TheChek News Flow

Shortage of oxygen-delivering machines is already a ‘real issue’ for hospitals in London

The UK government insisted it was on track to deliver tens of thousands of ventilators for treating coronavirus patients as it faced mounting criticism over its procurement plans and warnings that struggling hospitals may have to wait weeks for the critical devices.

Chris Hopson, chief executive of National Health Service Providers, on Thursday said a shortage of ventilators was already a “real issue” for hospitals in London, which is the epicentre of the Covid-19 outbreak in the UK.

He told the BBC’s Today programme that hospitals in the capital were struggling with an “explosion” of demand and faced a “continuous tsunami” of seriously ill patients. He later warned that in “three or four places, it's clear that they [hospitals] will run out of critical care capacity, probably by the weekend”. 

The NHS has access to 8,175 ventilators, which deliver oxygen to patients with acute respiratory difficulties.

Edward Argar, junior health minister, said the NHS would start to see a “steady delivery” of 8,000 ventilators “over the coming week, two weeks, three weeks”. Officials have indicated 30,000 would be required in total.

Following prime minister Boris Johnson’s call for industry to help plug the shortfall, companies including Airbus, Nissan and McLaren have seconded engineers to tackle the problem.

Dyson, the vacuum maker, on Wednesday said it had received a government order for 10,000 ventilators that it designed in 10 days. It expects to begin deliveries in “weeks”, but the government said this hinges on the ventilators passing regulatory and safety tests.

But businesses already involved in the production of medical devices have questioned the government’s approach, arguing that it should have engaged more with specialist suppliers. 

“The government appears to be much faster to communicate with the non-medical ventures than they do with the existing medical device supply chain,” said an engineer at one company who asked not to be named.

Andrew Rayner of MEC Medical, which produces ventilator parts, said he received a reply from the government three weeks after his company first offered help.

“There are lots of companies that have ventilators and are accredited by notified bodies. Why didn’t they just give them money to upscale?” he said. “Why are we going off on a tangent to make something from scratch?”

Officials insisted the government’s approach was on track and ministers were not just focused on working with the big-name manufacturers. They said this involved pursuing a number of avenues with different companies, both large and small, as well as importing ventilators from abroad.

The government is expected to offer support to companies already producing two existing models in the UK, said people aware of the matter.

However, Downing Street defended its decision that the UK would not participate in EU-wide efforts to source ventilators and testing kits.

Despite the fact that the UK left the bloc in January, the government was still eligible to take part in the EU initiatives during the Brexit transition period. 

Asked why the government chose not to participate in the EU efforts, a Downing Street spokesman said: “Well, we are no longer members of the EU.”

Layla Moran, a Liberal Democrat MP, accused the government of putting “Brexit over breathing".

A government spokesperson said: “Owing to an initial communication problem, the UK did not receive an invitation in time to join in four join procurements in response to the coronavirus pandemic.”

Officials in Brussels were perplexed when asked about the UK explanation about communication problems. The European Commission publicly announced the calls for tender and it was for individual countries to decide whether to join, EU officials said. 

The EU has initiated procurement exercises for masks and other 

protective equipment, lab equipment, testing kits and ventilators. 

As well as scrambling to source ventilators, the UK government is also working to strengthen the capacity of the health service. The NHS is recruiting thousands of extra staff, including recent retirees, and setting up a 4,000-bed military field hospital in east London.

However, the British Medical Association warned doctors were still being forced to work on the frontline of the crisis without adequate personal protective equipment, such as gloves and masks.

It cautioned evidence was growing that thousands of doctors and other hospital staff were “still not being provided with the kit they need to properly protect themselves and their patients”.

We short sellers see risks better than anyone else because it is our job

There is one sure-fire feature of crises: lawyers and lobbyists from big companies descend on capital cities to try to enact their clients’ punch lists of protectionist fantasies. So it has gone with the recent imposition of short selling bans in South Korea, Italy, France, Greece, Spain and others. Not only are these bans solutions in search of problems, but worse, they harm markets.

Many of these big companies — let us call them corporate socialists, or CorpSocs — surely understand that the vast majority of selling during this market rout has been from investors with long positions. It is almost amusing to those of us in the short-seller community that anybody thinks we have enough capital to put real selling pressure on the market. During the recovery from the global financial crisis, numerous short sellers shut down and, right now, the two largest dedicated short selling firms in the world each manage much less than $2bn in assets. Contrast that to Fidelity Investments, which manages about $2.5tn of long-only assets. 

Moreover, banning short selling reduces the ability of large long-biased investors to take risk, because it removes their ability to hedge. Say, for example, that a long-biased investor with a strong belief in Fiat Chrysler’s ability to manage through this crisis wanted to increase its exposure by shorting a basket of rival automakers. In this way, the investor would be able to neutralise much of the “beta”, or market movements, of its position in Fiat Chrysler. However, if you take away the ability of these long investors to hedge their long positions in times of extreme movement, such as these, the hypothetical investor above might sell part — or all — of its long position.

If further proof were needed that banning shorts is a dumb idea, it has been shown empirically that restrictions impose significant costs on markets. In 2012, three economists at the Federal Reserve Bank of New York published the results of their research into short selling bans imposed in 2008 and 2011. They concluded that not only did the bans have “little impact on stock prices” but that they “lowered market liquidity and increased trading costs”.

Since the last crisis, the CorpSocs got their tax breaks, talked up their stocks and made their management teams fabulously wealthy, with representation from law firms such as Wachtell, Lipton, Rosen & Katz, where the partners’ hourly rates exceed some people’s monthly earnings. 

At the same time, many of them complained about shorts because, it seemed, we were the only ones who saw the folly of their short-termist and selfish ethos. Now their unbridled greed is blowing up and they want government help — while still trying to muzzle those whose job it is to expose what lies beneath.

Investors, however, benefit from the awareness of risks that short sellers provide. Short sellers have warned for years, for example, about the fragility created by companies issuing huge amounts of debt to fund buybacks and takeovers. Shorts have warned for years about China — and I have personally been warning about the pandemic risk China poses for more than a decade. 

We see risks better than most policymakers and investors because it is our job to see risk. In contrast, the decadence of the post-crisis period saw some of the greatest gains flow to those who buried their heads in the sand and wilfully overlooked risk. This is the crowd that took its cue from Chuck Prince: “As long as the music is playing, you’ve got to get up and dance.”

Short selling is akin to the freedom of expression, and the ability to criticise the powerful that has formed the bedrock of our democracies for two centuries. In an era in which companies’ big legal budgets are often able to keep regulators at bay, short sellers are one of the few forces holding short-termist — or even lawbreaking — management teams accountable. 

In December, my firm said NMC Health was a fraud; it has since emerged that the former FTSE 100 company has at least $4bn in concealed debts. Our exposures of other listed frauds have led to seven delistings by regulators over the years.

Those advocating for bans on short selling are driven either by wilful ignorance, or by a desire to further entrench corporate socialism as the overarching principle of our capitalist system. The more CorpSoc is allowed to drive capitalism, the more voters will turn against capitalism. 

Full note attached