The week’s news included; CMA gives green light to Amazon’s Deliveroo investment, Saudi Arabia to buy Newcastle FC, True Religion files for bankruptcy (again), Oil prices tank despite production cut 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:
- City A.M. – Why our coronavirus recovery demands a new form of capitalism
- Bloomberg – Don’t Worry (Yet) About China Taking Over the World
- BBC News – Coronavirus: Will Covid-19 speed up the use of robots to replace human workers?
1. US CORONAVIRUS POLICY
It has been an eventful week in the US with regards to its coronavirus policy and the economy.
- Donald Trump has announced the US will halt further funding to the World Health Organisation (WHO) due to its failure with regards to the coronavirus outbreak. Trump said the organisation failed in its basic duty and must be held accountable. The US is the largest contributor and put in $400 million last year. Ireland has said it will quadruple its contribution to WHO in light of the US’s decision, although this will not cover the gap. WHO said it was disappointed in the US’s decision.
- There were protests in Minnesota, Michigan and Virginia against the lockdown and social distancing measures. Protesters argue its infringing their right to freedom. The State of Texas is to relax lockdown measures and will allow some non-essential businesses to open as early as April 27.
- In the last 4 weeks, the US economy has erased all the jobs it gained in the past 11 years
- Last week, there were an additional 5.2 million unemployment claims, bringing the total number to 22 million. This is the largest number of claims ever, dwarfing claims in every other financial crisis on record. The IMF predicts that the US economy will shrink 5.9% in 2020.
2. CHINA’S ECONOMIC CONTRACTION
China has posted its first quarterly economic contraction since 1992 due to the coronavirus outbreak. China’s economy shrank by 6.8% in the first 3 months of 2020 due to the nationwide lockdown. The world’s second largest economy was the epicentre of crisis and was the first to go into lockdown for nearly 2 months before measures were relaxed. Retail consumer spending crashed 19% in the quarter although industrial production fell just 1.1% year on year. Despite the deep decline, the level of contraction was still better than some analysts expected. China’s economy was predicted to sink by as much as 11% so the 6.8% shrinkage figures are somewhat positive.
3. JUSTEAT AND TAKEAWAY.COM
The Competition and Markets Authority has given the green light to the Just Eat and takeaway.com merger. The CMA initially blocked the £5.9 billion merger due to concerns about competition. Based on its findings so far in its investigation it decided to revoke the initial enforcement order against the integration. The two takeaway companies will now combine their businesses with takeaway.com taking a 58% in JustEat for 916p a share. JustEat will also sell its stake in Brazilian food delivery firm iFood. Takeaway.com left the UK market in 2016 after it lost over £750,000 in that year alone due to tough competition. The joint companies, however, process a staggering £6.6 billion worth of takeaway orders every year. JustEat has even seen its order soar 50% during the coronavirus outbreak.
4. CMA APPROVES AMAZON DELIVEROO INVESTMENT
The Competition and Markets Authority has provisionally approved Amazon’s £442 million investment in Deliveroo due to the coronavirus. Deliveroo’s revenue has tanked due to the virus and it has now partnered with Morrisons to help with grocery deliveries, making its service essential. The CMA recognised that without Amazon’s investment Deliveroo would likely collapse as there is no other source of funding. The CMA first launched its investigation into the investment in December due to concerns over Amazon’s control over Deliveroo, which could potentially harm consumers. Given the unprecedented times, the CMA approved it provisionally but will give its final decision in June.
5. SAUDI ARABIA TO BUY NEWCASTLE FC
Newcastle United Football Club is close to being bought by Saudi Arabia in a £300 million deal. Documents were filed with Companies House and the Premier League has been informed, suggesting the deal is close to completion. The bid is led by financier Staveley, backed by Saudi Arabia’s sovereign wealth fund and private equity duo the Reuben brothers. Current owner Mike Ashley, has been looking to sell club since 2017, now having been owner for 13 years. Ashley has been highly criticised by fans for failing to invest in the club and take the club forward. It is not yet clear how long it will take for the deal to be completed.
6. OASIS AND WAREHOUSE ADMINISTRATION
Fashion companies Oasis and Warehouse have fallen into administration causing 200 job losses. The companies’ owner, Icelandic bank Kaupthing, had sought to sell the brands for some time. The coronavirus outbreak however, made the sale of the businesses unfeasible. Like all high street retailers they also took a significant hit from the outbreak. As such, 1800 of the companies’ staff will be furloughed during the coronavirus outbreak while the board work with administrators to keep the business afloat. It is clear however, that retaining the businesses in their current forms will be not possible.
7. TRUE RELIGION FILES FOR BANKRUPTCY
Jean maker True Religion has filed for bankruptcy for the second time in nearly 3 years. This has largely been due to a failure to adapt and a decline in demand for denim jeans. True Religion was unable to keep demand for its luxury jeans and failed to attract new customers. In 2017, it filed for bankruptcy and sought to revive its brand. It attempted to do this through going back to its roots with a vintage vibe. Evidently, this brought no great success. Like other retailers the coronavirus outbreak tipped it very the edge as lockdowns dry up revenue. True Religion was founded in 2002 and posted a $78 million in 2017.
8. OIL PRICES
Oil prices crashed a further 20% last week despite the landmark production cut agreed by oil producers. OPEC+ and other key oil producers reached an agreement to cut production by 9.7 million barrels a day to cut the glut of supply and stabilise prices. Unfortunately, the agreement did not have an immediate effect on prices. Global demand has taken a hammering due to the coronavirus outbreak and this has been the key driving factor in this decline in prices. Demand has fallen by 29 million barrels per day to lows not seen in 25 years. Brent crude fell to $28 while US oil prices fell as low as $19.20 a barrel.
9. DEBENHAMS STORE KEEPS OPEN
Debenhams secured a deal with landlords to keep the majority of its stores after falling into administration. 120 of its 142 stores are to remain open after the lockdown, 7 are to close and the other 17 are in advanced talks. The 7 stores to close are; Leamington Spa, Salisbury, South Shields, Stratford-upon-Avon, Truro, Warrington and Westfield (West London). 422 staff will be affected by the closures and all have been informed. Currently, the majority of staff have been furloughed during the lockdown but despite the government support, the retailer is under severe pressure. Further stores are due to close as planned under a CVA agreed last year. In 2018, Debenhams posted a £491.5 million loss.
10. BREXIT NEGOTIATIONS CONTINUE
Brexit negotiations are set to resume between the UK and EU with the final deadline looming. The UK’s Brexit negotiator David Frost and the EU’s negotiator Michel Barnier will hold the conferences across three weeks, from this week until June. These talks will shape the future trading relation between the UK and the EU. Both sides only have until 31 December when the transition period is set to end. The UK government, however, has remained firm that the deadline will not be extended despite the coronavirus outbreak. Even if the EU requested an extension, the UK would reject it. If no agreement is reached, the UK will leave on World Trading Organisation terms or a “no-deal” scenario.