ALEX BRUMMER: As Cineworld temporarily closes its doors, there needs to be recognition that the days of large scale cinema-going may be over
- As an entertainment group built on debt, Cineworld was always going to be vulnerable in the pandemic
- An increasing number of households have access to movies at their fingertips
As an entertainment group built on debt, Cineworld was always going to be vulnerable in the pandemic. The big surprise is how it has survived for so long rather than why it took suspension of the latest James Bond film for it temporarily to close its doors.
There needs to be recognition that the days of large scale cinema-going may be behind us.
In much the same way as the coronavirus has speeded up the switch from high street to online shopping, and offices to more home working, it has also supercharged the way we access entertainment. An increasing number of households have access to movies at their fingertips with Sky, Netflix, Disney, Amazon and Britbox.
Closing: There needs to be recognition that the days of large scale cinema-going may be behind us
Yes, there will be movies such as the latest James Bond, the next Star Wars spin-off and fantasy world films which need the big screen. But more viewers seem to value flexibility above all else.
Nevertheless, nobody in Britain can regard the problems of Cineworld with equanimity. The latest 36 per cent slide in the share price tells its own story but with £3.5billion of debt on the last published balance sheet that is not surprising. The bigger worry for the UK is what this means for our creative industries.
Before the pandemic, Sky owner Comcast was planning to build 14 production stages in the UK at a cost of £3bn, adding at least 2,000 skilled jobs. It is not just filming and the release of new movies that will be affected by the pandemic but Britain’s postproduction industry based in Soho, London, and Manchester’s media city.
The creative industries are key areas of hope for the UK. The admirable JK Rowling production line is in good fettle, with her Robert Galbraith thrillers and kids still queuing to see cinema reruns of the Harry Potter series.
But even Rowling’s phenomenal output cannot hold up a whole sector.
In normal times, bankers and policy makers from around the world would be gathering in Washington next weekend for the annual meetings of the International Monetary Fund and World Bank.
It is paradoxical that at the moment when the services of the Fund and Bank are most needed, with a record number of more than 100 nations receiving assistance, travel to Washington is blocked by Covid.
This year’s meetings will be of the formulaic online variety.
What is already clear though is that the IMF, under the leadership of Kristalina Georgieva, is a more forgiving place than at the time of the financial crisis.
Instead of railing against borrowing and debts, the IMF argues, in a just-released chapter of its World Economic Outlook, that in the midst of the pandemic investment is urgently needed in health care, schools, digital infrastructure, safe building and transport.
It suggests that the multiplier, the generator of growth, from such spending is well above the sum invested.
Not quite the message that Chancellor of the Exchequer Rishi Sunak might want to hear on the day he reminded the country that Toryism was about balancing the books.
As miner Rio Tinto learnt to its cost, neglecting ethical and green issues can have far-reaching consequences with the clear-out of top executives. The main challenge for fossil fuel firms and the miners is tackling the carbon footprint.
Weir Group, established as a shipbuilder on the Clyde in 1871, offers a path. The company’s decision to dump its oil and gas interests is a pit-stop along the way.
The price of £314m achieved from Caterpillar is above expectations and helps reduce a debt pile.
It also underpins the desire of chief executive Jon Stanton to complete the conversion of Weir into a UK-based mining equipment champion. Weir’s fortunes are largely tied to the copper mining around the globe with the metal in huge demand for mobile phones, solar panels and electric vehicles.
So as well as providing cleaner equipment to miners and cutting carbon emissions by putting its service centres close to extraction sites, much of the output from copper deposits goes into greener technology.
Britain’s engineering sector is sadly depleted but Weir seeks to show that R&D (in partnership with Glasgow University) and focus is a way forward.
It needs to be on the front foot to keep private equity bargain-hunters at distance.