The week’s news included; EU takes legal action over Internal Markets Bill, Asda bought in £6.8 billion deal, Uber wins TfL court appeal, Ireland’s court says Subway’s bread is not bread
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:
Opinion articles of the week:
- City A.M – Will workplace diversity suffer from a new flexible working culture?
- Law Careers.net – Lawyer-client relationships in the age of Teams.
- Sky News – On the economy, the UK public is more like the sensible lion than Chicken Licken
- City A.M – Why Klarna — not Revolut or Monzo — represents the winning fintech strategy in a pandemic
1. EU SUES UK OVER INTERNAL MARKETS BILL
The EU has launched legal proceedings against the UK over its controversial Internal Markets Bill. Last month, Boris Johnson revealed plans to unilaterally alter the Brexit Withdrawal Agreement, in breach of international law. The Internal Markets Bill would give the UK the (domestic) legal right to ‘disapply’ any tariffs or restrictions that would create a border between Northern Ireland and the rest of the UK. Under the agreed Brexit Withdrawal deal, Northern Ireland’s standards are tied to the EU’s to prevent a hard border between Ireland and Northern Ireland. The UK government openly admitted that this would break international law in a “very specific and limited” way. This is undoubtedly a blatant renege on the agreement.
The move has been vehemently condemned by the EU to date. They have now issued an official notice to the UK warning that court action will be taken if the UK persists with this bill. The UK has until the end of November to address the issue. There will be emergency talks between the UK and the EU to resolve the matter.
Johnson has placed the UK between a rock and a hard place. The legally binding Withdrawal Agreement would uphold the Good Friday Agreement peace deal by not creating any borders within the island of Ireland. This would, however, break the integrity of the UK, creating a border between Northern Ireland and Britain. On the other hand, Johnson’s Internal Markets Bill breaks international law, severely tarnishing the reputation of the UK. Senior US officials have openly said there can be no trade deal if the UK does follow through with the Withdrawal Agreement. Other trading partners will likely react in the same way, if the UK is seen to flagrantly disregard international agreements. The EU are still open to negotiating trade deal talks but this conduct is only likely to fray relations.
2. ASDA BOUGHT IN £6.8BN DEAL
Asda has been purchased from Walmart by two British billionaire brothers in a £6.8 billion deal. Zuber and Mohsin Issa, owners of fuel station firm EG Group, will invest £1 billion in Asda over three years alongside private equity firm TDR Capital. This investment will see the consortium take a majority stake in Asda, leaving Walmart with a minority stake.
Having bought Asda for £6.7 billion in 1999, Walmart had long been itching to offload Asda due to declining profits. Walmart expects to post a $2.5 billion loss for 2020 so the windfall from this deal will certainly be welcomed. Hopes were high when Sainsburys pitched merge with Asda in 2018. The Competition and Markets Authority poured cold water on that deal however, blocking it over antitrust concerns. EG group owns 5200 garages across the UK and Europe and turned over roughly £18bn in 2019.
3. UBER WINS TFL APPEAL
Uber has won its appeal against TfL, allowing it to continue operating in London. In 2019, Transport for London did not renew Uber’s private hire vehicle operating license due to concerns over passenger safety and transparency. Uber appealed this decision and was able to operate as normal until the outcome of the appeal. The case was heard in Westminster Magistrates Court where it was held that Uber was ‘fit and proper’ to retain its London license. This was in spite of recognised ‘historical failings’. Cases of fraud by drivers, failure to report serious crimes along with endemic technical issues were all brought to the fore during the court hearing. The court fundamentally recognised that Uber has taken numerous steps to improve passenger safety and improve standards.
The dispute between Uber and TfL has been a running since 2017. Uber’s London license had been revoked back in 2017 but it relied on a series of court issued temporary licenses to continue operating. Finally, in November 2019, TfL rejected Uber’s application and no further license was granted. Uber’s 45,000 London based drivers will no doubt breathe a sigh of relief after this latest ruling.
4. NOKIA STRIKES 5G DEAL WITH BT
Nokia has secured a deal with BT to become its largest provider of 5G equipment. This follows the UK government’s decision to ban market leader Huawei from the UK’s 5G network. Under the deal, Huawei’s 2G and 4G network infrastructure will also be replaced. Nokia will provide additional base stations and antennas to facilitate data services for BT’s EE customers. EE has 1 million UK users. Nokia already provides 3G kit for EE.
There are growing concerns over the Chinese government’s influence over its multinational corporation. In July, the UK government announced a total ban on the purchase of Huawei equipment after 31 December 2020. Furthermore, as 5G networks are already operating, mobile network providers have until 2027 to entirely remove all Huawei equipment from existing structures. This was a reversal of the government’s decision earlier in January to allow Huawei to contribute non-sensitive elements of the 5G infrastructure. In the US, Byte Dances TikTok is also facing the heat as it was forced to secure a deal with a US company or face a ban. The tension between the West and China is only likely to escalate as suspicions of espionage remain and Chinese owned firms continue to face expulsion from western markets.
5. SUBWAY’S BREAD IS NOT ACTUALLY BREAD
The Irish Supreme Court has ruled that the bread of the sandwich franchise Subway, is not bread. Subway has been arguing since 2006 that its sandwiches are made using bread and is therefore a staple food so is exempt from tax. Subway has been in the court’s for 14 years arguing this case but it has finally been brought to an end.
The court found that Subway’s bread was too sugary to be considered a staple food, as per the VAT Act 1972. Under the Act, for bread to be considered a staple food (and therefore tax exempt) the weight of ingredients like sugar and fat cannot exceed two percent of the weight of the flour in the dough. Subways dough consists of 10% of such ingredients, well exceeding the exemption zone. The Supreme Court therefore held that Subway’s bread should be taxed at the standard rate of VAT in Ireland, 13.5%. The franchisee, Bookfinders Ltd, had been making a number of arguments to try and support its case but had rejected on both of previous appeals.
6. AIRBNB IPO
Airbnb is reportedly seeking to raise around $3 billion in its upcoming IPO. The accommodation rental platform confidentially filed for its IPO in August despite uncertainty around the pandemic. Booking numbers are starting to increase as tourism and local travel begins to pick up. Airbnb is aiming to list in December according to some reports. Its market value had already plummeted to $18 billion by April, nearly 50% down on its 2017 valuation. The floatation could see it achieve a higher valuation than this, but this is subject to market sentiment. This will not however, stop it from being one of the most highly anticipated IPOs of the year.
7. ROYAL DUTCH SHELL CUTS JOBS IN GREEN ENERGY SHIFT
Royal Dutch Shell has announced that it will slash up to 9,000 jobs due a slump in oil demand. The oil major is prioritising a shift towards low-carbon and renewable energy. The coronavirus outbreak accelerated the shift away from oil reliance. Although the demand for oil has picked up from the April lows in the height of lockdown. Shell narrowly avoided a loss but rival BP posted a huge $5 billion loss in quarter two of 2020. BP also announced 10,000 job cuts earlier this year to make savings. Firms are recognising that consumer demand of oil is going to continue to decline and that drastic operational changes were needed. Shell hopes to save as much as $2.5 billion by 2022.
Shell’s cuts represent more than 10% of its 83,000 strong global workforce. Shell will slash up 40% of its current spending on oil and gas production, halting new projects and closing refineries. Shell had 55 refineries in 2005 and now it has just 17. It will seek to close 7 more refineries over the next few years. The energy industry is changing but whether it’s fast enough to have any meaningful impact on the climate change emergency remains to be seen.
8. OCADO SUED FOR ALLEGED PATENT INFRINGEMENT
Online grocer Ocado has been sued by Norwegian firm AutoStore for allegedly infringing patents on its robotics technology. AutoStore creates technology for robot-operated warehouses and Ocado has unlawfully adopted it, having gained information as a customer of Autostore until 2012. Ocado’s Smart Platform uses storage systems and robotics which are allegedly under AutoStore’s patent. AutoStore will seek financial damages from Ocado and these costs are estimated to be in the hundreds of millions of pounds. Ocado saw a boom a sales during lockdown, rising 27% in 6 months to May 31 to £1.02 billion. Its use of smart robotics technology in its warehouses meant that it could not quickly expand capacity to cope with increased demand. Competitors such as Tesco and Asda could rapidly expand delivery capacity by hiring more staff.
9. DISNEY CUTS 28,000 JOBS
Walt Disney has slashed 28,000 jobs due to heavy losses incurred amid the pandemic. The media and entertainment giant lost a huge $4.72 billion between March and June. Some of its Disneyland parks have been shut since the start of the pandemic, with only a handful reopening with limited capacity. Consequently, it simply cannot accommodate the number of staff it currently has on the books. Disney says the majority of the cuts will be on part time positions.
The small glimmer of hope for Walt Disney came from its Disney Plus service which has smashed initial user growth estimates. Disney Plus had a target of 60 to 90 million subscribers by the end of 2024, around 5 years after launch. By August 2020, it had already reached this target of 60 million, only 9 months after launch. Its expected revenue from the service is expected be in the region of $4 billion. This, however, is far from enough to offset losses from other parts of the business. Walt Disney turned over nearly $70 billion in 2019, $26 billion of this came from its Parks, Experiences & Products business.
10. AMAZON’S PALM PAYMENT
Amazon’s latest technology will scan the veins in your palms to allow you to make payments just with your hands. The Amazon One scanner will be trialed in two of Amazon’s ‘Amazon Go’ supermarkets in Seattle. Users will not need an Amazon account to use the tool. They will simply insert their bank card and link their palm to that card. Customers can then simply ‘wave’ to make payment. Amazon hopes to roll out this technology to other retailers.
The tech giant sees the potential of this tool reaching way beyond just grocery store purchases. It hopes this could replace access cards for locations such as offices and stadiums. Facial recognition technology was also touted but this has been beleaguered by issues of privacy and racial profiling arising in many current use cases. The use of the palm is far less intrusive and cannot be used as a means of identifying someone.