The week’s news included; Flybe rescue deal sparks outrage, US-China phase one trade deal, Alphabet joins trillion dollar club, Greggs strike JustEat deal
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 – 37 brilliant questions to ask at the end of every job interview.
- City A.M. – Do central banks have enough firepower to fight the next recession?
- BBC News – Christmas adverts – do they really work?
1. FLYBE RESCUE
Budget airline FlyBe has secured a government deal to keep it afloat albeit in the face of staunch criticism. FlyBe was frantically seeking a rescue package from the government as it was on the brink of collapse. The government support came in the form of a tax repayment plan. FlyBe owes over £100 million in air passenger duties and the government has agreed to provide temporary relief over such payments. The CEO of FlyBe stresses this is not a bailout and simply provides the company with time to execute its turnaround plan. The owners, who include Virgin Atlantic, have also committed to pump more money into the business. FlyBe currently has 2400 employees, carries 8 million passengers annually and is the sole provider on some domestic UK flight routes. The government claims that FlyBe provides important links between domestic regions and supports development.
Other airlines have been extremely critical of deal. The CEO of RyanAir, Michael O’Leary, has threatened legal action against the government over the deal. O’Leary asserts the tax relief should be provided to all other airlines otherwise this breaches state aid and competition laws. He, along with many others, have also called for the full details of the deal to be made public.
FlyBe lost £9 million fundamentally due to weak demand and rising fuel costs. These factors are difficult to change so whether FlyBe can return to profitability before it runs out of cash again remains to be seen.
2. US-CHINA PHASE ONE TRADE DEAL
The US and China have finally agreed a trade deal signalling a thawing of relations. The world’s two largest economies have been locked in an escalating trade war over the last 3 years. This deal doesn’t remove tariffs nor is it comprehensive but it’s certainly a start. Under the deal, China will buy $200 billion of US goods over 2 years. It was also making concessions regarding IP and give great access to financial services firms. In return, the US will remove and reduce some tariffs.
Donald Trump was keen on obtain larger structural concessions, but this Phase One trade deal is by no means the end game. Analysts are describing it as a trade truce rather than trade deal. It deescalates tensions and reverses some damage caused by the trade war but doesn’t Phase Two negotiations, however, will not begin until after the Presidential Elections this year.
3. RENAULT POTENTIAL NISSAN SPLIT
Reports have emerged that automotive giant Renault may be splitting from the Nissan group. Contingency plans have allegedly been accelerated due to concerns Renaults performance is inhibiting growth a Nissan. The two have been in an alliance sharing resources and technology since the 90’s.
This move doesn’t come at a great time for Nissan. amid the controversy surrounding the former Nissan chief Carlos Ghosn. Ghosn was charged with financial misconduct a Nissan and was awaiting trial. He then jumped bail, escaping to Lebanon. This may however, act as form of cleansing for the company and be something of a watershed moment.
Renault shares however, tanked to a six-year low in response to the reports. The car industry is in an era of consolidation due to increasing competition and rising costs. Fiat Chrysler and PSA have agreed to merge while many other car makers collaborate. A separation like the one envisaged between Nissan and Renault certainly bucks the industry trend.
4. ALPHABET JOINS TRILLION DOLLAR CLUB
Alphabet, the parent company of Google, has joined the $1 trillion dollar club. Alphabets share price has risen 20% over the past sixth month. This growth has been fuelled by its Google cloud services with revenue predicted to hit $17 billion by 2021. This certainly bucks the trend as governments worldwide, particularly the US, are clamping down on tech firms over privacy concerns. Last month, cofounders Larry Page and Segrey Brin stepped down an executives of the company, allowing Sundar Pichai to take over as chief of both Alphabet and subsidiary Google.
The tech giant joins the league of trailblazer Apple along with Amazon and Microsoft in reaching the trillion dollar market capitalization. Amazon has since left club, falling to a $935 billion market capitalisation.
5. GREGGS STRIKES JUSTEAT DEAL
Greggs has teamed up with JustEat to provide a home delivery service. The bakery is trialling with a number of delivery services included Deliveroo and Uber Eats to capitalise on an ever-growing market. For now, it has signed only with Just Eat and deliveries will first take place in Bristol and Birmingham with eventual roll outs to other big cities. The continued presence in cities will be dependent on customer demand. Customers must spend a minimum of £1.50 in order to make a delivery.
It was a wildly successful 2019 for Greggs with profits up by double digits. This was largely driven by its vegan sausage. It looks to continue its success with the recent launch of its vegan steak bake. The bakery also plans to open 100 new stores over the next 12 months. Employees are also receiving a £300 special bonus due to the strong results.
6. GAMBLERS BANNED FROM USING CREDIT CARDS
The UK government has banned the use of credit cards for gambling. The ban will apply to online and offline gambling except lotteries that operate for good causes. There was an emphasis on the issue of online bets as Gambling Commission research shows that 22% of online gamblers that use credit cards are problem gamblers. Credit card fees along with large credit limits are thought to accentuate the financial woes of problem gamblers. From March 31 all online gambling websites must sign up to Gamstop. Persons signed up to Gamstop are prevented from using UK gambling websites as a means to kick addiction. Nearly half of 24 million gamblers in the UK gamble online.
7. CHINA’S ECONOMIC GROWTH HITS 30-YEAR LOW
2019 saw the slowest rate of economic growth for China in nearly 30 years. This declining level of growth is largely due to weak domestic demand for goods and services. In addition, the trade war with US has had a significant impact on economic growth. US emand for Chinese exports has diminished and costs of US imports across swathes of goods has increased. The Chinese government has attempted to mitigate the effects of the trade war by introducing tax cuts, encouraging bank loaning and other measures. Despite these measures, China’s economy grew 6.1% in 2019, the slowest rate since 1990. This rate of growth however, is still within the government target range but is simply lower than the double digit growth it has enjoyed for the past 20+ years.
8. BOEING CRISIS WORSENS
Boeing ended 2019 with negative orders meaning it received more cancellations than orders. The aerospace giant saw 87 order cancellations last year after the 737 Max jet was grounded globally. 737 Max order fell 90% in the year and other models also suffered a 29% drop. The issues were compounded by low cost carriers such as India’s Jet Airways going bankrupt, further reducing demand. Boeing has a lot of work to do in order for trust to be restored in its models. In the meantime, the financial costs of these crashes is running into the 10’s of billions with no immediate end in sight.
9. ASDA TRIALS SUSTAINABILITY STORE
Asda is trialling a new sustainability store. A store in Leeds will allow customers to refill their own packaging with everyday product, such as rice, pasta and Kellogg’s breakfast products. Every year, Asda uses 65,000 tonnes of plastic and like other supermarkets, has pledged to reduce this. Asda has pledged a 15% cut by February 2021. Alongside the refill stations, the supermarket will have a bottle recycling vending machine. The trial will last for 3 months in Leeds and if successful may be rolled out nationwide. Asda has also pledged to make its own brand product packaging 100% recyclable by 2025. Morrisons has also pledged to do the same. UK supermarkets use 58 billion tons of plastic annually.
10. AGRICULTURAL BILL
The new UK Agricultural Bill will come into force after Brexit and will reward farmers for protecting the environment and improving animal welfare. The legislation will replace the EU Common Agricultural Policy (CAP). Under CAP, the government currently issues £3.4 billion a year in subsidies to farmers, with the sum based on the size of the farm. Instead the Agricultural Bill will base subsidies on the protection and, improvement of the environment, wildlife and farm animal welfare. The bill will also introduce closer government monitoring of food security. Current funding levels will also be maintained throughout the current government. These changes will be phased in over 6 years from 2021. The legislation has largely been supported by those within the industry.