The week’s news included; France delays tech tax following US pressure, Central banks consider digital currency launch, Sky secures Netflix deal, Tesla hits $100 billion value
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:
- The Guardian – $1tn is just the start: why tech giants could double their market valuations.
- FT – Can global investment banks make it big in China?
- City A.M – The world has changed, but Davos has failed to keep up
The Brexit withdrawal agreement has been formally signed both by the EU and the UK, paving the way for the UK’s exit on Friday 31 January. The final stage will be ratification by the European Parliament on 29 January.
This is the historic hurdle to cross but huge challenges lie ahead. The UK will now enter a transition period, staying aligned with EU rules. The transition period, however, will end at the of December 2020, giving Boris Johnson just 11 months to strike a trade deal with EU amongst others. One of the most coveted deals Johnson will be seeking is one with the US. Last week, Treasury secretary Steve Mnuchin expects a trade deal to be completed within the year, certainly giving a boost to Johnson.
Chancellor Sajid Javid worried businesses when he said there would be “no alignment” with EU rules after Brexit. He later clarified that any divergence would be in the democratic and economic interests of the country. There is no doubt however, that a significant divergence could have significant ramifications for businesses who will have to quickly navigate a new trade framework.
An outbreak of the coronavirus in China began last week and authorities are scrambling to prevent further spread of the virus. The coronavirus has killed 56 people and nearly 2000 people in China have been diagnosed as of Sunday. The virus causes a severe acute respiratory infection. Its origin is unclear but it is thought to be through illegal trade of wild animals. It is not clear however, how the virus spreads from one person to another. The Chinese city where the virus initially emanated from, Wuhan, has been placed into quarantine. There is currently no vaccine for the virus but health organisations are gaining new information everyday.
Coronavirus has already had a devasting impact on businesses in China, as this period usually the busiest time for the tourism sector. Usually 400 million Chinese people travel during the Chinese New Year period. Now the Chinese government has cancelled all public celebrations. Furthermore, airlines have stopped flights, trains have stopped running, many hotels and tourist attractions have completely shut down and those that remain open have understandably seen a dramatic decline in footfall. Tourism accounts for 11% of Chinese economy so to lose out on such a key time of year will be significant for many companies. Businesses will no doubt be counting the costs for months to come.
3. FRANCE DELAYS TECH TAX
France has delayed it’s “tech tax” until the end of the year amid political pressure from the US. The French government started collecting the tax last year which saw large firms pay 3% tax on revenue generated in France. This tax almost exclusively affected US based multinationals such as Google and Amazon, sparking outrage from US lawmakers. In response, the US threatened retaliatory tariffs on $2.4bn of French goods, such as champagne and cheese. The US has now also called off these tariffs at least until 2021. France is certainly the frontrunner but it’s not alone in the drive to clamp down on multinational firms evading tax. The UK, Italy and Austria are all planning digital services taxes. Crucially however, if the Organisation for Economic Cooperation and Development (OECD) devises a multilateral taxation scheme for tech, the taxes will no longer apply. This comes after Google announced it would end it’s aggressive “Double Irish” tax avoidance scheme.
4. CENTRAL BANKS MULL DIGITAL CURRENCY
Global central banks are assessing the possibility of launching their own digital currencies. The Bank of England along with the central banks of the Eurozone, Canada, Japan, Sweden, Switzerland and the Bank for International Settlements are all considering the plan. They are assessing how a central bank digital currency would affect economic stability and monetary policy, amongst other issues. The concept is that a central bank digital currency would give businesses and individuals, who traditionally have no direct access to central bank reserves, the ability to hold value in the central bank currency. The value would be stable unlike many cryptocurrencies, but it is unlikely to have to capacity to be used for everyday purchases. It more likely to be used for payments and transaction settlements.
This comes as Facebook’s Libra currency has had its plans somewhat derailed. The currency is due to launch in 2020 but there no clear plan for launch following backlash from numerous governments. Before any release, Facebook will no doubt have huge regulatory hurdles to clear.
5. BEALES FALLS INTO ADMINISTRATION
Department store Beales has collapsed into administration putting 1000 jobs at risk. The retailer is one of Britain’s oldest and has suffered heavily due to rising overheads and decreasing footfall, posing a £3.1 million loss last year. Many analysts saw this collapse as long overdue as it, has been struggling for some time. Beales has frantically been seeking a buyer but was unable to secure a viable option. It also failed to secure rent reductions from its landlords. As result, it was forced to call in KPMG as administrators. Beale stores will continue to operate as normal for the time being as solutions are devised. Beales was founded in 1881 and currently operates 23 stores.
6. SKY STRIKES NETFLIX DEAL
Sky has struck a deal with Netflix to host Netflix shows on its pay-TV network. Sky Q customers will now have Netflix fully integrated into the service and the option to include Netflix’s basic subscription package as part of their package. Previously, customers would have to log into a separate app but they hope this integration will encourage more people to sign up to Sky Q. The streaming and broadcasting sector is moving towards greater collaboration and consolidation as competition increases. Sky also struck an integration with the BBC last year but failed to secure a deal for the new streaming service Britbox. Comcast bought Sky for $30 billion in 2018 appears set on improving offerings for Sky customers. Alongside integration deals, Sky has planned to increase its production budget to £1 billion by 2025.
7. TESLA HITS $100 BILLION
Tesla is hitting new heights as it’s share price hit $100 billion, surpassing the likes of Volkswagen. The electric vehicle maker has been boosted by better production figures and strong financial performance. Tesla has beat estimates last quarter posting a profit of $143 million, boosting investor confidence in the sustainability of Tesla’s business. Tesla’s share price has nearly doubled in the past 9 months and as electric vehicle uptake increases Tesla will undoubtedly benefit from this cultural shift.
The largest personal benefactor from this news is undoubtedly. CEO Elon Musk. Musk has an jaw dropping remuneration deal which could see him personally receive $50 billion of stock in by 2028. Musk will receive $350 million if he can keep the market cap above the $100 billion mark over next six months. This will see him receive a stock payout worth $350 million. He is then entitled to another $350 million payout for every additional $50 billion in market value surpassed, up to a company value of $650 billion.
8. ONLINE DIVORCES ON THE RISE
Online divorces are on the rise. Introduced in 2018, the online application for divorce has been filed by more than 70,000 people. The vast majority of litigants are opting for the digital method of divorce, supported by lawyers, as opposed to in person. In the third quarter of 2019, 39% of the 29531 divorce petitions were completed online. The introduction of online divorces is part of a wider drive to digitize the legal system and improve efficiency.
9. MORRISONS MANAGERIAL SHAKEUP
Morrisons has announced it will slash 3000 management jobs to make way for more shop floor workers. The cull is part of a drive to improve the customer experience. Over 4000 supermarket employees and 7000 hourly roles will be created as part of the plan. Retained managers will work to provide support to frontline workers. Many of the new roles will be created on its counters such as the bakery, butchers and fishmongers.
The supermarket has assured managers that there will be roles for all those within Morrisons for those who wish to stay. More details will be released in due course. It is clear the supermarket price wars as forcing the Big 4 supermarkets to rethink their strategies. Morrisons has suffered from the rise of Lidl and Aldi, losing nearly 0.5% of its market share over the past 2 years. Whether their strategy will prove successful remains to be seen.
10. JAGUAR LAND ROVER JOB CUTS
Jaguar Land Rover may shed up to 500 jobs at its Halewood factory, nearly 10% of its workforce at the site. The job cuts are part of a £2.5 billion cost saving drive and a move to improve efficiency at the plant. Falling demand for the Evoque and Discovery Sport models were also likely to be a contributory factor. The Halewood plant will now change its shift patterns to more effectively adapt to demands. JLR is also looking at further investments in electric vehicles as its current fleet is dominated by diesel vehicles. European governments are keen clamp down on diesel vehicles with tax increases and other charges. It has been a rocky few years for JLR. Over the past 2 years it has cut over 5500 jobs. The carmaker now employs 33000 workers across the UK.