This week’s news includes; Heathrow Third runway approved, TSB troubles continue, Microsoft makes $7.5 billion acquisition, House of Fraser closes 31 stores
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:
- City A.M “Do we need governments to regulate cryptocurrency?”
- CNN “Trade wars are scary. Why isn’t Wall Street freaking out?”
- City A.M “Who are the City’s best paid lawyers and what are they taking home?”
- BBC News explains why Raul Paul’s Drag race is big business
1. HEATHROW THIRD RUNWAY
The UK government has approved controversial plans for a third runway at Heathrow airport. The transport secretary deemed this the best option to ensure that the UK remains one of the best connected countries in the world and keep Britain competitive. The debate has been ongoing for over 20 years. It comes as no surprise that this decision has faced much criticism.
There are serious concerns not just about noise and air pollution that the additional runway will bring. There was no mention of climate control in the decision announcement, much to the displeasure of critics. In addition, increased flights frequency will bring substantial traffic and congestion on the surrounding roads. Affected residents will however, receive a total of £2.6 billion in compensation. Another line of criticism was about the London-centric sentiment that this perpetuates. Many other airports in the UK lag far behind Heathrow. In order for the UK as a whole to be competitive, not just London, investment is better spent improving other airports.
MP’s will vote on the expansion plans in a few weeks. The plans can only proceed if in the long term they can ensure compliance with air quality regulations. (The Guardian)
2. SKY TAKE OVER GETS GREEN LIGHT
The UK culture secretary has given approval for 21st Century Fox to fully acquire Sky, on the condition that it sells Sky News. Fox has been seeking to buy the 61% of Sky that it does not already own. It has faced severe regulatory scrutiny amid concerns the acquisition would give Rupert Murdoch too much control over UK media. Last December, Disney agreed to buy Fox’s entertainment assets including its stake in Sky.
US media behemoth Comcast launched its own £22 billion bid for Sky earlier this year. Sky is still considering both bids so the battle is not yet over. Comcast would not be obliged to sell off Sky News, given its current lack of influence in UK media. Further discussions between the Culture department and all parties involved will take place. It will be interesting to see what the final deal will look like. (BBC News)
3. TSB TROUBLES CONTINUE
The problems just keep compounding at TSB. In May, TSB attempted to upgrade its IT systems for customers. This upgrade failed and left millions of customers without access to online services. Over 6 weeks later and some customers are still without access to some online services. It caused chaos for customers with some unable to pay for rent, fuel and in one case even their wedding. Over 12,500 people have left the bank so far and many more are expected to follow.
To make matters worse, huge numbers of customers felt victim to fraudsters posing as TSB. With such limited communication from the bank itself, fraudsters took advantage. TSB received 10,600 alerts of potential fraud since the system meltdown, over 70 times the normal amount. Many victims could not get through to the TSB’s fraud squad because the operators were inundated with calls. 1,300 people are reported to have had money stolen. TSB initially refused to compensate victims. The bank quickly reversed this stance and is now committed to refunding all customers who fall victim to fraud resulting directly from the IT issue.
Another headache occurred with personal data. TSB sent out letters to customers acknowledging that their complaints had been lodged. In some cases however, customers received letters with other people’s names, addresses and reference numbers. This is likely to constitute a breach of data protection under GDPR. TSB could face investigation, legal action and hefty fines if this breach is deemed severe enough. Check out our article GDPR: A Summary for more on data protection breaches.
MP’s on the Treasury Select Committee say they have lost confidence in CEO Paul Pester and have urged him to resign. Pester has not yet shown any intention of resigning. He was criticised by the Financial Conduct Authority for providing a misleadingly “optimistic view” of services, despite the chaos. (City A.M)
4. GOVERNMENT SELLS OFF RBS SHARES
The UK government has sold off £2.5 billion worth of RBS shares but at a huge loss. The shares were bought as part of RBS’s bailout package during the financial crisis. They were worth 500p per share in 2008, now they have been sold at 271p. This represents a £2.1 billion loss.
Labour have strongly criticised the government for the selloff. They claim that there was no justification for this disposal, considering the enormous loss incurred by the tax payer. Some analysts do however; claim it would be difficult to make any sort of positive return from this investment. It is worth noting RBS shares fell to a low of 150p after the Brexit referendum. With Brexit itself, only a matter of months away this selloff could be in anticipation of another decline. The tax payer now owns roughly 62.4% of RBS. (The Independent)
5. MICROSOFT ACQUIRES GITHUB
Microsoft has acquired code repository GitHub for $7.5 billion. GitHub allows developers to store open source codes. open source means other developers from around the world can seamlessly collaborate to alter and improve code. Microsoft contributes to GitHub and has used the open source model on a number of projects.
This marks a key shift in Microsoft’s values. Traditionally, the tech giant was against open source developers. The new CEO Nadela is moving away from its core Window Products and now seeking to invest in. This will allow Microsoft to engage more with developers, in turn allowing the company to improve its own products. Microsoft is also developing its own open source operating system, Linux. This deal has faced some criticism as the company being under the control of a giant like Microsoft may undermine the ethos of the community. Microsoft has however, promised to ensure GitHub runs independently. It will not restrict any freedoms currently afforded to developers on GitHub (The Independent)
Last week, Microsoft also signed a deal with the UK armed forces to provide IT skills training to veterans. (City A.M)
6. HOUSE OF FRASER CLOSURES
House of Fraser has announced that it will close over 50% of its stores. The plan will see 31 of its 59 stores close, affecting 6000 jobs. If the plan is approved 2000 House of Fraser jobs and 4000 concession jobs will be cut. The closures include House of Fraser’s flagship Oxford Street store.
This forms part a CVA (Company Voluntary Agreement). This is where companies seek protection and develop cost cutting plans to convince creditors to delay collecting outstanding liabilities. These invariably involve job cuts and requesting reduced rents from landlords. The CEO claimed that the company faced an existential threat and urgently needed to adapt. The CVA still needs creditor approval and the vote takes place on June 22nd.
7. AMAZON WINS PREMIER LEAGUE RIGHTS
Amazon has bought the rights to broadcast 20 premier League matches for the next 3 seasons. It will broadcast 10 matches on only 2 days per season. This is similar to an American broadcasting style. These games will be available to all UK Amazon Prime subscribers.
This marks a much feared entry of Amazon into sports broadcasting. This package however, was not highly sought after by larger broadcasters. No one put up a high enough bid when the package was first auctioned. This package is estimated to have been sold for roughly £90 million. This is a bargain compared to the £3.579 billion paid by Sky earlier this year for its main packages. While we can’t consider Amazon major players in the business, they could become more prominent if their Premier League offerings bring in new viewers. (Sky News)
8. CAPITA LEGAL ACTION
Capita and FDM are facing legal action over issuing huge bills to graduates who left their graduate schemes before completion. All graduates on the schemes must undertake training that costs up to £21,000. Following training, they must complete 2 full years of work at the company. If they decide to leave before two years, they are contractually liable for the cost of training. They are liable even if they are dismissed, which can occur at short notice at any point throughout the 2 year employment period.
The QC of the Good Law Project, Jolyon Maugham, is bringing a claim against the companies to ban the practice. These bills may not be legally enforceable as they may constitute a form of “indentured labour”. Graduates generally cannot afford to pay the fees so feel obligated to stay at the firms regardless of any desire to leave. Maugham has launched a crowd funding campaign on Crowd Justice to raise £50,000 to fund the case. Capita provides a number of key outsourced public services such as collecting BBC license fees and tagging of prisoners. FDM provides a number of IT and Business support services. (The Independent)
9. BITFINEX CYBER ATTACK
One of the largest cryptocurrency exchanges, Bitfinex, suffered a cyber attack last week. Fortunately no customer funds were stolen. The company did however, have to shut down the exchange on Tuesday morning to deal with the issue. Hackers launched a Distributed Denial of Service (DDoS) attack. This is where networks of infected computers crash websites by sending extreme amounts of data, preventing the owners from accessing the system. The attack was designed to force Bitfinex to pay a ransom to regain access, not steal from customer accounts. Bitfinex soon resolved the issue. Bitcoin however, traded slightly lower on the day at $7,421.
Cryptocurrency exchanges are the primary targets for hackers seeking to steal funds. One of the most notable hacks occurred in 2013 where $450 million worth of Bitcoin was stolen. JP Morgan estimates that 1 in 3 crypto exchanges have faced cyber attacks. Exchanges have been improving security and providing better service for their users. Earlier this year, Coincheck was hacked and $533 million worth of cryptocurrency was stolen. The company refunded customers over $423 million from their own funds. (Business Insider)
10. PWC BANS ALL MALE SHORTLISTS
PwC has announced that all of its final interview shortlists will have to include at least one woman.
PwC had the worst average gender pay gap amongst the big 4 consultancy firms. It posted a 44% pay gap in April. PwC has now pledged to make its recruitment process more diverse. It has now set a 50-50 target for job interview shortlists.
Among other measures, the firm will also launch a programme helping women back into work after child birth. Many companies explained the gender pay gaps were due to more males in senior roles. This prompted calls to hire more female senior managers. Last week, FTSE managers gave some arguably weak explanations as to why they did not hire more females. (The Independent)