Dear All,
Detailed below is the Weekly News for 9th March.
There will be no Weekly News next week.
Gordon Polson
Chief Executive – Federation of Bakers Ltd
Chief Executive’s Weekly News for 9th March 2020
The CBI Update on Coronavirus and how it may impact your business.
Global implications
The outbreak of New Coronary Virus 2019-nCoV, colloquially known as Coronavirus, in the central Chinese city of Wuhan in Hubei Province, prompted an unprecedented Chinese and international response to an epidemic. As Wuhan and other local cities – and wider Hubei Province – went into lock-down around the Chinese New Year period, the human cost of the virus has, regrettably, been well documented. As businesses look ahead, what remains unclear, is the full extent to which the virus will impact productivity, supply chains, as well as the global economy.
The second outbreak of a SARS-type virus in China in twenty years, much of the analysis supporting business has sought to focus on the impact that the 2002-3 SARS outbreak had on the economy.
Economic impact
There are a host of potential consequences to the global economy as a result of the Coronavirus outbreak; supply chain disruption, increased financial market volatility, and export reductions to name a few.
To view the CBI’s full analysis on the economic impact of the Coronavirus, click here. (Updated 3 March)
GDP growth is projected to be between 5-5.5% for Q1 2020. The slowdown is predominantly being attributed to reduced trade traffic, and the impact the virus has had on the transport, tourism, recreation, restaurants and retail sectors
Rates of inflation are expected to remain around 4%, with the potential to rise further in response to pressures caused by reduced productivity and increased food (particularly meat) prices
Business confidence remains low, and this is expected to continue until investors consider the virus to have been contained. Expect investments to be put on hold
Investor confidence in stocks has fallen dramatically; the benchmark Shanghai Composite Index fell 8.7% as trading opened earlier this morning.
Supply chains
The highly integrated manufacturing processes across the globe means that the disruption to Chinese output is likely to affect industrial production across the globe. Furthermore, many retailers that import goods from China may also be significantly affected by delays to deliveries. Currently, the impact appears to be confined largely to non-food goods, but, if the situation elsewhere deteriorates, retailers may see supply issues mount. Additionally, construction and engineering firms have cited concerns about the availability of spare parts in the coming months.
This year, China’s industrial output could be running at a low level for a sustained period in response to the epidemic. Analysts anticipate that fragile manufacturing chains, where there is little possibility to shift sourcing, will be the most disrupted. These are anticipated to predominantly centre around advanced manufacturing and the automotive industry, where supply chain contracts run long and are reliant on localised expertise.
Productivity
Large output losses are anticipated as a result of employees being forced to self-isolate. The CBI has recently responded to the Prime Minister’s comments regarding Statutory Sick Pay (SSP) and will continue to provide guidance via My CBI.
Moving forward
The CBI remains active in sharing new information with members. We have a team on the ground in Beijing, working remotely to support members during this difficult time.
If you have any other questions, please contact us via our new dedicated inbox.
The outbreak of New Coronary Virus 2019-nCoV in the central Chinese city of Wuhan in Hubei Province, prompted an unprecedented Chinese and international response to an epidemic.
As Wuhan and other local cities across Hubei Province went into lock-down around the Chinese New Year period, the human cost of the virus has, regrettably, been well documented. As businesses look to the first working week of the new Lunar Year, what remains unclear, is the full extent to which the virus will impact productivity, supply chains and China’s and the global economy.
The second outbreak of a SARS-type virus in China in twenty years, much of the analysis supporting business has sought to focus on the impact that the 2002-3 SARS outbreak had on China’s economy. Seventeen years later, China plays a far more prominent role in global trade and international supply chains. Quarantined towns, closed factories, reduced air routes and travel warnings will influence global supply chains in a way which the previous outbreak never did.
Extract of Key industries affected
Commodities
The crude oil industry is particularly at risk. Economic activities have come to a halt to safeguard from the epidemic. Brent crude oil prices have been negatively impacted, and are expected to trend further negatively to 55-56US$/bbl
Coronavirus is likely to dent Q1 2020 demand for base metals. Demand is expected to decline mainly for aluminium and copper, which is used in the manufacturing of automobiles, appliances and the housing sector
Traders have begun to report that they are receiving Force Majeure notices from suppliers in China
Phenol: Demand for phenol could increase, as it is used as a disinfectant and as a vaccine preservative in medicine. Automotive manufacturers may encounter supply issues, since the major phenol manufacturers have their plants located in China.
Catering, food, retail and entertainment
Nearly all China movie theatres have been shut down in CNY
China box office in CNY 2020 was estimated 7bn RMB（2019 whole year China total box office was 64.3bn RMB, yoy growth at 5.4%)
Chain restaurants claimed shut down a few branches such as Starbucks, Haidilao, XiBei
Other retailers temporarily shut down stores such as Apple, Ikea
In 2019 CNY, the whole catering and retailing income was estimated 1,005bn RMB
Poultry and Pork prices in China are anticipated to witness downward pressure on account of lower than expected demand during the peak Lunar New Year period amid the coronavirus outbreak
Corn and Wheat prices in the US fell sharply owing to investors selling most stocks in fear of lowering demands due to Coronavirus in the Chinese market
China is a major vitamin manufacturer and exporter, the duration of supply impact due to factory shutdowns is estimated to be around 4-6 months.
CBI Highlights of this month’s Economy in brief include:
The first estimate of GDP growth for Q4 2019 came in at 0%, in line with our ‘nowcast’ and consensus expectations
Since the New Year, business surveys have shown a clear improvement in optimism, including the largest positive swing in sentiment in the history of our manufacturing survey (which goes back to 1958). We’ve also seen a marked improvement in investment plans, and expectations for growth in output/business are generally in positive territory. But will it last?
On balance, we expect a steady improvement in economic growth over the next couple of years. But this is conditional on a gradual lifting of Brexit uncertainty throughout 2020, and a stabilisation of global growth. Full copy attached
Barclays Economic Update: UK manufacturing pmi stood at 51.7 in mar’20
According to IHS markit, the Uk manufacturing purchasing managers’ index (pmi) stood at 51.7 in feb’20, compared to 50.0 in jan’20, but below the earlier flash estimate of 51.9.
Manufacturing output increased at the fastest pace since apr’19, as growth strengthened in both the consumer and intermediate goods sectors. In contrast, the downturn at investment goods producers continued.
Business optimism strengthened, reaching a nine-month high, reflecting planned new investment, product launches, improved market conditions and a more settled political outlook.
Supply chain disruptions were rapidly emerging, however, as the outbreak of coronavirus (covid-19) led to substantial raw material delivery delays, rising input costs and increased pressure on stocks of purchases.
The effects of the covid-19 outbreak had a noticeable impact on supply chains during feb’20. Average vendor lead times increased to the greatest extent since jul’18, while the eight-point drop in the level of the seasonally adjusted suppliers’ delivery times index was the largest in the 28-year survey history.
Economic powers offer emergency help in coronavirus crisis
The world’s economic powerhouses launched a coordinated push to indicate that they can cope with the fallout from coronavirus, after the organisation for economic cooperation and development (OECD) warned global growth could be declined to half.
Governments, central banks and international economic institutions agreed to take necessary steps to prevent economic meltdown, prompting signs of recovery on stock markets still reeling from their worst week since the financial crisis of 2008.
The Bank of England joined the US federal reserve and the Bank of Japan in promising to take action if necessary, increasing expectation that they will turn to interest rate cuts as a stimulus measure.
UK-USA trade objectives published by Government
The Government published its strategic objectives for trade negotiations with the USA on 2 March and the International Trade Secretary, Liz Truss, made a statement to MPs about them. She told MPs that the Government aims to have 80% of UK trade covered by free trade agreements (FTAs) within 3 years, starting with the EU, the US, Japan, Australia and New Zealand. The Labour Shadow International Trade Minister, Bill Esterson, called for greater commitments to protect agricultural standards through the Agriculture Bill and expressed concern about American demands for greater market access for US pharmaceutical businesses, which could drive up the cost of medicines. Ms Truss reiterated the Government’s position that the NHS would not be on the table during negotiations with the USA. and that a FTA with the USA would not diminish or lower UK food safety or animal welfare standards. The SNP Spokesperson, Stewart Hosie, criticised the vagueness of the Government paper and Ms Truss responded by highlighting that a USA-UK trade deal could boost the Scottish economy by up to £500 million.
SACN consults on low carbohydrate diets for people with T2 diabetes
The Scientific Advisory Committee on Nutrition (SACN) is consulting on its draft report (supporting documents) on lower carbohydrate diets for people with type 2 (T2) diabetes. Following a robust, comprehensive assessment of existing systematic reviews and meta-analysis, SACN concluded that for blood glucose (sugar) levels, lower carbohydrate diets may have benefits over higher carbohydrate diets in the short term, although their longer-term effects are unclear. SACN also concluded that for body weight, there is no overall difference between lower and higher carbohydrate diets in the long-term (at or beyond 12 months). The deadline for responses to this consultation is 30 April 2020. Once SACN has considered all the responses to the consultation, it will publish its final report and make recommendations to the Government. SACN will also consider research recommendations based on limitations in the current evidence base.
Cheating or Competing? CMA Shines Light on Anti-Competitive Behaviour: The CMA is calling for everyone in business to understand their responsibilities under competition law. Their new ‘Cheating or Competing?’ campaign aims to educate everyone in business about which practices are illegal and urges people to come forward if they suspect a business is gaining an unfair advantage through these.
Find out more here.
Help to Understand Changes to Apprenticeships Now Available:The Apprenticeship Intermediary Service is a centralised support service delivered by NSAR (National Skills Academy for Rail) to help you understand the changes that are taking place with apprenticeship funding for non-levy employers.
Click here to see details of how you can get involved together with details of free webinars on the subject.
| Mycotoxins: Discover the MyToolBox E-platform!
The MyToolBox Consortium is proud to announce its final project output after four years of collaboration: The accumulation of expertise in prevention and control of mycotoxins is now available in a unique web-based platform providing guidance to farmers, storage managers and food/feed processors and suppliers: More detailed information about the overall MyToolBox Project can be found under: www.mytoolbox.eu Kind regards, |