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Bank of England base rate likely to stay at 0.1% but there could be £100bn more stimulus

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bank of england base rate likely to stay at 0 1 but there could be 100bn more stimulus

The Bank of England could launch a further stimulus package worth as much as £100billion before it cuts rates to below zero, economists are forecasting.

Economists say interest rates are likely to remain at 0.1 per cent when the Bank meets this week.

But data firm Bloomberg said the money markets are already beginning to price in a cut to negative in the second quarter next year. And one expert has even raised the possibility of the Bank at some point introducing restrictions on the use of cash.

Stimulus: The Bank of England could launch a further stimulus package worth as much as £100billion this week

Stimulus: The Bank of England could launch a further stimulus package worth as much as £100billion this week

Stimulus: The Bank of England could launch a further stimulus package worth as much as £100billion this week

A move to negative interest rates – the first time ever in Britain – would mean commercial banks being charged to lodge their money with the Bank, and those charges, in turn, would be passed on to their customers.

The hope would be that this would encourage banks to lend and prompt firms and households to spend rather than save, thus giving a lift to the economy. Bank governor Andrew Bailey is expected to publish a report this week into the prospect of negative rates after warning in June they were a possibility.

Since the onset of the crisis, the Bank has beefed up its programme of money creation, or ‘quantitative easing’ (QE), taking the total from £445billion to £745billion.

Howard Archer – chief economic adviser to the Item Club, which uses the Treasury’s computer model of the economy – said he expected more QE later in the year.

Douglas McWilliams – deputy chairman of the independent Centre for Economics and Business Research – said that with soaring levels of business failures and job losses expected between now and the middle of next year, we may well require a mixture of QE and negative rates just to keep the economy afloat.

But he warned that, without controls on the use of physical money, negative rates would simply see cash stored ‘under the mattress’. He added: ‘It will be interesting this week to see if the Bank suggests restrictions on cash usage.’

Bank governor Andrew Bailey is expected to publish a report this week into the prospect of negative rates

Bank governor Andrew Bailey is expected to publish a report this week into the prospect of negative rates

Bank governor Andrew Bailey is expected to publish a report this week into the prospect of negative rates

Such restrictions could range from a ban on cash, thought to be unlikely, through limiting ATM withdrawals, requiring all self-employed people to register for VAT, reducing higher denomination banknotes and encouraging the larger retail chains to phase out the acceptance of cash for anything other than small items.

Chris Williamson, chief business economist at IHS Markit, said: ‘I don’t think negative rates are imminent. But the Bank will need to produce more stimulus from somewhere. It will have to face the reality the recovery from earlier in the year is losing momentum.’

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Debenhams will slash 2,500 store and warehouse jobs to cut costs

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debenhams will slash 2500 store and warehouse jobs to cut costs

Debenhams is to axe 2,500 jobs across its stores and warehouses in an attempt to cut costs after sales plummeted during the coronavirus lockdown.

The department store is scrapping the roles of sales manager, visual merchandise manager and selling support manager as part of a management restructuring process.

The move, which was first reported by RetailWeek, comes four months after Debenhams collapsed into administration.

Debenhams said it has no plans to shut more stores as part of the restructure, having closed seven after announcing administration. 

It comes as shocking new data revealed that the number of people on company payrolls in the UK has fallen by 730,000 since lockdown –  the biggest drop in employment a decade.

Dire figures have started to show the huge impact of coronavirus on the labour market, with a wave of jobs being axed.

In the three months to June, the number in work decreased by 220,000 – the largest quarterly slump since 2009. Total hours worked slumped by a fifth over the quarter to the lowest level since 1994.

Debenhams has axed 2,500 jobs across its stores and warehouses to costs after sales plummeted during lockdown

Debenhams has axed 2,500 jobs across its stores and warehouses to costs after sales plummeted during lockdown

Debenhams has axed 2,500 jobs across its stores and warehouses to costs after sales plummeted during lockdown

It comes four months after Debenhams collapsed into administration, thought it says it will not be closing any stores

It comes four months after Debenhams collapsed into administration, thought it says it will not be closing any stores

It comes four months after Debenhams collapsed into administration, thought it says it will not be closing any stores

Meanwhile, the numbers on payroll tumbled another 114,000 in July, as the claimant count – which includes some people who are in work – increased again to reach 2.7million. 

Underlining the misery, Debenhams announced it is cutting 2,500 roles. 

A Debenhams spokesman said: ‘We have successfully reopened 124 stores, post-lockdown, and these are currently trading ahead of management expectations.

‘At the same time, the trading environment is clearly a long way from returning to normal and we have to ensure our store costs are aligned with realistic expectations.

Biggest fall in employment for a decade as impact of Covid is felt 

Employment saw the biggest fall in a decade in the three months to June as coronavirus hit.

Official figures showed the number in work decreased by 220,000 – the largest quarterly decrease since 2009. 

The 0.2 per cent drop comes after a long period after the credit crunch in which employment levels have hit repeated highs. 

The employment figures are still up 0.3 per cent year on year. And unemployment stayed flat, as the government’s support schemes and a rise in inactivity masked the true effects of lockdown.

Workers aged under 24 and those over 50 were the worst hit by the fall.   

The total hours worked slumped by a fifth over the quarter to the lowest level since 1994. 

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‘Those colleagues affected by redundancy have been informed and we are very grateful to them for their service and commitment to Debenhams.

‘Such difficult decisions are being taken by many retailers right now, and we will continue to take all necessary steps to give Debenhams every chance of a viable future.’

Analysts have warned the grim news is the tip of the iceberg, as the full effects of lockdown have so far been masked by the government’s massive support schemes. 

The latest figures today showed that 9.6million jobs have been furloughed, with the Treasury paying out £33.8billion in subisidies. 

Many people appear to have chosen to stay economically ‘inactive’ rather than hunt for work – meaning they remain outside the headline unemployment figures.

Figures released tomorrow are due to confirm that the UK has formally entered a recession – with a second consecutive quarter of GDP contracting.  

ONS economist Jonathan Athow said: ‘The labour market continues recent trends, with a fall in employment and significantly reduced hours of work as many people are furloughed. 

‘Figures from our main survey show there has been a rise in people without a job and not looking for one, though wanting to work. 

‘In addition, there are still a large number of people who say they are working no hours and getting zero pay.

‘The falls in employment are greatest among the youngest and oldest workers, along with those in lower-skilled jobs.

31809240 8614679 image m 10 1597127237144

31809240 8614679 image m 10 1597127237144

Some 730,000 fewer people are now on the payroll than in March before the country went into lockdown to combat the killer disease

The latest ONS figures showed the average number of hours worked per week has stayed flat overall - although there was a slight bump for the self-employed

The latest ONS figures showed the average number of hours worked per week has stayed flat overall - although there was a slight bump for the self-employed

The latest ONS figures showed the average number of hours worked per week has stayed flat overall – although there was a slight bump for the self-employed

Job vacancies showed slight signs of recovery in July - but are still far lower than during the credit crunch

Job vacancies showed slight signs of recovery in July - but are still far lower than during the credit crunch

Job vacancies showed slight signs of recovery in July – but are still far lower than during the credit crunch

Latest figures show that 9.6million jobs have been covered by the government's furlough scheme since the crisis began

Latest figures show that 9.6million jobs have been covered by the government's furlough scheme since the crisis began

Latest figures show that 9.6million jobs have been covered by the government’s furlough scheme since the crisis began

‘Vacancies numbers began to recover in July, especially in small businesses and sectors such as hospitality, but demand for workers remains depressed.’  

The ONS said that around 7.5million people were temporarily away from work in June this year, most of them on the Government’s furlough scheme.

Some 9.6million jobs have been furloughed costing £33.8billion  

Some 9.6million jobs have been propped up by the government’s furlough scheme during the coronavirus crisis, figures showed today.

Treasury data showed the scale of the support being given by the state, with 1.2million firms putting in claims worth £33.8billion since March.

Another 2.7million claims have been filed for self-employed grants, totalling £7.8billion.  

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Around three million of these had been away for three months or more.

Some 300,000 people in the UK were away from work because of the pandemic but getting no pay last month. However, that figure had been over half a million in April and May.

Redundancies were up by 27,000 quarter on quarter to 134,000, in another sign of what is to come. 

The claimant count – which includes people receiving in-work benefits – increased by 94,400 to 2.7million last month. It is up 117 per cent, or 1.4 million, since March. 

Total weekly hours worked in the UK decreased by a record 191.3million, or 18.4 per cent, in the quarter to June compared to the previous three months.

It was the largest quarterly decrease since estimates began in 1971, with total hours hitting the lowest level since 1994. 

Chancellor of the Exchequer Rishi Sunak said of the latest figures: ‘Today’s labour market stats make it clear that our unprecedented support measures, including the furlough and self-employed support schemes, are working to safeguard millions of jobs and livelihoods that could otherwise have been lost.

‘I’ve always been clear that we can’t protect every job, but through our Plan For Jobs we have a clear plan to protect, support and create jobs to ensure that nobody is left without hope.’

Fears are mounting of a ‘bonfire of jobs’ amid warnings a third of firms are planning to lay off staff this autumn.

Many of the cuts are set to come from hospitality businesses such as hotels, restaurants and cafes, as well as shops that were already on the brink before the pandemic.

The Bank of England predicted last week that unemployment will rise by a million by the end of the year. 

Labour has been demanding the government ditches plans to scrap the furlough scheme entirely from October, forcing employers to take on the full costs of staff wages again. 

Shadow work and pensions secretary Jonathan Reynolds said: ‘Labour has repeatedly warned the Government their one-size-fits-all approach will lead to job losses. These figures confirm what we feared – Britain is in the midst of a jobs crisis.

‘It is extremely worrying that this increase in unemployment has hit older workers, the self-employed and part-time workers hardest.

‘The Government must wake up to the scale of this crisis and put an end to this jobs crisis, and adopt a more flexible approach targeted at the sectors who need it most.’

Debenhams to axe 2,500 jobs 

Debenhams is cutting 2,500 jobs as the high street bloodbath continues.

A spokesman for the store chain said its trading was ‘ahead of expectations’ and had successfully reopened 124 stores post-lockdown.

‘At the same time, the trading environment is clearly a long way from returning to normal and we have to ensure our store costs are aligned with realistic expectations,’ the spokesman said.

‘Those colleagues affected by redundancy have been informed and we are very grateful to them for their service and commitment to Debenhams.

‘Such difficult decisions are being taken by many retailers right now, and we will continue to take all necessary steps to give Debenhams every chance of a viable future.’

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Rebecca McDonald, senior economist at the Joseph Rowntree Foundation, said: ‘Preventing falling levels of employment turning into a surge in poverty must be a national priority.’

Federation of Small Businesses national chairman Mike Cherry said: ‘The success of the job retention scheme has kept our employment figures healthy over the past few months but reality is now starting to hit home.

‘As our economy unlocks, many thousands of people will be looking for work over the next year. That’s why a focus on job creation – not just retention – is so critical.

‘In light of today’s figures, the future of the job retention scheme will need to be reviewed closely. The option of a meaningful extension to the furloughing initiative should be kept open, especially now local lockdowns are a fact of life and a meaningful second spike in coronavirus infections is possible.’

Yael Selfin, chief economist at KPMG UK, said: ‘As the Job Retention Scheme unwinds, we expect unemployment to rise quickly in the fourth quarter. That could see unemployment average over 6 per cent this year compared to only 3.9 per cent at present.

‘Government needs to step in and help those who are likely to lose their job retrain for new openings in different sectors. It is an opportunity to upskill a large section of the UK labour market, providing better prospects for the future.’ 

The Bank of England’s latest forecast says the economy will shrink by 9.5 per cent this year, making it the worst downturn in a century. 

GDP figures due to be released this week are set to show that the UK has entered a technical recession - with two consecutive quarters of contraction. The Bank of England predicts that the downturn will be the worst in a hundred years (chart pictured)

GDP figures due to be released this week are set to show that the UK has entered a technical recession - with two consecutive quarters of contraction. The Bank of England predicts that the downturn will be the worst in a hundred years (chart pictured)

GDP figures due to be released this week are set to show that the UK has entered a technical recession – with two consecutive quarters of contraction. The Bank of England predicts that the downturn will be the worst in a hundred years (chart pictured)

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New short-term best buy fixed-rate savings deals and cash Isas

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new short term best buy fixed rate savings deals and cash isas

More green shoots have appeared in the savings market as the recent revival in fixed-term savings rates has continued over the last week.

Challenger banks have continued to increase their rates on short-term fixed-rate deals while best buy tax-free Isas have also been launched.

Experts said the presence of Treasury-backed National Savings & Investments at the top of the best buy savings tables was driving the revival, with banks forced to increase rates to attract savers away from NS&I, which has hoovered up billions of pounds over the last few months.

There have been signs of slight green shoots in the savings market in recent weeks, with challenger banks increasing the rates they pay on fixed-rate bonds and Isas

There have been signs of slight green shoots in the savings market in recent weeks, with challenger banks increasing the rates they pay on fixed-rate bonds and Isas

There have been signs of slight green shoots in the savings market in recent weeks, with challenger banks increasing the rates they pay on fixed-rate bonds and Isas

But savers must move fast if they spot an attractive deal, with savings rates having hit record lows this year and the market still fragile due to the impact of the coronavirus on the economy and bank lending.

The best rates usually come from smaller banks and may not be around for long if large numbers of savers deposit their cash with them.

Over the last week several have increased the rates they pay on one and two-year fixed-rate bonds.

Secure Trust Bank launched a one-year bond paying 0.95 per cent on £1,000 or more on Thursday, and then upped its rate to 1.16 per cent just two days later.

This is the second-best rate available on the market, after the 1.2 per cent offered by Sharia bank QIB UK, available through savings platform Raisin. Challenger bank Oaknorth increased the rate on its one-year bond from 0.74 per cent to 1.11 per cent on Monday, edging out United Trust Bank paying 1.1 per cent.

And Charter Savings Bank increased the rate it pays on its bonds, which can be opened with £5,000, with its one-year bond paying 1.05 per cent and its two-year 1.16 per cent, the fifth and fourth-best rates available on the market, respectively.

These bonds can all be opened online, while Charter Savings Bank also accepts postal applications.

While there seems very little reason for savers to fix for longer than 24 months – with longer fixes paying no better rates than shorter deals – the recent rise in short-term fixed rates is a rare bit of good news for savers in what has otherwise been a miserable year.

‘National Savings & Investments propping up the market means some of the banks which need funding are having to break out, which forces others to follow’, James Blower, founder of The Savings Guru, said.

‘Those who need it are finding they can’t raise any serious volume being priced below NS&I so are having to pay up now.’

And although rates on fixed cash Isas continue to lag regular accounts, tax-free savers have not been left out of the recent rates revival.

Coventry Building Society launched a best buy 16-month fixed-rate Isa paying 0.77 per cent, and two and three-year Isas paying 0.85 per cent and 0.9 per cent, which require customers to fix their rate until November 2022 and 2023, respectively.

All three Isas can be opened with £1 online, by phone or by post, and accept previous years’ Isa transfers.

The moves came just a day after Charter Savings Bank upped the rate on its own two-year fixed-rate Isa, from 0.85 per cent to 0.92 per cent, the best rate in our tables. It also cut its one-year rate from 0.76 per cent to 0.71 per cent, but this is still enough to leave it in second place.

Both Isas, plus its best buy three-year fixed-rate paying 0.95 per cent, can be opened with £5,000 online, accept previous years’ transfers and savers can choose to have interest paid monthly.

However, savers should be slightly warier of fixing their Isa for longer than a year because they can earn up to 0.95 per cent interest on easy-access accounts, although many may wish to hedge against easy-access Isa rates falling further.

The top tax-free Isa is offered by Skipton Building Society and pays 0.95 per cent for six months, at which point the rate falls to 0.45 per cent. Savers can open the account online and it accepts transfers.

After Skipton, the best rate is offered by NS&I and Cynergy Bank, both of which pay 0.9 per cent, although NS&I’s Isa does not accept transfers. Both can be applied for online, while NS&I’s can also be applied for by phone, although the bank recommends savers use its website wherever possible.

But despite this, the average closed easy-access Isa pays a higher rate than the average Isa available to savers on the market, meaning savers may actually be better off sticking with their current Isa provider at the moment.

Up to £20,000 can be saved tax-free each year in an Isa.

Moneyfacts’ Rachel Springall said: ‘It is vital that savers act quickly to take advantage of the top rate deals and also to switch if they find they are earning a poor return, especially if they have their cash in an easy access account with a high street bank.

‘The next 12 months look uncertain for the savings market and any positive changes now could be fleeting. Consumers would be wise to remain vigilant and consider the more unfamiliar challenger banks if they hope to secure a lucrative return on their cash during this time.’


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How these small businesses have bounced back thanks to Britain’s bike boom

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how these small businesses have bounced back thanks to britains bike boom

While many small businesses continue to suffer at the hands of the coronavirus pandemic, those in the cycling industry have never been busier. 

A fear of catching the virus on public transport has seen a big rise in the number of people cycling, while sales of new bikes have exploded. 

Meanwhile, much quieter roads and good weather at the start of lockdown, got many people out on bikes old and new to enjoy their daily dose of exercise and fresh air. 

Recently published data from the Department for Transport revealed cycling levels rose by up to 300 per cent on some days over the lockdown period.

A fear of catching the virus on public transport has seen an increase in people using bikes

A fear of catching the virus on public transport has seen an increase in people using bikes

A fear of catching the virus on public transport has seen an increase in people using bikes

And with public transport use still discouraged where possible and the UK Government’s £2billion plan to make roads more cyclist-and pedestrian-friendly, the trend is only expected to continue.      

This has been great news for bike shops, who have reported brisk business in terms of sales, maintenance and repairs, making them some of the small businesses that have thrived in lockdown. 

But it’s not just traditional bike shops who have benefitted from the uptick in the cycling economy, so too have some accessory makers and electric bike producers. 

Catherine Ellis is co-founder of Hill & Ellis, which designs and produces ‘stylish and functional’ bags for bikes. She launched the business in 2013 and has since enjoyed an annual turnover of £70,000.  

‘It was the classic gap in the market story. I was a regular cyclist – cycling to work every day and regularly going into meetings,’ she said.

‘There was nothing on the market that worked on the bike and looked good on the arm. Everything was black PVC and ugly, and to add insult to injury they were uncomfortable to carry off the bike.’ 

Catherine Ellis is co-founder of Hill & Ellis

Catherine Ellis is co-founder of Hill & Ellis

Catherine Ellis is co-founder of Hill & Ellis

Demand for her cycling accessories dropped when the UK went into lockdown earlier this year, though luckily the brand is online-only and didn’t suffer from high overhead costs. Nevertheless, profits took a hit in the first few weeks.  

Then things started to pick back up, says Ellis. The number of cyclists started to increase among key workers and she decided to offer a 50 per cent discount to NHS workers.

After just five weeks, demand shot back up again, and to more than usual. 

Ellis added: ‘Bike shops had stayed open right from the beginning of lockdown to provide maintenance services and they had seen an upsurge in sales as more and more people turned to their bikes. 

‘So they started investing in more stock, which included our products. Our wholesale orders are up by double what they were this time last year.’

Similarly, electronic bike manufacturers Ampler Bikes, based in London, saw growth slow down when the pandemic hit but was able to adjust quickly thanks to its business model.

Ampler Bikes designs and manufactures electronic bikes and sells its products across Europe

Ampler Bikes designs and manufactures electronic bikes and sells its products across Europe

Ampler Bikes designs and manufactures electronic bikes and sells its products across Europe

Chief executive Ardo Kaurit, who founded the company alongside friends Hannes Laar and Rait Udumäe, said the business was able to survive due to its international footing.

‘Ampler was founded in Tallinn, Estonia in 2016 and we opened our first flagship store in Berlin in 2018,’ he said.

‘We built and moved into a new assembly factory in November 2019, which increased our production rate and enabled us to have all bikes fully stocked not long before the pandemic.

‘We’ve had an incredibly successful year so far, with year-over-year sales increasing 88 per cent over the first five months of 2020. This year, we are on track to double our 2019 revenues of €5.7million (£5.12million).’

Rising to the challenge

Kaurit said some of Ampler’s 70-strong workforce did find their daily jobs had changed or disappeared but that they were immediately put into new positions and nobody was let go or furloughed.

Its events team took the biggest hit with around 40 events cancelled this season, while its Berlin showroom had to close temporarily. However, Ampler found new ways to work digitally, such as launching its ‘digital test ride’ concept and putting more focus on its social media channels.  

Ellis was also lucky enough to keep her and her staff working throughout the lockdown and did not need to take any grants or loans, though she is considering a bounce back loan. 

She said: ‘It looks attractive as it has low repayment charges and could be the best way to inject some needed cash.

‘This time has allowed me to really consider the company and our product line. We had a few product ranges in the pipeline from January, which did have to be put on hold as manufacturers closed down during lockdown, but we are now working on them.

‘We are also going to add more products to accommodate different cycle styles and are looking into personalisation options to make our products more attractive as gifts.’  

Like Ampler Bikes, Hill & Ellis decided to put a stronger emphasis on its customer service and engagement. 

It offered complimentary gift wrapping and gift cards in a bid to ‘send a bit more love to everyone’ during the difficult period. 

Ellis added: ‘Customers were buying our products as presents or part of “care packages” so now I am working on more options for personalisation for that extra touch.’

L to R: Ardo Kaurit, Hannes Laar and Rait Udumäe co-founded e-bike company Ampler Bikes

L to R: Ardo Kaurit, Hannes Laar and Rait Udumäe co-founded e-bike company Ampler Bikes

L to R: Ardo Kaurit, Hannes Laar and Rait Udumäe co-founded e-bike company Ampler Bikes

The percentage of daily riders has increased from 55% to 91% when switching to an e-bike

The percentage of daily riders has increased from 55% to 91% when switching to an e-bike

The percentage of daily riders has increased from 55% to 91% when switching to an e-bike

A sustainable future

Both businesses are positive about their futures.

The uptake of cycle-to-work schemes in the UK rose a whopping 200 per cent in May, while bicycle and car parts chain Halfords saw sales jump 23 per cent three months ago.  

Kaurit is particularly excited about the future of electronic bikes, as recent research has suggested the percentage of riders who ride daily or weekly has risen from 55 per cent to 91 per cent after switching from a regular bike to an e-bike. 

He said: ‘I believe e-bikes offer an alternative for people who may not have the option of cycling unassisted, for instance the elderly or those with physical disabilities. 

‘So in this respect, e-bikes could give those individuals all the health benefits of cycling without worrying about whether they’ll be able to physically do it.  

‘We believe we are still in the beginning of the electric revolution and even though the market is already big and has grown fast, there is still plenty of room for further growth. With new brands popping up and new cycle paths opened, the sea is rising for everyone.’       

Growth opportunities are not restricted by borders either. In China, Beijing’s bike-share system grew by 150 per cent as early as March, while cycling traffic in Dundee, Scotland, rose by 94 per cent in April. Paris has also subsidised e-bike purchases, reimbursed bike repairs and created more bike parking spaces.

Hill & Ellis is working on its vegan bag range

Hill & Ellis is working on its vegan bag range

Hill & Ellis is working on its vegan bag range

Kaurit said: ‘It is great to see cities and governments encouraging cycling and more and more people starting to look into it as their main means of transport and acknowledging that cycling is great for health, budget and the environment.   

‘We are happy to hear bikes are becoming more popular in the UK, and it is reassuring to hear that the UK government is encouraging cycling and healthier modes of transport by investing in more cycleways and urban cycling routes.’

Ellis added: ‘If some good can come out of the pandemic it is this. As more people enjoy the benefits of cycling, it offers many solutions to problems such as pollution, tube overcrowding, traffic congestion, personal health and it genuinely is really enjoyable.’   

She said the UK Government’s £2billion commitment to investing in cycling infrastructure would increase the attraction of cycling as it becomes, safer, easier and quicker. 

‘Investing in green economies and encouraging green alternatives such as commuting by bike will help us protect the planet and our health for the future,’ she added. ‘Hopefully, this could be one good to come out of this.’   

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