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Canadians seethe over lockdown-defying politicians

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In his Christmas Eve video message, Rod Phillips, finance minister of Canada’s largest province, sat next to a crackling fireplace and commiserated with the people of Ontario that they could not “be in person with as many family and friends as we’d like to”.

In reality Mr Phillips was on vacation at a luxury resort on the Caribbean island of St Barts. Despite rushing back after his trip was exposed, he resigned on New Year’s Eve.

The daily tally of politicians and government officials who have flouted stay-at-home recommendations to travel abroad over the holidays has sparked outrage in a country that places a premium on following rules and has a low tolerance for hypocrisy in public life.

Canada has weathered the Covid-19 crisis relatively better than the US and much of Europe, and has been more prudent than most in securing vaccine doses. But health officials are under renewed pressure as cases rise in the populous eastern provinces of Ontario and Quebec, lockdowns tighten and Canada falls behind other countries in its rollout of Covid-19 vaccines.

Chart showing Covid-19 deaths per 100k in Canada, US and EU

The seven-day average of daily new cases jumped to more than 10,000 on Friday, five times higher than at the peak of the first wave last May, while daily deaths averaged 176, the high reached during the first wave.

“People are very angry and frustrated at being told they can’t sit in the backyard with friends or visit relatives while members of government are flying all over,” said Lorian Hardcastle, a professor of health and law at the University of Calgary.

Since Mr Phillips’ resignation, almost two dozen politicians and senior officials at all levels of government have admitted to travelling outside Canada to take a holiday or visit sick relatives. Most have apologised.

Two members of Prime Minister Justin Trudeau’s Liberal government resigned from their roles after travelling to the US over the holidays.

In Alberta six members of the provincial government and premier Jason Kenney’s chief of staff resigned or were demoted for leaving the country, including Tracy Allard, the minister responsible for the province’s vaccine rollout, who holidayed in Hawaii.

Mr Trudeau said he was “disappointed”, and his government will disqualify anyone returning to Canada from non-essential travel from receiving the C$1,000 Covid sickness benefit, meant to encourage employees who contract the virus to quarantine.

Stacked bar chart showing vaccine pre-orders to December 1 in doses per capita

Across Canada, governments have responded by clamping down on movement as cases mount. Quebec imposed a four-week curfew taking effect at the weekend, while Ontario extended school closures to the end of the month and is considering a curfew.

That, in turn, has heightened tensions over the slow pace of Canada’s vaccine rollout.

Canada has secured more vaccines per capita than any other country. It has orders with seven drugmakers for almost 400m doses, equal to 10 doses per person. Canadian regulators were also among the first to approve the BioNTech/Pfizer and Moderna vaccines, for which it has agreements to buy up to 116m doses.

However, as of Friday only 0.7 doses had been administered per 100 people, one-third the rate of the US and UK, according to Our World In Data. At the last count, half of the 545,000 doses distributed to the provinces remain in storage.

“The rollout so far has definitely been inadequate and it’s very worrisome in relation to the depth of the crisis,” said Kerry Bowman, a bioethicist at the University of Toronto. “The next few months look terrible if we do not rise to this.”

On Friday, Ontario premier Doug Ford warned several regions were running low on vaccine supplies and that the whole province “will be out of Pfizer vaccines by the end of next week”.

Other provincial leaders have also criticised the pace of distribution, but Mr Trudeau said quantities of both the Pfizer and Moderna vaccines would “scale up” next month.

“We need to make sure we’re getting those doses as quickly as possible and I can assure you we continue ongoing conversations with the companies about accelerating the schedule of delivery,” he told reporters.

Bar chart of Total number of vaccination doses administered per 100 people in the total population showing Canada’s vaccine rollout has been slower than in the US and UK

In a statement Anita Anand, the federal minister of public service and procurement in charge of securing vaccine supplies, said Canada would receive more than 2m doses by the end of the month. She insisted Canada was still on track to meet its goal of inoculating “all Canadians who choose to be vaccinated by the end of September”.

In the meantime, at least some older Canadian “snowbirds” who regularly travel to Florida for the winter are viewing that as a faster path to getting vaccinated. The US state is offering doses to all seniors aged over 65 including to non-citizens and non-residents under relatively loose conditions.

“They’re saying if I have to wait until summertime to get it here, wouldn’t it be nicer to go down south, get both injections and be finished with everything by the end of January,” Toronto-based travel insurance broker Martin Firestone said. But that would mean defying the government’s stay-at-home advice.



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Analysis

Pandemic fuels fast food’s appetite for UK expansion

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Fast-food chains are gobbling up high street sites left vacant by struggling retail and casual dining operators as they target aggressive expansion in the UK.

Adam Parkinson, European vice-president of the Filipino fried chicken group Jollibee Foods Corp, said the company wanted to be in “every major city in the UK” with plans to invest £30m, including opening 10 new outlets in 2021 and a further 15 to 20 next year.

The first will be a flagship site on Leicester Square in London, which is set to open as lockdown restrictions on restaurants lift in May.

German Doner Kebab claimed to be the UK’s “fastest growing restaurant chain” after it announced plans to open between 47 and 49 new outlets this year, doubling its estate and creating roughly 1,800 jobs.

The group, which launched in Berlin in 1989 but is based in Glasgow, had originally planned to open about 25 UK sites this year but Imran Sayeed, its chief executive, said the pandemic-driven boost in demand for takeaway food had spurred wider expansion. “New communities discovered us during the pandemic [and] that opened up avenues for us to look at some of the territories that we had not been looking at,” he said.

Same-store sales jumped 51 per cent last year compared with 2020 and were already up a further 38 per cent this year, Sayeed added.

Others that have announced plans to open multiple sites this year include “fast pizza” company Fireaway, which intends to double its UK estate to 110 sites, aviation-themed Wingstop, a US fried chicken brand, and the US fast-food chain Wendy’s, which has secured five sites for its return to the UK after it exited the market 20 years ago blaming high rents and operating costs.

Fast pizza group Fireaway intends to double its UK estate to 110 sites © Alamy

The growth is being fuelled predominantly by overseas chains which see the UK as an attractive market from which to launch a European expansion.

Jollibee also plans to open its first continental European site in Spain this year, while Wendy’s chief executive Todd Penegor said the company planned to “solidify a good beachhead in the UK to really prove out the model for the broader European business”.

Graeme Smith, managing director at consultancy AlixPartners, which advises Burger King UK, said the UK was a popular place for fast-food chains to establish themselves in Europe because of its “proximity to the US market is terms of cultural trends and even simple things like language”.

Thomas Rose, co-founder of property consultancy P-Three, said established brands such as McDonald’s and Burger King were also weighing expansion but were “more sensitive” about publicising their plans as negotiations were continuing with existing landlords over rent while stores had been closed.

The growth of fast-food chains stands in stark contrast to the travails of the wider restaurant sector, which has suffered under a series of government lockdowns that have allowed takeaway food to be sold but ordered dine-in restaurants to close.

Jollibee plans to open 10 new sites this year, with the first a flagship outlet on London’s Leicester Square © Jollibee

One in six casual dining restaurants shut during 2020, according to the industry research firm CGA, as the pandemic hit a sector already struggling with high debts as a result of private equity ownership, over expansion and increasingly steep operating costs. Overall, 3,267 food-led venues closed — equivalent to 63 a week — CGA data showed.

Rose said that the closure of casual dining chains and the administration of several large retailers such as Philip Green’s Arcadia, owner of Topshop, and Paperchase had opened up opportunities for new entrants to the UK’s fast-food market that would not have been possible before, as landlords desperately seek tenants to take up empty high street lots.

“Fast food was historically excluded from real estate because rents were too high and landlords were more discerning about what brands they chose,” he said.

Parkinson said: “Our prime location is always on the main pedestrianised street on a corner site and they were few and far between pre-Covid but now they are jumping into our laps.”

The rush to expand has in part been driven by significant drops in property prices as the pandemic accelerates consumers’ shift to shop, order food and entertain themselves online.

Rents have fallen as much as 40 per cent in some locations such as London’s Oxford Street but are typically down around 20 to 25 per cent.

Tom Grogan, director of Lemon Pepper Holdings, the franchise owner of Wingstop UK, said the crisis “has allowed us to secure preferential agreements with landlords”.

Sayeed said German Doner Kebab found that demand was driven by teenagers and 20-somethings who were looking for alternative types of fast food: “McDonald’s and Burger King are great brands but people are looking for new things rather than just eating burgers and fried chicken.”



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Investors lambast Sunak’s plans to raise corporation tax

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Shareholders have hit out at the British government’s plans to raise the UK corporation tax rate and warned it could make the country a less attractive place for investment.

Chancellor Rishi Sunak on Wednesday set out plans to increase the corporation tax rate from 19 to 25 per cent for larger businesses in 2023 — the first time it will have been raised since 1974.

The Treasury estimates the move will raise £17bn in 2025-26, but investors expressed concern because of how it could reduce dividend payments by companies.

Richard Buxton, fund manager at Jupiter, an investment group, said Sunak’s proposed increase in the corporation tax rate amounted to a “sizeable bite” out of businesses’ profits.

“When looking at potential profits over a three to five year time horizon investors will have to factor this in, and it will erode earnings and potential dividend growth,” he added.

“In turn, this may at the margin reduce the attraction of UK equities to both domestic and international investors.”

The UK is one of the world’s most popular financial markets for income-seeking investors.

Tom Stevenson, investment director at Fidelity International, a fund manager, said Sunak’s increase in the corporation tax rate would leave the UK just about competitive “but shareholders in the largest, listed companies that will bear the brunt of the measure will not welcome this”.

David Page, head of macro research at Axa Investment Managers, another investment group, said he expected more countries to raise corporation tax rates like the UK, but added: “Does this make the UK less attractive? At the margins yes.”

Nigel Green, chief executive of deVere Group, a financial adviser, said Sunak’s move “will reduce profit after tax and slash the profit available for dividends. This will not go unnoticed by those looking to invest in the UK”.

Sunak said in his Budget speech in the House of Commons that even after his corporation tax reform, the UK’s headline rate would still be the lowest among G7 nations.

But experts said the UK does not look as competitive internationally on other measures, because it is much less generous than other countries — including France and Germany — in the share of capital spending that companies are allowed to set against taxable profits.

An OECD measure of the effective marginal corporate tax rate — the amount of tax a hypothetical company pays on an extra pound of profit — shows the UK is close to the average among developed economies now, but could have one of the toughest regimes among the international organisation’s member nations after 2023.

“The headline rate is not the only thing that matters . . . Mr Sunak is taking a gamble that raising corporate taxes further up the international pecking order won’t have too terrible an effect on investment,” said Paul Johnson, director of the Institute for Fiscal Studies.

Corporation tax rise will give UK relatively high effective rate. Chart showing Effective marginal corporate tax rate, 2019 (%). With the increase in UK's corporation tax in 2023 it will be behind only Australia, Spain and New Zealand in the OECD with the Effective marginal corporate tax rate

The IFS said the extra revenue stemming from the higher rate of corporation tax would in the long run be less than the government’s £17bn a year estimate.

A higher rate would reduce incentives for companies to make investments that would increase profits in later years, it added.

Sunak said on Wednesday the majority of businesses would avoid the corporation tax reform given a rate of 19 per cent would apply to businesses making profits of less than £50,000 each year.

He added the rise in the corporation tax rate to 25 per cent for larger companies in 2023 will be preceded by a new allowance for capital spending, providing a “super-deduction” of 130 per cent on new plant and machinery. 

Dan Neidle, a partner at the law firm Clifford Chance, said the two year tax break would be a strong incentive for companies to accelerate investments that were in the works, although it was not long enough to generate new capital spending that took time to plan.

Tax campaigners TaxWatch UK also criticised the move, saying it would give a tax break to companies that have thrived during the pandemic, including Amazon.

Analysis by TaxWatch found Amazon Services UK, an entity that provides warehousing and delivery services, would have its corporation tax bill wiped out based on its last reported spending on plant and machinery. Amazon declined to comment.

Several smaller companies announced they would bring forward investments as a result of Sunak’s proposed tax break, although larger businesses including defence manufacturer Meggitt said that it would be more difficult to change long term plans.

Tony Wood, chief executive of Meggitt, said the company made “decisions on where to do [the] engineering effort based on what is right for the decade rather than what is right for the two year timeframe”.

But Gavin Cordwell-Smith, chief executive of Hellens group, which owns a paving slab manufacturer in Sunak’s Richmond constituency, said that “as a direct consequence of the [chancellor’s super deduction] announcement, we have already decided to accelerate our growth plans, including a new production line”.

Chemicals maker Christeyns will also bring forward investment plans — and likely increase them — in three factories, said director Nick Garthwaite. 

Some business leaders expressed concern at how Sunak’s planned tax break would only last two years, and be immediately followed by the increase in the corporation tax rate to 25 per cent.

“The chancellor wants a two year investment boom, but we will then go from feast to famine at a time when the consumer recovery might be tailing off,” said one executive.

Additional reporting by Sylvia Pfeifer in London



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China’s leaders focus on post-Covid economy at annual meeting

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China’s National People’s Congress, the country’s annual rubber-stamp parliament session, will convene on Friday for a meeting set to focus on a problem many other countries wished they had: how to rein in an economy that has rebounded from the coronavirus pandemic.

“There have been intense discussions about monetary and fiscal policy,” said Wang Jun at the China Center for International Economic Exchange, a government think-tank in Beijing. “The primary goal is to stabilise leverage, but if policy [tightening] goes too far too quickly it may have a negative impact on financial markets as well as the real economy.”

The NPC will run for about a week and is typically a forum where previously agreed measures and policy objectives are formally approved. Last year’s session, however, was dominated by Chinese president Xi Jinping’s surprise announcement of a stringent national security law for Hong Kong after the city was rocked by anti-government protests in 2019.

The gathering also provides the biggest stage of the year for Xi to project his unchallenged grip on both the government and the Chinese Communist party as he prepares for an unprecedented third term in power in late 2022.

China’s post-Covid recovery contrasts starkly with the situation in the US, where the pandemic has claimed the lives of more than 500,000 Americans and President Joe Biden is pushing Congress to pass a $1.9tn economic stimulus package.

China annual GDP growth rate 2018-2020

Guo Shuqing, one of China’s most powerful financial regulators, warned this week about the dangers of “extremely loose monetary policies” in the US and other pandemic-wracked economies, saying the measures could cause “too much fluctuation” in Chinese financial markets.

He added that China’s property market was still afflicted by “relatively large bubbles” and suggested lending rates would “rebound” this year. Guo, who heads the banking regulator and is also the most senior party official at China’s central bank, pronounced late last year that the real estate sector was the country’s “greatest grey rhino in terms of financial risk”.

Guo’s comments sparked a sell-off on regional markets, illustrating the difficult balance he and other financial officials must attempt to strike. Stimulus measures rolled out by Chinese president Xi Jinping’s administration early last year helped spur investment but also propelled debt levels in the world’s second-largest economy to about 270 per cent of GDP.

“While the leadership feels confident about the economy’s trajectory, there is still a lot of uncertainty,” said Andrew Polk at Trivium, a Beijing-based consultancy. “Authorities need to find a way to unleash consumption and pick up slack from industrial production and real estate investment.”

Shuang Ding, chief China economist at Standard Chartered in Hong Kong, said Beijing was likely to reduce its budget deficit to 3 per cent of GDP, down from 3.6 per cent last year. But he also forecast the Chinese economy would grow at least 6 per cent year on year, with “substantial room for outperformance”, and create 11m jobs.

“The most pressing economic issues are how to withdraw from last year’s expansionary fiscal policy and how to increase consumption,” said Jia Jinjing, an economics professor at Renmin University in Beijing. “The central deficit budget will be lower than last year but still above 3 per cent. We cannot rely too much on increased debt to spur consumption.”

China retail sales growth

NPC delegates will also formally pass the party’s 14th five-year economic plan, which is focused on achieving “self-reliance” in a number of critical technology sectors as well as ambitious environmental goals, including reaching peak carbon dioxide emissions by 2030 and net-zero emissions by 2060.

The NPC session in 2020 was delayed for almost three months by the pandemic and fixated on the imposition of the national security law on Hong Kong.

This year, it is likely to approve measures that will further reduce the pro-democracy camp’s representation in the city’s legislature. It is also expected to unveil rules consolidating Beijing’s hold on an already pro-establishment “election committee” that chooses Hong Kong’s chief executive.

Dozens of Hong Kong democracy activists, including publisher Jimmy Lai and jailed student leader Joshua Wong, have been charged with alleged offences of the security law. In a speech last month, Xia Baolong, head of the Chinese government office responsible for Hong Kong, singled out Lai and Wong as “extremely vile anti-China elements”.

“There doesn’t seem to be any end to the crackdown,” said Willy Lam, a China politics expert at the Chinese University of Hong Kong. “Xi has made up his mind to snuff out Hong Kong’s opposition movement altogether. For ordinary people, Beijing will insist on ‘patriotic education’ in the schools and media.”

A Chinese academic who advises Beijing on Hong Kong issues said the territory had been “too unbridled” prior to last year’s passage of the national security law. “The central government had no other option,” said the academic, who asked not to be identified. “The Hong Kong opposition overestimated its power.”

Additional reporting by Xinning Liu in Beijing



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