Coronavirus Business Update: Fears of ‘debt tsunami’ as governments ramp up borrowing


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Latest news

  • The global oil market will remain oversupplied until early 2022, according to the president of the Dallas Federal Reserve

  • UK regulator Ofgem is proposing a rise in energy bills to offset suppliers’ pandemic debts

  • Scotland plans to vaccinate up to 1m people before the end of January as the most populated parts of the country prepare to go into a stricter lockdown

UK government deficit at peacetime high

Data this morning showing the UK hitting a record peacetime deficit throws the spotlight once again on the rapid increase in debt for governments and companies across the world as they struggle to cope with the fallout from the pandemic. 

The Institute of International Finance, which represents financial institutions, on Wednesday warned of a “debt tsunami” as global borrowing accelerated at a pace that could bring “significant adverse implications for economic activity”. 

Debt burdens on developing economies, as emerging markets correspondent Jonathan Wheatley explains in our Big Read, are becoming especially acute — Zambia this week became the sixth such country to default or restructure debt so far this year. G20 leaders meeting this weekend are expected to agree a “common framework” to help poor countries get beyond their imminent cash flow problems and tackle the longer-term problem of debt sustainability.

Tensions are simmering in richer regions too. European Central Bank president Christine Lagarde this week refused to countenance any help for over-indebted eurozone governments while the European Commission urged EU member states not to build up unsustainable debt positions as it signed off 2021 budget plans.

Back in the UK, there were more signs that households too were feeling the strain. Nationwide, the country’s largest building society, said it was doubling the amount set aside for bad loans.

The FT’s new financial literacy foundation aims to bring personal finance skills to the most vulnerable. Read deputy editor Patrick Jenkins on why these skills matter more than ever.


A vaccine-led economic rebound could cause the US dollar to fall as much as 20 per cent next year, some analysts say. The greenback is typically in demand in times of stress, reflecting its safe haven status. “Even if the US economy performs quite well, we think the dollar can weaken substantially as investors look for higher returns outside of the US and exit the safe havens that they have been in throughout the Covid period,” said a Goldman Sachs executive.

Another safe haven asset — gold — may also be a victim of the potential recovery. There are signs that the precious metal’s two-year rally is coming to an end as investors move into commodities more connected to industrial demand such as silver, used in solar panels, and platinum, a component of catalytic converters.

Line chart of gold price ($ per troy ounce) showing that the yellow meatal has eclipsed its 2011 peak this year

An emergency pandemic rule that allowed UK companies to fast-track share issues has been scrapped. The provision had allowed for the exclusion of ordinary shareholders from large fundraisings.


Retailers across Europe are lobbying governments to lift restrictions to save the crucial Christmas shopping period beginning with Black Friday promotions next week — a month-long spell normally responsible for up to half of annual sales for many non-food companies. UK retail sales jumped in October as shoppers flocked to stores ahead of the forced closure of non-essential stores in England earlier this month.

Chart showing volume of retail trade (rebased, 2015 = 100)

BuzzFeed’s acquisition of HuffPost highlighted the effect of the pandemic on digital media titles and their reliance on advertising. Traditional publishers such as the Financial Times and New York Times by contrast are now supported mainly by subscription revenues. Condé Nast, owner of Vogue, is accelerating its shift to digital after print advertising fell off a cliff during the crisis.

The pandemic-fuelled online shopping boom means turnover for parcels for the UK’s Royal Mail has surpassed that of letters for the first time. The company last month began collecting parcels from doorsteps across the UK, with customers able to hand over items to postmen and women or leave their packages in a “safe place” for a small fee.

Global economy

The US Treasury declined to extend some of the Federal Reserve’s emergency lending measures, prompting the Fed to warn that the US economy remained “strained and vulnerable” in the face of an uncertain outlook and rising coronavirus cases. Markets were unsettled, while the US Chamber of Commerce said the decision “ties the hands of the incoming administration, and closes the door on important liquidity options for businesses at a time when they need them most”.

Column chart showing assets ($bn) of emergency Fed facilities

The pandemic has shown the need for a remodelling of food supply chains, with more investment in local suppliers and distributors, improvements in tackling waste and a greater emphasis on food security. Read our special report: Sustainable Food and Agriculture

UK consumer confidence has fallen to its lowest level in six months while the closure of bars and restaurants has had a serious effect on spending, according to two surveys. Watch our video on how the pandemic has hit the UK hospitality sector.

Video: How coronavirus hit hospitality | Crunched

Get in touch

How is your workplace dealing with the pandemic? How are you dealing with it as a professional or a manager? And what do you think business and markets — and our daily lives — will look like after we eventually emerge? Also — tell us what you think about this newsletter and how we can make it more useful to you. Email us at [email protected]. We may publish your contribution in an upcoming newsletter. Thanks.

Adrian_Nantwich comments on Gita Gopinath: ‘Fiscal policy plays an essential role in recovery’.

Investment in ‘health’ and expenditure on ‘healthcare’ requires a careful distinction. Inputs into our health status include other policies and investments (housing, child development) as well as those we would typically recognise as healthcare expenditure (beds, number of doctors). Indeed, income inequality is related to aggregate and individual measures of health status so health policy encompasses education. There is an ongoing discussion about the income elasticity of healthcare expenditure, so it would be interesting to know if the public sector expenditure is replicating market spending in countries with Beveridge and Bismarck type models.

The essentials

Coronavirus cases in the US jumped by a record number on Thursday, while hospitalisations topped 80,000 for the first time and deaths rose by the most in more than six months. States reported 182,832 infections, topping the previous record on November 13 by more than 10,000. Compare the country’s performance with its peers using our interactive tool.

Millions of workers have seen their pension plans thrown into question by the pandemic. FT Money tackles some of the key issues facing savers.


An encouraging week for vaccine developments ended with news that Pfizer and BioNTech will be the first to submit a candidate for regulatory approval — in this case by the US Federal Drug Administration — potentially paving the way for shipping by mid-December.

It follows news that the vaccine in development by Oxford university and AstraZeneca is showing promising initial results for the elderly.

Science editor Clive Cookson looks at the mRNA technology behind the Pfizer-BioNTech and Moderna candidates while magazine columnist Tim Harford warns us not to get carried away: many obstacles still stand in the way of our dream of inoculating the world.

Infographic explaining how mRNA vaccines work

Final thought

Lockdowns may have upended the traditional Christmas shopping dash for presents but fear not: from dandyish objects of desire to foodie finds and home comforts — the How to Spend It gift guide has got you covered.

© Getty Images




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