TUI declares greatest ever crisis for the business and housebuilders pick up tools

“The pound jumped 0.2% against both the euro and US dollar after the latest UK GDP figures weren’t as bad as expected. The economy fell by 5.8% in March versus expectations for a 7.9% decline; unfortunately April is likely to show a much worse decline as it represents the first full month of lockdown,” says Russ Mould, Investment Director at AJ Bell.

“US markets had a miserable session last night with losses in the region of 2% on the Dow Jones and S&P 500. That negativity extended across the UK, Europe and parts of Asia on Wednesday, with investors worried about a potential second wave of coronavirus infections.

“The FTSE 100 fell 1.2% to 5,921 with miners, tobacco and banks among the key stocks weighing on the index. Only a handful of FTSE 100 stocks were in positive territory, led by housebuilder Berkeley as its sector gets back to work and telecoms group Vodafone extending yesterday’s gains."

TUI

“On the day the UK heads for the golf course as certain lockdown restrictions are lifted, travel company TUI is going to wish its leisure activities were included in the list. Sadly going on holiday seems a long way off and so all TUI can hope is that people still want to forward book their getaway break so there is money still coming into the business.

“Its final half results show a cruel twist of fate. Having seen its best ever month in January for bookings, four months later it says Covid-19 is the greatest crisis the company and the tourism industry has ever faced.

“TUI calls itself a resilient business but the big question is whether it can stay afloat long enough to get through the crisis. It has a €1.8bn bridging loan from the German government which must be paid back by mid-2022.

“A comment that it has sufficient funds to cover the ‘coming months’ doesn’t seem as reassuring as messages from other businesses outside the travel sector, many of whom say they can survive well into next year in a severe economic backdrop.

“There will almost certainly be pent-up demand from many people eager to get a break in the sun as soon as they are allowed. However, there will also be a lot of people nervous about flying even after restrictions are lifted.

“TUI is doing everything it can to cut costs and adapt to the new way of life such as making sure its flights, hotels and ships can facilitate social distancing guidelines. But ultimately it is dependent on the virus being brought under control and no-one knows when that will happen.”

Housebuilders

“The housebuilding sector is in the vanguard of businesses returning to work as lockdown conditions are eased.

“The need to get Britain building again is arguably pretty acute as even a short disruption could set back attempts to build enough new homes to meet demand over the long term.

“Several builders have started to resume activity on site, with Crest Nicholson today the latest to announce its plans to do so. Crest Nicholson is a bit behind the curve with some of its peers already having been back at work in some fashion for several weeks.

“Taylor Wimpey’s update this morning feels like a further significant step towards some kind of normality as it announces plans to reopen sales offices and show homes. This move is accompanied by measures we may have to get increasingly used to in the coming months with pre-booked appointments, perspex screens and social distancing markers likely to be part of the new normal across a range of sectors.

“It isn’t a surprise to see Taylor Wimpey’s actions coincide with a defrosting of the wider property market, in England at least, as estate agents are given the green light to open, viewings are permitted and working hours for construction businesses are relaxed to support social distancing.

“The next question will be whether people feel confident enough to buy and sell homes in the current uncertain environment.

“The fact several builders managed to complete transactions and take reservations through the lockdown suggests an impressive degree of resilience in the housing market.”

These articles are for information purposes only and are not a personal recommendation or advice.