Business Updates: U.K. Recovery Slowed in July as Delta Spread - 21 minutes read
Daily Business Briefing
Sept. 10, 2021Updated Sept. 10, 2021, 12:39 p.m. ET
Sept. 10, 2021, 12:39 p.m. ETA shopper in London. Retail sales in Britain fell in in July, contributing to the first decline in consumer-facing services since January.Credit...Hannah Mckay/Reuters
The British economy almost stalled in July, even as most of the final pandemic restrictions were lifted. The services sector, which had been the engine of the economic recovery this year, ground to a halt as the Delta variant spread across the country, forcing people to stay home and consumer spending to decline.
Gross domestic product increased by 0.1 percent in July from the previous month, according to the first estimate by the Office for National Statistics, a slower expansion than most analysts had expected. Although Britain eked out a sixth consecutive month of gains, the pace was considerably slower.
The main reason the economy grew at all was the reopening of an oil field after planned maintenance. Services and manufacturing output were flat and construction contracted for a fourth month.
Output from the service industry, which include shops, restaurants and hotels, fell for the first time since January, the statistics agency said, primarily because of a decline in retail sales. These services are still nearly 7 percent below their prepandemic level. In the overall services sector, the return of music festivals and other large events in July wasn’t enough to offset declines in advertising, real estate and elsewhere.
At the same time, manufacturing was hampered by a struggle to fill vacancies and construction companies were waylaid by price increases and scarce materials such as steel and lumber.
The economy was still 2.1 percent below its prepandemic size in July and could struggle to fully recover as shortages of staff and products weigh on economic activity.
“Making up that last G.D.P. ‘lost’ portion of output will be the hard bit as the early gains from the reopening have been largely exhausted,” analysts at the Royal Bank of Canada wrote in a note.
The Bank of England expects the economy to return to its prepandemic size this year, but the shape of the recovery has changed. The central bank said last month that faster growth in the second quarter would be offset by a slowdown in the third quarter.
Since then, the central bankers have been paying close attention to supply chain disruptions and their impact on inflation. Because of the persistence of the virus, the central bank still hasn’t seen the rebalancing of demand toward services (such as travel and office catering), and away from goods (like cars and work-from-home equipment) that it expected, Andrew Bailey, the Bank of England governor, told British lawmakers this week.
And so, the global demand for goods was pushing commodity prices higher, like oil and metals, he said.
Policymakers expected supply bottlenecks to eventually be resolved as the pandemic comes to an end, but Mr. Bailey said he was more concerned about how long the mismatches in the labor market would go on. Businesses across nearly every sector have complained about not being able to fill positions, even though unemployment has risen and many people are still furloughed from their jobs.
“At the moment, we’re seeing some leveling off of the recovery,” Mr. Bailey said on Wednesday.
Many companies were already moving toward vaccine mandates, but they were focused on white-collar workers.Credit...Eli Hartman/Odessa American, via Associated Press
President Biden on Thursday laid out a wide-ranging plan to tackle the pandemic, including requiring companies with more than 100 employees to mandate that their workers get vaccinated or face weekly testing.
The move comes as airlines, restaurants and other businesses are already feeling the pain of an economic pullback caused by the Delta variant of the virus. The new rule, which Biden instructed the Occupational Safety and Health Administration to put in place by drafting an emergency temporary standard, will affect some 80 million workers.
Many companies were already moving toward mandates. In a recent Willis Towers Watson survey, 52 percent of respondents said they planned to institute vaccine mandates by the end of the year, and 21 percent said they already had such requirements.
But many of those mandates, including at companies like Goldman Sachs and UPS, have focused on white-collar workers, who tend to have higher vaccination rates. This presidential directive will help industries that are facing labor shortages, like retail and hospitality, institute a requirement on their frontline workers.
“It levels the playing field,” said Ian Schaefer, a partner at the law firm Loeb Loeb.
Companies will now face new decisions, like whether to pick up the tab for weekly testing and how to handle religious exemptions — tasks many are already finding challenging.
A recent poll by Aon of 583 global companies found that of the employers that have vaccine mandates, 48 percent said they were allowing for religious exemptions; only 7 percent said they would fire a worker for refusing to get vaccinated.
Among unanswered questions:
How will the government gather, store and track information on employee vaccinations?
What penalties will companies face if they choose not to follow the new requirement?
Does it apply to all workers, or only those going into an office?
When will the new rules take effect?
Reaction was, unsurprisingly, mixed. The Business Roundtable and the U.S. Chamber of Commerce both welcomed the Biden administration’s actions. But Gov. Greg Gianforte, Republican of Montana, the only state to ban vaccine mandates, called the new rules “unlawful and un-American.” The Republican National Committee said it intended to sue.
Whether legal challenges will prove successful is unclear. OSHA’s emergency temporary standards pre-empt state governments’ existing rules, except in states that have their own OSHA-approved workplace agencies. (About half do.) The legal basis for a challenge is likely to be weakest in states that are directly within OSHA’s jurisdiction, like Montana, Texas and Florida.
Do you run or work at a business that will be affected by the new vaccine mandate? If so we’d like to hear from you. Email Lauren.Hirsch.com and please let us know how to reach you if we need to learn more.
Employees entering Citigroup’s headquarters in Manhattan in July.Credit...Jeenah Moon for The New York Times
The issue of vaccine mandates has been a delicate balance for employers, weaving in politics, health and privacy. But the government has put increasing pressure on employers to play a role in helping to vaccinate the country — and executives are desperate to get back to a degree of normalcy.
On Thursday, President Biden said the Occupational Safety and Health Administration was drafting a rule mandating that all businesses with 100 or more workers require their employees to either get vaccinated against the coronavirus or face mandatory weekly testing. That move would affect some 80 million workers.
Even before that announcement, mandates and inducements by city, state and federal governments, as well as full Food and Drug Administration approval of the Pfizer-BioNTech coronavirus vaccine for people 16 and older, made it easier for executives to go ahead.
What’s in the new OSHA rule?
The specifics have not yet been made public, but the president said two new requirements would apply to businesses with 100 or more employees: They must require that workers get vaccinated against the coronavirus or be tested at least once a week, and they must give workers paid time off to receive the vaccine and recover from any side effects.
Lawyers said Thursday that it was not immediately clear whether the rule would apply to all employees or only those who work in company offices or facilities.
Does OSHA have authority to do this?
OSHA has the authority to quickly issue a rule, known as an emergency temporary standard, if it can show that workers are exposed to a grave danger and that the rule is necessary to address that danger. The rule must also be feasible for employers to enforce.
Such a standard would pre-empt existing rules by state governments, except in states that have their own OSHA-approved workplace agencies — about half the states in the country. States with their own programs have 30 days to adopt a standard that is at least as effective, and that must cover state and local government employees, such as teachers. Federal OSHA rules do not cover state and local government employees.
The legal basis for a challenge is likely to be weakest in states that are directly within OSHA’s jurisdiction. Among them are some of the states that have recently been hardest hit by Covid-19 and where politicians have been resistant to mandates — such as Texas and Florida.
“I think that the Department of Labor probably is in good stead to be able to justify its mandate for health and safety reasons for the workers,” said Steve Bell, a partner at the law firm Dorsey Whitney who specializes in labor and employment.
“They’ve got a broad pretty solid basis for saying: ‘We’re here to protect the workers, and this is part of our purview, and we think that this is something that will protect employees,’” he said.
How extensive are company mandates already?
Corporate vaccine mandates began to roll out substantially in late July, shortly after the Biden administration announced that it was requiring all civilian federal employees to be vaccinated against the coronavirus or to submit to regular testing and other strict requirements. Walmart and Disney led the way, followed by others including Uber and Google. When the F.D.A. granted its approval on Aug. 23, more mandates came flooding in from Goldman Sachs, Chevron and others.
Still, many are not comprehensive. Companies like Walmart and Citigroup have mandates for their corporate employees but not for frontline workers. Many companies are dealing with labor shortages and varying levels of vaccine hesitancy across state lines.
In a recent Willis Towers Watson survey of nearly 1,000 companies, which together employ almost 10 million people, 52 percent of respondents said they planned to have vaccine mandates by the end of the year, compared with 21 percent that said they already had vaccine requirements.
How are companies carrying out mandates?
The approach to mandates has run the gamut. Some, like Tyson Foods, which is requiring vaccines for its entire U.S. work force, have said that vaccines are a condition for employment. United Airlines has said it will fire employees who do not abide by the airline’s vaccine mandate or get an exemption; those who are exempt will be placed on temporary leave, in many cases unpaid.
Others, though, have worked a degree of flexibility into their requirements. Many, like AstraZeneca, have allowed employees with religious or medical exemptions to undergo weekly testing as an alternative to vaccination. Some, including UBS, have said employees who do not want the vaccine may work from home.
A recent poll by Aon of 583 global companies found drastically different policies. Of employers that have vaccine mandates, 48 percent said they were allowing for religious exemptions; just 7 percent said they would fire a worker for refusing to get vaccinated.
What are companies doing about unvaccinated employees?
Companies have been offering incentives to persuade workers to get the vaccine. Some, such as Kroger, have offered bonuses, while others have provided vaccinations in the workplace and additional paid time off to increase inoculation rates.
But others have been using deterrents, including loss of employment. Delta Air Lines, for example, has been requiring unvaccinated employees to pay an extra $200 a month to stay on the airline’s health plan. Other companies have been restricting office entry for those who are not vaccinated.
Workers who are unvaccinated because of a disability or conflicting religious beliefs have been told that they must follow strict safety guidelines like regular coronavirus testing, masking and social distancing. Some are allowed to work remotely.
How does the law cover vaccine mandates?
Companies are legally permitted to make employees get vaccinated, according to guidance from the U.S. Equal Employment Opportunity Commission, though a number of states have proposed legislation limiting the ability to mandate for employees or guests.
Employers are allowed to ask about a worker’s vaccination status, which is not protected by the Health Insurance Portability and Accountability Act, known as HIPAA. The law, which protects a patient’s confidential health information, applies only to companies and professionals in the health care field.
Do you run or work at a business that will be affected by the new vaccine mandate? If so we’d like to hear from you. Email Lauren.Hirsch.com and please let us know how to reach you if we need to learn more.
A Ford showroom in New Delhi, India. The automaker said it would close its operations in the country.Credit...Altaf Hussain/Reuters
Ford Motor’s decision to close its Indian operations was met with shock and defensiveness on Friday, after it became the latest American company to close its doors in a country with both tremendous possibilities and high hurdles.
The decision announced on Thursday would affect 4,000 employees as well as hundreds of dealers and a considerable number of customers.
More than $272 million has been invested in setting up dealerships that employ about 40,000 people, said Vinkesh Gulati, president of the Federation of Automobile Dealers Associations in India, which represents more than four-fifths of the country’s retailers.
Many Indians were expecting delivery of their new Ford vehicles on Friday, the day of the Hindu festival of Ganesh Chaturthi, the birthday of a god worshiped as the harbinger of good things and a symbol of prosperity. Now, selling those cars could become difficult.
“The first priority is service, but when a company exits, whatever they may say for confidence building, no comment will ring true because customers are scared,” Mr. Gulati said in a telephone interview.
Ford is the latest prominent American vehicle manufacturer to leave India, following Harley Davidson which exited in the winter of 2020 and General Motors, which quit the local market in 2017.
Global manufacturing giants had long looked at India’s growing middle class as a market to grab. They had also been enticed by the country’s cheap labor and promises by Prime Minister Narendra Modi to cut red tape and make business easier to conduct.
Though the government has made some progress, it has struggled to remove barriers and construct a robust ecosystem. Industry experts say a lack of demand has discouraged the private sector.
The economy has also taken a hit from the pandemic. India recently posted strong economic growth on paper, but the official figures benefited from a sharp contraction last year when the government locked down the economy to contain the coronavirus.
Economists say India will struggle in coming years to make up the growth lost from the pandemic. Real household income fell last year, as unemployment grew and tens of millions of middle-class Indians fell into poverty.
Ford plans to phase out its plants in India. A vehicle assembly plant on its western coast in Gujarat will be shuttered by the fourth quarter of 2021 and another for vehicle and engine manufacturing in the southern Indian state of Tamil Nadu by the second quarter of 2022. The company hopes to restructure its operations around electric vehicles and niche markets, like providing imported Mustangs to India.
Government officials on Friday defended India’s business environment in the local media, saying other automakers have prospered. Still, industry figures showed that demand for new vehicles has weakened in recent years, and automakers are dealing with industrywide challenges like a tight market for computer chips.
Brian Moynihan, the chief executive of Bank of America, announced the changes in a staff memo.Credit...Shannon Stapleton/Reuters
Bank of America overhauled its top management Friday after the decisions of two key executives to retire prompted a cascade of changes.
Alastair Borthwick, who has run the commercial banking business for nine years, was appointed chief financial officer starting in the fourth quarter, the bank said in a statement. He succeeds Paul Donofrio, who will become vice chair and oversee sustainable finance.
Lauren Mogensen will become global general counsel at the end of the year, succeeding David Leitch, who will retire next year. The heads of the bank’s investment-banking and trading divisions will stay in their current roles and report directly to the chief executive, Brian Moynihan.
“As we focus on the path ahead and what it requires, and individuals decide they are ready to transition and/or retire, we are able to promote and expand colleagues from inside the company resulting in new opportunities, smooth transitions, and continued momentum,” Mr. Moynihan wrote in a memo to staff.
Aditya Bhasin was promoted to chief technology and information officer. His predecessor, Cathy Bessant, will become vice chair of global strategy.
An apartment complex in Chicopee, Mass. In some places, tenants do not have official leases, making them hard to find, and harder to help.Credit...Cody O'Loughlin for The New York Times
The vast majority of a $46.5 billion rental assistance fund sits unspent, despite one estimate that puts the number of renters in immediate danger of eviction at two million.
The House Financial Services Committee will hold a hearing on Friday to examine the shortcomings of the fund, known as the Emergency Rental Assistance Program, which had only distributed a fraction of its total funding by Aug. 1, according to the Treasury Department.
Federal and local officials, housing experts, landlords and tenants have cited an array of problems that slowed the flow of aid:
Bureaucratic missteps at all levels of government.
Resistance from landlords.
The reluctance of local officials to ease eligibility requirements for the poor.
Difficulty raising awareness that rental aid even existed.
A steep rise in rents that increased the incentive for kicking out low-income tenants.
Over the past several months, the White House and Treasury Department have been racing to deal with the program’s problems, repeatedly revising guidelines to allow tenants to receive payouts with a minimum of documentation, while enlisting state judges and even law school students to help tenants delay or prevent their evictions, report Glenn Thrush and Conor Dougherty of The New York Times.
Attempts to stave off evictions go back to last spring, when about $4 billion in rental assistance was tucked into the $2.2 trillion CARES Act signed last March by President Donald J. Trump. Unlike other federal emergency programs, like stimulus checks, which were mainly controlled by Washington, rental assistance was given to states and large cities and counties, which were free to design their own programs to suit their local needs.
How the program fell apart: From the beginning, local governments struggled with administrative headaches. Then the momentum stalled. READ THE FULL ARTICLE →
The disgraced founder of the blood testing start-up Theranos arrived at the federal courthouse and stood trial for two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.CreditCredit...Mike Kai Chen for The New York Times
The judge in the trial of Elizabeth Holmes, the founder of the blood testing start-up Theranos, canceled Friday’s proceedings after a juror said he might have been exposed to someone with the coronavirus.
The juror reported no symptoms, and is getting a lab test on Saturday. Out of caution, Judge Edward J. Davila of the U.S. District Court for the Northern District of California proposed going dark while awaiting the test results. The trial is expected to last four months.
Lawyers for the government and the defense made their opening statements on Wednesday, and a former controller for the company began to testify before the proceedings ended for the day. [Read more about the trial’s opening statements.]
The government’s case
Robert Leach, an assistant U.S. attorney, methodically described the times that Theranos came close to going out of business. “Out of time and out of money, Elizabeth Holmes decided to lie,” he said, in what became a refrain
Mr. Leach described Theranos’s false claims that its technology was being used on battlefields. He showed apparently falsified reports that Ms. Holmes gave to investors from pharmaceutical companies endorsing Theranos’s technology. He said she had peddled wildly exaggerated revenue projections and had used the news media to execute her fraud.
“The scheme brought her fame, it brought her honor, and it brought her adoration,” Mr. Leach said.
The defense argued that Ms. Holmes was a hardworking, if naïve, entrepreneur who did not succeed but did not commit any crimes.
“The villain the government just presented is actually a living, breathing human being who did her very best each and every day,” said Lance Wade, a lawyer with Williams Connolly who represents Ms. Holmes. “Trying your hardest and coming up short is not a crime.”
Mr. Wade argued that the reality of Theranos’s failure was more complicated than the government’s presentation and that the company had built some valuable blood-testing technology.
There has been intense media interest in Elizabeth Holmes’s trial.Credit...Nick Otto/Agence France-Presse — Getty ImagesThe circus
Interest in the trial was so high that a line began forming to get into the federal courthouse before 5 a.m. Entering the windy alley in front of the courthouse at about 8 a.m., Ms. Holmes was swarmed by camera crews. She was escorted through the scrum by her boyfriend, Billy Evans, and family members.
Curious members of the public also showed up, as did a crew of three blond-haired women in black suits who resembled the defendant. At one point, Mr. Evans and the women in black passed around a padded seat for the courtroom’s hard benches.
Carlos Chavarria for The New York TimesElizabeth Holmes, the disgraced founder of the blood testing start-up Theranos, stands trial for two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.
Here are some of the key figures in the case →
Stephen Lam/ReutersHolmes founded Theranos in 2003 as a 19-year-old Stanford dropout. She raised $700 million from investors and was crowned the world’s youngest billionaire, but has been accused of lying about how well Theranos’s technology worked. She has pleaded not guilty.
Justin Sullivan/Getty ImagesRamesh Balwani, known as Sunny, was Theranos’s president and chief operating officer from 2009 through 2016 and was in a romantic relationship with Holmes. He has also been accused of fraud and may stand trial next year. He has pleaded not guilty.
Jefferson Siegel for The New York TimesDavid Boies, a prominent litigator, represented Theranos as its lawyer and served on its board.
He tried to shut down whistle-blowers and reporters who questioned the company’s business practices.
Getty ImagesThe journalist John Carreyrou wrote stories exposing fraudulent practices at Theranos.
His coverage for The Wall Street Journal helped lead to the implosion of Theranos.
Jeff Kravitz/FilmMagic, via Getty ImagesTyler Shultz and Erika Cheung are former Theranos employees and were whistle-blowers. They worked at the start-up in 2013 and 2014.
Shultz is a grandson of George Shultz, a former secretary of state who was on the Theranos board.
Eric Thayer for The New York TimesJames Mattis, a retired four-star general, was a member of Theranos’s board.
He went on to serve as President Donald J. Trump’s secretary of defense.
Edward Davila, a federal judge for the Northern District of California, will oversee the case.
Kevin Downey, a partner at the Washington law firm Williams Connolly, is the lead lawyer for Holmes.
Robert Leach, an assistant United States attorney for the Northern District of California, will lead the prosecution for the government, along with other prosecutors from the U.S. attorney’s office.
Read more about Elizabeth Holmes:
U.S. stocks were down slightly in midday trading Friday, with the SP 500 heading for its fifth day of losses, its longest losing streak since February. The index was down about 0.1 percent.
The Nasdaq composite was down as much as 0.3 percent, dragged lower by Apple shares, which dropped 3 percent after a federal judge ordered the company to stop restricting app developers from directing customers to other ways to pay for their services.
President Biden on Thursday ordered new federal vaccine requirements to push two-thirds of American workers to be vaccinated against the coronavirus, reaching into the private sector to mandate that all companies with more than 100 workers require vaccination or weekly testing. The mandate presents challenges for businesses.
U.S. producer prices rose 0.7 percent in August from July, the Labor Department reported on Friday, a sign of continuing inflation. The Producer Price Index was up 8.3 percent from a year prior, the largest jump since the 12-month data was first calculated in 2010, according to the Labor Department.
European indexes were lower, with the Stoxx Europe 600 down 0.3 percent on Friday. Gross domestic product in Britain increased by 0.1 percent in July from the previous month, according to the first estimate by the Office for National Statistics, which was slower than economists expected.
Shares for Kroger as much as 8 percent in midday trading after the supermarket reported that sales decreased by 0.6 percent in the quarter ending Aug. 14 compared with the same period last year.
Source: New York Times
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