The week’s news included; Airbnb ploughs on with IPO plans, Just Eat to stop using gig economy model, Court of Appeal rules police facial recognition tech unlawful, Law firm DWF scraps A-Level requirements following results chaos
Below are our top 10 stories that you need to know about. Be sure to check our twitter page, Facebook page and Instagram 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:
- Bloomberg – Oil Companies Wonder If It’s Worth Looking for Oil Anymore
- City A.M – Farms and our diets must embrace technological disruption
- BBC News – ‘Raise sick pay’ to lower virus health and economic risks
- The Independent – Why has UK been so badly hit and what must government do now to restore confidence?
- The Guardian – Rishi Sunak is riding high, but history shows No 11 can be a dangerous address
1. UK ECONOMY
The UK has officially entered recession for the first time in 11 years. The UK economy contracted by 20.4% in the second quarter, one of the steepest declines amongst G7 countries. There is hope of a bounce back but the economic outlook is still quite bleak.
This downturn will significantly impact employment figures which have already taken a battering. 220,000 jobs were lost in the UK between April and June. This, unsurprisingly, is largely the result of swathes of job cuts across almost all sectors due to the pandemic. The decrease in employment figures has not been this steep since the 2008 financial crisis. There is also deep concern that when the furlough scheme ends in October, thousands of further job cuts will ensue. Over 7.5 million workers were on furlough in June so many see this period as the calm before the storm. Businesses are having to reshape their models and have invariably downsized.
Alternatively, firms have decided to cut hours such as Pret a Manger or have looked to zero-hour contracts. Over 1 million people are now on zero hours contract and this has been rising since the start of lockdown. The government’s Eat Out to help out scheme was used 10.5 million times in the first week, a welcome boost for high street restaurants. For many other sectors, such as theatre and fashion retail, many firms are facing a truly existential threat. How quickly the economy can recover and restore jobs remains to be seen.
2. FORTNITE SUES APPLE AND GOOGLE
Fortnite has sued Apple and Google over their decision to remove the viral game from their app stores. Creator of Fortnite, Epic Games, will be seeking an injunction to force the tech giants to change the way they operate their app stores. The decision to drop Fortnite arose from Epic Games’ move to introduce a direct payment plan for the game. Such a payment plan would bypass Apple and Google’s 30% cut from each in-app purchase. This constituted a breach of app store rules according to Apple and Google, so they dropped Fortnite from their respective app stores. Epic Games claims the move by the tech firms breaches anti-trust law. It will not seek any financial remedy from Google or Apple. Epic Games released Fortnite in 2017 and the game brought in a staggering $1.8 billion in revenue last year.
3. AIRBNB IPO
AirBnb has revealed it plans to launch its IPO despite a highly uncertain future. The company suffered a huge 67% decline in revenue. Like the rest of the hotel industry, Airbnb’s bookings have collapsed during the pandemic. Over 80% of bookings in April were cancelled so millions of refunds were issued to hosts over the past few months where such cancellations occurred. Consequently, the company slashed 1900 jobs in May. Even prior to the pandemic, Airbnb posted a huge $322 million loss in the first nine months of 2019.
Despite this uncertain future, Airbnb is still keen to launch its IPO after its initial plans to launch earlier this year were derailed. Airbnb could go public by the end of the year, even in spite of its huge drop in value. The company’s valuation halved from its 2017 peak of $31 billion to just $18 billion in April 2020.
4. JUST EAT TO STOP USING GIG ECONOMY WORKERS
Just Eat Takeaway has revealed that it will stop using gig economy workers to provide better job security and benefits for its staff. Just Eat Takeaway delivery drivers are considered independent contractors, as per Uber’s model as described below. These workers are not entitled to employment benefits such as holiday pay and have limited job security, if any. CEO Jitse Groen has stated he wants to eliminate this model and improve working conditions for its staff. The boss recognised the challenges faced by its staff and felt they were financially capable of doing more to help. Their strong financial position was no doubt evidenced by their recent merger spree. Takeaway.com and Just Eat merged in January in a £5.9 billion deal. In June, another $7.3 billion merger deal was announced with US giant Grubhub.
The coronavirus outbreak has been largely positive for takeaway firms. Takeaway orders spiked over lockdown despite an initial dip. At the start of lockdown consumers hoarded food and were tentative about ordering food in. As coronavirus cases declined from their peaks customers increasingly turned to takeaways.
5. UBER WARNS OF CALIFORNIA SHUT DOWN
Uber has warned that it may have to completely shut down in California if must classify its drivers as employees. Currently, Uber drivers are considered independent contractors and are therefore not entitled to employment rights. This is the under premise that drivers choose when they work, and Uber does not restrict who they work for. Consequently, Uber believes it does not exercise control over drivers that amounts to employment.
The California Supreme Court is now hearing a case concerning whether Uber must classify its drivers as employees. This would require Uber to reconsider its business model. Uber’s CEO Dara Khosrowshahi warned that the company would be unable to adapt quickly to such a change, meaning it may pull out of California entirely for some time. The UK Supreme Court is also hearing a case over the same issue. The outcome of these cases could have huge implications not just for Uber but the whole gig economy.
6. FACIAL RECOGNITION RULED UNLAWFUL
The Court of Appeal has ruled that the use of automatic facial recognition (AFR) technology by the South Wales Police was unlawful. The police had been using the technology in Cardiff city centre without informing those in the area of its use. The case was brought forward by civil rights group Liberty and Cardiffian Ed Bridges. Bridges claimed the technology was an “intrusive and discriminatory mass surveillance tool”.
Previous courts had found its use was not unlawful. The Court of Appeal however, found various deficiencies, which rendered the use of AFR unlawful. The data protection impact assessment conducted by the police was inadequate. There was no clear guidance on where AFR should be used and inadequate steps to determine if the technology had racial or gender bias. From a human rights perspective however, the court deemed the use of AFR proportionate and not an unlawful infringement. These deficiencies however, can be resolved and this decision does not issue a blanket ban on AFR. The South Wales Police will not appeal the ruling. BBC News looks closer at the decision.
7. DWF SCRAPS A-LEVEL REQUIREMENTS
In the wake of a chaotic A-Level results day, law firm DWF announced their decision to scrap A-Level requirements for prospective trainee solicitors. The firm will now request “good A-Levels/Scottish Highers or Equivalent”, as opposed to its previous AAB A-Level requirement. DWF had already implemented the Rare Contextual Recruitment system in 2017 to improve social mobility and this new measure will certainly aid their contextual assessment. Due to the coronavirus outbreak, the English exam boards used algorithms to calculate students’ grades. Nearly 40% of A-Level students’ grades were downgraded from their predicted grades, jeopardising university places and future job prospects.
DWF’s move is not only reassuring for students but also highly important for social mobility. Professional services across the board have been keen to improve social diversity within their organisations. Poor schools amongst other socioeconomic factors often mean highly talented students don’t achieve the A-Level grades of their more privileged counterparts in other regions. Big 4 accountancy firms, PwC and EY had already scrapped their academic requirements for graduate roles and have broadened the social backgrounds of their staff. Following this latest debacle with A-Level grades, many other organisations will likely follow suit.
8. GYMSHARK HITS £1 BILLION
Fitness clothing brand Gymshark secured an investment deal valuing it at a whopping £1 billion. The firm gained popularity primarily through a highly effective social media strategy and has been going from strength to strength. It turned over £250 million last year and is growing rapidly. US private equity firm has purchased a 21% stake in the company for roughly £200 million. This gives the firm a huge £1 billion valuation. 28-year-old founder Ben Francis was a pizza delivery boy when he set up the company from his parents’ garage in 2011.
9. DEBENHAMS JOB CUTS
Debenhams has announced that it will slash 2500 jobs as the struggling retailer fights for survival. The department store had already fallen into administration in April and announced 4000 cuts in May. These cuts will primarily affect store and distribution centre workers. Big high street stores have announced over 20,000 cuts since the start of the pandemic and there appears to be no end in sight. The owners are now exploring plans for a possible liquidation in case it can no longer stay afloat. As discussed above, the lack of industry specific government support for retailers could prove fatal for many stores. High streets were already in deep decline before the pandemic. The scale of loss caused by the pandemic could see the end of our high streets as we know it.
10. TOSHIBA LEAVES LAPTOPS
Toshiba has officially exited the laptop market after 35 years in the field. Toshiba sold 80% of its laptop business in 2018 to Sharp. The remaining stake Toshiba held was shares in its laptop arm, Dynabook. Sharp has now purchased this stake, marking Toshiba’s official exit from the field.
The laptop market has been difficult for many players, but particularly Toshiba. Larger players like Lenovo have increased market share. Between 2011 and 2017, Toshiba’s PCs sales fell by nearly 90%.