This week’s news includes; Parliament Brexit vote date set, Deutsche Bank offices raided by regulators, auditors BDO and Moore Stephens to merge and JLR to move jobs to Slovakia.
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 “Can the ‘broken’ fashion industry be fixed?
- City A.M Are we headed towards a mortgage timebomb?
- Bloomberg China Has a Secret Weapon in the Race to Dominate Electric Cars
1. BREXIT D-DAY
The date has been set, Parliament will have a meaningful vote on Theresa May’s Brexit deal on the 11th of December. While many businesses are in support of Theresa May’s deal, this deal seems unlikely to gain parliamentary support. Labour have committed both to rejecting Theresa May’s deal and to supporting a vote of no-confidence in Theresa May if she loses the vote. They would push for another referendum. Theresa May has not ruled out a no deal Brexit if her deal was voted down.
Brexit is currently on a cliff-edge of a political crisis. This is because there is no certainty on what may happen. A cross-party group of MP’s have committed to blocking a no-deal Brexit if Theresa May’s deal is rejected. Donald Tusk however, stated last week that there will be no opportunity for the renegotiation of a new deal. He has confirmed that if the current deal is rejected by Parliament, then there will be either no deal or no Brexit. It currently appears that there as if there is no majority for any of these options within Parliament. What will ensue if Parliament rejects the Brexit deal is unprecedented and wholly unknown. With the March 29th deadline looming, there is real concern about possibilities.
Last week, the Bank of England also issued a stark warning stating large parts of the British economt are not ready for a no-deal Brexit. The bank detailed the “worst case scenario” of a no-deal Brexit. These predictions are based on the assumption that the UK operates on WTO rules and does not strike a trade deal by 2022 and net migration turns negative. In this event the BoE predicts GDP will crash 8%, house prices would fall 30% and inflation rises to 6.5%. Critics claim that we warnings “lack all credibility”. BBC News looks closer at the bank’s predictions.
We explore some of the other issues and opportunities that may arise in a no-deal in our insight article.
2. DEUTSCHE BANK RAID
Deutsche Bank’s Frankfurt office has been raided by German police in a money laundering probe. Over 170 police offers and inspectors searched six of their offices in the financial centre of Germany.
Written and electronic documents were seized. Authorities are investigating into whether two individuals helped. This investigation was primarily triggered by the Panama Papers leak which revealed the offshore tax arrangements of the rich and famous. This raised suspicion about the involvement of major banks in the practices. Two employees are now accused of wide spread facilitation of tax evasion. It is thought some 900 customers were aided avoiding tax to the sum of 311 million euros. It is thought Deutsche Bank’s BVI based subsidiary was also involved
This created just another headache for Germany’s biggest bank. New CEO John Sewing stepped in this year, vowing to turn the business around. After numerous scandals including involvement in Libor rigging and Russian money laundering, this is another blemish on the bank’s tarnished record. Deutsche Bank’s share price has fallen 50% in 2018 alone. Share prices fell a further 4% in response to the investigation.
3. MARRIOTT DATA BREACH
The Marriott hotel has been suffered a colossal data breach affecting half a billion customers. Hackers accessed the guest reservation database of its Starwood brand. Attackers have had unauthorised access to customer data since 2014. Information including; names, addresses, passport numbers, travel information. Payment card information was also stolen but this was encrypted. The company cannot confirm that the encryption key was not also stolen. Affected customers will be contacted and free subscription to fraud-checking service will be offered.
EU citizens have been affected by the breach so it could face the huge fines introduced under GDPR. Marriott could pay out a maximum of 4% of its $22 billion global revenue. Our insight article explores GDPR in more detail.
Check out Bloomberg’s report for more on the Marriott data breach.
4. BAYER JOB CUTS
Bayer has announced that it will be cutting 12,000 jobs worldwide. This forms part of its restructuring plan to improve profitability and make £2.3 billion in saving. The pharmaceutical giant current employs 118,200 people worldwide. Two years ago it acquired Monsanto for over £52 billion and hopes to make £2.3 billion in yearly savings once the integration is complete. Bayer is one of the largest pharmaceutical companies in the world and turned over €35 billion in 2017. (The Independent)
5. AUDITOR MERGER
Accountancy firms BDO and Moore Stephens have entered advanced merger discussions. BDO and Moore Stephens are the sixth and eighth largest UK accountancy firms. The merger will see the combined firm overtaking Grant Thornton to become the fifth largest accountancy practice. The combined firm will have annual revenue of £560 million.
Many hope that this merger will help reduce the market monopoly of the big four. The big four accountancy firms have come under significant scrutiny for significant audit failings in a number of high profile cases. The big four have received record fines for poor auditing in the cases of BHS, Ted Baker and Quindell. The big four audit 98% of the FTSE 350 companies.
The merger between BDO and Moore Stephens is unlikely to dent the dominance of the big four. The combined firm’s revenue is only 25% of the smallest of the big four, KPMG, who posted UK revenue of £2.1 billion in 2017. The combined firm may however, achieve dominance in the mid-market. (Sky News)
6. GM JOB CUTS
General Motors has announced that it will shutting 8 factories globally, shedding 14,000 jobs . Five of these factories earmarked for closure will be in North America. This forms part of it’s restructuring to boost profitability and will see its total workforce cut by 15%. GM has been struggling with declining sales of its smaller vehicles as well as increased costs of production materials such as steel due to the US-China trade war. This plan is expected to save the company $6 billion by December 2020. GM is now seeking to invest in electric and autonomous vehicle development to stay ahead of the trend.
The markets were pleased by the decision as share prices rose 4.8% on the news. Politicians on the other hand were disappointed. President Donald Trump took to Twitter to criticise the decision. He stated that he was “looking at cutting all GM subsidies, including…. for electric cars”. Electric car manufacturers receive a federal tax credit, subsidising productions of the first 200,000 cars produced. The company also received millions in federal grants. It will be interesting to see whether any subsidy cuts will be or even can be made. (Yahoo)
7. VW TESCO ELECTRIC CAR PARTNERS
Volkswagen has struck a deal with Tesco to provide extensive free electric car charging points. Over 2,500 charging bays will be installed at nearly 600 stores by 2021. This project alone would boost the number of charging points in the UK by 14%
This venture hopes to encourage the use of electric cars. Electric car sales rose 22% in the year to date and yearly sales of electric cars in the UK passed 100,000. While diesel car sales declined 30%, with over 37 million vehicles on UK roads there much work is still to be done. The government has announced measures to aid the shift to electric/hybrid vehicles. By 2040, the sale of new petrol and diesel vehicles will be banned.
8. VIAGOGO LOSES COURT CASE
Viagogo has been ordered to change the way it operates after losing a court case. The ticket resale website was found to be breaching consumer protection laws. The Competition and Markets Authority launched legal action against the platform last August and has now been successful.
Viagogo will now be forced to amend a number of its policies. It must inform consumers if there’s a risk they may be refused entry. They must also provide information on ticket sellers customers, prevent sales of tickets not owned by sellers and increase the ease for customers to get their money back. (The Independent
9. UK TRAINS
Rail fares are set to rise by 3.4% in January. This is the largest increase in five years but still below the 3.6% average limit set by the government in April. In the North of England however, Northern Rail and TransPennine Express will put up fares by 4.7% and 4.6% respectively. As expected, this was met by fierce criticism by customers due to the poor service. Rail fare hikes have increased above wage growth almost invariably over the past 7 years. Passengers in the UK pay the highest rail fares in Europe. The rail regulator, Office of Rail and Road (ORR) now ordered Network Rail to improve its poor service or face a fine. This is the first time in 10 years that the ORR has issued an order against Network Rail. (City A.M)
10. JLR JOB CUTS
Jaguar Land Rover has announced that it will shift 200 UK jobs to Slovakia. This is because “the external environment remains challenging”. The firm has issued stark warnings about the potential impact of a no-deal Brexit and the impact on its supply chains. Brexit, coupled with declining diesel sales has put JLR in a slump.
In April, JLR announced that it would cut 1000 jobs at its Solihull plant and workers will have the opportunity for voluntary redundancy. It has also put another 1000 workers in its Castle Bromwich plant on a three day week until Christmas. (BBC News)