This weeks news includes; London Stock Exchange merger blocked, Amazon win $1.5 billion legal case, loses advertisers, Lloyds to move out of London, Tesco fined 129m.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Click on the links for full stories.
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Opinion articles of the week:
- Forbes asks how will Brexit really impact Fintech in the U.K.?
- Sky News explores the claim that ten million jobs could be replaced by robots in next 15 years.
- The Guardian argues that Snapchat ‘will be bigger than Twitter, Yahoo and AOL with advertisers’.
1. BREXIT BEGINS: ARTICLE 50 TRIGGERED
On the 29th of March 2017, Theresa May sent a letter to Donald Tusk, President of the EU Commission notifying him that the UK is officially triggering article 50, formally launching the Brexit process.
With Article 50 now triggered, one might think Brexit negotiations can begin straight away – but it’s not quite so simple. Indeed, there is already a dispute over how the talks take place. The split was laid bare by two of yesterday’s key documents: firstly, the letter from Prime Minister Theresa May to EC president Donald Tusk, and secondly a draft motion leaked from the European Parliament.
In her letter to Tusk (the document that kicks off the UK’s exit from the European Union), the PM repeats no fewer than four times her desire to hold so-called parallel talks. The British government believes it cannot agree to any conditions of leaving the EU without, simultaneously, discussing the terms of its post-Brexit relationship with Brussels.
German Chancellor Angela Merkel has previously welcomed parallel talks. Her comments yesterday seemed to represent something of a U-turn, but on closer examination she still believes negotiations around the future relationship can begin “hopefully soon”. Politicians in Spain and Italy appear to be malleable when it comes to the order of the talks.
With Article 50 triggered before the end of March, as promised, the UK has hit the ball cleanly into the EU’s court and will now await a response. Tusk has called a meeting of the remaining 27 EU states on 29 April at which he wants to adopt the negotiating guidelines for Brexit. The run-up to this event will start in Malta tomorrow when Tusk publishes his draft guidelines, allowing for four weeks of pan-European wrangling ahead of the deadline. During that time, we should get a clearer idea of how the talks will be structured – but expect some bad-tempered arguments along the way. (City A.M)
2. LONDON REMAINS NUMBER 1 FINANCIAL CENTRE IN THE WORLD
London has held onto the top spot as the world’s leading financial centre, according to a global study. However, political uncertainty from Brexit and the US election has had a “significant impact” on the state of affairs, as London and second place New York fell 13 and 14 points respectively compared to the last Global Financial Centres Index by Z/Yen. Those were the steepest declines, bar Calgary, amongst the world’s top 50 financial centres.
The latest Global Financial Centres Index by Z/Yen said the top five financial centres remained unchanged with the capital holding onto its crown, followed by New York, Singapore, Hong Kong and Tokyo.
But Singapore is fast closing in on the two cities ahead, rising eight points to be 20 points behind New York, having been 42 points behind in the last report. The capital was still comfortably ahead of other European hotspots though – Luxembourg was 18th, Frankfurt 23rd and Paris 29th in the rankings. Rajesh Agrawal warned that London must be able to recruit and retain the best global talent to maintain its status.
The world’s top 10 financial cities
- London
- New York
- Singapore
- Hong Kong
- Tokyo
- San Francisco
- Chicago
- Sydney
- Boston
- Toronto
(City A.M)
3. LONDON STOCK EXCHANGE MERGER BLOCKED
EU regulators have blocked London Stock Exchange’s £21bn merger with German stock exchange Deutsche Boerse. The European Commission said the deal would have created a “de facto monopoly” for certain financial services. The merger would have combined Europe’s two largest stock exchange operators.
London Stock Exchange Group said it “regrets” the commission’s decision, as the deal would have created a “world-leading” financial markets firm. The commission blocked the deal, which had already been thrown into doubt by Brexit, shortly before the UK started the formal process of leaving the European Union.
It is the third time that a merger between LSE and its German rival has failed to come to fruition. They announced plans for a “merger of equals” about a year ago, following attempts by Deutsche Boerse to strike a deal with LSE in 2000 and 2004.
However, the merger was dogged by questions about where the joint firm would be based and how it would pool liquidity between the exchanges. Those questions intensified after the UK voted to leave the European Union.
LSE warned last month that the deal was unlikely to receive EU approval over concerns that it would limit competition.
The UK’s stock exchange operator has been a takeover target many times since 2000. Mr Wilson says the collapse of the Deutsche Boerse merger might encourage new bidders, possibly from the US. But he says new national interest rules about takeovers of UK firms could make any deal even more difficult. (BBC News)
4. AMAZON WINS $1.5 BILLION COURT CASE
Online shopping behemoth Amazon has avoided a $1.5bn (£1.2bn) tax bill after winning a legal dispute in a US tax court.
Judge Albert Lauber rejected a variety of arguments presented by the Internal Revenue Service (IRS), bringing to an end a lengthy court battle.Ruling in favour of the world’s largest online retailer, he said it was legal for Amazon to have funnelled its European sales through a low-tax Luxembourg sub-company in 2005 and 2006, instead of the US.
Amazon said that if it had lost it could have had been forced to pay a US tax bill as high as $1.5bn and potentially faced “significant” tax liabilities in the years to come. The company – which according to Forbes is the world’s 12th most valuable brand – made $2.37bn of profit in 2016, four times what it made in the four previous years combined.
Yet Amazon could still face additional tax bills in Europe if Brussels officials choose to take further action. Luxembourg is known as one of the world’s biggest tax havens, offering heavy discounts on corporate taxes that have attracted global companies such as Pepsi and Apple.
During his Presidential campaign, Donald Trump criticised Amazon for not paying enough in tax. The online retailer’s chief executive, Jeff Bezos, responded angrily to the claims, triggering a social media battle. (The Independent)
5. CANADA TO LEGALISE RECREATIONAL MARIJUANA
Marijuana will be legal for all Canadians over the age of 18 by July 1, 2018, marking Canada’s 151st birthday in style.
Prime Minister Justin Trudeau’s Liberal Party will officially announce the plan on April 10.
The legislation is expected to easily pass through Parliament, as it holds support from major political parties both to the right, and left of Trudeau’s Liberals. As well, a majority of Canadians support legalizing marijuana, according to a recent poll from NRG Research Group.
The plan follows the recommendations laid out by a federal task force — led by former Toronto police chief Bill Blair and former Justice Minister Anne McLellan — and leaves it up to the provincial governments to implement the plan and control how marijuana is sold, reports CBC.
Though the federal government stipulates a minimum age of 18 to purchase marijuana in stores, provinces will be free to raise the age as they see fit. Canadians will also be able to grow up to four marijuana plants in their household.
Trudeau has faced criticism from rival political parties who’ve accused him of failing to deliver on his campaign promise to legalize marijuana federally by spring of 2017. The April 10 announcement, while not expressly fulfilling the prime minister’s intended timeline, will at least assuage those concerns. Canadians go back to the polls in October of 2019. (Business Insider)
6. LLOYDS MOVE OUT OF LONDON
Lloyd’s of London says it will establish a new European subsidiary in Brussels to avoid losing business when the UK leaves the EU. The 329-year-old insurance market confirmed the plan as it released its latest annual results.
“A subsidiary office will be opened in Brussels with the intention that it will be operational for the January 1 renewal season in 2019,” it said.
The insurance market’s continental business generates 11% of its premiums. However, she stressed that the Brussels office was an additional base, simply an EU subsidiary, and that the number of jobs affected was fewer than 100.
Lloyd’s of London has about 700 London employees, but the market it runs involves more than 30,000. Other financial institutions have also said they are thinking of moving some business within Europe. Several investment banks, including Bank of America, Barclays, and Morgan Stanley are considering relocating staff to Dublin. Frankfurt, Madrid and Amsterdam are also likely to benefit. HSBC is expected to move significant numbers of employees to Paris.
Lloyd’s of London also announced it had made a profit of £2.1bn in 2016, the same as for the year before. It said conditions over the course of the year had been “extremely challenging”. There were £2.1bn of major claims – the fifth highest since the turn of the century – which was due mainly to Hurricane Matthew and the Fort McMurray Wildfire in Canada. (BBC News)
7. APPLE WINS IMPORTANT LEGAL CASE IN AUSTRALIA
Apple has won a major regulatory battle in Australia that will likely see it retain control of its contactless payment technology. Four banks had wanted to negotiate with Apple to gain access to its payments technology for their own apps, avoiding having to pay fees to Apple. But the country’s competition watchdog has now barred them from collectively bargaining with Apple.
The decision is the first of its kind and could set a global precedent.
In its final ruling on the case on Friday, the Australian Competition and Consumer Commission (ACCC) said that the collective threat to boycott Apple was “likely to reduce or distort competition”.
What did the banks want?
They wanted their own apps to have access to the contactless payment technology used in iPhones.
The near field communication (NFC) system allows users to settle bills by holding their phone to a small terminal, with the money deducted from a bank card registered with Apple Pay.
Commonwealth Bank, Westpac, National Australia Bank and Bendigo & Adelaide Bank together command around two-thirds of Australia’s credit card market.
But so far, they do not allow their cards to be used with Apple Pay because they have never reached agreement on the conditions.
Why did they want to bargain collectively? Doing so would have put them in a much stronger position against Apple. They wanted to convey to Apple that unless it gave them access to its iPhone technology, they would continue to prevent their customers from using Apple Pay.
Apple Pay collects a fee from the bank for each transaction, meaning Apple risked a significant loss.But the commission said that ruling in favour of the banks would have reduced competition by forcing Apple to act more like Google, who’s more open Android operating system allows contactless payments from individual apps. (BBC News)
8. TESCO TO PAY £129m FOR ACCOUNTING SCANDAL
Tesco has been hit with a £129 million fine from the Serious Fraud Office (SFO), but has escaped prosecution over its accounting scandal. The supermarket giant said its subsidiary – Tesco Stores – has reached a Deferred Prosecution Agreement with the SFO following a two-year investigation into false accounting at the firm. The move means Britain’s biggest supermarket will escape prosecution as long as it “fulfils certain requirements”, including paying a hefty penalty.
The announcement came as the financial watchdog found that Tesco had committed market abuse when it inflated profits by £263 million – later revised up to £326 million – in a trading update on August 29 2014. In an unprecedented move, the Financial Conduct Authority said it had forced the supermarket to compensate investors who had bought shares and bonds on – or after – August 29 and had held the securities when the statement was later corrected on September 22 2014.
Tesco chief executive Dave Lewis said: “Over the last two-and-a-half years, we have fully co-operated with this investigation into historic accounting practices, while at the same time fundamentally transforming our business. (Business Reporter)
9. BT FINED £42m BY OFCOM
BT has been slapped with a record fine of £42m by regulator Ofcom and has additionally agreed to pay rivals in the market as much as £300m after it admitted to breaching rules by failing to compensate other operators over delays to installing Ethernet lines.
The fine is the largest ever to be imposed on a telecoms provider and the failings were committed by the company’s Openreach arm, which is used by providers such as TalkTalk and Vodafone to develop and maintain their networks across the UK. Through its investigation, Ofcom found that between January 2013 and December 2014, BT misused the terms of its contracts to cut compensation payments owed to those telecoms providers for failing to deliver Ethernet services on time.
Ethernet services are high-speed cables used by large businesses, and mobile and broadband providers, to transmit data. The lines also provide high-capacity links for hospitals, schools and libraries.
The penalty imposed also includes a £300,000 fine which Ofcom says is because BT failed to provide accurate and complete information to the regulator during the investigation. (Business Reporter)
10. UBER PULLS OUT OF DENMARK
Uber will shut down its operation in Denmark next month following the introduction of new taxi laws, the company has said, marking the latest European setback for the US ride-booking service. A company spokesman, Kristian Agerbo, said on Tuesday Uber “must take the consequences” of the rules, which among other things will require cabs to be fitted with seat occupancy sensors and fare meters.
Uber has faced problems in cities including Madrid, Frankfurt, Paris and London, and is awaiting a decision from the European court of justice that could determine how it is regulated on the continent: as a transport service or a digital platform.
The company, which says it has 2,000 drivers and 300,000 people using its app in Denmark, said it would not be able to operate unless the regulations were changed, but added it would “continue to work with the government … to enable Danes to enjoy the benefits of modern technologies like Uber”. As has happened elsewhere in Europe, taxi driver unions, cab operators and politicians have argued that Uber does not comply with the legal standards for established taxi firms and its service represents unfair competition.
Danish prosecutors last year in effect accused the company of operating an illegal taxi service, indicting it on charges of assisting its drivers – two of whom have also been fined – in breaking applicable national taxi laws.
Since arriving in Europe in 2011, the San Francisco-based firm has faced numerous legal and other challenges. Its drivers have been physically attacked in Paris, where two of its most senior European executives were also put on trial on charges of running an illegal transport service.
Courts in France, Germany, Italy, Spain, Belgium and the Netherlands have banned Uber’s low-cost UberPop service, which uses non-professional drivers, while an employment tribunal in London ruled its licensed drivers should be classed as workers with access to the minimum wage, sick pay and paid holidays. (The Guardian)
