This week’s news includes; Monarch airline collapses, US imposes further tariffs on Bombardier, EU clamps down on corporations and Scotland bans fracking.
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 looks at The 16 stocks UBS believes will be the biggest winners from driverless cars
- CNN asks Why do European airlines keep going bust?
- Bloomberg looks at the Chief of ETF’s (Exchange Traded Funds) at BlackRock ETF view of Bitcoin. (video)
1. MONARCH AIRLINE COLLAPSES
Monarch has gone into administration. The Civil Aviation Authority confirmed this at 4am on Monday meaning that all Monarch flights to and from the UK were instantaneously cancelled. The airline suffered a £291 million loss last year and had been struggling in recent months. Monarch primarily blamed terror attacks in Egypt and Tunisa and a weaker pound for its collapse.
Another key reason for its collapse was its shift from a charter airline to a low budget one. The profit margins were simply too low for the company to absorb any significant external shocks and this evidently contributed to its demise. This combined with their inability to match competitors such as Ryanair and Easyjet all led to the collapse. The enormous task of repatriating over 100,000 British residents abroad who were due to fly Monarch subsequently began while over 800,000 passengers lost their bookings.
For more information on the collapse, read BBC News’ report.
2. US ANTI-DUMPING TARIFFS ON BOMBARDIER
The United States has proposed tariffs of roughly 300% on Bombardier aircraft after accusations that they receive illegal subsidies from the UK and Canada. The US Commerce Department alleges that Bombardier are dumping aircraft in US markets at unfairly low prices due to these subsidies. They proposed an additional 79.82% tariff, in addition to a 219.63% duty announced last week.
These duties comes as welcome news to US based Boeing, the world’s largest aircraft manufacturer. This makes Bombardier aircraft unfeasibly expensive as imported jets are almost four times more costly, potentially leading to a completely stop of Bombardier aircraft sales to US airlines . There are serious concerns that this could put thousands of jobs at risk.
To find out more about the aircraft production industry read Reuters’ report.
3. EU CLAMPS DOWN ON CORPORATION TAX
Amazon has been ordered to pay €250 million in back taxes to Luxembourg by the European Commission. The Commission had ruled that a tax agreement between Luxembourg and Amazon constituted unlawful state aid and that this money must be repaid. Amazon has stated that it will explore its viable opportunities for rebuttal and seek to appeal.
The European Commission has been cracking down on large multinational corporations as shown by its £2 billion competition fine for Google and in analogous case where it launched a lawsuit against Ireland over its taxation of Apple (see below). Read City A.M’s report for more.
The European Commission has announced that it will launch legal action against the Republic of Ireland for failing to retrieve £11.5 billion in back taxes from Apple. The Commission ruled that the tax agreement constituted state aid. The case is now being referred to the European Court of Justice. Read City AM’s report for more information
4. YAHOO HACK AFFECTED 3 BILLION
Yahoo revealed that the data breach in 2013 affected every single Yahoo account. It was previously announced in 2016 that only 1 billion were affected by the breach in 2010 but it has now transpired that all 3 billion Yahoo user accounts. The hackers stole person information from user accounts such as telephone numbers and birth dates but no bank details or credit card data was accessed. Yahoo is currently contact users who were not previously notified that their data was potentially affected.
5. €50m FINES FOR SOCIAL MEDIA SITES FAILING TO FIGHT HATE SPEECH
Germany has introduced fines of up to €50 million for social media sites that fail to take down obvious hate speech. Platforms with over 2 million German users will be required to remove any “obviously illegal” within 24 hours. This draconian measure is a bold move by the German government at a time where regulators worldwide are seeking to crack down on the social media sites providing a platform to spread hate speech.
Many critics believe that these new rules will lead to unnecessary censorship and some even believe it poses as an infringement on free speech.
6. ROVIO IPO
Rovio, the maker of “Angry Birds” launched its IPO last week and was valued at $1 billion. Share prices soared initially, up 7% from its initially price of €11.50. On Tuesday however, the share price fell and trading as low as 5% below its IPO price.
Rovio rose to prominence from its hit game, Angry Birds. The game led to them obtaining licensing rights for Angry Birds products and even led to The Angry Birds Move which grossed around $350 million. Since Angry Birds however Rovio has been unable to create another game to even remotely mirror the success of Angry Birds.
The mobile gaming market is fickle and it is increasingly difficult for the developers to attain longevity at the top of the market. The makers of Candy Crush, King Digital Entertainment, failed to make a successor capable of reaching the popularity that Candy Crush had in its prime and so left investors dissatisfied with their investments. The maker of FarmVille, Zynga, also faced a similar fate.
Read CNN’s report for more information.
7. CATALAN BANK MOVES LEGAL BASE
Sabadell has begun to move its legal base out of Catalonia amid a constitutional crisis in the region. Leaders in Catalonia have claimed that they will declare independence from Spain after holding a referendum despite the Spanish government deeming it unconstitutional and launching attempts to shut down all polling stations. Sabadell, based in Barcelona is Spain’s 5th largest bank and will move its legal base to Alicante but will keep employees and its headquarters in Barcelona.
It is feared that CaixaBank could also follow Sabadell and move its base from Catalonia. The Catalonian leaders have not yet declared independences (08/10/17) but it is expected to be announced as early as Monday 9th. The European Union has confirmed that it would not recognise an independent Catalonia, excluding it from EU jurisdiction and protection.
To find out more about the issues in Catalonia and the effect on businesses read BBC News’ report.
8. UK CHIP MAKER ACQUIRES US TECH FIRM
Dialog Semiconductor is to purchase US based Silego Technology for $306 million. Dialog supplies Apple with chips and is seeking to grow its presence in the Internet of Things industry. Silego produces customisable chips called “Configurable Mixed-signal ICs” and Dialog will take on Silego’s more than 200 employees.
The deal is expected to be completed by the end of 2017. Barclays and Hogan Lovells were financial and legal advisers respectively to Dialog on the deal.
This deal will come as welcome news to the UK government who expressed concerns over the rampant acquisitions of UK companies by foreign firms. Recent examples include; Japan based SoftBank’s £24 billion acquisition of ARM Holdings and US based Vantiv’s acquisition of UK based Worldpay for £9.3 billion. While this deal is evidently not on the same scale as the foreign acquisitions, the movement of talent and resources into the UK can only be positive.
9. GOLDMAN SACHS AGREES LEASE ON FRANKFURT BUILDING
The Brexit-related financial service exodus is becoming more of a reality as Goldman Sachs has agreed a lease for news offices in Frankfurt. The investment bank confirmed its decision to move staff out of the UK following Brexit earlier this year but it has now agreed to lease upper floors of the Marienturm tower that is currently under construction.
Goldman Sachs has claimed it could increase Frankfurt based staff from the current 200 to roughly 800 depending on the nature of the UK’s final agreement with the EU. Over 10 large investment banks have all announced plans to relocate after Brexit and so far, Frankfurt is the most popular destination. Read Bloomberg’s report for more information.
The EU voted this week to delay the negotiations because of how little progress had been made, meaning talks cannot move to the next stage. Read Business Insider’s report for more information.
10. FRACKING BANNED IN SCOTLAND
The Scottish government has announced that fracking is now banned in Scotland. Many oil and gas companies had been considering plans to frack in Scotland. The controversial gas extraction method has faced growing opposition from environmental groups and after conducting researching and consulting experts the Scottish government decided to prohibit it.
While the decision was welcomed by environmental groups and the vast majority of public who gave feedback, it is estimated that fracking could have brought up to £4.6 billion of goods and services into Scotland so critics argue this decision is a blow for the Scottish economy. For more reactions read Sky News’ report.
Read our insight article ” Fracking: The Economic and Environmental Pros and Cons” for more information on the impacts of fracking.