Top 10 Stories of Last Week! 04/02/2019

This week’s news includes; Government revokes state financial support for Nissan, Mike Ashley bids for Patisserie Valerie, Law firm DWF lays out IPO plans and Hermes to launch new employment status

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: 

  • Business Insider A Microsoft executive has said that stopping government agencies from using facial recognition software would be “cruel in its humanitarian effect.”
  • BBC News Why are accountants getting their sums wrong?
  • The Lawyer Are legal trainees a burden?

1. BREXIT UPDATE

With Brexit under 8 weeks away, the nature of the UK’s exit from the EU is still uncertain. Theresa May was in Brussels last week, seeking the “alternative arrangements” for the controversial Irish backstop. The EU were quick in pouring cold water over this prospect. The EU asserted that no part of the withdrawal agreement is open for renegotiation. The backstop would see the UK remain in the customs union in case a future trade deal was not reached, preventing a hard border in Ireland. Crucially, there is no time so the UK could remain in the customs union indefinitely. Theresa May has assured MPs that the backstop is undesirable for both sides as the UK would not pay contributions to the EU, but this was far from sufficient to appease MPs.

The EU Commission has now agreed however, to expand the “political declaration” on the future of the UK’s relationship with the EU. Although not legally binding, it will bring greater clarity on the matter and Theresa May hopes this will persuade MPs to support her deal. Swathes of MPs have however, stated they will not support the deal without legally binding changes to the withdrawal agreement. The clarity on the political declarations appears little more than warm words.

European Council President Donald Tusk also added more fuel to the fiery debate. He attacked Brexiteer politicians stating, “I’ve been wondering what that special place in hell looks like, for those who promoted Brexit, without even a sketch of a plan how to carry it out safely”. Unsurprisingly, this was met with anger from UK politicians on both sides of the debate.

2. NISSAN

The government have responded to Nissan’s decision to move production of its X-Trail SUV to Japan. Nissan will now have to reapply for taxpayer support that was granted following its promise to keep production within Sunderland. The company has now backtracked, and 741 jobs will no longer be created in Sunderland. Nissan was eligible to receive £61 million in support and has received £2.6 million to date. The manufacturer must now reapply for the remaining £58.4 million.

Nissan has attributed the move primarily to business reasons but did cite uncertainty around Brexit. The company like many other automakers has suffered due to declining car sales in China. Despite the reasoning, the decision came as a huge blow for the government’s vision for post-Brexit Britain. The car manufacturing industry has been the most vocal about the impact of Brexit on its business. There is concern that this could mark the beginning of an exodus of automakers from the UK.

3. HMV RESCUE

HMV was rescued last week by Sunrise Records, a Canadian firm. The deal will see 100 stores purchased, saving 1,487 jobs. 27 stores will not be acquired and have been earmarked for closure. 455 jobs will be lost as a result. The flagship HMV store on Oxford Street is one of those set to close.

Sunrise purchased HMV for an undisclosed price but beat Mike Ashley and others to acquire HMV.

This was HMV’s second slip into administration as it struggles to keep up in the digital age. Despite accounting for 1/3 of all UK physical music copy sales, the market is shrinking by nearly 1/5th year on year. The challenging retail conditions coupled with soaring business rates and increasing staffing costs is leaving HMV fighting for survival. Unless it can effectively adapt, HMV may end up becoming a relic of a bygone era.

4. MIKE ASHLEY BIDS FOR PATISSIRIE VALERIE

Sports Direct made a bid for collapsing café chain Patisserie Valerie but rescinded the offer on Sunday. Patisserie Valerie fell into administration last month after an accounting scandal. HMRC exposed a £20 million blackhole in their books due to “potentially fraudulent, accounting irregularities”. An investigation into its former auditors Grant Thornton is also ongoing. The chain was then unable to meet their debt repayment obligations and were forced to call in the administrators. 70 outlets have already closed with the loss of 900 jobs but 121 were kept open in the hope of a buyer. Sports Direct cancelled its £15 million bid when administrators KPMG stated that Sports Direct would have to pay a minimum of £17 million.

Mike Ashley, owner of Sports Direct, appears set on dominating the high street. Wherever a high street store is in distress Mike Ashley is not too far behind. Last year, Ashley bought House of Fraser, Evans Cycles and Agent Provocateur. He also sought to acquire HMV but missed out to Sunrise Records.

5. DWF IPO

City law firm DWF is hoping to raise £75 million from its IPO next month. This will be the largest UK law firm listing to date and DWF will become only the sixth UK law firm to float. A minimum of 25% of the firms share capital will be floated. Partners will remain self-employed members essentially as part of a partnership owned by a public limited company. The firm hopes to offer dividends of as much as 70% of net profit.

DWF hired US investment bank Stifel to advise on the listing. The firm has opted to float to raise funds for operation investment, capital contributions and potential acquisitions.

6. GIG ECONOMY SELF-EMPLOYED PLUS SCHEME

GMB and Hermes have struck a deal to provide better employment structure for its workers. It’s couriers will now be able to select a self-employed plus status, where workers will receive employee benefits such as minimum wage and holiday pay. Workers under the scheme will be entitled to negotiate pay rates with a minimum of £8.55 and a total of 28 days paid annual leave (pro rata). There is no sick pay nor can couriers benefit from the max rate available to self employed workers.

Hermes couriers may also join the GMB Union and benefit from full representation.
This could structure addresses one of the main concerns about the gig economy. Workers are now able to receive some benefits of employment, which may have called out for. This may be ideal for workers for whom Hermes is their main source of income. For workers who prefer the flexibility and opportunity to maximise a second income the scheme may not be ideal for them. Crucially however, workers will now have a greater choice.

Legally however, there is no recognition for a self-employed plus scheme. The absence of full employment benefits such as sick pay despite, a relationship seemingly akin to employment could still see Hermes facing lawsuits over the scheme.

7. JLR LOSSES

Jaguar Land Rover posted a staggering £3.4 billion loss in 2018. This loss was largely due to a steep £3.1 billion fall in the value of its investments and factories. Aside from this, the company still posted £273 million loss. the car maker has been hit hard by declining sales in China and waning demand for diesel cars. Sales fell £100 million year on year.

Throughout last year, JLR announced thousands of job cuts in an attempt to turn the business around. Western governments are clamping down on diesel cars in a bid to reduce pollution. With JLR’s fleet primarily consisting of diesel cars the automaker will need more drastic measures to stay afloat.

8. SPOTIFY PROFITS

Spotify has posted its first ever quarterly profit. The music streaming service posted a €94 million operating profit in the three months to December 2018. The company also boasted a 29% rise in revenue to €1.15 billion. Spotify has notoriously been a loss maker, without posting a single quarterly profit in its 13 year existence. The profit this quarter was boosted by a 36% rise in numbers of paid subscribers. Spotify now boasts 96 million paid subscribers. Despite the profit, Spotify is still expected to post over €200 million in losses for 2019.

9. CRYPTO BOSS DEATH LEAVES £100M CLIENT ASSETS IN LIMBO

Founder of Crypto exchange QuadrigaCX has died with the password to £110 million worth of client assets. The company is one of Canada’s largest crypto exchanges.

Gerald Cotten suffered complications from Crohn’s disease and died. As founder, he had sole control over the transfer of funds from the exchange and no one else in his team had permission to manage client funds. Cotten was the only one with the relevant passwords leaving client funds in cold storage essentially.
His wife was unable to bypass the encryption on his laptop, despite hiring expert help. She is now seeking credit protection but has received numerous threats from clients unable to withdraw their funds from the exchange.

Exchanges pride themselves on security but this makes accounts exceptionally difficult to breach in events such as this. This highlights one of the issues with some cryptocurrency exchanges and wallets. A number of people have died holding large sums of cryptocurrency but as the passwords are known only by the holders the assets are stuck indefinitely. This creates issues for inheritance unless passwords are disclosed in a will. As cryptocurrency market matures this may be a matter addressed by the community.

10. NORWEGIAN AIR TROUBLES

Norwegian Air faced a difficult 2018, posting a loss of £140 million for the year. The company has attributed the losses to steeper competition, rising fuel prices and engine problems on some aircraft. . Increased numbers of passengers also claimed compensation for cancellations and delays. In early 2018, the airline identified that several engine parts in its Boeing 787 aircraft were wearing out faster than anticipated. This led to regulatory restrictions on Norwegian Air’s ability to operate affected aircraft in the US. Norwegian Air has since resolved the issue and struck a deal with the manufacturer. The company has been focused on growth through cost cutting and investment. It now hopes to return to profitability in 2019.


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