stuff era of the 1980s 

If anyone is in any doubt over the economic consequences of the pandemic, I advise them to spend half an hour or so looking at the big banks’ results. 

The Big Four have lent like there is no tomorrow to keep their customers afloat, in the full knowledge that billions of pounds of this borrowing will never be repaid. 

Even allowing for the fact that you and I, as taxpayers, are underwriting large chunks of the money, the high-street lenders have been forced to set aside enormous sums to cover bad debts. 

Gathering storm: High-street lenders have been forced to set aside enormous sums to cover bad debts.

Accounting geeks will know that some of this can be put down to changes in the rules in the aftermath of the reckless lending that fuelled the financial crisis. The banks these days have to recognise expected loan losses far earlier than they did in the past. It’s possible the pendulum has swung too far and they are now being excessively prudent. 

Some suspect there is an element of ‘kitchen-sinking’, or over-egging the likely loan losses under cover of the virus. 

If that’s so, then in future they will be able to add back some of those write-offs, and, through sleight of hand, boost their profits, dividends and, of course, their bosses’ bonuses. The more alarming prospect, however, would be if things turn out to be every bit as bad as the banks expect. 

Delve into their figures and you will find that, in its worst case scenario, Lloyds says unemployment will peak in 2021 at 12.5 per cent, national income will shrink by 17.7 per cent this year and house prices will fall by just under 30 per cent over a three-year period. 

Gulp. Over at NatWest, the bank formerly known as RBS, it’s no better. Its economists foresee a worst case of unemployment running at 14.4 per cent this year, with the economy contracting by nearly 17 per cent. 

Joblessness on this scale would be worse than the Boys from the Black Stuff era of the 1980s, when UB40 sang of the ‘One in Ten’ on the dole. Whilst I am optimistic that the economy can still bounce back strongly, I’m not convinced people have grasped how bad things could become if complacency and loss of confidence take hold.

Perhaps some have been seduced into thinking they will be protected by Rishi Sunak’s capacious safety cushion of furlough cash, mortgage ‘holidays’ and cheap loans to keep businesses afloat. 

This is a fools’ paradise. No Treasury in the world, and no group of bankers, are able to wave a wand and make the pandemic damage disappear in a puff of smoke. 

And, having enjoyed several years of a booming jobs market, there is a generation of people who have little inkling just how much anguish unemployment creates, for families and for communities. 

Around the world, economies are taking a battering and the dole queues are getting longer. The US has suffered its worst contraction since the Second World War and 17 million Americans are out of work. 

The European Union has been hit by the sharpest decline since official figures started 25 years ago. This week the Bank of England’s Monetary Policy Report will give its view on the UK outlook and it will be grim. 

Whatever one’s view on the effectiveness of the clampdowns in northern England on the spread of the virus, there can’t be much doubt that they have a chilling effect on confidence and local economies. 

It is not a case, as it is sometimes portrayed, of a crude choice between the economy and protecting the populace against the virus. The health of the nation and its wealth are in lockstep. One hopes that alongside his medical advisers, Boris is also listening to economists, bankers and the businessmen and women at the sharp end of the economic emergency.

HAMISH MCRAE: John Lewis is a rare beacon of hope

When there are seismic shifts in the economy, the companies that will triumph are those that can get ahead of social and economic change rather than be beaten by it.

And that is why the John Lewis Partnership should be a beacon for other enterprises faced with a massive challenge.

For some firms, obviously the US high-tech giants, the past few months have been one of those once-in-a-lifetime opportunities to stride even further ahead.

Adapting to the crisis: John Lewis is looking at converting empty shops into housing 

Amazon has just reported that its revenues are up 40 per cent in the second quarter. For a giant company, that scale of boom is off the charts. It is getting five years of natural growth in a couple of months.

It is not alone. In the space of a few hours Amazon, Facebook, Apple, and Alphabet, the parent company of Google, all beat Wall Street’s estimates of their earnings. Their shares duly shot up.

But if you are in a business that by its very nature has benefited from the impact of the coronavirus, then that is what happens. If you run department stores and supermarkets in British cities, as John Lewis and Waitrose do, it is very different.

This is not about coping with a boom. It is about survival. That is why what they are doing is a beacon for other businesses.

I confess to being an admirer of the Partnership, partly because it is the most successful employee-owned business in the land, but more because of its service and quality.

You know the joke that if you get an early warning of some impending disaster, get to your nearest John Lewis because nothing bad ever happens there.

Well, something very bad indeed has happened to high street retailing and the company has already announced that eight out of its 50 department stores are going to close. We have now got some details of what, under its new chair, Dame Sharon White, it plans to do with the space.

Firms must be prepared to change if they are to triumph 

It will be used for private and affordable housing. More and more of the business will be pushed online, with the John Lewis department stores expecting to generate up to 60 per cent that way, and Waitrose up to 20 per cent.

This is naturally devastating for the partners who will be made redundant. Nothing can take away the pain of that. All credit to its people who have come up with ideas for expansion, including a move into horticulture.

But the main message here is that we can be confident that the group will survive, not something than can be said about some other retailers.

So it is always better to assume that the changes will be greater than most people expect and plan for that, because you can always row back later.

There is a general example of this now in the shift to online working. We have no idea whether if will be viable in the long term for businesses to have a majority of staff working from home.

NatWest plans for 49,000 of its 65,000 people to carry on working from home until next year

NatWest plans for 49,000 of its 65,000 people to carry on working from home until next year

A lot of employees like it, or say they like it, but what works for a few months does not necessarily work for years. If staff are used to working together they can carry on doing so. But how do you build morale, train new recruits, give a business drive? 

NatWest plans for 49,000 of its 65,000 people to carry on working from home until next year. Barclays also has many staff home-working, but wants to get people back to the office.

Its chief executive, Jes Staley, explained: ‘We want our people back together, to make sure we ensure the evolution of our culture and our controls, and I think that will happen over time.’

That must surely be right. Culture and control are two key elements in every business and both can go dreadfully wrong. The banking industry can give us plenty of examples of that.

But the chances of something not being picked up are surely even greater if your people aren’t in the office and you can’t see what they are doing.

It is easy to see the winners from these searing changes to all of our lives. It is easy to spot the losers too. I am afraid it will take years for travel and tourism to recover.

The hard thing to judge is how well companies in the middle – neither obvious winners nor obvious losers – are coping. But as a general rule it is those that make the radical, often painful, decisions early that will end up stronger.

And those that wait, like Charles Dickens’ Mr Micawber, for something to turn up, will find that it doesn’t – or at least not in time to save them.

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TOBY WALNE: It’s $2,000 an ounce, but should you join the gold rush?

It’s $2,000 an ounce… but should you join the gold rush, asks TOBY WALNE

A rush of investors seeking a safe haven from stock market turmoil is pushing the gold price close to a mythical $2,000 (£1,538) an ounce.

Fears of a second coronavirus wave causing another lockdown have seen demand for gold bars and coins among first-time gold buyers rise by more than 1,100 per cent over the past fortnight compared to the same time last year, according to bullion trader Pure Gold Company.

Yet many investors are understandably wary that the soaring price of this precious metal might eventually come tumbling down.

So is it too late to join in the gold rush? Most experts think it has become risky to buy at the current price – even though it could yet go higher.

Risk: Gold is seen as insurance amid the stock market turmoil

Crucially, the booming market is being driven by people hedging against a future economic crisis – not trying to get rich quick. 

Josh Saul, chief executive of Pure Gold Company, says: ‘Clients fear they may have missed out on the gold price gains from December last year to now, when gold has risen in value by more than 30 per cent.

‘But they are not buying purely for growth – but as an insurance policy. The higher the risk, the more expensive the insurance – and with the price of gold having risen, this provides an indication of how the market perceives the world during these times of great economic uncertainty.’

Earlier this week gold hit $1,981 (£1,523) an ounce before falling back down to about $1,975.

This record price is above the previous high of $1,921 an ounce reached in September 2011 during the European debt crisis – before it then fell.

With economic uncertainty remaining on the horizon the possibility of breaking through this $2,000 barrier is real – though not necessarily a reason to invest.

Confidence over the economy has been further dented by a resurgence of Covid-19 cases in Europe, reinforced by last week’s decision to reimpose quarantine rules for those travelling to Spain. 

On top are concerns that the printing of more money by the US Federal Reserve, Bank of England and European Central Bank might not be enough to fend off growing worries of a recession.

This so-called quantitative easing tactic to boost economies also runs the risk of devaluing currencies – making base metals such as gold seem relatively more attractive. 

Adrian Lowcock, head of personal investing at broker Willis Owen, says: ‘We think gold could easily break through the $2,000 mark this year. But it is fair to ask after a rally of this magnitude if gold has any value left for investors.’

If you think the gold price is going up – or will stay high as other assets fall back – one of the simplest ways to invest is through a fund that tracks the price.

Jason Hollands, managing director of adviser Tilney Bestinvest, says: ‘Thankfully, these days investment in gold no longer requires physical possession of the metal or even investing indirectly through volatile gold mining shares.

‘A far simpler way to get involved is through an exchange traded fund – an investment vehicle listed on the stock market that tracks the price of a physical asset. These can also be included in your Isa or pension.’

Gold tracker funds include Invesco Physical Gold ETC, listed on the London Stock Exchange. It replicates the performance of the London Bullion Market Association Gold Price charging just 0.19 per cent a year. Another is ETFS Physical Gold. 

Last week gold hit $1,981 (£1,523) an ounce before falling back down to about $1,975

Last week gold hit $1,981 (£1,523) an ounce before falling back down to about $1,975

A number of actively managed investment funds also put money into firms involved with gold – usually through mining stocks. Gold funds include BlackRock Gold & General and JPM Natural Resources.

Hollands says: ‘Funds which invest in the shares of mining companies rather than bullion are not for the faint-hearted. The cost of extraction is high so profits are sensitive to changes in the underlying price of base metal. You can have periods of stellar returns followed by steep losses.’

Hollands points out that year to date global gold mining equities are up more than 48 per cent compared to the 30 per cent rise for bullion prices.

Investors that want the real thing can also buy shares in a 400-ounce, 24-carat gold bar for just a few pounds directly from a bullion trader, such as BullionVault or the Pure Gold Company.

You can also invest in gold coins. Sovereign and Britannia coins are deemed legal tender, so escape capital gains tax if they rise in value. A Sovereign is currently worth about £380. 

MAGGIE PAGANO: Should we break up tech behemoths?

MAGGIE PAGANO: Should big tech behemoths be broken up like Theodore Roosevelt axed Standard Oil and telephone companies in the 1920s?

  • Big tech is enjoying what can only be perversely described as a good lockdown
  • Would breaking tech giants up benefit the customer? 

While much of corporate America, from airlines to hospitality, has been savaged by the pandemic, big tech is enjoying what can only be perversely described as a good lockdown. 

The big four – Apple, Amazon, Facebook and Google’s parent Alphabet – posted combined quarterly sales of £156billion from April to June, and all reported higher profit. 

Unsurprisingly, Amazon came out top with a record quarter of £68billion in sales, sending its shares shooting up 4 per cent. Another £4billion or so was added to the Bezos wallet. 

Centre of the universe?: Apple, Amazon, Facebook and Google’s parent Alphabet posted combined quarterly sales of £156billion from April to June

Yet the rise in value of the tech giants was all the more astonishing because it came just hours after their chief executives were grilled on Capitol Hill about their alleged abuse of monopoly power and global dominance. 

Perhaps just as well that the results did not come out until a day after the hearing, on what was dubbed ‘Super Thursday’ so the congressmen were not armed with fresh proof of just how powerful and profitable they are. And the fact all four reported on the same day meant none could be singled out. Strength in unity, as the saying goes. 

As it was, Apple’s Tim Cook, Amazon’s Jeff Bezos, Alphabet’s Sundar Pichai and Facebook’s Mark Zuckerberg squirmed and struggled to defend themselves during what was a combative hearing in which they did not for once have all the slick answers.

Zuckerberg admitted to ‘neutralising’ rivals, and has already described his purchase of WhatsApp and Instagram as a ‘digital land grab’. 

Even Bezos sweated when asked about a bookseller being taken out by his Amazonian beast. 

What a land grab it is. The four horsemen control nearly all that we do on the internet: selling apps, sending messages, pestering us with ads, stealing news, answering people’s questions and buying just about everything one wants. 

This is extraordinary power. Fortunately, the US politicians are serious about discovering how this power works, how it is wielded and if necessary cracking down on their reach. The sub-committee of the House Judiciary Committee has been investigating their dominance over the internet for a year now, and came well prepared with ammunition to show how the tech titans have been responsible for bullying and destroying small businesses. 

That’s on top of charges that big tech controls how we are surveilled and our data manipulated, that Facebook spreads misinformation and censors, while Amazon handles laundered goods. 

But what should the policymakers do? Should the big tech behemoths be broken up in the same way Theodore Roosevelt took the axe to Standard Oil and the telephone companies in the 1920s? Or can their power be reined in by higher taxes and stiffer regulation? 

It’s a daunting dilemma. On the one hand, there is a strong argument that the West should support rather than demonise these great success stories, because the real threat is China. Nearly half of the world’s biggest online firms – including Alibaba and JD.com – are Chinese, and they are growing fast. 

There is another point. Would breaking them up benefit the customer? As most of us could testify, going through lockdown without Facetime on our mobile phones and Amazon to shop online may have been tougher still. 

But not impossible. As we also saw during lockdown, small business owners snapped into action and came up with the most enterprising solutions. Now what we need is a fairer environment in which smaller social media outlets or online retailers can compete before being crushed by the big guns. 

How can a more level playing field be achieved? Well, US politicians should look to the Australian government for inspiration. It has announced plans to force Google and Facebook to pay news outlets for content in an attempt to prevent the country’s media from being ravaged. 

If they don’t pay, the Australian regulators will fine them hundreds of millions of dollars. Facebook and Google have already threatened to walk away rather than pay for news. Good. Let them walk. 

Unusually, there is cross-party support for change. Both the Republicans and Democrats want to see big tech reformed, to varying degrees and for different reasons. 

But don’t hold your breath, certainly not until after the November US elections. Which is why the share prices of the big tech corporations largely stormed ahead after their results. Investors take the view that the regulators will not be cracking down any time soon. 

ALEX BRUMMER: US economy a worry for Whitehall

ALEX BRUMMER: US economy is in terrible shape and that should be a worry in Whitehall since America is our single biggest trading partner

August has often been a month of nasties for financial markets, and the portents for this year are not great. 

The headline 32.9 per cent collapse in American output in the three months to the end of June, the worst such number since the first quarter of 1946, is truly horrendous. 

It was enough to frighten President Trump into musing on Twitter that Covid-19 and the surge in postal voting could lead to a fraudulent presidential election in November. 

Going in the wrong direction: Any hope that the normally resilient US economy would achieve the dreamed of ‘V’ shaped recovery has faded

The US economy is in terrible shape and that should be a worry in Whitehall since America is our single biggest trading partner. Forging a trade deal with the US is critical to the vision of global Britain. 

The only grain of comfort to be drawn from the US data is that it is measured on an annualised basis. On the simpler standard used by the UK, the decline is actually 9 per cent which is relatively modest when compared to the 19.1 per cent fall in GDP in Britain in the three months to May. 

The jobless picture in the US is also alarming. Another 1.4m-plus workers made claims for benefits in the period to July 18, bringing the total on the dole up to over 17m. Any hope that the normally resilient US economy would achieve the dreamed of ‘V’ shaped recovery has faded as Covid-19 hotspots have sprung up. 

For the moment, the White House is faced with a reverse ‘L’ – a plunge in output followed by a period of flat lining. 

Wall Street, which has been mesmerised by the earnings heft of big tech during lockdown and has tended to ignore miserable economic data, plummeted more than one per cent and the concern must be this is the start of something worse. 

Why should one fear August? Traditionally, it is the month when the top traders are on their yachts or in the Hamptons, and it is lesser mortals who lead the market charge. Here in the UK it was the month in 1992 when sterling began its journey out of the exchange rate mechanism (the precursor of the euro). It was also the month when the run on Northern Rock began in 2007 and when the fate of Lehman was sealed a year later. 

Have courage.

Final curtain 

The pandemic is proving the ultimate stress test for global banking. 

Changes in the way the banks set aside funds for future losses are catching the market by surprise, with provisions at Lloyds Bank in the first half of the year 60 per cent higher than predicted. 

The best case scenario is that super-cautious chief executive Antonio Horta-Osorio wants to go out on a high and has front-loaded the potential damage, resulting in a £3.8billion provision in the first half – leading to a cash loss of £560m. 

Certainly, Santander earlier this week took the chance to kitchen-sink the goodwill in its accounts, which dates back more than a decade. 

My suspicion is that the outlook is every bit as gloomy as the Lloyds provisions would suggest. 

The strain on the household finances of millions of ordinary citizens in the pandemic is huge. 

Even though Covid-19 loans might have a government indemnity, pre-pandemic credit of all kinds – from mortgages to credit cards and motor loans – could go badly wrong. In previous downturns in Britain the biggest problem has been the property sector turning sour. History is likely to repeat itself. The fashion for home and flexible working will take a toll on office values. 

Even more seriously, Covid-19 has been a killer for city centre and secondary shopping mall stores and eateries. 

Loans to retail groups will have to be rescheduled or written off and the bloodbath could be every bit as great as after the financial crisis. 

The markets are taking a dim view of bank shares and Lloyds stock, widely held by private investors, plunged 7.6 per cent to the lowest level in eight years. 

That is not the legacy of which Horta-Osorio has been dreaming.

Snap back 

Kodak has long been considered a bombed-out photographic company with a dominant brand, a sinking business and desperate for a deal. 

This week it joined the pharma frenzy after the Trump administration lent it £600m to turn over its factories to making ingredients for Covid-19 medicines. 

The stock soared 16 times from $2 to more than $30. Say cheese. 

ALEX BRUMMER: Worst not over for bank share investors

Jes Staley has had more than his fair share of ethical issues to deal with, but his judgement that Barclays is Europe’s most credible investment bank is valid. 

The chief executive’s strategy has knocked the divestment campaign of maverick investor Ed Bramson of Sherborne out of the ball park. 

Volatile markets in the pandemic produced a rise in foreign exchange, bond, debt and share trading, providing a hedge against dreadful Covid-19 loan losses. 

Alarm: Barclays, led by Jes Staley (pictured), tells us how bloody the pandemic is going to be for the big lenders

The underlying numbers from Barclays, and even more dispiriting results from Ana Botin’s Santander, do not augur well for Natwest and Lloyds, which lack other streams of income. 

Barclays tells us how bloody the pandemic is going to be for the big lenders. 

In the worst scenario, the Office for Budget Responsibility estimates that, of the £50billion or so of Covid-19 lending, some £32billion could be rotten and land on the Exchequer. The bounce back scheme is 100 per cent guaranteed by the Treasury but banks are exposed to at least 20 per cent of the other bailout credits. 

Banks cannot divorce themselves from the daily toll of administrations, recapitalisations, insolvencies and credit card defaults. Loan losses in the first half of this year for Barclays were a hefty £3.7billion. 

What will be alarming for all holders of bank shares will be the £593m provisions at Barclays’ consumer arm, mainly from credit cards. At Lloyds, Antonio Horta Osorio doubled down on credit cards in 2016 when he splashed out £1.9billion on MBNA. 

Santander UK looks like a bloodbath. Botin has taken the axe to the goodwill in the accounts dating back to the purchase of Abbey National in 2004, resulting in a writeoff of £5.6billion. 

The Spanish-controlled bank has taken advantage of a health scare to get all the bad stuff out there, resulting in a charge of just under £18billion when global write-offs and pandemic loan losses are added together. Any idea Madrid may have had of cashing in on Santander UK through a flotation look to be dashed. 

Botin’s great hope rests on its Brazil and Mexico operations which have been flourishing. Given, however, that Brazil is among the countries most affected by coronavirus, it isn’t necessarily going to be much of a counterweight to difficulties elsewhere. 

The best that can be said from this first batch of bank results is that Covid-19 is testing the banking reforms post-financial crisis, and so far so good. Buffers built up in good times have supported lending and, by putting the lid on dividends and bonuses, capital has been conserved. Banks are unlikely to emerge unscathed. The scale of loan losses and writedowns is alarming. 

It wouldn’t be surprising if investors in bank shares could be tapped up for more equity before the nightmare is over.

Lifeguards 

As a global leader in vaccines, Glaxosmithkline should be flying in the pandemic. In creating a Covid-19 vaccine it is on the high road in partnership with Sanofi, and a big order of 60m of doses from the Government should be a confidence booster. 

Paradoxically, the closure of surgeries globally means, with the exception of children’s inoculations, the vaccine arm has been punished. 

Much attention at Glaxo will be on the first-half earnings shortfall and there will be unfortunate comparisons with Astrazeneca, which strengthened its oncology medicines this week with a £4.8billion investment in Japanese pharma company Daiichi Sankyo. 

Glaxo is not standing still. Its vaccine for respiratory syncytial virus, a big cause of deaths among children under one, has passed a significant regulatory hurdle.

It is also effective on older people and could save up to 14,000 lives a year among this group in the US. 

The more serious issue for Astra and Glaxo is the ethical scrutiny of one-off Covid vaccine deals with the UK and other Western democracies. 

Bad Arm 

Open war has broken out between smart chip designer Arm and its former whollyowned Chinese offshoot. 

Beijing-supporting staff have rallied behind Arm China boss Allen Wu, who the Cambridge-based company accuses of disruptive behaviour. 

Owner Softbank’s sale of a 51 per cent stake in Arm China to Chinese interests is a giant security, technology and geopolitical error. So predictable, and so depressing. 

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ALEX BRUMMER: Thierry Bollore parks at Jaguar Land Rover


ALEX BRUMMER: Thierry Bollore making big jump in moving from mass production Renault to image-driven luxury sector of Jaguar Land Rover

  • JLR’s far bigger and better resourced rivals, BMW and Daimler, are throwing everything at developing electric cars that can compete with soaraway Tesla
  • It is reported that JLR is seeking a large credit of more than £1billion from the Government’s Project Birch aid scheme

Jaguar Land Rover (JLR) has reached out to car-making royalty in the choice of its new chief executive, Thierry Bollore, who is a refugee from Renault in the aftermath of the Carlos Ghosn scandal. 

He arrives at the Tata Motors-owned car maker at a desperate time. 

JLR’s far bigger and better resourced rivals, BMW and Daimler, are throwing everything at developing electric cars that can compete with soaraway Tesla. The luxury British manufacturer has so far developed just one e-model, the Jaguar I-Pace. 

Leap of faith: Thierry Bollore arrives at the Tata Motors-owned car maker at a desperate time

The key to JLR’s success in modern times has been its focus on design. It now finds itself hamstrung by a lack of scale compared with competitors. It ran up a loss of £500m in the three months to March before experiencing the very worst of lockdown. 

It is reported that JLR is seeking a large credit of more than £1billion from the Government’s Project Birch aid scheme. 

Chancellor Rishi Sunak is being extremely tough with commercial firms seeking favours, particularly those which have rich proprietors. 

Sunak’s tough line with Richard Branson’s Virgin Atlantic eventually unlocked personal capital from the entrepreneur and matching funds from its co-shareholder Delta in the US.

Tata Motors is run and financed independently of India’s Tata Group, its ultimate controlling investor. 

But as Tata is among India’s most successful group of companies, one understands why Sunak might be loath to write a taxpayer cheque. 

In much the same way as Rolls-Royce is key to British aerospace, so JLR is a vital component of Britain’s motor industry and home to that most iconic of British vehicles, the Land Rover. It is unthinkable that it would be allowed to fail. 

It is not what has happened to JLR’s finances in the peak of the pandemic which is important but what comes next. JLR has begun adjusting, with redundancies of 1,000 staff and £1billion of savings. This on top of a previous package of efficiencies.

Its revival under Tata Motors ownership has been a triumph for overseas investment in the UK. But it has reached a crossroads. The two big issues for car makers are overcapacity and building greener cars. 

Bollore has vast experience of both. However, he is making a big jump in moving from mass production to the image-driven luxury sector.

Cleaning up 

Reckitt Benckiser is among a small group of British companies equipped to be a long-term winner from Covid-19. Its brands, from Dettol to Cillit Bang, are what every household needs. 

So it is no surprise that operating profits powered ahead in the first half of the year. Chief executive Laxman Narasimhan has ramped up a new ‘solutions’ service for companies ranging from Delta Airlines to Avis seeking to improve hygiene. 

In a world of deep cleaning and disinfecting Reckitt is perfectly placed. Compass, Mitie and big outsourcers may regret they didn’t get there first. But they don’t have the products, research centres or brands. 

The 25 per cent uplift in the share price since the start of the year suggests that investors trust Narasimhan. His predecessor Rakesh Kapoor had a torrid time, including having to handle a death toll in South Korea from a poisonous chemical in humidifiers, complaints about misleading marketing of Nurofen and the opioids legacy parked at spin-off Indivior. 

Another inheritance is Narasimhan’s next problem. The accounting punishment of writing down baby food maker Mead Johnson has been taken. Performance is suboctane, with sales falling 4.8pc in the second quarter. Reckitt is known for skill in polishing up bombed-out brands, but the baby formula has defied the magic touch. 

Turning it around will be trickier than flogging Dettol in a pandemic.

Shop talk 

Selfridges is a store group owned by wealthy people, offering great choice and service for well-heeled tourists. 

But with the travel industry nearly at standstill, trade has ground to a halt. The group is having to adjust which means 450 staff, 14 per cent of the workforce, face redundancy. The Weston family-controlled enterprise plans to reshape and focus online. 

One can’t but feel that the department store concept is based on a glamorous shopping experience. That can’t be replicated on mobile devices. 

VICTORIA BISCHOFF: Covid-19 widens gender pay gap


VICTORIA BISCHOFF: Coronavirus crisis set to throttle women’s earning potential further, widening already hefty gender pay gap

A friend recently shared what lockdown life has been like for his family.

His wife is up and at her desk by 4am. He rises at 5am to do an hour of work before getting their two young children up, dressed and fed. She takes over at 10am so he can go back to his desk, and then he tags back in for the lunch shift. She relieves him around 2.30pm and looks after the children until he finishes his work around 8pm. 

Just hearing about it had me reaching for a large glass of red. 

Under pressure: Women have provided two thirds more childcare than men during lockdown

Believe it or not, they are the lucky ones. Not everyone can work from home or has a job flexible enough to fit around childcare. 

And even if it is, this stressful juggling act often isn’t sustainable for long. 

This has forced many parents to reduce their hours and take a pay cut or give up work entirely. 

And when I say parents, the statistics say women. 

Women have provided two thirds more childcare than men during lockdown, Office for National Statistics figures revealed last week. A separate study of almost 20,000 working women, also published last week by campaign group Pregnant Then Screwed, claimed that almost three-­quarters of mothers have had to work fewer hours because of a lack of childcare. 

Mothers are also 47 per cent more likely than fathers to have permanently lost or quit their job as a result of the current crisis, according to research by the Institute for Fiscal Studies.

For many women, having a baby can already be an enormous financial blow, hitting their pay, pensions and career progression. 

Few couples opt for shared paternity leave, with women still far more likely to take more time off work than men to raise children. 

Now the coronavirus crisis is set to throttle women’s earning potential further, widening the already hefty gender pay gap. 

Earning less will also have dire consequences for women’s pensions, which were already significantly smaller than men’s before Covid-19, not to mention their mental health and sense of worth. Women are already more likely to work in industries hit hardest by the crisis such as retail and hospitality. 

Those who have been furloughed or forced to reduce their hours to look after youngsters now fear they will be first in the firing line when it comes to redundancies or being passed over for future promotions.

But with schools and summer camps closed and nurseries unable to open or restricted on numbers, someone has to stay at home with the children. 

And with men still more likely to be the main breadwinner, the default is often for the mother to take on this role. 

The Government urgently needs to bolster its childcare funding and throw a lifeline to the thousands of nurseries, pre-schools and childminders on the brink of collapse. 

Nurseries were struggling before the pandemic because they were not being paid enough to offer 30 free hours of childcare a week to working parents. Employers also need to do their bit by offering families the flexibility they need to continue working. 

With no quick fix to the Covid-19 crisis, we cannot afford to regress to a Fifties way of life — or we may find it becomes permanent.

Show some bottle 

When I was growing up, Mum always paid the milkman with a cheque left in the top of a washed-out bottle on the doorstep. 

She was at work when he called at the house to take payment and this was safer than leaving cash. 

Yet the country’s largest home delivery milk company, Milk & More, has told customers that as of this month they can no longer pay by cheque due to ‘potential health issues’. What nonsense. 

Surely the milkman could just wear gloves? Presumably he still has to handle empty bottles customers have touched. 

And what about customers like Money Mail reader Christine Reeve, aged 80, of Suffolk? 

She says: ‘I pay my paper bill and donate to charities by cheque, and no one else says it is a health hazard. I do not do online banking, and don’t like direct debits.’ 

The change shows a disregard for the elderly and vulnerable who rely on cash and cheques