Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

What does the delayed reopening mean for UK shares?

  • 29 June 2021 (7 min read)

Despite being technically able to trade, June has brought a raft of difficulties for businesses in sectors such as tourism and leisure sector. A delay to the lifting of COVID rules means pubs and businesses continue to face tough trading, while the decision to move Portugal to the ‘Amber’ travel list has damaged public confidence in overseas holidays, possibly with implications for the rest of the summer.

As we own several companies affected by the delayed reopening, however, we thought we would offer some quick thoughts below.

Travel – take-off delayed

The outlook for travel operators remains unclear. UK consumers typically spend £38bn abroad over the summer but restrictions are now starting to eat into the peak summer period. Some operators have suspended bookings, for example, due to administrative issues around restrictions and processing refunds.

For certain companies, we can still see a route to recovery. Better capitalised businesses should be able to make it to the other side of the pandemic. While there have not been any high-profile failures, we believe this could change as government support is withdrawn. With marketing often the highest variable cost for travel operators, fewer competitors should translate into higher profits. Indeed, 2022 is likely to offer a period of ‘super-normal’ profitability for those left, with the survivors benefitting from strong demand.

Domestic leisure looking brighter

The outlook is perhaps slightly better for the domestic leisure economy. Demand should be strong once restrictions are lifted, with consumers ready to spend some of the £140bn in excess savings built up during the pandemic. People are likely to eat out more often and eat or drink more when they do so. You might choose to have the full three courses rather than just dessert, for example, or opt for a more expensive meal. We have a number of positions in restaurants, pubs and leisure operators across the UK desk.

Indeed, the biggest challenge for leisure operators this summer might be the weather, assuming restrictions are lifted in July. Warm weather and cloudless skies might keep people away from bowling alleys and cinemas, for example, as was the case over the final Bank Holiday weekend in May. Where possible, we are keeping closely in touch with management teams to understand how they are trading and to understand the implications for our investor’s capital.

The UK is not just a reopening story

UK equities are not just about travel and leisure stocks. We continue to find exciting new opportunities with a buoyant IPO market, as well as companies growing through existing trends such as the rise of pet ownership or greater home spending.

It is also worth mentioning that we do not hold ‘reopening’ positions just to take advantage of the reopening. Where we have invested in this group of businesses, we have done so because of their long-term growth potential and supported them through the pandemic, or because they have used the crisis to restructure. The Restaurant Group is a good case in point, with Jamie Forbes-Wilson having written about the company previously here. We will continue to keep you regularly updated, including through our monthly Strategy Perspectives which you can find here.

Stocks mentioned in this article are for informational purposes only and do not represent a recommendation to buy, sell or hold the security in question.


Why UK equities are a must-have for any global equity portfolio?

The UK equity market is a key geographical market and source of potential returns for investors globally

Learn more

Have our latest insights delivered straight to your inbox

Subscribe to updates.

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This promotional communication does not constitute on the part of AXA Investment Managers a solicitation or investment, legal or tax advice. This material does not contain sufficient information to support an investment decision.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice.

    The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors.

    Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. References to league tables and awards are not an indicator of future performance or places in league tables or awards and should not be construed as an endorsement of any AXA IM company or their products or services. Please refer to the websites of the sponsors/issuers for information regarding the criteria on which the awards/ratings are based. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment.  Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. 

    Are you an IFA or other Professional Investor ?

    Are you a financial advisor, institutional, or other professional investor?

    This section is for professional investors only. You need to confirm that you have the required investment knowledge and experience to view this content. This includes understanding the risks associated with investment products, and any other required qualifications according to the rules of your jurisdiction.