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European business braces for second wave

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September was not kind to Frédéric Moschetti, whose company provides equipment for big events such as the Cannes Film Festival and Grand Prix races. 

After eking out some work this summer when Covid-19 briefly abated in France, allowing people to travel and meet, four big contracts were cancelled in two weeks. “I lost €200,000 worth of work in a flash,” the boss of family-owned SMM Events said. “I try to stay positive but that was a tough blow.” 

The entrepreneur is not the only one struggling to remain optimistic as a second wave of the virus sweeps across Europe, bringing with it new constraints on doing business. France, Spain, and Germany have all introduced tougher controls on movement and gatherings in recent days, while Italy and the UK are preparing new measures to address a surge in infections. Current restrictions are now close to the peak in June when the EU was in lockdown, according to an analysis by UBS.

Europe’s business leaders are watching with anxiety. Following a record 9.8 per cent contraction in OECD economies in the second quarter, many were encouraged by the summer bounce in activity as governments loosened lockdowns.

“We saw over the summer an improvement in our business data,” said Karl Gunther Deutsch, head of research at the Federation of German Industries (BDI). 

Staff numbers in factories recovered quickly in France to pre-Covid levels

Information gathered by Huq Industries, which tracks mobile location data in real time, shows that office and factory staff in France and Spain began to return to work in June and July. In Germany, France, the Netherlands and the UK, commuters started using public transport again.

In a sign that business confidence was beginning to stir, two-thirds of French companies did not bother to draw down the government’s emergency loans, according to Fabrice Le Saché, vice-president of the country’s employers’ confederation Medef. “In August we had surveys showing 76 per cent of chief executives were quite positive on investment and on hiring,” he said.

Now, however, hopes that the summer’s tentative recovery would gather momentum are giving way to fears of what the winter holds. A drop in eurozone services activity last month was the latest sign of the threat to the region’s economy.

Commuters wearing protective face masks ride a Metro train in Madrid, on Wednesday © Paul Hanna/Bloomberg

Travelers wear protective face masks at Charles de Gaulle airport, Paris, on Tuesday © Nathan Laine/Bloomberg

Pierre-André de Chalendar, chief executive of global building materials giant Saint-Gobain, worries that the indicators of a second wave “are pointing in the wrong direction”. After a 19 per cent fall in sales in the second quarter, Mr de Chalender said that the French group, which has a market capitalisation of €20bn, had “returned to normal” in the third quarter.

While infection rates vary by country, businesses across Europe are hoping governments will keep their promise to avoid a repeat of the universal lockdowns that paralysed entire industries earlier this year. 

“I hope governments are going to react in a more sensible way if there is a stronger second wave,” said Mr de Chalendar. “We do not want the same situation as in April and May. We cannot afford that.”

Hotel bookings in the UK have been slower to pick up

Ilham Kadri, chief executive of Solvay, the Belgian materials and chemicals company whose sales tumbled by almost a fifth in the second quarter, at the peak of the crisis, agrees. Although parts of Solvay’s industrial customer base such as aerospace remained tough, the return to work in factories across Europe gave the company hope that “there will be light in the fourth quarter — unless there is another severe lockdown,” said Ms Kadri.

But some fear even limited restrictions risk destroying the fragile consumer confidence that had begun to take root during a fleeting few weeks this summer.

Europe’s leisure and hospitality sectors — made up of millions of small businesses — are already feeling the impact even of early closures of bars and restaurants, never mind outright shutdowns as in Paris recently.

© Yves Herman/Reuters

© Michaela Handrek-Rehle/Bloomberg

For Jens Zimmer Christensen, president of the European restaurant, café and bar association, Hotrec, and owner of the 64-room Hotel Maritime in the Danish capital Copenhagen, the equation is a brutally simple one.

“When restaurants close . . . people get scared,” he said. Closing restaurants and bars early means “people don’t go out.”

While Europe’s industrial sector is also affected by an erosion of confidence, there are signs that manufacturers will weather a second wave better than the first time round. 

“The surprising thing for us is that the industrial side of the business has improved over [the] last two months,” says Tony Smurfit, chief executive of Smurfit Kappa, Europe’s largest paper packaging company. “Most of our industrial customers are saying they hope for a much better year next year.”

Solvay’s Ms Kadri says demand from her automotive customers appeared to have stabilised, while the electronics industry continued to benefit from digitalisation. “It remains quite resilient,” she said.

Visits to bars had almost fully returned to levels on the continent before the second wave

If European businesses dread the spectre of tough lockdowns, the first wave of the virus did leave some useful legacies. For many manufacturers the procedures needed to ensure steady production were established during the spring and will smooth the process when restrictions return.

“We decided to keep our crisis response team going despite the situation getting better, to be prepared for the second wave,” said Henrik Ehrnrooth, chief executive of Finland’s Kone, one of the world’s biggest lift and escalator manufacturers. “The problem we struggled with [in the first wave] was how [to] keep the supply chain going.” It took “heroic” measures to resolve that problem, he said, but solutions are now in place. 

Both Kone and Saint-Gobain say their decentralised management structures will be vital to navigating a second wave, given the varied responses to a resurgence of infections, not just country by country, but even town by town.

“If we tried to make more decisions and steer from Finland we would be several steps behind every day,” said Mr Ernrooth.

Yet, as the virus spreads, the lack of any international co-ordination on how to respond is beginning to fuel concerns about longer-term consequences. Employers federations in Italy, France and Germany say their members are warning that this fragmented approach risks undermining any economic recovery.

In Germany, where big industries export roughly 80 per cent of their goods, “the sprawl of travel restrictions in Europe and across the Atlantic and to China has become a serious problem in serving customers, and acquiring new contracts,” said BDI’s Mr Deutsch.

Impediments to German exports quickly become a problem for the EU as well, with Germany accounting for roughly 30 per cent of extra-EU trade.

Use of public transport has been slower to recover

Although Europe’s stock markets have rebounded from their March lows, investors are wary. Even before the resurgence in Covid-19 cases, the landscape had changed for Europe’s businesses, said Thomas Schuessler co-head of European equities at DWS, Deutsche Bank’s asset management arm. Companies on the continent had been far more aggressive in cutting their dividends than their US or Asian counterparts, he said, and had loaded up on debt to survive.

“A lasting legacy of covid will be the huge debt load and that you have to handle that somehow,” he says.

But as businesses steel themselves for more disruption, there are more pressing concerns. Many fear even the most stringent safety measures and testing cannot see off all risk as the winter flu season arrives in the middle of a second wave.

“One of big dangers of covid wave two for us is absenteeism,” said Mr Smurfit, whose packaging company is seeing an acceleration in demand from ecommerce customers ahead of the Christmas season. “I worry we won’t have enough people to meet demand out there in Q4. When people get a cold now they will think they have got covid.”

Additional reporting by Silvia Sciorilli Borelli in Milan and Richard Milne in Oslo



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EU pledges aid to Lithuania to combat illegal migration from Belarus

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EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.



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Britain’s wrong-headed approach to refugees

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UK immigration updates

Thanks to the bravery of volunteers who run towards storms at sea to rescue ships’ crews, few British institutions command as much respect as the Royal National Lifeboat Institution. The charity, however, has recently had to negotiate a different kind of storm, over its efforts to help refugees who get into difficulties crossing the Channel from France. Nigel Farage, the former Brexit party leader, accused it of running a taxi service for illegal trafficking gangs. Last week, the RNLI said it had received hundreds of thousands of pounds of extra donations in response.

The RNLI has become embroiled in a now familiar story when the summer months allow more small boats to make the Channel crossing. Compared with the flows to other countries such as Spain, Italy and Greece, only a handful of migrants attempt the journey. That makes the UK’s inability to control the border in an effective and humane way — and shabby treatment of those who do make it across — no less of a scandal.

Britain’s strategy for stemming the flow has relied mostly on paying the French authorities to limit the number of boats crossing and return any that leave to France, while deterring would-be migrants through the unwelcoming environment that awaits them. Just as EU countries are dependent on their neighbours for keeping entrants down — whether Morocco for Spain or Belarus for Lithuania — the UK needs French co-operation to control the mutual border. Diplomatic spats, whether over Brexit or extra Covid quarantine restrictions on arrivals from France, have made that harder.

The UK approach manages to be simultaneously ineffective and cruel. Yvette Cooper, chair of the home affairs select committee, wrote last week to home secretary Priti Patel to complain of unacceptable conditions in the holding facility for migrants who make it to the Kent coast. A recent unannounced visit by MPs found most of those remaining in the overcrowded facility sitting on a thin mattress on the floor, with women and children in the same room as adult men.

Earlier this year, the High Court ruled that “squalid” conditions in the Napier Barracks, a temporary centre set up last year to house asylum seekers during the pandemic, were so bad as to be unlawful. While arrivals have declined since the peak seven years ago, cutbacks have led to a backlog in processing claims, leaving more in a legal limbo.

Since the start of the pandemic Britain has shut down other paths into the country, ending a resettlement scheme. This has ceded the ground to people traffickers. The “push factors” of the risk of violence and torture at home and “pull factors” of higher living standards mean many are still willing to resort to risky and illegal methods to try to reach the UK. Creating a harsh environment for those who make it has done little to dispel the widespread belief among migrants that Britain is a better destination than other European countries, and stem the flow.

That will not stop the government trying. Barristers have warned that a clause in draft border legislation could potentially make it a crime to help asylum seekers arrive in the UK, with a maximum penalty of life imprisonment; at present it is illegal to do so to earn a profit. The Home Office says the clause is aimed at criminal traffickers. But along with a suggestion to set up offshore processing centres, the provision has rightly earned criticism from human rights groups. If the government is unwilling to create safe and legal routes, its only option is to prevent people from coming in the first place. That, ultimately, will mean relying on France.



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Olympic organisers investigate after Belarusian runner seeks refuge

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Tokyo Olympics updates

A Belarusian runner due to compete at the Tokyo Olympics was taken to the airport against her wishes after making complaints about her coaches, according to media reports on Sunday night.

The International Olympic Committee, the Games organisers, said it had asked for clarification from the Belarus team about the status and whereabouts of Krystina Tsimanouskaya, who is due to compete in the women’s 200m sprint on Monday.

Belarus’ dictatorial leader Alexander Lukashenko and his regime are widely seen as international pariahs after he fraudulently claimed victory in last year’s presidential election and then embarked on a brutal campaign to suppress protesters and supporters of his rival, which has seen thousands beaten and jailed. 

Images and video circulated on social media sites by Belarusian opposition activists appear to show Tsimanouskaya at Tokyo’s Haneda airport, where she refused to board a plane and instead sought refuge with Japanese police.

Krystsina Tsimanouskaya took part in the heats for the women’s 100 metres on Friday but narrowly missed qualifying for the semi-finals © Aleksandra Szmigiel/Reuters

The IOC said it “has seen the reports in the media, is looking into it and has asked the [Belarus] national Olympic committee for clarification”.

Japanese police did not immediately respond to requests for comment.

The Belarusian Olympic Committee did not immediately respond to requests for comment, but a statement attributed to the body suggests she had been removed from competition by coaches on the advice of doctors advice about her “emotional, psychological state”.

Late on Sunday, Tsimanouskaya shared a screenshot of that statement on Instagram with the message: “This is a lie.”

“I am asking the International Olympic Committee for help, they are putting pressure on me and they are trying to take me out of the country without my consent,” Tsimanouskaya said in a video message reportedly recorded on Sunday evening from the airport and posted on social media.

A person close to Olympic officials said there remained “confusion” around the incident, adding they had been told that Tsimanouskaya had boarded a coach to the airport and had gone through the departures area to board a plane to Istanbul, where she then sought Japanese police to ask for asylum.

Belarusian opposition leader Sviatlana Tsikhanouskaya tweeted that she was grateful to the IOC for its quick reaction. “She has a right to international protection and to continue participation in the Olympics. It is also crucial to investigate Belarus’ NOC violations of athletes’ rights,” she said.

Tsimanouskaya on Friday appeared to criticise her coaches and team management in an Instagram post that said she had been “ignored” and that “people in higher ranks should respect us as athletes”.

The 24-year-old had taken part in the heats for the women’s 100 metres on Friday but narrowly missed on qualifying for the semi finals of the event. She is listed on official Olympics sites as due to compete in the first round of the 200 metres at the Olympic stadium on Monday morning.





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