The week’s news included; Walmart wades into TikTok acquisition deal, New UK supply chain laws to crack down on illegal deforestation, Waitrose teams up with Deliveroo, Hut Group plans £4.5bn IPO
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 – Why TikTok may not survive being sold
- City A.M – A no-deal Brexit could cause the UK’s digital sector to shrink.
- FT – How the government wants to limit judicial review
1. FORTNITE’S APP STORE SAGA
A US judge has ruled that Apple is permitted to ban Fortnite from its app store as part of a ongoing case. This is a preliminary hearing and the full hearing will take place at the end of September. Three weeks ago, we discussed Apple and Google’s decision to pull Fortnite from their respective app stores for breaching their rules. Fortnite maker Epic sought to implement a direct payment scheme, bypassing Apple and Google’s respective 30% charges. Apple and Google had even banned the use of Unreal Engine, a graphics tool of Epic Games. Unreal Engine is used by numerous game makers. While the judge deemed that Apple was entitled to remove Fortnite, she ruled against the move to ban Unreal Engine due to the severe impact on innocent third parties. The ban on Fortnite remains in force for now but the full hearing will take place on 28 September.
2. WALMART STEPS INTO TIKTOK DEAL
Walmart has waded into the TikTok saga and will team up with Microsoft to acquire the social media app. TikTok has until 15 September to secure a takeover deal for its US arm with a US company following President Trump’s executive order. After 15 September, US companies will not be permitted to deal with TikTok. Microsoft has been the front runner to acquire the company, but Walmart has announced it will team up with the tech giant in a bid for TikTok. Walmart has been the largest retailer in the US for decades, but Amazon has stolen its thunder. Such an acquisition will certainly help it diversify its income.
President Trump’s decision to ban business with TikTok was due to concerns over the Chinese government’s influence over the social media app. There were significant fears that the personal data of US persons was prone to theft and the app could be used for espionage. TikTok has roughly 100 million active US monthly users. The CEO of TikTok, Kevin Mayer, resigned last week in light of this saga. He felt unable to lead the company forward due to the political pressure.
This deal seems like the only way for TikTok to remain viable in the US but there are some doubts over the viability of the deal itself. TikTok is expected to be valued at up to $30 billion. Deals of this size invariably take months to negotiate. TikTok has had barely 6 six weeks since the announcement. Despite this, many analysts remain confident the deal will go through.
3. NEW SUPPLY CHAIN LAWS
The UK government has started a consultation on new laws requiring businesses to show their products & supply chains are free from illegal deforestation. Stark warnings have come from environmental groups over mass deforestation disrupting ecosystems. Furthermore, deforestation accounts for 11% of greenhouse gas emissions. Deforestation is particularly prevalent in the palm oil business. Palm oil is found is practically every consumer product such as bread, soap, chocolate, and makeup so it is highly lucrative for sellers. Under the proposed laws, UK businesses would be required to publish the sources of their products or face fines. Such legislation could significantly impact the trade of palm oil among other commodities like cocoa and soy, which are often sourced through illegal deforestation. Some argue however, that until demand for such products diminishes, illegal cultivators will continue felling trees. The consultation will run for six weeks.
4. AIRLINE INDUSTRY
Virgin Atlantic appears to have secured its future with a £1.2 billion rescue deal. Creditors of the struggling airline approved the package which will see them receive 20% less than their entitlements. Virgin Atlantic was already due to run out of cash by the end of September. This deal will provide it with enough cash to manage the next 18 months. Virgin Atlantic has already announced 3500 job cuts, 35% of its entire workforce. The Virgin group will contribute £200 million of the £1.2 billion required.
Virgin Atlantic’s main business is unsurprisingly transatlantic flights and due to extraordinarily high infection rates in the US, business has flatlined. The business has been scrambling for a rescue deal since the start of lockdown and was denied a £500 million government bailout loan back in April.
The whole aerospace industry is in turmoil and there is no sign of a quick recovery. Last week, American Airlines slashed 19000 jobs while Gatwick Airport announced 600 job cuts after an 80% fall in travel. Rolls Royce has posted a historic £5.4 billion loss in the first 6 months of 2020. It is restructuring is business and this will involve slashing 9000 jobs globally, with 6000 of those in the UK. Servicing aircraft is a large part of Rolls-Royce’s business but with fleets out of service, this has significantly affected the books. With weak demand set to continue, the whole aerospace will no doubt face a challenging future. Which players can successfully weather this turbulent period remains to be seen.
5. HUT GROUP IPO
The Hut Group has revealed plans to launch an IPO this year which could raise as much as £920 million. The Hut Group owns a variety of fitness & beauty brands such as Lookfantastic and Myprotein. It also owns warehousing and delivery systems which are licensed to customers for a fee. The group plans to list in London and could achieve a valuation of £4.5 billion. If the company achieves a £7.5 billion valuation by 2022, founder Matthew Moulding will receive a hefty £700 million. Moulding currently owns 25.7% of the business. The Hut Group was founded in 2004 and turned over £1.1 billion in 2019.
6. WAITROSE TEAMS UP WITH DELIVEROO
Waitrose is teaming up with Deliveroo as its partnership with Ocado draws to a close. This new partnership will allow customers to receive goods in as little as 30 minutes. 500 products will be made available to order on Deliveroo and will be in addition to the Waitrose Rapid Service which boomed during lockdown. Waitrose Rapid Service delivery allows customers to receive groceries within two hours or a selected one-hour window. Waitrose is boosting its delivery slots to 250,000 as it adapts to changing customer trends. Marks and Spencer purchased 50% of Ocado’s retail business last year for £750 million. This acquisition allows M&S to provide grocery delivery for the first time.
7. TOPSHOP OWNER EMPLOYMENT LAW CONTROVERSY
Arcadia Group is facing accusations of breaching employment law over basing redundancy payments on the furlough pay rate. Arcadia Group is Sir Philip Green’s empire, including brands such as Topshop, Miss Selfridge and Dorothy Perkins. As many as 500 staff are being made redundant in the group’s head office. Redundant staff who had been furloughed are set to receive notice pay based on the furlough rate which is 80% of their total wages. Employees are entitled to statutory notice pay which is equivalent to one week’s pay for employees with under two years’ service. Employees receive an additional weeks’ pay for every year worked up to a maximum of 12 weeks’ pay.
The government introduced a new law at the end of July attempting to prohibit the use of furlough pay rates where issuing redundancy payments. Instead workers are required by law to receive redundancy pay based on 100% of their wage rate. Arcadia, however, claims they were acting within the law in taking this decision. The decision with Arcadia has passed the consultation period so affected workers will need their own lawyers to challenge the decision. No legal action has been brought against the firm as of yet. The Guardian reports on the issue.
8. TESCO ADDS 16000 JOBS
Tesco has announced that it will create 16,000 permanent jobs in the UK due to a boom in its online business. At the outset of the pandemic demand for online delivery was overwhelming and many customers saw themselves waiting weeks for delivery slots. Although lockdown measures have relaxed, demand for online delivery remained strong so Tesco is now expanding its service. The UK’s largest supermarket will hire 10,000 pickers across the UK and 3000 delivery drivers. The remaining 3000 will be spread across a variety of other roles. Tesco had already bolstered its workforce in April, adding 4000 new staff to cope with the initial rush. Tesco has already more than doubled its capacity to deal with online orders and predicts online sales of £5.5 billion for 2020, over £2 billion more than last year.
9. PRET SLASHES JOBS
Pret a Manger has announced that it will slash 2800 jobs and permanently close 30 stores. Sales in many of its stores have plummeted. The chain is prominent in financial and city centres where office workers would typically descend on its stores for lunch and coffee. With major employers still opting for remote working, Pret simply cannot sustain itself in its current form. Even in July, sales picked up 7% but are still as low as 2010 levels.
Pret has already reduced hours of its staff, with 1000 workers being placed on minimum hour contracts to limit costs. Employment in the retail sector has slumped 45% and it is unlikely to pick up anytime soon.
10. BEZOS HITS $200 BILLION
Last week, Amazon CEO and founder Jeff Bezos surpassed net worth of $202 billion, another landmark record. This is the first time in modern history anyone has crossed the $200 billion mark and Bezos is now twice as wealthy as Tesla founder Elon Musk. Bezos initially broke the record for richest person in modern history back in 2018 as his wealth surpassed the $150 billion mark. His wealth is soaring because Amazon’s share price is soaring, up 86% in the past 8 months alone. Bezos owns an 11.2% stake in the tech giant. He would have reached this threshold much sooner had it not been for his divorce with his now ex-wife Mackenzie Scott in 2019. In the divorce settlement she received a 4% stake in Amazon worth a huge $37 billion at the time. That same stake is now worth over $60 billion.