The week’s news included; The UK has left the EU: what next? Huawei granted permission to develop UK 5G network, Airbus pays £3 billion to settle global bribery case, Northern rail renationalised,
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:
- BBC News – Coronavirus: Could it damage the global economy?
- City A.M – Brexit day is here – but does the rest of the world even care?
- The Independent – Is Boris Johnson’s Huawei decision a rare example of evidence based policymaking?
1. BREXIT IS OFFICIAL
The UK has officially left the EU, ending 47 years of membership of the block. The celebrations have ended and the UK’s flag has already been removed from the European Council building. So what now? The UK has now entered an 11-month transition period, under which, we will remain tied to EU rules. During this period however, there will be no British MEPs and no British ministers at EU meetings. Freedom of movement and goods remain the same but all of this ends on 31 December 2020.
In these 11 months, the UK must negotiate a deal with the EU to clarify a plethora of issues and secure a feasible relationship for the future. If no deal is secured then a “no-deal” situation will ensue where the UK falls back on WTO rules for trade but many other legal issues such data sharing may go unresolved. The UK must also secure trade deals with other nations, in place of the trade deals we currently have with the EU. Many claim all this is unachievable but Johnson has remained adamant that the 31 December deadline will not be extended. The UK’s official exit from the EU marks the start of crucial period for the nation’s future.
2. HUAWEI ALLOWED UK 5G ROLE
The government has decided to let Huawei have a limited role in the development of the UK’s 5G network. This goes against the advice of the US who warned all allies not to contract Huawei for any network infrastructure works. Crucially however, the UK government stressed Huawei will only be working on non-sensitive periphery elements of the network. They will be banned from “core” elements where sensitive information passes and from defence and nuclear power sites. Mobile network providers will also be required to scale back their reliance on Huawei in their networks to maximum of 35%.
Huawei is a market leader in 5G infrastructure technology in a field where there isn’t much competition. The main players in the UK network infrastructure sector aside from Huawei are Nokia and Ericson. Huawei denies allegations that it is a security risk due to the Chinese state’s perceived influence over the firm.
The US had previously warned that such a move could prevent intelligence sharing between the US and allies who contract Huawei, due to security concerns. Many senior officials in the US have said they are disappointed with the decision but there is no sign as of yet there will be a material impact to the special relationship between the US and the UK.
3. AIRBUS PAYS RECORD UK BRIBERY FINE
Airbus has agreed to pay €991m as part of a €3.6 billion global settlement of a bribery case. This settles a four year criminal investigation into “endemic” bribery within Airbus’ businesses spanning a number of years. Airbus channelled large amounts of illicit funds used for bribery through various tax havens. The settlement is part of a deferred prosecution agreement meaning the aerospace giant will not face criminal charges, crucially avoiding a potential ban on involvement in public contracts. This is the largest fine ever issued by the UK Serious Fraud Office, dwarfing the £497 million bribery fine issued to Rolls Royce in 2017. The aircraft manufacturer will also pay France €2.08bn and €525m to the US.
4. JOHNSON & JOHNSON TO PAY $340m
Johnson & Johnson has been ordered to pay $340 million to the state of California over its misleading of customers about the safety of its pelvic meshes. The pelvic mesh products are permanent surgical implants for women to treat certain conditions. Johnson & Johnson unlawfully downplayed and omitted certain risks of the product when marketing to doctors and patients. This huge sum was significantly less than the $800 million initially sought by California. Johnson & Johnson will however appeal the case so there is still more to come. The company already paid out $117 million to 41 states and DC over similar allegations.
5. DELOITTE RECEIVES RECORD FINE
Deloitte has received a record £1 million fine over its role as administrator of Comet. Retailer Comet collapsed at the end of 2012, leading to the loss of over 6000 jobs. The Institute of Chartered Accountants in England and Wales (ICAEW) deemed that Deloitte failed to take due care in addressing the potential conflict of interest in its role as administrator. Deloitte had previously worked as an advisor to Comets’ owners and later took over as administrator. Deloitte has always denied allegations of a conflict of interest. The ICAEW has also reprimanded two of the Deloitte partners who oversaw the process, but they will not be banned. Deloitte and the partners agreed to pay a total of £1 million. Deloitte will also additional pay the ICAEW’s costs. Full costing details will be released this coming week.
This fine is the largest issued by ICAEW but is dwarfed by the fines issued by the audit regulator, the Financial Reporting Council. In the 2018/19 year, the FRC issued £42.9 million in fines to auditors.
6. ASTON MARTIN SEEKS EMERGENCY FUNDING
Aston Martin is seeking £500m in emergency funding as the luxury car maker struggles to stay profitable. The firm had a poor 2019 and expects a nearly 50% decline in earnings for the year. The firm is unable to draw in enough buyers and after needing a £120 million cash injection last year, this emergency funding will also be crucial if the company is to turn itself around. £182 million of the emergency funding will come from a consortium led by Lawrence Stroll and the remainder will come from other investors. Aston Martin launched its IPO in 2018 had a poor performance on the day and struggled ever since. The company’s share price is down over 70% from it’s IPO price.
Aston Martin is best known as the car model of choice for the fictional character James Bond, featuring in all films.
7. NORTHERN RAIL RENATIONALISED
Northern Rail is to be nationalised after months of poor service for customers. The rail company has had severe problems since the timetable changes in May 2018. The government determined the service was inadequate and that commuters had lost trust in the company. Just 56% of Northern trains arrived within 1 minute of the scheduled time last year, nearly 10% beneath the national average. Franchise holder Arriva, was due to run Northern until 2025 but will now be stripped of the franchise from March 1. The state owned company OLR, will then take charge from this point. The branding will remain the same and no jobs will be lost.
Arriva blames infrastructure issues such as signalling for the travel chaos but understands the government’s decision.
8. UBER EATS LOSES EXCLUSIVE MCDONALDS DEAL
Uber Eats has lost its exclusive deal with McDonalds. Currently, only Uber Eats offers McDonalds delivery in the UK and completes 15 million deliveries a year. Uber Eats lost its exclusivity to JustEat who will now become McDonalds’ second delivery partner. This is significant for Uber Eats as McDonalds accounts for roughly half of all deliveries on the app. Further competition could see Uber Eats’ UK revenues dwindle. JustEat is the largest food delivery service in the UK largely due to its strong presence in towns outside major cities. JustEat had it’s £6.2 billion merger with takeaway.com put on ice over competition concerns, but this McDonalds deal may just further cement its dominance.
This is another headache for Uber who are already facing the permanent loss of its license to operate in London. Last year, TfL revoked its license over passenger safety concerns but Uber is currently appealing the decision so can continue operate as normal. London is by far, Uber’s largest single market.
9. BANK OF ENGLAND KEEPS RATES STEADY
The Bank of England voted to keep interest rates at 0.75%, surprising the markets. The Bank of England had predicted a decline in UK economic growth due to Brexit so as the UK formally leaves the EU, an interest rate cut was expected by many. The central bank predicted long term growth of just 1% over the coming years. Businesses were however, pleased with the certainty provided by Johnson’s landslide victory and ensuing clarity about the trajectory of the political landscape. This increase in general market confidence is a key factor why the bank’s Monetary Policy Committee decided overwhelmingly to keep rates level.
10. FCA FINED FOR ITS OWN PENSION SCHEME FAILINGS
The UK financial watchdog has been fined £2000 over failings in its own pension scheme. The Financial Conduct Authority was flagged by the Pension Regulator for its auto-enrolment scheme. Insufficient detail was provided to staff on costs charged by fund managers. Furthermore, pension trustees were not adequately trained. This comes as another unfortunate event for the regulator. Last year, the collapse of Neil Woodford’s funds raised concerns over the monitoring of the regulator. The current Head of the FCA Andrew Bailey will take charge at the Bank of England in March.