Boris Johnson had previously called it “a nuclear deterrent”, warning that to impose a second national lockdown to tackle Covid-19 would be a “disaster” and would inflict “misery” on the public. But on Saturday he hit the red button.
The decision, taken at a bleak cabinet meeting on Saturday lunchtime, will cause further economic destruction, while the prime minister was left struggling to contain the political fallout among Conservative MPs.
One Tory MP said the mood on the Conservative benches was “grim”, while another said the response among colleagues to the idea of a month-long national lockdown in England was “nuclear”.
Five weeks after Mr Johnson’s scientific advisers called for an immediate “circuit breaker” lockdown — and a fortnight after Labour backed the idea — the prime minister finally bowed to the merciless reality of the pandemic.
One cabinet minister said the decision to put the whole of England into a second lockdown was taken by “consensus” after new evidence suggested the NHS would be overwhelmed by early December.
But the mood among Mr Johnson’s cabinet, gathered for a Zoom call on Saturday, was said one by one member to be “dismay”. The economic costs are piling up, so too is the political damage.
Although Mr Johnson prefers to talk about the introduction of “tougher national measures” on Thursday, the new policy is in reality the circuit-breaker that he and his fellow ministers previously denounced.
Only a day earlier, Dominic Raab, foreign secretary, said: “In areas where the virus is not picking up, people would feel it was not only counterproductive or ineffective but desperately unfair for measures to be imposed across the board.”
Mr Johnson and party whips spent Saturday afternoon attempting to placate Conservative MPs who share Mr Raab’s scepticism and fear that the policy cure for Covid could be worse than the disease.
Steve Baker, former Brexit minister, is among those who fear the economic and wider health consequences of the policy. “Colleagues have a great many questions due to the costs involved,” he said.
Mr Johnson’s planned press conference to announce the new policy, scheduled initially for 4pm, was repeatedly delayed as the prime minister and fellow ministers attempted to win over Tory MPs to back the policy.
The House of Commons will vote on the national lockdown on Wednesday and Mr Johnson will be hoping that anger among Tory MPs has dissipated by then. “The mood is one of depression,” said one former minister.
While Mr Johnson can expect Labour support — he has largely adopted Keir Starmer’s policy — a Tory rebellion would further weaken the prime minister’s position.
Rishi Sunak was seen by Tory MPs as their bulwark against a tougher national restrictions, but the chancellor ultimately bowed to warnings from Chris Whitty, chief medical officer, and Patrick Vallance, chief scientific adviser, that a health catastrophe was approaching.
Mr Sunak was left scurrying to produce the latest of several upgrades to his “winter economic plan” — set out on September 24 — to increase furlough support during the lockdown.
The chancellor’s allies said there had been a “collective” decision to impose the lockdown, but Mr Sunak was lying low and his Twitter feed spoke about “the PM’s announcement on further restrictions across the country”.
Mr Sunak had been the leading advocate of the “balanced approach” which saw the government attempt to contain the virus using a series of regional lockdowns, but that strategy is now in tatters.
For weeks Mr Johnson and Mr Sunak ratcheted up their “regional” approach to tackling the virus — and the economic support needed to sustain the policy — but in the end Covid-19 overwhelmed it.
Labour and the Liberal Democrats were quick to argue that Mr Johnson should have accepted reality — and scientific advice — earlier, but the prime minister said he still “passionately believed” it was right to try the regional approach.
In an attempt to limit the economic damage, Mr Sunak insisted the new lockdown must be time limited — it is scheduled to end on December 2 — making it less open-ended than the first lockdown introduced on March 23.
But the cabinet also agreed that the new tough lockdown measures could be retained as part of a “regional approach” after December 2, under a newly-created “tier 4”, if infection rates remained high.
Mr Johnson said that he hoped families would be able to spend time together at Christmas, but he acknowledged the sombre reality: “Christmas is going to be different this year, perhaps very different.”
H&M experiments as it refashions stores after the pandemic
The Hennes & Mauritz flagship store on Stockholm’s main square is trying to break the mould. A woman sewing a patch on to trousers, party dresses for hire, a beauty salon and a personal shopping service is not standard fare for most fast-fashion outlets.
But it could be a taste of things to come as H&M, the world’s second-largest clothes retailer, works out what to do with its vast network of 5,000 stores after a pandemic that has increasingly pushed shoppers online. The Swedish chain is not just looking at services such as renting and repairing clothes, but on whether its shops can play a role in the logistics of online selling.
For Helena Helmersson, appointed last year as the first H&M chief executive outside the company’s founding Persson family, it is all about boosting relationships and engagement with customers.
“The physical store network that we have is one of our strengths. It’s the different roles the stores can play, the different formats. What kind of experiences are there in a store? Could they be part of an online supply chain? There are so many things to explore . . . it’s almost thrilling,” she told the Financial Times.
Helmersson, 47, has had a tough first year as chief executive. At the height of the first wave of the Covid-19 pandemic, four-fifths of H&M’s physical stores were closed and a big push online was unable to offset the hit. Sales fell a fifth in H&M’s financial year until the end of November to SKr187bn ($22.6bn), while pre-tax profits plunged 88 per cent to SKr1.2bn, interrupting a nascent recovery after years of decline.
Sales plunged in March and April, before rebounding strongly in the summer, and then getting hit again around Christmas.
But as the pandemic has forced H&M into speedier decision-making and increased flexibility and with Helmersson forecasting a wave of pent-up demand when Covid-19 comes under control, the chief executive is emboldened to say: “Overall, we will come out of the pandemic stronger.”
Anne Critchlow, analyst at Société Générale, said that relatively small increases in sales at H&M could lead to bigger rises in profits. “Potential recovery is part of the attraction of H&M to investors at the moment: it’s very highly operationally geared. H&M should be the fastest to recover,” she added.
But she argued that Inditex, the Spanish owner of Zara that overtook H&M as the world’s biggest fashion retailer by sales a decade ago, was a “better quality company”, and that the Swedish group may be a “bit slower” at returning to its pre-pandemic profit levels as some customers steer clear of its stores.
H&M’s shares fell consistently from 2015 to 2018, before largely treading water since then, although they have climbed 50 per cent since their Covid-19 low in March last year.
Helmersson, a H&M lifer who joined the retailer in 1997 as an economist, said she started to see “light at the end of the tunnel” after a “very demanding” period. “I have super-high expectations on myself. Adding a crisis on top of that, it’s been a really tough year.”
Now, however, her focus is moving to a critical question for H&M: “Where do we need to move faster?”
Despite being in fast fashion, critics said H&M had become slow, outpaced by nimbler Inditex and online retailers such as Zalando and Asos. Inditex could get new clothes to Zara stores in weeks from nearby manufacturing sites in Europe while H&M, with more sourcing in Asia, took longer. Opening new stores gave the Swedish group an easy path to sales growth but did not help its profit margins, which have been declining consistently for the past decade.
Helmersson said H&M took “really, really fast decisions” at the start of the pandemic on how it bought garments, worked with its supply chain, and moved to selling more online. She pointed to how technology allowed designers, suppliers and the production office to work together at the same time to produce new clothes, rather than waiting for one to send a garment to another.
“It sounds really basic but if you do that in many processes you can be much faster. You also have data to give you more customer insight, which means you can act much quicker,” she said, adding that accessories can now go from conception to store in a few weeks, T-shirts in six weeks, and trousers in eight.
H&M is also trying to increase its speed on sustainability, bringing in a target of using 30 per cent recycled materials by 2025. Critchlow said that the group was leading the industry in its attempts to become circular, although many voice concerns over how much fast-fashion groups encourage excess consumption. Strong investor demand this month led to H&M reducing the interest rate for its maiden sustainability-linked bond, which was 7.6 times oversubscribed
Helmersson, a former head of sustainability at H&M, said that the hardest task for the retailer was decoupling its growth from its use of natural resources. She added that the trials in repairing and renting clothes as well as selling second-hand garments through the website Sellpy, in which H&M is the majority owner, were important but difficult to gauge how big they could become. “We have such a size that we can to some extent influence customer behaviour. But we will also see how willing they are,” she added.
Critchlow said H&M deserved “full credit” for the trials but that they were unlikely to lead to soaring profit margins. She added that the crucial questions were how fast H&M returned to pre-pandemic sales and profit levels and whether it could go further. “It requires H&M to manage the costs of the stores,” she said, adding that renegotiated leases during the pandemic had only helped a little.
There is also a debate about how much increasing online sales — expected to rise from 28 per cent of H&M’s total last year to about 43 per cent in 2025, according to Critchlow — help given that they come with additional costs such as delivery and returns as well as in logistics.
Helmersson is unbowed, arguing that H&M will offer multiple ways for customers to engage with the retailer through various store formats offering different services, online, and its own club. “The customer journey is constantly evolving,” she said. “We will follow, and influence. Before, it was about transactions, now it’s about relationships with customers.”
How vaccine laggard CureVac hopes to come out on top
Fifteen years ago, after an hour-long meeting in the basement of a Paris hotel, Bill Gates agreed to back a German entrepreneur who claimed a new class of drug would revolutionise the fight against infectious diseases.
When Covid-19 shook the world last year, CureVac — the company built by Ingmar Hoerr with the help of the Microsoft founder’s money — seemed perfectly positioned to make good on that investment and produce a “best-in-class” vaccine.
It could be ready “by the autumn”, predicted European Commission president Ursula von der Leyen.
But while local rival BioNTech and US competitor Moderna brought to market vaccines using similar messenger RNA technology in less than a year, CureVac’s product is lagging up to six months behind.
This is the story of how one of the most promising vaccine makers is trying to get back on track after development delays, the brain haemorrhage of its founder and a bizarre — possibly fictional — attempt by the White House to steal the company away from Germany.
‘America first’ again?
Following a meeting with pharma executives at the White House in early March, German media reported that the Trump administration had sought to lure the company, which also has a Boston base, to the US and secure its vaccine exclusively for Americans.
The news led to an uproar in Berlin, especially after billionaire Dietmar Hopp, CureVac’s lead investor, seemed to verify the reports in a magazine interview.
Days later, CureVac’s American chief executive Daniel Menichella abruptly left the company, even though the biotech denied an official approach by the US government had ever taken place. The Trump administration also rubbished the reports — in one of the few public rebuttals by the former president’s staff against a reported “America first” policy stance.
Amid the turmoil, Hoerr, the company’s founder who had just taken over from Menichella as chief executive, suffered a brain haemorrhage in a hotel room, and relinquished the role again.
Venture capitalist Friedrich von Bohlen und Halbach, who sits on CureVac’s board, told the Financial Times that the Trump tale was probably “made up” by people leaping to conclusions about the presence of a German company at a US government event.
But the reports were enough to spook European leaders. On March 16, von der Leyen spoke to CureVac’s management via video conference, and then publicly offered the 20-year-old company an €80m loan “to quickly scale up development and production of a vaccine”.
By mid-June the German government had chosen to invest €300m in CureVac, for a 23 per cent stake, ahead of its flotation on the Nasdaq in August. Economy minister Peter Altmaier left little doubt as to Berlin’s motives: “Germany is not for sale, we don’t sell our silverware,” he told reporters.
Suggestions that CureVac’s investors may have spread the Trump tale to engineer a response from Angela Merkel’s government were strongly denied by people close to the company.
“It was not the plan to get German public money,” said von Bohlen, who first invested in the nascent company in 2004, and whose holding company, Dievini Hopp, created with Hopp, still owns half of CureVac.
In any case, the company was unlikely to up sticks. When Hopp, a co-founder of tech group SAP, first agreed to invest roughly €2m in CureVac in 2005, he wanted to “make sure that we build infrastructure and new jobs here in Germany”, von Bohlen recalled.
Waiting for data
There was some rationale behind the German government’s investment, however. CureVac, which was developing a rabies vaccine when the Covid-19 crisis began, had more experience with infectious diseases than BioNTech.
Some scientists also believed that CureVac, which unlike its rival does not chemically modify its mRNA, could end up prompting a stronger immune response.
But an initial readout from phase 1 trials in November damped the high expectations. The data showed that the level of antibodies produced by the vaccine was higher than the average in the blood samples of recovered Covid-19 patients, but appeared to be lower than those produced by the BioNTech and Moderna’s candidates.
However, as each company’s results were measured using different assays and against a different group of convalescent patients, they were not directly comparable, according to Suzanne van Voorthuizen, an analyst at Kempen. “You are always comparing apples with oranges,” she said.
The inconclusive data did not deter the European Commission, which signed a contract to secure 405m doses soon thereafter. Manufacturing deals with Germany’s Wacker Chemie and Rentschler followed in the next few weeks, as well as with France’s Fareva.
CureVac also raised $517m via a share offering and its shares trade more than six times last August’s IPO price. Twice in the last few weeks the company’s market value has surpassed that of Deutsche Bank and now stands at about €16bn.
“In two years from now, nobody will care any more [about the delay],” said von Bohlen. “Capacity, quality and price — that is what everyone will care about,” he added, predicting that regular vaccinations would be required to protect against virus mutations and that CureVac’s mRNA technology would be ideally suited to that challenge.
An initial readout from large-scale phase 3 trials is expected in March, and although CureVac has given up on pursuing US authorisation, citing market saturation, approvals from the EU regulators will probably come halfway through 2021.
Being behind in the race to produce an mRNA Covid-19 vaccine could also end up being a blessing in disguise for CureVac, according to founder Hoerr, 52, who is recovering from his health crisis. He claims time spent perfecting the formulation of its candidate has given its product several competitive advantages.
Unlike vaccines by BioNTech and Pfizer, which currently have to be kept at an ultra-cold -70C while being shipped, and Moderna’s product, which must be kept at -20C, CureVac’s candidate is able to survive in standard fridge temperatures for at least three months, making it much easier to deliver to the developing world. “That’s not a miracle,” said Hoerr. “That is technology. You have to work on that.”
Additionally, at 12 micrograms per dose, it requires the smallest amount of active ingredient among the mRNA vaccines, enabling more efficient distribution.
CureVac, which claims to be able to produce 300m doses this year and a further 1bn in 2022, spent extra time scaling up its manufacturing network.
The positive assessment is shared by pharma giant GlaxoSmithKline, which bought a 9 per cent stake in CureVac in July and earlier this month pledged a total of €150m to develop so-called “next-generation” Covid-19 vaccines with the company to tackle new variants.
The UK government has also agreed to provide CureVac with access to its genomic sequencing expertise. In exchange, the UK will receive 50m doses of the biotech’s jab and permission to use contract manufacturers to produce it in Britain.
“The UK is one of the most advanced countries in understanding mutations and sequencing them,” said Wassili Papas, a portfolio manager at German institutional investor Union, which has a small stake in CureVac. “So for them to choose CureVac, there must be something to it.”
CureVac’s ambitions were given its biggest boost to date in early January, when German pharma group Bayer agreed to help with the production and approval of the Covid-19 candidate — the first foray into vaccine development in the company’s 158-year history.
Bayer told the FT that the agreement was a “one-off” and that the company “just wanted to help”, denying suggestions that Merkel’s administration had pushed for the partnership.
The German government told the FT that it “explicitly does not exert any influence on the operating business of the company via its shareholding”, while von Bohlen said Berlin was first informed by the companies of the agreement after the deal was closed.
Nonetheless, in a government press conference last month, Armin Laschet, the newly elected head of Merkel’s party and the premier of North Rhine-Westphalia, which is home to Bayer, was clear about the deal’s significance.
“We need to recognise how important it is at this moment not to be completely reliant on the global market,” he said, “but also to be able to independently produce in Germany.”
Two weeks ago, CureVac began submitting approval data to the European regulator, and with the first batch of doses secured by the EU, the vaccine could also offer the bloc a chance to repair some of the political damage caused by the much-criticised procurement of the BioNTech and Oxford/AstraZeneca jabs.
If successful, the company built by Hoerr, who has reportedly been nominated for a Nobel Prize, could even eclipse Bayer’s €64bn market value, said von Bohlen, and along with BioNTech, reshape the entire sector.
“MRNA has the potential to become, by orders of magnitude, the broadest therapeutic class in medicine,” he said. “It’s a bit of a revival of the German strength in the pharmaceutical industry.”
The bar chart in this article has been amended since original publication to correct a rounding error
Amazon given lifeline in Future Group fight after India Supreme Court ruling
India’s Supreme Court handed Amazon a lifeline on Monday in its fight for the country’s vast retail market by temporarily barring Indian retailer Future Group from closing a $3.4bn deal with Reliance Industries.
Amazon is racing against time to stop Reliance’s chairman, Mukesh Ambani, from buying up Future’s 1,500 fashion and grocery stores and boosting his ambitious JioMart venture, which delivers daily essentials from a growing network of small shops.
Ambani swooped for the ailing Future Group late last year, after it missed a bond payment and its credit rating was downgraded to “near default”.
The deal has been signed off by regulators and is pending a green light from the National Company Law Tribunal (NCLT) and a vote by Future’s shareholders.
But Amazon alleged that the sale breached a contract it had with a subsidiary of Future that barred Future from selling its retail assets without Amazon’s consent.
An arbitration panel in Singapore called in October for the deal to be put on ice pending a final verdict, and Amazon appealed to India’s Supreme Court to intervene.
On Monday, the Supreme Court agreed the NCLT should not “sanction” the deal until it has heard the case, which is scheduled for March.
Amazon’s fear is that, once Future’s shareholders vote, any legal action will become “irrelevant”, said a source with knowledge of the company. “There is no point in closing the stable door after the horse has bolted,” he said.
The deal would give Reliance, which is already the country’s biggest offline retailer, another national network of stores and brands including Big Bazaar and the gourmet food store Foodhall.
It would strengthen JioMart as a competitor to Amazon, which currently has just under a third of India’s booming ecommerce market, estimated to be worth $86bn by 2024, according to research firm Forrester.
Neil Shah, an analyst at Counterpoint, said that Reliance was racing Amazon to win over millions of mom-and-pop stores. JioMart taps into the 400m users of Reliance’s Jio mobile phone network and has partnered with WhatsApp for payments.
“Reliance getting stronger is direct competition to Amazon,” said Shah. “It’s a battle of technology companies in the end and it’s the data that counts rather than just building a retail channel, it’s a means to an end.”
Amazon has cast the battle with Future and Reliance as the latest example of the uneven playing field foreign investors face in the country. Its case comes as Vodafone and Cairn Energy are fighting long-running legal disputes over retrospective taxes with Prime Minister Narendra Modi’s government.
But Future argues that Amazon’s contract was with subsidiary Future Coupons — which markets and distributes gift and loyalty cards — not the entire group, so the international arbitrator’s order is not valid and the deal can go ahead.
Its lawyers have likened Amazon to the East India Company and said it was obstructing the transaction “to prevent any competition in the Indian retail market”.
Amazon acquired a 49 per cent stake in unlisted Future Coupons in 2019, with the right to buy into the flagship company after a few years. Amazon also holds minority investments in More, a supermarket chain, and department store chain Shoppers Stop.
Together with Walmart-owned Flipkart, Amazon commands about 70 per cent of the online market in India. However, India’s regulations currently restrict a foreign company from running online “multi-brand retail” stores, similarly to how Amazon operates in the US.
Legal experts said Amazon may have invested in Future Coupons to work around the FDI rules and exercise control indirectly, with the hope of eventually being able to invest further if and when the rules change.
While the legal battle continues over enforcing the international arbitrator emergency order, there is a good chance Future and Reliance will close the deal and come out on top, said Nigam Nuggehalli, law school dean at BML Munjal University in Gurgaon outside New Delhi.
“When Amazon entered a complex structure at this time, it was already sailing close to the wind,” added Nuggehalli.
“Lawyers are basically arranging contracts to meet the challenges of FDI regulations and tax compliance and things can go wrong,” he said. “When that happens you have cases like Vodafone and Amazon/Future.”
Future, in deep distress after India’s coronavirus lockdown and in danger of liquidation, has argued that it will collapse if the deal does not go through, putting 25,000 employees out of work.
Debanshu Mukherjee, a co-founder of the Vidhi Centre for Legal Policy, said Indian courts would probably consider it important to keep the company alive to save jobs.
“Courts are also considering whether the company survives and they would look at this factor,” said Mukherjee. “Everything will be worse if the underlying asset loses all its value.”
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