This week’s news includes; Melrose GKN takeover, Barclays face mortgage mis-selling fines, Uber sells east-Asia business, Amazon enters housekeeping
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. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- Sky News looks at Britain’s retailers are facing “a perfect storm” that will see businesses squeezed and more corporate failures.
- Legal Cheek claims that the partner problem means law firm gender pay gap stats are pretty useless
- City A.M claims that the UK cannot afford to turn away skilled migrants.
1. MELROSE GKN
Melrose has succeeded in its takeover bid for engineering firm GKN. 52.4% of GKN shareholders voted in favour of the takeover. This marginally passed the 50% plus one share required to approve the takeover. GKN has been struggling financially and shareholders deemed this the best option to change its fate. Melrose will pay £8 billion for the company.
The deal will face significant political scrutiny because GKN is a key British engineer with significant history. It currently produces parts of Eurofighter Typhoon jets GKN is 259 years old and even supplied soldiers at the battle of Waterloo in 1815.
Airbus has already stated its relationship with GKN would be in jeopardy in the event of a Melrose takeover. Airbus clearly stated it only wishes to work with companies with “a commitment to long-term investment and strategic vision”. Melrose is a company turnaround specialist with a reputation for breaking up companies. GKN has however, made legally binding commitments relating to research and development and that the firm will remain in the UK. Whether this will be enough to ease concerns remains to be seen. (Reuters)
2. GENDER PAY GAP FIGURES
The UK government has imposed obligations for large companies to reveal their gender pay gap figures. Big names in finance and business have revealed theirs and they fundamentally highlight the inequality within our society. Companies with over 250 employees must publish the differences in the average amount their workers are paid. Unsurprisingly, men are earning significantly more than women, particularly in the legal and finance sectors.
The disparity largely stem from the hierarchical inequality in the business world. There are far more men in senior positions and consequently earn notably more than female worker . Arguably, the disparity at senior level stems from the fact legal and finance have long been male dominated sectors. The pool of candidates fighting for top positions has historically been predominantly male but this is certainly changing. The obligation to release these figures will however, provide much needed impetus to resolve this issue.
Business Insider looked at the finance sector highlight the highest and lowest gender pay gaps. At the top of list was HSBC with a mean pay gap of 59%. Goldman Sachs was not far behind with a mean pay gap of 55.5%. Goldman Sachs blamed this high figure on the high number of male senior officials compared to females on comparable wages (mentioned above). Bank of America Merrill Lynch was at the bottom of the list with a mean pay gap of only 17.1%.
In the legal sector Linklaters has a mean pay gap of 39.1% while Pinsent Mason’s pay gap stands 22.4%. Check Global Legal Post for more law firms’ pay gap.
For more on what firms are doing to resolve the issue read our insight article, Mind the (Gender Pay) Gap.
Uber announced that it will be selling its entire south-east Asia business. Uber’s main competitor in the area, Grab, will purchase the business. As part of the deal however, Uber will gain a 27.5% stake in Grab and Uber CEO Dara Khosrowshashi will join the Grab board. Grab however, has been put on the Philippines and Malaysia’s competition watch list as a result of this deal. There is serious concern that this deal could harm competition in the country and subsequently leave consumers worse off. Reuters looks closer at the competition concerns.
Uber lost a staggering $4.5 billion in 2017 and this sale marks its third retreat from the east. In 2016 Uber pulled out of China as it was losing $1 billion a year in China alone, largely due to fierce competition from Didi. It also pulled out of Russia in 2017. Uber does however, have over 50% of the market share in the US, Australia and Latin America so it’s not all woes for Uber. (The Guardian)
Our insight article; The Future For Uber explores whether Uber’s model is sustainable in the long run.
4. BARCLAYS PAYS OUT MORTGAGE MISSELLING FINE
Barclays has reached a $2 billion settlement with US regulators. The fines relate to the deceptive sales of mortgage backed securities that led to the 2008 financial crisis. Banks lied to investors about the quality of the mortgages they offered. Barclays sold more than $30 billion worth of these securities between 2005 and 2007.
Barclays did however; pay out notably less than some of its rivals. JP Morgan paid out a whopping $13 billion while Deutsche Bank Credit Suisse paid $7.2 billion and $5.3 billion respectively. Regulators in the Europe and the US have issued fines amounting to more than $342 billion to big banks since 2009. (CNN)
5. DROPBOX IPO
Dropbox listed on the NYSE last Monday. Dropbox was initially valued at $8 billion with share priced at $21. Its share price rose throughout the day and closed 35% up at $28.48. It is currently trading at roughly $30. Dropbox is a cloud storage provider and posted revenue of over $1 billion last year. The vast majority of revenue comes from its 500 million individual users but with competitors such as Google’s cloud, there are concerns about whether Dropbox can sustain its position. (CNBC)
6. AMAZON BREAKS INTO HOUSEKEEPING INDUSTRY
Amazon has revealed that it is making it an entry in the $16 billion housekeeping industry. The tech giant has begun hiring cleaning staff employees in Seattle.
In 2015, Amazon launched its marketplace for home maintenance services. The marketplace connects consumers with handymen and housekeepers. Amazon does not employ any of these workers and similar to the Uber model, they are all currently classified as independent contractors. Amazon’s housekeeping employees will now list on the marketplace and allow Amazon to maintain certain standards. Progress has been slow on the marketplace so Amazon hopes this new move could revitalise the project.
The marketplace is already disrupting services like Yelp. This move however, could severely revolutionise the shape of the Home services market. The independent workers in this sector could possibly suffer a similar fate to the thousands of independent retail stores that have collapsed over the past five years.
Bloomberg looks at Amazon’s latest venture in more detail.
The “Uber” model of connecting workers with consumers without employing anyone is certainly profitable. As employment law continues to develop however, our insight article explores whether this model is sustainable.
7. CARILLION JOBS SAVED
Over 9000 jobs that were under threat when Carillion collapsed have been saved, since January. Numerous suppliers have now employed workers who otherwise would have been unemployed. Despite this, over 1700 jobs have lost so far.
There are still some services that Carillion delivers and as a result some 6400 workers have been retained. Their futures’ are still in jeopardy as arrangements are still being made. Furthermore, investigations are still ongoing. Carillion went into liquidation in January after it could not meet its financial obligations totalling £900 million. It employed more than 20,000 and had 450 UK government contracts.
For more on the current situation with Carillion check Sky News’ report.
8. LINDSAY LOHAN LOSES GTA COURT CASE
Lindsay Lohan has failed to sue Rockstar Games over privacy issues. The case dates back to 2014 where Lohan claimed that Rockstar Games unlawfully used her likeness in the game Grand Theft Auto Five (GTA V). She claimed that one of the characters had a similar appearance, voice and even clothing that looked like her clothing line. The New York Court of Appeal disagreed with Lohan’s argument and stated the character in question merely resembled a “generic young woman”.
GTA V is one of the most successful video games of all time. It has sold over 275 million copies and was the best selling game of 2017, despite being released in 2013. (BBC News)
9. H&M PROFITS SINK
H&M profits fell by 61% in the last quarter. This was largely due to a wider market slow down in retail consumption. Sales fell for the second successive quarter and the company had notably high levels of unsold stock. It will have to introduce further discounts throughout the next quarter.
We have recently seen the demise of big high street stores such as Toys R Us and Maplin. New Look also announced the closure of 60 stores to make savings. Unlike New Look however, H&M is actually looking to increase its number of physical stores. H&M currently has 4700 stores in 69 countries and plans to open a further 220 in 2018. This is a bold move in an age where online retailers like ASOS and Boohoo are becoming increasingly dominant. (BBC News)
10. TALKTALK CYBERSECURITY
TalkTalk’s cyber security is facing scrutiny yet again. Any anonymous hacker exposed a flaw in TalkTalk’s website that has been unresolved for years.
The flaw allows hackers to take control of “talktalk.co.uk” and customers’ personal details could easily be input to this fake website and stolen. TalkTalk has since fixed the flaw but the ease with which the hacker identified it is worrying. TalkTalk were even alerted about this vulnerability in 2016 during a bug bounty but failed to fix it.
Talk Talk will undoubtedly face more pressure to improve its cyber security. The telecoms giant suffered a huge cyber hack in 2015 which data was stolen from 157,000 customers. Talk Talk was fined £400,000 by the With General Data Protection Regulation coming into force on the 25th of May , the fines will be substantially higher unless TalkTalk improves its security.
Sky News looks closer at the nature of the breach.