The week’s news included; A tale of two trillions: UK debt hits £2tn while Apple value hits $2tn, Citibank sues hedge fund to return $176m sent accidentally, Airbnb files for IPO, Selfridges launches fashion rental service
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 – The UK must close its digital skills gap — or face an unemployment crisis.
- CNBC – Here’s what it will take for Apple to get to $3 trillion
- City A.M – Big money is already in crypto markets, but we’ve only just reached the tip of a slow moving iceberg
- FT – How HR leaders are rewriting the rules of work in a pandemic.
1. UK DEBT HITS RECORD £2TN
UK public debt has topped £2 trillion for the first time in history. The nation’s debt rose by £227.6bn since last year. This enormous increase is due to the economic support measures introduced by the government to stem the impact of the coronavirus pandemic. Over 6 million people still remain furloughed costing the government £10 billion a week. Other schemes such as Eat Out to Help Out and the ‘bounce back’ loans all contributed to this hefty sum. Public debt now exceeds gross domestic product for the first time in 50 years. These moves were however, essential to prevent catastrophic numbers of job losses during lockdown. UK employment figures crashed in the last quarter, falling 220,000 over the period. There is still concern that the worst is yet to come, and many warn of a cliff edge when the furlough scheme ends in October. Although the government has achieved some stability, officials warn of deep cuts and austerity after the pandemic to balance the books.
2. APPLE HITS $2TN
Apple has become the first US company to reach a $2 trillion valuation. Apple’s share price has soared 50% this year alone, despite a temporary dip at the outset of the coronavirus outbreak in the US. The tech giant posted $59.7 billion in revenue and its services sales rose 14.85% year on year, indicating a positive step in shifting its reliance on hardware. Apple will however, soon be launching its highly anticipated 5G handset. All of these factors have instilled investors with confidence in Apple’s growth potential, leading to this remarkable rally.
Apple joins an exclusive club of companies reaching a $2 trillion valuation. The only other member is Saudi Aramco who hit $2tn when it listed in December 2019. Apple has now surpassed Aramco to become the most valuable publicly listed company in the world. To put this in perspective, Apple’s value is larger than the economies of 190 of 197 countries.
3. UBER AND LYFT INJUNCTION
Uber and Lyft have been granted an injunction allowing them to operate as normal in California while their huge employment lawsuit is heard for appeal. California introduced a new law at the start of 2020, obliging “hiring entities” to provide gig economy workers with employment benefits. Ride hailing apps, Uber and Lyft, claimed their workers were independent contractors so they were not “hiring entities”. The firms are also adamant that the vast majority of drivers do not want to be classified as employees. A judge however, disagreed and deemed their drivers to be employees. Consequently, Uber and Lyft planned to pull out of California entirely, as the ruling would oblige them to reshape their entire business model in California in less than two weeks.
The court has now granted them an emergency injunction allowing them to operate as normal while it considers their case for appeal. Uber and Lyft must however, submit plans for hiring drivers by early September, which again is considered unrealistic.
California is something of a test case for the entire gig economy model. Unless Uber and Lyft’s appeal is successful, the sector could see its most significant overhaul in its short history.
4. AIRBNB IPO
Airbnb has confidentially filed for its IPO with the US Securities and Exchange commission. Reports emerged two weeks ago that the rental property site was rekindling its floatation plans. This comes despite a horrendous market backdrop due to the coronavirus pandemic. Airbnb already slashed 25% of its total workforce. Its market value had already plummeted to $18 billion by April, nearly 50% down on its 2017 valuation. The confidential filing means neither the number of shares to be listed nor the firm’s financial information was publicised.
5. CITIBANK SUES HEDGE FUND FOR $176M SENT IN ERROR
Citibank has sued US hedge fund Brigade Capital, demanding the return of $176 million which was sent to them in error. Brigade was only meant to receive $1.5 million to cover interest on a loan but an ‘operational mistake’ saw them receive over 100 times this amount. The bank had only meant to cover interest payments to creditors of cosmetics company Revlon. Citibank is acting as administrative agent of Revlon and carries out payments on their behalf. This mistake, however, saw Citibank accidentally send creditors a total of $900 million. They swiftly requested the return of the money but Brigade, amongst others, have refused to send it back. Citibank has now filed a federal lawsuit to oblige creditors to return the sum.
Typically, money sent in error cannot be kept by the receiving party. In this case however, the difficulty is that the $176 million covers the outstanding amount owed to Brigade by Revlon. Citibank argues its clear Brigade was only entitled to the $1.5m interest payment at this point, so the amount sent does not belong to them. The courts will now decide whether Brigade can keep the money.
6. WORK FROM HOME: THE NEW NORMAL
PwC and Schroders have announced they will not oblige staff to come back to the office full time even after the coronavirus crisis. PwC employs 22,000 people across the UK while Schroders has over 2,000 employees.
Workers at PwC will be permitted to spend more time working remotely. Staff will not be obliged to come into the office but there is an expectation staff will split their time somewhat evenly. By the end of October, it aims to have half of all its staff back in the office, but this will be voluntary.
Fund manager Schroders announced that staff will be permitted to work from home after the pandemic as they see fit. Previously staff, were only allowed to work from home one day a week. Staff will now have no fixed number of days to work in the office. Instead, their working patterns can be agreed with their managers. Regional law firm BLM has also closed two of its offices as part of a drive towards permanent remote working.
These moves towards remote working pose an existential threat for many retailers in financial hubs. These retailers’ huge overheads are usually offset but the swathes of office workers who descend on the localities. With tens of thousands of workers working from home more regularly, this will likely reshape the face of our high streets.
7. SELFRIDGES OFFERS RENTAL SERVICE
Selfridges has announced plans to launch its first fashion rental collection. The department store will collaborate with clothing sharing platform HURR allowing customers to rent high end clothes for up to 20 days. This new rental service also forms part of a drive towards greater sustainability in the fashion industry. The impact of ‘fast fashion’ has been devastating on the environment and wear-it-once items are a huge contributory factor. The rental market for clothing is growing and could prove a useful tool in combating the environmental harm of fashion. This is also gives the retailer access to customers who typically cannot afford to buy their products, generating crucial revenue.
The coronavirus outbreak will require retailers to innovate in order to draw in customers and stay afloat. World renowned retailers like Selfridges are no exception. Last month, the iconic department store slashed 450 jobs due to the coronavirus pandemic. High end department stores have been more acutely affected by the pandemic due to the lack of wealthy tourists who often bolster the books with big spending. We look at how the fashion industry will adapt post-Covid in our insight article.
8. STA GOES BUST
Youth travel firm STA has collapsed due to the coronavirus pandemic. The firm is renowned for arranging gap years and volunteer projects for young people in destinations globally. The coronavirus pandemic has caused swathes of cancellations and has brought trading to a standstill. Consequently,STA’s income has been decimated and it had no option but to cease operations. Customers with bookings will be updated by the company but most packages are Atol protected so customers are unlikely to be out of pocket. STA was founded in 1971 and operates 50 stores in the UK. 500 jobs are now in jeopardy.
9. M&S CUTS 7000 JOBS
Marks & Spencer has announced it will slash 7000 jobs over the next three months. The coronavirus outbreak has hugely affected sales of clothing and home goods. Although online sales rose by nearly 40% over the lockdown period, M&S sales in clothing and home goods have tanked by 29.9%. Like all department stores, M&S has huge overheads and relies on consistent flows of customers in its stores to balance the books. The retailer’s recent acquisition of half of Ocado’s retail business will allow it to significantly improve its online sales. Groceries and online sales however, simply won’t sustain its current business model. M&S recognises this and this move marks its largest restructuring to date. These cuts represent roughly a tenth of its 78,000 strong workforce. The cuts will affect both its stores and management offices.
10. UK HOUSE BUYING BOOM
July saw over £37 billion worth of property sales in the UK, the largest monthly sales total for 10 years. This follows the governments decision to cut stamp duty, to encourage sales. The threshold for paying stamp duty was increased from £125,000 to £500,000 bringing about average savings of £4500. This sum is nearly £10 billion higher than last year. The UK economic outlook is however, bleak as we officially entered recession two weeks ago. Whether this boom in house sales will continue remains to be seen. According to property website Rightmove, the average house price in the UK in August is £319,497. Check out the BBC’s house affordability calculator for more on the state of the housing market.