This week’s news includes; Comcast wins bid for Sky, USA and China trade wars escalate, Apple pays Ireland back taxes and Tesco launches Jack’s
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:
- BBC News No-deal Brexit would hit UK economy, says IMF
- The Independent “Financial crisis 10 years on: Who are the winners and losers?”
- BBC News Why do billionaires want to own the news
1. CHEQUERS DEAL DYING
Brexit negotiations have hit an impasse. EU leaders have unanimously rejected Theresa May’s chequers proposals at a convention in Salzburg. While this wasn’t an official Brexit meeting, the rejection is a heavy set-back for the government.
In response, Theresa May gave a defiant speech following the convention. She criticized the EU for dogmatically rejecting proposals without reasoning and without putting forward any credible suggestions. The EU proposals to date have involved the UK becoming what she called “a vassal state”, subject to EU rules without representation. She stated that the EU must respect the UK in negotiations. Brexit Secretary Dominic Raab has also questioned how serious the EU is about negotiations, given their lack of cooperation.
European Council President, Donald Tusk claimed the UK already knew about the EU’s red lines for many weeks. He was however, confident that a compromise was still possible. Whether a “compromise” will be sufficient to satisfy both Theresa May and the UK parliament is questionable. With the official leave date for Brexit only 6 months away, the UK’s future relationship with the EU is no clearer than it was 18 months ago. BBC News analyses the status quo in greater detail.
We explore the practical implications of a no-deal Brexit in our insight article.
2. SKY ACQUISTION: COMCAST OUTBIDS FOX
Comcast has outbid Fox for the takeover of Sky. A blind auction was run where Fox and Comcast battled for ownership of the UK broadcaster. Comcast won the battle with a bid of over £30.5 billion or £17.83 per share. This dwarfed Fox’s final bid of £15.67.
Fox had been the forerunner in the bid for Sky. In June, despite a CMA review raising concerns of media neutrality and public interest, the UK culture department found no grounds to block Fox’s takeover. Sky sought to acquire the 61% of Sky that it did not already own. The battle for Sky has been gradually escalating. In July, Fox increased its bid to £24.5 billion which was soon beaten by Comcast in £26 billion. The blind auction was set by the UK’s Takeover Panel as a means to settle the bidding wars.
Sky still must vote on whether to accept Comcast’s bid. Sky’s shareholders have however, already advised the company to accept the bid. (The Verge)
3. USA CHINA TRADE WARS RAGE ON
The US and China have both introduced additional tariffs on imported products, as the trade war escalates. Donald Trump imposed tariffs on $200 billion worth of Chinese goods while China responded with tariffs on $60 billion worth of American goods. China’s tariffs affect products such as computers, wines, meats and textiles. The US tariffs are currently imposed on a wide variety of consumer goods products from suitcases to toilet roll. Some products like Smart Watches were removed from the 6,000 products affected by the latest tariffs because US companies producing in China would face significant production cost increases. Trump has stated that China’s retaliation would see tariffs on another $267 billion worth of imports. This will mean all Chinese goods imported to the US will be subject to tariffs. In contrast, only half of US products have been affected by Chinese tariffs. China however, has targeted key areas of Trump’s support base such as farmers. The tariffs have for example, seen a resurgence in Chinese soy bean farming who are benefitting from reduced competition from the USA.
Concerns are rising though as some US tech firms are requesting protection from the next round of tariffs. The trade war was first initiated by the US who claimed China’s trade policy was unfair. There is a $375 billion trade deficit between the US and China. The US also introduced the tariffs due to the alleged theft of US companies’ technology.
BBC News fully analyses the current state of the trade war.
4. APPLE PAYS IRELAND BACK TAXES
Apple has paid the Irish government 14.3 billion euros (£12.7 billion) in back taxes, following a ruling from the European Commission. The European Commission found that Ireland’s tax regime gave Apple an unfair advantage. Ireland allowed Apple to pay less tax than other companies and so Ireland was ordered to collect the taxes back but failed to do so. The EU had initially launched legal action against Apple due to the significant delay in collecting payment. Now that the money has been paid, the legal action will be withdrawn.
Apple has however, appealed the case. The money paid will be held in escrow until the appeal has concluded. The final appeal could however, take years to resolve.
Ireland has a corporation tax rate of 12.5%, one of the lowest in the EU. Consequently, it’s a ideal location for multinational companies seeking single access to the EU to domicile. As of 2015 there were over 700 US companies domiciled in Ireland. (The Guardian)
5. SAINSBURY’S ASDA MERGER CMA REVIEW
The Competition and Markets Authority has begun an in-depth investigation into the Sainsbury’s and Asda merger. The CMA deems that the deal “raises sufficient concerns” for an investigation to be warranted. It is expected that prices will fall by 10% for customers. In practice, this means suppliers are likely to be squeezed by the combined company.
The merger is worth £15 billion and creates a giant with over 31% of the market share. Some analysts expect the CMA will require around 6% of their supermarkets to be sold off. If this is the case, Morrisons is likely to be the primary buyer and are likely to receive a cheaper price for the sites. Tesco already has a 27.4% market share so is unlikely to be able to buy up any of the stores required to be sold.
The deadline for completion of the first part of the CMA’s investigation will be 5th March 2019. (BBC News)
6. TESCO LAUNCHES JACK’S
Tesco has launched its own budget supermarket brand to compete with Aldi and Lidl. 15 stores new “Jack’s ” stores will open. The first two stores have opened in Chatteris in Cambridgeshire and Immingham in North East Lincolnshire.
The stores will be considerably smaller than Tesco in terms of range. Only 2,600 product lines will be available at Jack’s. Tesco on the other hand has tens of thousands of product lines. Over 1800 products under the Jack’s brand will be launched.
The Jack’s stores will help Tesco compete in the budget market. The range of products available will ensure that it does not compete directly with Tesco, rather, it will provide Tesco with the opportunity to challenge Lidl and Aldi. Lidl and Aldi’s combined market share has grown from 8.4% to over 13% in just 4 years. 80% of goods at Jack’s will be sourced from the UK. This will keep costs down and reduce the impact of a decrease in the value of the pound post-Brexit. It will be interesting to see how successful this brand turns out to become. (Sky News)
Check out our Tesco company watch page for more.
7. SCALLOP WARS END
The UK has agreed a peace deal with France over the so called scallop wars. This comes after a deal collapsed earlier in the month. Last month, French vessels collided with and attacked British vessels fishing for scallops, claiming they were overfishing in the Baie de Siena region. French fishermen took matters into their own hands and some British vessels were allegedly hit with smoke bombs and rocks.
French boats are banned from fishing in this region to protect the scallop population but British ships face no such restrictions. A truce was called and UK vessels agreed not to fish in the area from May to October. This deal was however, on the basis that UK vessels would not lose out financially. The deal initially collapsed as no agreement could be reached on the proposed compensation package.
The agreement now stipulates, larger boats will be banned from fishing in the area. Vessels under 15m in length will still be permitted to fish in the area. The French wanted all British vessels banned but found this compromise to be better than no deal.
8. JLR WORKERS ON THREE DAY WEEK
Workers at Jaguar Land Rover in Birmingham have had their working weeks reduced to three days until Christmas. Roughly 1,000 workers at Jaguar’s Castle Bromwich plant will be affected. This is to allow for adjustments to their production. JLR largely produces diesel vehicles but the UK is shifting away from diesel vehicles. The government has announced plans to ban all diesel vehicles due to growing evidence showing its negative environmental impact.
By introducing reduced working weeks, JLR can slow down its vehicle production to make the adjustments effectively. Affected workers will however, remain on full pay.
The company has also been vocal about the negative impacts of Brexit. JLR has over £80 billion of planned investment into the UK and a no-deal Brexit could jeopardise this investment. JLR currently employs 40,000 people directly and 260,000 in its supply chain. (The Guardian)
9. EQUIFAX FINED FOR DATA BREACH
Equifax has been fined £500,000 by the Information Commissioner’s Office (ICO). The credit reference agency failed to protect customer data and the details of 15 million were compromised. The firm failed to have adequate technical and procedural measures in place to protect consumer data. The breach took place between May and July in 2017, where names, dates of birth, addresses, driving licence and financial details were all compromise.
The US parent entity had also been warned of a critical vulnerability in their data protection system only 2 months before the breach.
The breach occurred before the introduction of the General Data Protection Regulation. Under GDPR companies can be fined up to 4% of global annual turnover for failing to have adequate safeguards. For Equifax that would have been a £120 million fine. (Sky News)
Check out our insight article for more on GDPR.
10. FAST FOOD STRIKES
Strike action has been planned for a number of casual and fast food restaurant workers. JD Wetherspoons, McDonald’s and TGI Fridays workers will strike on the 4th of October. The strike forms part of an international day of strike action for fast food workers to fight for better conditions. The primary objective is to obtain £10 a hour wages.
In 2017, Wetherspoons announced £20m-worth of pay rises and £27m for this year, while McDonald’s downplayed the scale of the strikes. There was no comment from TGI Friday’s
Despite this, the strike numbers are quite relatively low. At McDonald’s only 4 outlets have planned strike action, Cambridge, Crayford, Watford and Brixton. In Brixton, only two out of one hundred staff has signed the ballot to take action. (BBC New
