Shares in airlines, hotel groups and pub companies have tumbled, after it emerged that the government is weighing up tough new “circuit break” restrictions to avert a second wave of Covid-19 infections.
International Airlines Group, which owns British Airways, was the biggest loser on the FTSE100, down nearly 11% by mid-morning, while the aircraft engine maker Rolls-Royce was not far behind, down 7%, and easyJet fell nearly 8%.
Pub companies such as JD Wetherspoons and Mitchells & Butlers, as well as hotels groups Intercontinental and Whitbread, also suffered heavy losses as traders spooked by the threat of curbs on hospitality sold shares.
The rout affecting hospitality and travel shares came after the health secretary, Matt Hancock, refused to rule out a two-week lockdown as the “last line of defence” against rising rates of Covid-19 infection.
The imposition of restrictions akin to those that were in place throughout the summer would severely reduce international travel and could also mean pubs, bars, restaurants and hotels would be forced to shut their doors again, just months after they were allowed to reopen.
Analysts at the stockbroker IG said the possibility of London being included in lockdown restrictions had sharpened fears among investors.
“While localised restrictions have become somewhat normalised of late, the economic importance of London means we are likely to see a more significant market reaction if the growth in cases leads to significant economic consequences,” said the senior market analyst Joshua Mahony.
“From a tourism perspective, the rise in Covid cases in the UK does little to help boost sentiment around travel stocks. While we have become accustomed to the UK imposing quarantine restrictions on visitors from specific countries, the prospect of quarantines on UK tourists holidaying abroad would put a major stake in heart of the travel industry,” Mahony said.
“With the growing likeliness of quarantine restrictions being imposed on UK visitors, it comes as no surprise to see the likes of IAG, easyJet, Carnival, Rolls-Royce, and InterContinental Hotels Group heading up the FTSE 350 losers.”