This week’s news includes; Theresa May postpones Brexit vote, ECJ rules UK can Brexit unilaterally, Auditors facing CMA shake up, Sainsbury’s and Asda challenge merger probe
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:
- CNBC: Tesla shares could surge nearly 27% as it becomes ‘sustainably profitable,’ Baird says.
- City A.M: Should other countries take a leaf out of Trump’s economic playbook?
- BBC News: Why your pizza may never be delivered by drone
1. BREXIT DEVELOPMENTS
Theresa May pushed back the meaningful vote on the Brexit due to take place last Tuesday (11/12). She recognised that her Brexit deal would be rejected by a significant margin. A general parliamentary rule of thumb is that governments should not run votes they don’t think they can win. The vote has been postponed to January 21 2019 at the latest. Theresa May received significant criticism from all sides as MP’s felt the fundamental objectionable terms of the deal will not change, so the delay was pointless.
Theresa May wanted to get legal assurances from the EU about the contentious Irish backstop. The backstop prevents a hard border in Ireland if no future trade deal is reached between the UK and EU. The UK would remain in the customs Union but the backstop can only be exited upon mutual agreement between the UK and EU. This creates serious concerns that the UK can be kept within the backstop indefinitely and it can be used by the EU as leverage in negotiations. This is the crux of the impasse in Parliament.
By Wednesday, the chairman of the Conservative 1922 Committee, Graham Brady, received 48 letters of no-confidence in Theresa May, triggering a vote within the Conservative Party. Theresa May won the no-confidence vote. 200 Conservative MP’s voted in favour of May and 117 voted against. Another leadership challenge cannot be launched for at least another 12 months although she had to agree not to take the party into the next general election. She survived but is by no means in a strong position.
Mrs May had no success in Europe throughout the week. She sought to gain legally binding assurances from EU leaders to soothe MP’s concerns about the backstop. The resounding message from all EU leaders was that the deal could not be renegotiated so any assurances would be nothing more than kind words.
Parliament is in deadlock and with no changes to the deal, there appears no way out. There is no majority in Parliament for Theresa May’s deal, a no-deal Brexit or a second referendum.
2.MACRON FACES NO CONFIDENCE VOTE
Following the fate of his British counterpart, French president Emmanuel Macron is facing a vote of no confidence from the French parliament. This has been triggered by the Gilets Juanes (Yellow Vest) protests. What started out as a protest against fuel duties has now led to a direct threat to Macron’s Premiership. Five weeks of civil unrest have now ensued and France is embroiled in a political crisis.
Macron has tried to appease protesters with a number of concessions. He froze the planned fuel tax hikes, increased minimum wage and tax-free overtime. While this is significant, Macron is unlikely to lose the vote due to the strong majority he holds within parliament.
3. ECJ BREXIT RULING
The European Court of Justice ruled that the UK can unilaterally cancel Brexit, following the advice of its Advocate General. The UK’s membership would not change if Article 50 notice was withdrawn. The right to cancel Brexit is only valid until the entrance of withdrawal agreement with the EU or two years after the triggering of article 50 for exiting the EU (29th March 2019).
The lawsuit was initially brought forward by anti-Brexit Scottish MP’s who are pressuring for the reversal of Brexit. There was no clarity within the legislation of a member’s right to cancel the withdrawal process. The government reiterated that they have no intention of revoking the UK’s notice to withdraw from the EU. (BBC News)
4. AUDITORS FACE SHAKE UP
The CMA announced that the big four auditors may face a market share cap as the watchdog cracks down on the sector. The firms, EY, PwC, KPMG and Deloitte hold something of an oligopoly over the market. 98% of FTSE 350 firms are audited by one of the big four. After a series a high profile scandals, most notably the collapse of BHS and Carillion, the CMA began looking into reforms.
The measure is likely to include a limit on the number of listed firms the big four can audit. Alternatively there may be the requirement for joint audits, where a firm from outside the big four would work with one of the big four on the audits of large companies.
This will undoubtedly shake up the market. There were calls for the firms to even be broken up but it appears the CMA will opt for less radical measures. The segregation of the big four’s audit functions from non-audit was deemed only viable for UK operations. The measures will be put forward to the government next week who decide whether to implement them. Read Sky News’ report for more.
5. ECB STIMULUS STOP
The European Central Bank has announced that it will end its EUR 2.6 trillion stimulus package. The bank deemed that growth within the Eurozone was sufficient to stop its quantitative easing programme. The programme was designed to inject cash into economies to boost economic growth and inflation through the purchase of government bonds.
This decision to stop the programme did however, raise eyebrows as Eurozone growth is relatively stagnant and the economic outlook is not particularly bright. This was even recognised by the ECB itself who predicted maximum growth of 1.7% in 2019. The German economy, the powerhouse of the EU, contracted by 0.2% in the third quarter of 2018. With Brexit likely to impose an economic shock to the Eurozone there are concerns that the withdrawal of the stimulus package was premature.
6. APPLE ORDERED TO STOP SELLING IN CHINA
A Chinese court has banned Apple from selling iPhones in China. The court granted an injunction request from chip maker Qualcomm to prohibit Apple from selling models released since iPhone 6s. The ruling prevents Apple from importing and selling these models, according to Qualcomm. The injunction was granted for an alleged breach of patent law. The patents held by Qualcomm allow users to adjust and change photographs. Apple however, denies that the ban is in place. (The Independent)
7. SAINSBURY AND ASDA CHALLENGE MERGER PROBE
Sainsbury’s and Asda have announced that it will launch a judicial review of the CMA’s probe into its merger. The supermarkets argue that they were not given sufficient time to make their case for the merger. The CMA claims providing this additional time will prevent the body from completing its investigation by the deadline.
The CMA has stated that the merger will be blocked if customers are worse off. Both Asda and Sainsbury’s lodged the application for judicial review because they are confident customers would fundamentally benefit from the deal. The merger would see the creation of the UK’s largest supermarket entity with combined revenues of £51 billion. The supermarkets have claimed that customers will see prices slashed by 10%.
Check out our insight article exploring the merger.
8. BROADBAND COMPENSATION
Customers of the UK’s largest providers of broadband and landline services who suffer loss of service will soon receive automatic compensation. Customers who suffer an outage which is not fixed within two days will receive £8 per day in compensation. Where engineers cancel within 24 hours or do not arrive on schedule customers will receive £25 in compensation. The compensation will be available for BT, Talk Talk, Sky, Virgin Media and Zen home and small business customers. This forms part of a deal with Openreach. The deal was designed to comply with Ofcom’s new compensation code of practice.
Critics have noted however, that most service issues are fixed within two days. Therefore, the new compensation packages will not apply to the majority of customers who suffer outages.
9. UK WAGES ON THE UP
Wages in the UK appeared to have recovered from the financial crisis. Wages increased by 3.3% in the last 3 months to October, that fastest rate of increase since 2008. Average weekly wages hit the highest rate in 7 years at £495/week. Both unemployment and employment rose in the last quarter. Unemployment rose by 20,000 to 1.38 million. Employment on the other hand, increased by 79,000 due to more people joining the labour force. For more analysis on the figures check out BBC News’ report.
10. VIRGIN GOES TO SPACE
Last week, Virgin Galactic completed its first launch of a tourist space flight. Virgin hopes to offer commercial flights to space by March 2019. Passengers will enjoy weightlessness at an altitude of roughly 60 miles. To put this in perspective, most commercial aeroplane flights reach altitudes of 7 miles. These flights will however, be reserved for those with deep pockets. Flights currently cost $250,000 per person. Over 600 people have signed up to be first in line for these ground-breaking flights.