Top 10 Stories of Last Week! 11/11/2019

The week’s news included; Disney launches new streaming service, Tesla picks Germany over UK for new factory, Lloyds shareholders lose £600m HBOS lawsuit, Vodafone posts $1.6 billion loss

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 – Uber needs to buy Lyft to survive, and finally make profits
  • Law careers – Are e-signatures valid in a commercial context, and what are their legal implications?
  • BBC News – England flooding: Why insurance may not cover damage.
  • City A.M – Initial public offerings: Is there still a pulse?

1. BRITISH STEEL SAVED

British Steel has been saved by Chinese firm Jingye in a £1.2 billion deal. The deal will save the 4000 jobs which were in jeopardy following the collapse of British Steel. The company has been in liquidation since May and has been kept running by government. Jingye will invest £1.2 billion in British Steel over the next 10 years for a 33% stake, providing lifesaving funding for the firm.

Jingye have no plans to move production away from the current plants in Scunthorpe and on Teeside and all jobs are expected to be retained. Jinye assets this is a long term commitment to the company. British Steel will run as normal as the deal is finalised. Jingye is a Chinese metals producer with over £4.4 billion in assets and also boasts hotels and real estate in its portfolio. BBC News explores why Jingye has opted to buy the firm.

2. DISNEY JUMPS INTO STREAMING

Disney launched its streaming service last week and bagged 10 million subscribers in one day. This uptake even exceeded Disney’s expectations as the service faced numerous technical issues. Disney Plus has launched just in the US and costs just $6.99 a month or $69.99 a year. Disney offers a seven day free trial so its not clear how many of those 10 million plus subscribers will continue after the trial. Nonetheless, Disney shares were up 3% upon launch.

Netflix shares on the hand saw its shares fall 1.5%. Netflix however, fired back with its own response, revealing a new deal with Nickelodeon. The deal will bring a range of Nickelodeon shows to Netflix as well as some new productions. Check out our insight article looking at whether Netflix can stay dominant in the face of this competition.                                                       

3. ALIBABA’S $13 BILLION SHARE LISTING

Chinese e-commerce giant Alibaba has got the green light for a record $13.4 billion share listing in Hong Kong. This makes it the largest ever cross border secondary listing. Alibaba, often dubbed the Amazon of the East, plans to use funds raised from the listing to invest in its delivery service, cloud computing and local services platforms. The Alibaba stock will be priced mid week and it’s hopes to raise as much as $15 billion from the listing. This listing is certainly a boost for Hong Kong which is facing economic turmoil following 5 months of riots and civil unrest.

4. TESLA PICKS GERMANY OVER UK

Tesla revealed that, largely due to Brexit uncertainty, it will open it’s first European plant in Germany rather than the UK. The gigafactory will be built on the outskirts of Berlin along with a R&D base. The factory will manufacture batteries along with its Model 3 and Model Y vehicles. CEO Elon Musk had previously downplayed risks of Brexit but now recognised the UK was too risky to base it’s new plant. Things have been looking up for Tesla recently. It posted a surprise profit of $143 million last quarter and it recently approval to build its first gigafactory in China, making it China’s first fully foreign owned plant.

5. ENERGY PRICE CAP LAWSUIT

Centrica, the owner of British gas, has won an important legal case over changes to the energy price cap. Last year, the energy regulator Ofgem introduced a last-minute change to the methods used to set the energy price cap. The cap saw a lower price cap introduced and this change resulted in a £70 million one-off charge for British Gas. Centrica, backed by the other big six energy firms, then launched a judicial review process against Ofgem. The argument was that the surprise regulation was not transparent, and the court agreed. The fundamental nature of the price cap will remain unchanged but this is no doubt a good win British Gas in an increasingly challenging energy market. Although the decision was a declaratory relief judgement, which provides a formal declaration without awarding damages or ordering action.

6. UK AND GERMANY AVOID RECESSION

Both the UK and Germany have narrowly avoided technical recession, but challenges lie ahead. Germany was on the brink of recession after a contraction in the second quarter but managed a meagre 0.1% growth in the third quarter. The German economy is stagnating, largely due to its weakening manufacturing sector. This weakness has been fuelled by a wider economic slowdown across the globe, particularly in China. In the UK on the other hand, grew at the marginally faster rate of 0.3% in the third quarter. This also follows an economic contraction in the second quarter. Despite the fact recession was avoided, this is the slowest rate of growth since 2010. The economy is moving pretty sluggishly and with further Brexit uncertainty looming. On a more positive note however, UK unemployment continued to fall in quarter and earnings also rose. BBC News looks closer at the UK’s economic results.

7. LLOYDS SHAREHOLDERS LOSES HBOS CASE

Nearly 6000 Lloyds TSB shareholders have lost a £600 million lawsuit against Lloyds. The case relates to Lloyds’ 2009 acquisition of HBOS, a bank which was overburdened with bad mortgages. As part of the acquisition, Lloyds secretly loaned HBOS £10 billion. HBOS also received a total of £40 billion in emergency funding from the Bank of England and the US Federal Reserve. Ultimately, this deal was terrible for Lloyds and the bank was bailed out by the government for £20 billion. The shareholders sued for compensation, as Lloyds’ loan to HBOS was not disclosed to shareholder before shareholders voted to approve the acquisition and ultimately led to the heavy losses.  

The court rejected the claim for compensation. The judge accepted the bank should have disclosed the loan but this omission was not significant enough to suggest shareholders had insufficient information to make a decision. Shareholders were disappointed and are considering to appeal the case.

8. MERCEDES JOBS CUTS

Mercedes-Benz is reportedly planning to cut over 1000 jobs due to a challenging market. The announcement was made by its owner Daimier who expects to save as much as €1 billion from the move. A large factor for the cuts is the increased costs of meeting CO2 emission targets. In the EU, CO2 emissions for new cars must fall to 95g of CO2 per kilometre by 2021. Then emissions must fall by to under 60g by 2030. This requires a lot of investment and a shift in the range of vehicles produced by manufacturers. Largely only electric and hybrid models will meet the criteria but the range of electric models available produced not just by Mercedes, but the wider industry is insufficient to sustain profits. We are likely to see flurry of new hybrid and electric models flood the market over the next few years and manufacturers scramble into the electric era. Honda recently announced that all its new vehicles would be electric or hybrid from 2022.

9. VODAFONE POSTS £1.6 BILLION LOSS

Vodafone has posted a huge half year loss of £1.6 billion amid legal troubles in India. The Supreme Court in India has ruled against Vodafone over the calculation of license and regulatory fees. The decision could see Vodafone leave the Indian market altogether. It has predicted costs of at least £3.2 billion but this figure could increase significantly. Vodafone is now seeking relief from the Indian government. The requests include, waiving of interest, spreading out of fees over 10 years and a two year grace period before any payments are made. This is big decision for the government as Vodafone is India’s single largest foreign direct investor. Vodafone have made clear they will not invest in India until the matter is adequately resolved.

Overall however, the outlook is much better. Global revenue rose to £18.8 billion, up 0.4%. Two weeks ago, Vodafone secured Virgin Mobile as a client and will now host its data services on its network.  

10. BUDGET SUPERMARKET SALES SOAR

Lidl has posted strong sales this quarter, up 8.8% as it takes the crown of fastest growing supermarket. Aldi came in close second posting a 6.7% increase in sales. The two-budget supermarket is gaining ground on the bigger supermarkets now holding a combined 14% of the market. Morrisons and Asda were the biggest losers, posting falling sales of 1.7% and 1.2% in the quarter respectively. Lidl and Aldi are on huge expansion drives. Lidl announced two weeks ago that it will pump £15 billion into its British suppliers. Aldi also has plans that will see it open a new UK store on average week for the next two weeks.

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