Rishi Sunak presented the new Job Support Scheme (JSS) on 24th September as a replacement for the furlough scheme. It will begin in November and last for six months.
For those workers returning to work on a part-time basis and working at least one third of their normal hours, the Government and their employer will each top up one-third of pay lost for each hour not worked, with the Government’s contribution capped at just under £700 per month.
All small and medium-sized businesses are eligible, but large firms will need to show a loss of revenue from the pandemic.
This scheme is much less generous than the furlough scheme, with employers now paying a minimum 55% of employees’ salaries and the Government a maximum of 22%. Even allowing for the many factors affecting redundancy decisions, for some companies facing the choice of keeping existing workforces on part-time versus shedding some workers and the remainder working full-time, the new scheme will not prevent job losses.
Businesses will also need to be generating some income to be able to take advantage of the scheme, and there are unfortunately many previously viable firms in the leisure and hospitality sectors that will be stuck on life support until wider restrictions are lifted.
The UK and the EU will start a key week of Brexit talks in Brussels on 29th September, with both sides warning that progress must be made in order to meet the October deadline for a trade deal. Discussions have so far produced little progress on a range of contentious issues including the ‘level playing field’, dispute resolution and cooperation on law enforcement, despite noises emanating from the negotiations last week that the tone had turned more positive.
Once again, investors’ worries were predominantly focused on Europe and the UK, with their equity markets faring worst. Infection rates are rising most quickly there, and restrictions have been widely re-imposed. Having been a relative bright spot in previous months, European equities fell by more than 3.5% during the week.
The UK’s FTSE 100 and 250 indices dropped by 2.73% and 2.94% respectively. The sharp falls occurred at the start of the week with a consolidation through the remainder, but the market’s response to the Chancellor’s new package was underwhelming.
Government bonds proved more attractive this week, but Gilts and Index Linked Gilts were still negative with 0.04% and 1.13% losses, respectively. Corporate bonds were also negative, with only those strategies exposed to foreign currencies outperforming.
Precious metals had a poor week, with the gold price falling by nearly 3%, and that of silver by more than 13% as sentiment soured. We have been expecting a consolidatory phase in these markets for some time given their strength this year, and despite these falls, both metals remain far ahead of global equities in 2020.
The economic data schedule is quiet this week until Thursday, when we have final PMI data for manufacturing businesses, and then Friday when we see the latest US jobs numbers for September. The 29th September also sees the first Presidential debate featuring Donald Trump and Joe Biden in Cleveland, Ohio.
Market views by Ollie Stone – Head of Portfolio Management and Fairstone Private Wealth Ltd (28th September 2020)