This week’s news includes; Theresa May suffers two Brexit defeats in Parliament, Tesla sets up in China, Netflix sued over Bandersnatch and Flybe acquired for £2.2 million.
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 asks Is China burdening Africa with debt?
- City A.M claims that the UK is tipped to remain attractive location for M&A in 2019
- CNBC explains how Apple and Tesla shares on the blockchain could be the next big thing in crypto.
1.TOUGH WEEK FOR THERESA MAY
Another week, another set of Parliamentary defeats for Theresa May’s government. With barely 10 weeks until the UK is set to leave the EU, Parliamentarians are manoeuvring but the deadlock remains far from broken.
Last Monday, Parliament voted to amend the Finance Bill to limit the government’s power in the event of no-deal. If the UK leaves without a deal, the government would have reduced power to set tax policy without the approval of Parliament. The motion passed by a majority of just 7 votes. While in itself, the motion does not substantially affect the government, if more restrictive legislation is subsequently passed it could cripple the government. The impetus behind this motion is to coerce Theresa May into ruling out a no-deal Brexit. Advocates mark this vote as an important first step.
The second defeat of the week was more significant and controversial. An amendment to the EU (Withdrawal) Act 2018, tabled by Conservative MP Dominic Grieve. The amendment states that if Theresa May’s deal is voted down on Tuesday (as expected), she will only have three days to bring a “Plan B” before Parliament. She was previously entitled to 21 days under a previous amendment. The motion passed by a majority of 11 votes.
The controversy was centred around Speaker of the House John Bercow. Bercow came under staunch criticism for breaching Parliamentary precedent to allow the vote. The original motion setting the 21 day limit was put “forthwith”, which traditionally meant that it is unamendable and not open to debate. The legal advice from clerks urged against the vote but Bercow still allowed the vote regardless. He and his supporters defended his right to break precedent, given the unprecedented circumstances. The speaker is no stranger to controversy although this debacle has raised fresh questioning over his mandated impartiality.
2. GOOGLE RIGHT TO BE FORGOTTEN
Google has received crucial support from the EU’s top lawyer over the application of the right to be forgotten online. The Advocate General Maciej Szpunar of the EU Court of Justice said that Google is not required to apply the right to be forgotten globally. This advice stems from a case brought forward by the French data regulator CNIL. While this is only advice, the court usually follows the advice of its advocate general.
A landmark ruling in 2014 established the right to be forgotten. The search engines themselves however, are the final arbiters of what information is removed with the right to be forgotten. It decides which requests from affected individuals to address with removal from the search engine. The company weighs up public right to access to such information against Individual rights to private life. Google has received 2.9 million requests for removal from its search engine but had agreed to remove only a fraction of these.
3. TESLA SETS UP IN CHINA
Tesla is set to open a factory in China, its first factory outside of the US. It marks a bold statement of intent as the “gigafactory” will cost £4 billion to construct. The factory will produce Model 3 and Model Y vehicles and production is expected to begin by the end of the year. China traditionally requires all foreign companies seeking to setup in China to have a sponsor firm. Tesla was granted an exception by the Chinese government. The Chinese government has hinted at lowering barriers to trade in China but there has been little action.
This move can allow Tesla to mitigate the impact of the US-China trade war and effectively break into the world’s largest car market. Tesla’s current costs to sell in China are up to 60% than for local firms. The company will now longer need to import as many vehicles and therefore Tesla is likely to see a boost in profit margins.
Check out our company watch page to learn more about Tesla.
4. CAR MANUFACTURERS SLASH JOBS
Ford and Jaguar Land Rover announced thousands of job cuts last week, as a cocktail of challenges for the automakers is forcing drastic action.
Jaguar Land Rover announced that it will cut up to 12.5% of its workforce, shedding 5000 staff. This forms part of JLR’s £2.5 billion cost cutting initiative to help turn the business around. The cuts will largely affect management and administrative staff. These come in addition to the thousands of job cuts announced last year.
Ford also announced plans to cut thousands of job across Europe. The manufacturer has recognised that a drastic turnaround is necessary but has not indicated the extent of the cuts. It has provided assurance that cuts are not imminent as it discusses with unions to find the most effective means of cost reduction. Ford is likely to shift focus onto its more profitable models and invest in electric/hybrid technology. Ford’s profits in Europe fell 82% last financial year and currently employs 13,000 in the UK.
There have been a number of significant issues for automakers, particularly in the UK. For the first time in over two decades, new car sales in China have fallen. Automakers have relied on booming sales in China to balance the books but demand appears to be waning. Another key factor is the decline in diesel sales, triggered by government policy. Across the EU, governments are clamping down on diesel vehicles due to concerns over pollution. 90% of the vehicles JLR produces are diesel, hence why falling diesel sales has significantly hurt JLR’s books.
In addition, uncertainty around Brexit is causing. JLR has been particularly vocal against a no-deal Brexit. Automakers operate on a “just-in-time” basis which relies heavily on seamless movement of goods. Manufacturers are concerned that a no-deal would severely disrupt this process. Ford has also warned that a no-deal Brexit would require a review of UK operations.
5. NETFLIX FACES BANDERSNATCH LEGAL BATTLE
Netflix has been sued by book publisher Chooseco over its “Black Mirror: Bandersnatch” film. In the interactive film, viewers make choices which shape the story and the outcome of the film. Chooseco owns the trademark for the gamebook series “Choose your Own Adventure” where the reader makes choices which shape the story. Similarity, Netflix’s film is centred upon Bandersnatch, based upon a fictious book turned game, in which reader’s choose their own adventure. Chooseco claims that this breaches its trademark. The company is now seeking the greater of $25 million or Netflix’s profits made from the film.
6. HIGH STREET SUFFERS TOUGH CHRISTMAS
The British Retail Consortium claim that Christmas 2018 was the worst Christmas for retailers in 10 years. Across the sector there was 0% year-on-year growth in December. Mothercare was by far the biggest loser, unable to shake off its troubles. It suffered a 11.4% decline in sales over the Christmas period. The company will close 36 more stores by the end of March 2019. Debenhams saw a fall in like-for-like sales, reporting a 5.7% dip over the period. Marks & Spencer also saw sales fall 2.2%.
2018 was a rough year for the high street. Check out our video explaining why the retail sector has been struggling
7. SUPERMARKET CHRISTMAS SALES
Supermarkets had a good Christmas on the whole. Tesco was the biggest winner of the sector, posting its best Christmas since 2009. In the six weeks to Christmas, like-for-like sales were up 2.2%. Sales at Booker, Tesco’s recent acquisition, rose 6.7%. Sainsbury’s was the biggest loser, posting a 1.1% dip in sales. This decline was however, largely driven by a decline Aldi and Lidl on the other hand saw 10% and 8% increases in total sales respectively over the period.
8. FLYBE ACQUISITION
FlyBe is to be bought by the consortium Connect Airways for £2.2 million. The consortium, led by Virgin will see FlyBe operate under the Virgin brand.
The deal must still be approved by shareholders, who will receive just 1p per share from the deal. In 2010, each share was worth 295p when FlyBe floated. If the deal goes through however, the consortium offers over £100 million in cash injections through loans and investments. This could help restore the company to profitability. FlyBe offers domestic flights through the UK. The firm turned over £752 million last year but posted a loss of £14.8 million. FlyBe issued a profit warning last October which saw its stock price slump to record lows.
9. SAMSUNG SLUMP
Samsung has announced that it expects a drop in quarterly profits amid challenging retail conditions. The tech giant forecasts $9.7 billion in profits for the last quarter in 2018, a 29% fall. This fall is largely due to weak demand. Samsung’s profits had been buoyed by strong demand for chips but sales have been waning. The economic slowdown in China is hitting profits across the industry, as competitor Apple also suffering.
On a more positive note, Apple struck a deal with Samsung to offering iTunes movies & shows on Samsung TVs. The deal will also see support for AirPlay on Samsung TV. This move is designed to diversify its income streams sufficiently to cope with a slow down in iPhone sales.
10. ECONOMY ENERGY COLLAPSE
Energy supplier Economy Energy has fallen into administration. The firm desperately sought to find a buyer but was unsuccessful. This has left 235,000 in limbo. Ofgem has said it will select a new supplier to take on Economy Energy’s customer base.
The energy supplier was ridden with problems. The firm was facing revocation of its energy supply license. Ofgem had banned them from taking on new customer due to poor customer service. The firm regularly requested one off charges and had inadequate customer complaints handling procedure.
Economy Energy is the 9th small supplier to go bust over the past year. It joins Extra Energy who went bust in November. There are numerous energy suppliers who all sought riches after the energy market allowed competition. In the first six months of the year, 13 new members entered the market. As of June 2018, there were 68 gas and electricity suppliers in the UK. The energy market is however, dominated by the big six; British Gas, EDF, N-Power, EoN, Scottish Power and SSE. N-Power and SSE recently scrapped merger plans due to challenging market conditions.