This weeks news includes; Reckitt Benckiser sells food business for £3 billion, £14 billion lawsuit against MasterCard falls through, Morgan Stanley picks Frankfurt for post-Brexit hub.
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. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- City A.M claims that artificial intelligence is our chance to shoot for the moon.
- Deutsche Bank’s CEO claims that Brexit outcome will be worse than people imagined.
- City A.M argues that If Brexiteers need a real reason to leave the EU, just look at Italy.
1. UK GOVERNMENT BANS CREDIT & DEBIT CARD SURCHARGES
The government has announced that it will ban surcharges on credit and debit card payments from 2018. These charges usually come at the end of transactions when payment by card is selected and these charges can be up to 20% of the transaction cost itself. Total charges in the UK amounted to nearly £500m last year.
Companies usually charge these fees to cover the cost of card payment transactions but this practice will be banned come 2018. The ban will also apply to government agencies and local councils. It is hoped that this will allow consumers to more accurately compare prices between retailers as these surcharges made it more difficult to do so.
To find out more about the ban read the Independent’s report.
2. HS2 RAILWAY AWARDED £6.6 BILLION GOVERNMENT CONTRACT
The construction of new stations and lines to service the HS2 railway are set to begin next year after the government awarded the project an additional £6.6 billion. The line will run between London and Birmingham and it is hoped to help resolve the issue of the North-South divide reducing travel between London and Birmingham from 1hr 28m to just 49 minutes.
The overall budget for the project was revised up to £55 billion but some claim this is a gross underestimation and predict that it could cost over £100 billion. The government however are committed to delivering the project on time and on budget. The project is expected to create over 16,000 jobs.
Read The Guardian’s report for more information.
3. RECKITT BENCKISER SELLS FOOD BUSINESS TO MCCORMICK
UK based consumer goods giant Reckitt Benckiser has sold off its food business to US food and condiment giant McCormick for £3.2 billion. The sale will go some way to help Reckitt Benckiser pay off some of its debt after a £13 billion acquisition of baby formula maker Mead Johnson earlier this year.
Reckitt Benckiser’s food business was highly sought after, it boasts brands such as Frank’s RedHot and Cattlemen’s sauces. McCormick fought of bids from Unilever and Hormel Foods and it hopes that this acquisition will strengthen its position in the US’s $21 billion condiments market.
For more on the deal read the BBC’s report.
4. MASTERCARD £14 BILLION LEGAL ACTION FAILS
The lawsuit against MasterCard relating to uncompetitive interchange fees charged to customers has fallen through. The legal action, brought forward by Walter Merricks on behalf of 46 million consumers who claimed the fees paid by retailers on credit and debit card payments was uncompetitive. The total figure sought in damages from the claimants amounted to over £14 billion, the largest claim in British legal history.
The case was initially filed in September 2016 and related to the interchange fees charged between 1992 and 2008. The Competition Appeal Tribunal concluded however that it would be impossible to calculate the loss suffered by each individual claimant so the claim could not continue as a class action lawsuit.
To find out more about the case read BBC New’s analysis.
5. MORGAN STANLEY
Morgan Stanley will be moving its EU hub to Frankfurt after Brexit. It is thought that the bank could double its presence in Frankfurt, rising for 200 to 400. The US giant will also move other operations out of London to other EU destinations such as Paris and Dublin.
The bank currently has over 5000 staff in London and it is believed that after Brexit this number could be in the low hundreds.
This is just the latest in series of bulge bracket departure announcements. Deutsche Bank, Goldman Sachs, Citigroup and Bank of America Merrill Lynch (see below) have all stated their intentions to move operations out of the UK after Brexit. The extent of the impact these departures will have on the UK financial service sector is not clear but this certainly marks a blow for the UK’s post-Brexit prospect. City A.M looks closer at the details on Morgan Stanley’s plans.
Morgan Stanley’s profits have also risen by 11% to $1.8 billion this quarter after strong overall performances despite a tough trading environment. BBC News looks further at Morgan Stanley’s finances.
6. UNILEVER PROFIT RISE
Unilever posted a 3% rise in profits for the first six months of 2017, despite still licking its wounds from their failed £100 billion acquisition of Kraft-Heinz. This rise has been attributed to the giant’s following of its “long term-plans” which include making £6 billion worth of savings. This has been best evidenced by its sale of Flora and other spreads earlier this year as well as a 25% reduction in employee travel expenses.
Profit before tax rose to £4 billion in the first six months of 2017. To find out more about how Unilever is looking to cut costs read The Telegraph’s analysis.
7. UK PENSION AGE RISES UK INFLATION FIGURES
The government have announced that they bring forward plans to raise the receipt of pension age from 67 to 68. The plans will be phased in between 2037 and 2039 instead of 2044 as was initially planned. This will affect people currently aged between 39 and 47. Find out more about the rise here. (BBC News)
Inflation figures from June were released and show a slowing in inflation for the first time since October 2016. Inflation, the average rise in prices of consumer goods and products, was up by 2.6% in June compared to 2.9% in May. This was largely due to a fall in petrol prices but average earnings are rising slower than inflation so despite the fall on average people will be feeling marginally poorer. Inflation rose sharply after the Brexit vote due to the rapid fall in the value of the pound. This made the cost of our imports rise and consequently our cost of living.
To find out more about the inflation figures read BBC News’ analysis.
8. RSPB LOSES LEGAL CASE TO STOP SCOTTISH WINDFARM CONSTRUCTION
The Royal Society for the Protection of Birds (RSPB) has lost a legal case to prevent to construction of a windfarm in Scotland. The Scottish government approved the construction of a £2 billion windfarm off the north-east coast of Scotland. The RSPB argued that this could severely harm the seabirds in the surrounding area and launched legal action.
The RSPB won the initial case but it was overtuned in May this year and they subsequently launched an appeal to the UK Supreme Court. The application for appeal was rejected and so the RSPB have no further redress and so construction is set to go ahead. The windfarm is hoped to power 325,000 homes and bring in £1.2 billion into the Scottish economy.
For more about the case read The Guardian’s report.
9. AVIVA SELLS OFF SUBSIDIARY FOR £300m
Insurer Aviva has sold off its subsidiary Friends Provident International (FPI) to International Financial Group for £340 million. The sale comes as part of a strategic restructuring after the outfit’s poor performance.
FPI provides insurance services to high net worth clients in Asia and the Middle East but has been struggling consistently and posted a £2 million loss in 2016. Aviva bought FPI as part of a £5.6 billion acquisition of Friends Life Group in 2015.
Read more about the deal at Business Reporter.
10. QUIZ LAUNCHES £90m FLOATATION
Fashion retailer quiz is to sell a £92 million stake in the company to float on London’s alternative investment market (AIM). The ambitious Glasgow based company is poised to become “the next BooHoo.com” and is hoping to be valued at £200 million.
Investors are very positive as the company posted strong financial figures, with a 44% rise in operating profits last year. The company is owned by the Ramzan family who will still own a 48% stake in the company after the floatation. Read more about the Ramzan’s at The Guardian.