Regardless of the official rules, Omicron harms hospitality | Larry Elliott


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C.Christmas parties are canceled. Restaurants are reporting an increase in the number of no-shows. The first preliminary signs of the economic impact of the Omicron variant are emerging.

The relatively small decrease in the number of guests in the week up to 29.

But the anecdotal evidence is that part of the population is risk averse and doesn’t wait for an official lockdown before adopting more cautious behavior. That has been the case in the past and there is no reason to believe that this time around, although the Prime Minister insists that the Christmas celebrations do not need to be canceled.

The government does not want to harm the economy, but the sectors that can least bear it will suffer short-term damage, even if the Omicron variant turns out to be less threatening than feared. The hospitality and stationary retail sectors need a brilliant celebration after a few desperate years. For some companies, canceled Christmas bookings will be the last straw.

Each new wave of the virus involves structural changes in the way the economy works. It can be assumed that other variants will follow Omicron, so that there will be more work from home, more online shopping and a shift in spending from personal services to shopping for goods.

This is a classic case of what economist Joseph Schumpeter called creative destruction, and for the losers it will be a painful process. It may take years for the full effects of the pandemic to become apparent.

In the meantime, the likely shift in spending from services to goods will exacerbate supply chain problems and increase inflationary pressures. When the news from Omicron broke, the financial markets reflexively assumed that central banks would delay their tightening policies. That may not turn out to be the case.

Petrol pumped up

Just last month the price of oil was nearing $ 90 a barrel, and there was talk of breaking the $ 100 mark shortly. The speculations turned out to be unfounded. A combination of factors – fears that skyrocketing prices would bring the global economy to a standstill, tougher containment of Covid-19 in Europe, the release of oil from strategic reserves and the arrival of the Omicron variant – resulted in a sharp decline.

After the decision of the Opec cartel and its allies to continue the production increase planned in January by 400,000 barrels per day, the price of crude oil has now fallen again. At a time after the news broke, Brent crude was trading at $ 67 a barrel – nearly $ 20 a barrel down from its high of $ 86 in October.

Those who fill up with petrol or diesel have every reason to wonder why they are not feeling the benefits. Retailers quickly raised prices to around 150p a liter when the global price of oil rose, but they were slow to bring them back down as crude oil prices fell.

RAC says retailers are making 19p per liter profit compared to 6p per liter before the pandemic. That looks strikingly like price gouging.

London lag

It’s fair to say that listing rules rarely make the heart beat faster for companies looking to trade on the London Stock Exchange. However, the reshuffle announced by the Financial Conduct Authority has some significance.

Put simply, the watchdog tries to facilitate a faster market launch for the founders of innovative companies while at the same time maintaining adequate protection against hostile takeovers.

The dime seems to have fallen that the London Stock Exchange isn’t the first port of call for fast-growing tech companies that, if they are even listed in Europe, increasingly favor Amsterdam. New York is where the real action takes place. Daily Tesla trading on Wall Street is more than three times that of the entire London Stock Exchange.

Paul Marshall, co-founder of the Marshall Wace hedge fund, writes in the FT that UK fund managers would rather have steady dividends than high growth and that the LSE is in danger of becoming a Jurassic Park. If Marshall is right, and trading volume is suggesting, it will take more than just changes to listing rules to restore London’s mojo.

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