This week’s news includes; new French tech tax sparks US backlash, big auditors all fail to meet quality standards, ICO flexes GDPR muscles slapping BA and Marriott with £275m in fines, Amazon’s Alexa partnership with the NHS
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:
- HBR – When a Company Dominates Its Market, Do Employees Benefit?
- All About Law – Why digital streaming services have traditional TV fighting for its life—and the legal headache that has resulted.
- CNBC – Why there are almost no Starbucks in Australia.
- Wall Street Journal – What Kylie Jenner Can Teach Us About Mergers & Acquisitions (M&A).
1. NEW FRENCH TECH TAX SPARKS US BACKLASH
The French senate has approved a controversial tax on big tech companies, sparking a backlash from US lawmakers. President Trump immediately ordered an investigation into the tax and there are now concerns retaliatory tariffs or taxes could now be imposed on the EU.
The French tax imposes a 3% levy on all revenue earned from digital services in France. The tax will only apply where firms generate over €25 million revenue in France and have global revenue exceeding €750 million. The impetus behind this levy is to ensure big tech companies pay they “fair share” of tax. Many firms channel their profits through low-tax jurisdictions such as Ireland, irrespective of where they generate revenue.
France proposed for this levy to apply across the EU but faced staunch opposition from countries such as Ireland, Demark and Sweden. Although the tax doesn’t target specific countries, the majority of big tech firms are US based so such a levy can be taken as an affront to US businesses. This measure is highly unlikely to go unchallenged by the US so a steep escalation in trade tension between the US and the EU is increasingly probable.
2. ALL TOP AUDITORS FAIL TO MEET STANDARD TARGETS
All of the UK’s top accounting firms have failed to meet audit quality standards according to the Financial Reporting Council. PwC, KPMG, Deloitte, EY, BDO, Grant Thornton and Mazar were all found to have performed inadequately. FRC targets require 90% of reviewed audits to be deemed good or in need of minor improvements. Grant Thornton, PwC and KPMG have all been put under closer supervision. The FRC has said the results are totally unacceptable.
This follows a number of high profile scandals in which poor auditing failed to sound the alarm on key issues. Carillion and BHS collapsed where audits failed to pick up on fundamental financial problems and Patisserie Valerie found a £20 million blackhole in its books. These failures among others have led to calls from the government for a shakeup of the sector. Some have gone as far as calling for a breakup of the big four and the replacing of the “toothless” FRC watchdog. There is no doubt the pressure will continue to mount and serious reforms will need to be made.
3. ICO SHOWS ITS GDPR TEETH WITH £275M IN FINES
The ICO issued over £275 million in fines against BA and Marriott for serious data breaches, utilising it’s new teeth under GDPR. The owner of British Airways is set to receive a hefty £183 million fine for breaching data protection law. A personal data breach saw the personal data of 500,000 BA customers stolen. International Airline Group (IAG) will be fined 1.5% of total global revenue for the breach by the UK information commissioners office. The ICO deemed BA to have inadequate security measures to protect customer data hence why the fine was applied.
The Marriott has also been fined £99 million for a data breach in 2014 affecting 339 million customers. The breach however, was not disclosed until last year, after the introduction of GDPR. The data breach affected Starwood 2 years before Marriott’s acquisition of the chain in 2016. Marriott was deemed to have carried out inadequate due diligence prior to the acquisition, particularly with regards to data security. Marriott has said it will appeal the fine.
These were the first major fines under the stringent GDPR regulations. The regulator has the scope to apply fines of up to 4% of global revenue.
Check out our insight article to find out more about GDPR
4. IBM $34 BILLION RED HAT ACQUISITION
IBM has completed its $34 billion acquisition of software maker Red Hat. This makes it one of the largest tech acquisitions of all time, beating Softbank’ recent $31.4 billion acquisition of ARM. This deal doesn’t take the crown however, falling behind Dell’s $67 billion acquisition of EMC in 2015. The deal has faced a number of regulatory roadblocks but has successfully cleared them. The US Department of Justice gave its approval in May, while the EU only gave its approval last month. The deal will allow IBM to expand its subscription software products.
5. BMW ELECTRIC MINI PRODUCTION
BMW has committed to producing new electric Minis in the UK. BMW had revealed the UK production-base in 2017 but warned that production may be moved abroad if the UK left the EU without a deal. The firm has now made a firm commitment despite the Brexit-related uncertainty. Mini’s first fully electric will be produced in Cowley and deliveries will begin in March 2020. Two weeks ago, JLR also announced that it would produce its electric model in the UK. These are certainly encouraging signs for the UK’s post-Brexit car industry.
With so many car manufacturers scrambling to produce electric models however, there are concerns that the UK is not entirely prepared for a mass uptake of electric vehicles. The UK has over 24,000 charging points but the majority of the UK still live within 2-4km from a charging point.
6. VIRGIN GALACTIC IPO
Virgin Galactic, the space tourism company, has revealed plans to list on the stock market. The company hopes to raise $1.4 billion from the listing. The money will go towards building more ships and speeding up the program. Virgin Galactic has already secured $80 million in deposits for the first commercial space flights. Founder and majority shareholder Sir Richard Branson will be going up in one of the first flights in 2020 and customer flights will soon follow.
Both Amazon and Tesla are also competing to take customers to space. We are likely to see a flurry of commercial space flights over the next decade. Although ensure your pockets are deep enough, flights are expected to cost in the region of £250,000.
7. AMAZON’S ALEXA PARTNERSHIP WITH THE NHS
Amazon will integrate expert health advice into its Alexa devices in a new partnership with the NHS. The voice-assisted Alexa device will now automatically search the official NHS website when asked medical questions. The Alexa device previously selected popular responses when asked medical questions.
The government has said the deal could relieve some of the pressure on the health service, providing people with quick answers for minor ailments. This forms part of a wider shift in the NHS towards digital solutions. The concern is however, that the advice could stop people from obtaining medical attention.
Critics have also raised serious concerns about data protection. Amazon said all information is encrypted, stored securely and not shared with any third party.
8. CRYPTO THIEVES STEAL £26M FROM JAPANESE EXCHANGE
Japanese crypto exchange Remixpoint has fallen victim to a huge hack in which £26 million worth of cryptocurrency was stolen. Currency was stolen from the “hot wallet” from which transactions are carried out but the cold storage of currency was unaffected. A third of the stolen funds belonged to Remixpoint themselves however, with the rest belonging to customers.
Remixpoint has issued an apology but is still investigating the incident. All trading was immediately suspended on the exchange. Cryptocurrency exchanges have proven vulnerable to attack as advanced cyber criminals target the untraceable cryptocurrencies. Recently, Coincheck lost a staggering $500 million worth of coins.
9. MICROSOFT’S FIRST RETAIL STORE
Microsoft has opened its first European retail store in London last week. The tech company is following the steps of competitors and offering a unique in-store experience to draw in new customers. The store opened in Oxford Circus, just a stones throw away from Apple’s flagship store. Microsoft are focused on primary locations where footfall is consistent and consumers are more interested in shopping experiences.
The 21,000 square foot store contains Microsoft Surface computers and tablets, an Xbox gaming room and even a digital classroom with coding classes. This store opening forms of a part of wider shift away from its core Windows and Office products. Microsoft now brings in 25% of revenue from Office and just 18% from Windows.
Microsoft’s move is in stark contrast to general tale of the high street. A record number of high street stores closed last year. Unlike traditional retailers however, Microsoft will not be relying on instore sales to stay afloat. Rather the store will supplement global sales and increase brand presence.
10. SUPERDRY LOSS
Superdry has posted a £85.4 million loss as it struggles with a retail tough market. Store sales were down 4% over the year and group revenue stagnated at £872 million. The huge loss was largely caused by a £130 million write down of assets and lease costs. The company is struggling, it had already issued 3 profit warnings this year alone. Share prices fell by 7% in response to the news, compounding to an 80% fall from their 2018 all-time high.
Aside from the general external challenges SuperDry has been embroiled in an internal boardroom battle. In April, all the executive board all quit in protest at shareholders decision to place founder, Jordan Dunkerton, as interim CEO in April. He pledges to turn the business around through a design led culture. The board have been replaced but a full time CEO has not yet been found.