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City optimistic on bounce back after lockdown exit announcement but businesses


Brokers have selected recovery stocks expected to benefit from the easing of restrictions

City analysts have expressed optimism on the economy’s bounce back after Boris Johnson announced the roadmap out of lockdown on Monday.

However, businesses are demanding strong financial support ahead of Rishi Sunak’s presentation of the budget on March 3.

READ: Boris Johnson announces April reopening of pubs, restaurants and shops

According to the new plans, retailers and hospitality venues could reopen as early as April 12, followed by cinemas, hotels, theatres and concert halls in May if it all goes well.

As of June, weddings and indoor gatherings of six people could be reintroduced, while large events such as concerts may resume with the use of rapid testing.

The government will release updated guidance for international travel on April 12 so UK residents can plan for the summer, with restrictions not removed before May 17, although companies were inundated with requests on Monday.

TUI () had its best day of bookings in over a month, while Thomas Cook saw traffic rocketing 100% on its website.

Flight and holiday bookings zoomed up 337% and 630% respectively for easyJet (), the BBC reported.

Meanwhile, representatives of the hospitality sector said they were “obviously devastated” that its reopening will be so far away, with venues closed for nearly 200 days with just a couple of weeks of heavily restricted trading in December.

“A major package of financial support is imperative if hospitality is to survive,” said Kate Nicholls, chief executive of trade body UKHospitality.

“This delay in reopening will make the job of survival all the more difficult for businesses only just clinging onto existence. It is much more than just an inconvenience for many employers in our sector, it is another delay that they cannot afford and, for too many, will not be able to survive… The job for the Government now is to make sure that our sector survives this further period of closure intact.”

Savings to save the day

Analysts at Peel Hunt expect a strong recovery, considering the extent of lockdown and the pace of vaccine roll-out, and the newsflow to be progressively positive.

“After the highest GDP fall (9.9%) of the major economies last year, we now expect the sharpest recovery,” the broker commented.

UK residents are estimated to hold £125bn of additional savings in their pockets which they couldn’t spend on leisure, retail and transport.

The opportunity to spend some of these ‘forced savings’ should more than offset the impact of higher unemployment levels and lower spending from those impacted financially by the pandemic, Peel Hunt reckons.

However, politicians are estimated to remain cautious, as they will want to avoid U-turns while mutations remain a threat.

Who is primed for recovery?

Banks and other lenders will have still significant upside gearing to a UK economic recovery, with () and () providing exposure to the wider UK economy and trading at distressed multiples of recovered earnings.

Barclays () has only half of its business in the UK but should also bounce further, as concerns over credit quality in its Barclaycard unsecured lending book would reduce, and it should benefit from expected continuing strength in debt and equity issuance through its investment banking arm.

In the much-distressed retail sector, Peel Hunt forecast there will be market share winners, a return towards ‘normal’ shopping trends, continued spending on homes and a rebalancing of online penetration and store demand.

AO World (), Naked Wines (), Moonpig (), Dunelm () and Pets at Home () are expected to emerge out of lockdown as market share winners after boosting their customer base over the past few months.

WH Smith (LON:WHSM) and Superdry () will benefit from a return to previous shopping patterns, while Topps Tiles (), DFS () and ScS () will continue to rely on home improvement demand since…



Read More: City optimistic on bounce back after lockdown exit announcement but businesses

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