The week’s news included; Three sectors facing coronavirus litigation, Virgin Media & O2 plot merger, Makeup giants battle to buy Charlotte Tilbury, Elon Musk wipes $14bn from Tesla value in one tweet,
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:
- Al Jazeera: Could the oil price crisis radically redefine US-Saudi relations?.
- CNN – Facebook and Google are coming for Zoom.
- Law Gazette – Thousands of law firms facing collapse, research suggests
Guardian – Deliveroo was the poster child for venture capitalism. It’s not
looking so good now.
1. US ECONOMY DECLINES
The US economy shrank 4.8% in the first quarter, the fastest rate since the financial crisis. This figure was worse than expected considering for the first 2 months of the quarter the US was largely operating as normal. US states only began implementing lockdowns in the last 2 weeks of March. The US has become the epicentre of the coronavirus as the world’s largest economy grapples with over 1 million cases. Bloomberg had already put the chance of a recession at 100% and analysts expect a deeper decline in quarter 2. Consumer spending is the driving force of the US economy and this has essentially been wiped out due to the outbreak. 26 million people have filed for unemployment benefits. Despite the government’s $3 trillion economic stimulus package, some analysts predict double digit declines in GDP.
2. JOHNSON & JOHNSON TALC LAWSUITS
A New Jersey judge has ruled that thousands of lawsuits against Johnson & Johnson can proceed and expert testimonies can be heard. Johnson & Johnson is accused of selling talc products and baby powder which were contaminated with asbestos. These products then allegedly caused ovarian cancer in users who are now seeking compensation. This ruling will simply allow the case to proceed and is not a final verdict. Johnson & Johnson sought to block the plaintiffs’ experts from testifying in New Jersey. This would essentially block the case as this would prevent the provision of scientific evidence illustrating the potential link between the J&J products and ovarian cancer. Johnson & Johnson denies all allegations and is also appealing a $4.69 billion fine in Missouri over the same issue.
3. CORONA LITIGATION
Last week saw a number of vocal threats of litigation related to the coronavirus outbreak. The lawsuits surround various parties refusing to pay due to the outbreak. This trend will undoubtedly continue as the post-lockdown economic landscape unfolds.
The Competition and Markets Authority threatened legal action against companies who fail to refund customers who cancelled travel or weddings due to the coronavirus outbreak. Many airlines have openly said they will not refund in cash until after the outbreak and offer vouchers instead. Many companies also don’t allow refunds, only rebookings, or else customers will lose their money if they cancel. Despite the unprecedented times, consumer protection laws require full refunds if services or goods have not been provided.
Shopping centre owner Intu has warned retail stores of legal action if they refuse to pay rent during the lockdown. Many retailers have stated they will not pay rent, including Burger King and Primark. Intu posted a £2 billion loss for 2019 and operates major shopping centres in the UK. The government has issued new legislation allowing commercial tenants to delay rent payments, but some Intu tenants have refused to enter any negotiations on rent.
Pubs and restaurants are taking joint legal action against insurers who are refusing to pay out for losses incurred during the lockdown. These businesses all have insurance covering business interruption due to infectious diseases but insurers are finding ways out of paying. Some insurers refuse paying out because there were no diseases on the premises so therefore, any business interruption is outside the scope of insurance. Many companies say they will go bust without these pay outs and have launched legal action to get this payment.
4. OASIS AND WAREHOUSE TO CLOSE PERMANENTLY
Oasis and Warehouse are to close permanently after failing to secure buyers. The brands fell into administration two weeks ago and were sold to restructuring firm Hilco. Hilco bought their stock but none of their 92 stores and 400 concessions. 1800 people, who are currently furloughed at these stores and concessions will lose their jobs. Oasis and Warehouse had been struggling for some time, but the coronavirus outbreak tipped it over the edge. 42 head office staff will retain their jobs for the time being under the administrators.
5. VIRGIN & O2 PLOT MERGER
The owners of Virgin Media and O2 are in talks to merge the two UK telecom giants. Virgin Media and O2 have a combined 40 million UK customers. O2 is dominant in the mobile market with 34 million customers. Virgin Media is owned by Liberty Global, while O2 is owned by Spanish firm Telefonica. There has been no further comment on the talks but they are thought to be at a preliminary stage. This merger would help the firms better challenge rivals Sky and BT.
O2 has not had huge luck on its large-scale corporate actions. Telecoms firm Three UK sought to buy O2 in 2015 but this was blocked by the European Commission due to competition concerns. In 2018, Telefonica also toyed with the idea of floating O2 to raise cash and reduce debt but was deterred by Brexit economic uncertainty.
6. MAKEUP GIANTS BATTLE TO BUY CHARLOTTE TILBURY
Some of the largest makeup companies are seeking to buy UK firm Charlotte Tilbury for over £1 billion. L’Oreal, Estee Lauder, Puig (owner of Paco Rabanne perfumes) and Unilever amongst others have all launched bids and a decision could be made this month. This comes as large firms have been on a spending spree, snapping up smaller cosmetic companies. Charlotte Tilbury was founded in 2013 and has just two standalone stores in the UK. It has been in the eye of makeup giants for some time and and posted revenue of £100 million in 2018.
7. ELON MUSK TWEET TROUBLE PART 2
Elon Musk wiped $14 billion off Tesla’s stock in one tweet. The billionaire CEO of Tesla tweeted ” Tesla stock price is too high imo”. The Wall Street Journal asked whether he was joking and whether the tweet was vetted, to which Musk replied ‘no”. Elon Musk is required to have all tweets vetted by his lawyers after reaching a settlement with regulators in 2018. This latest tweet wiped $3 billion of Musk’s personal wealth just as Tesla was reaching all-time highs of nearly $100 billion. Check our previous top 10 explaining Elon Musk’s tweet trouble.
8. BA SLASHES JOBS
British Airway has announced that it will cut 12000 jobs due to the decline in global travel. BA’s parent IAG group is seeking to restructure the company and is beginning to implement a redundancy programme as the coronavirus outbreak has obliterated revenue. Furthermore, there is no sign of any speedy recovery for the airline industry as a whole. TUI has cancelled all beach holiday until June due to travel restrictions and such cancellations are mirrored across the sector.
With no immediate bailout in sight, BA recognised that it must take action in order to stay afloat. The company will now work with trade unions to formulate a suitable restructuring and redundancy scheme. BA had already furloughed 22,626 workers but due to the low demand for the foreseeable future, 12000 staff will be made redundant. This represents nearly 25% of its total workforce. IAG made a €535 million loss in the first quarter of 2020, most of which is due to BA’s lack of income.
9. CHARLES TYRWHITT LOOKS TO BUY TM LEWIN
Shirt maker Charles Tyrwhitt is seeking to purchase rival TM Lewin in an auction of the firm. Corporate finance company Alantra is running an auction to sell TM Lewin as owners Bain Capital seeks to offload the firm. A number of other bidders are also in the running to purchase the retailer. A wider market downturn combined with the coronavirus has rattled the high street to the core. To stay afloat many retailers are likely to consolidate over the coming months. TM Lewin was founded in 1898 and has 66 stores in the UK.
10. UK BREAKS COAL FREE RECORD
Britain has been powered without coal-fire energy for 22 consecutive days, a new record. This is the longest uninterrupted stretch the UK has gone without coal power since 1882. Furthermore, solar power has been on rise as UK solar farms generated a record 9.6GW of electricity. The UK’s coal stations are on the decline and the UK government is to ban coal generated power from 2025. Coal now only accounts for 2.1% of all generated power, falling over 20% in just four years. The previous record for uninterrupted coal-free energy production was 18 days and was achieved over three years ago.