The week’s news included; LSE sells Italian stock exchange for €4.3bn, H&M fined €35.3m for privacy breach, Trust Pilot plans IPO, HSBC to provide $1 trillion in green financing
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 – Hong Kong will stay a key financial hub say experts
- City A.M – Investing in a greener future: How do we make the sums add up?
- BBC News – Kamala Harris v Mike Pence: Five takeaways from Vice-President debate
- Reuters – Deliveroo’s IPO is a dish best served soon
1. FURLOUGH SCHEME EXTENDED
The furlough scheme has been extended for six months, helping those businesses required to close due to local and national coronavirus restrictions. The government will now pay two thirds of employees’ salaries, instead of 80%. Infection rates in the UK are rising and concerns of a winter national lockdown are growing. If companies are legally required to shut to meet national or local restrictions, they will be eligible for grants of up to £2100 per month per employee to cover wages. Unlike the current furlough scheme which ends 31 October, employers will not be required to contribute to wages. If a region enters a local lockdown, businesses will be eligible to receive up to £3,000 per month. This scheme could run for up to 6 months and a review will be held in January. The introduction of such a scheme shows the government is facing the reality that a quick economic recovery is now out of the picture.
2. BORSA ITALIANA ACQUIRED
The London Stock Exchange (LSE) has sold the Italian stock exchange, Borsa Italiana, to Euronext for €4.3 billion. French firm Euronext operates a number of exchanges across Europe including in Amsterdam, Dublin, Paris. The company beat the German and Swiss exchanges to secure the deal with LSE. Euronext is, however, is only worth around €7 billion so it will need to raise all the cash through debt and new equity.
LSE has been seeking to purchase a 45% stake in data firm Refinitiv from Thomson Reuters. This $27 billion deal is, however, contingent upon approval from the European Commission. The Commission has openly stated that such a deal could not pass until LSE sells Borsa Italiana, due its dominance in the European bond markets. LSE would have liked to retain control of Borsa Italiana but certainly saw this deal as necessary sacrifice to acquire Refinitiv. Reuters looks closer at the deal
3. H&M FINED FOR PRIVACY BREACH
Fashion retailer H&M has been fined €35.3m for illegally storing excessive information on some of its employees in Germany. This conduct directly breached privacy laws under GDPR and is the second largest fine issued for privacy breaches. H&M was found to have been storing excessive amounts of data on employees at its Nuremberg service centre. This included information on holidays, illnesses, religious beliefs and family matters. Under GDPR companies must retain only what is necessary to satisfy the purpose for which the data was collected. The German data protection regulator found H&M had far exceeded what was necessary. H&M accepted the fine, apologised and said it will be compensating affected employees. The hefty fine will no doubt serve as a warning for other firms potentially flouting GDPR.
4. TRUST PILOT IPO
Trust Pilot has announced it will be launching its IPO on the London Stock Exchange. The Copenhagen based online review platform could launch as early as Q1 2021. The platform allows users to post reviews on all kinds of businesses and services. There has however, been criticism over fake reviews on the site and it has had to take numerous steps to improve trust. Trust Pilot could be valued at around $1 billion and the cash raised through the IPO will allow it to expand significantly. Trust Pilot was founded in 2007 and turned over $100 million last year. It generates most of its revenue through companies which subscribe to its platform.
5. CINEWORLD CLOSURES
Cineworld has confirmed that it will temporarily close all its UK and US cinemas as the coronavirus outbreak makes its future uncertain. 45,000 jobs will be lost, with 6,000 of these in the UK. The cinema company hopes to rehire staff as coronavirus restrictions ease and footfall increases. With global cases soaring to record highs, there is however no sign that this will be any time soon.
All cinemas have been acutely affected by the pandemic. Activity perked up over the summer with releases such as Tenet, but this was not sustained. A number of new films saw their release dates delayed, including the new James Bond movie “No Time To Die”. With no new releases and restrictions on social gatherings, cinemas are struggling to bring in enough customers to justify staying open. Competitor Odeon has announced that nearly 1 in 4 of its theatres will now only open on weekends. Cineworld owns 536 Regal Cinemas in the US as well as 127 Cineworld and Picturehouse Theatres. Cineworld shares tanked as much as 57% in response to the news.
6. UK ECONOMY FALTERS
The UK economy grew by 2.1% in August, but this fell well below estimates. These weak figures come in spite of the Eat Out to Help Out scheme which provided 50% off food at restaurants up to a maximum £10 discount. 100 million discounts were claimed in August, but this did little to boost the wider economy. In June and July, the economy saw 8.7% and 6.6% growth respectively. In August, coronavirus restrictions were relatively laxed as the infection rate was low. Economic output levels however, across almost all sectors in August were still far lower than pre-Covid levels. The economy is also 9.2% smaller than pre-Covid levels and now a further decline looks likely. In September, cases started to rise, and new localised restrictions were introduced across the country. The latest wave of localised coronavirus lockdowns has every chance of causing a contraction in the wider economy as economic activity declines. Many experts had hoped for a V shaped recovery, a steep decline but an equally quick recovery. Without any significant handle on the coronavirus outbreak however, the prospect of a speedy economic recovery is highly unlikely.
7. HSBC TO PROVIDE $1 TRILLION IN GREEN FINANCING
HSBC has said it will provide up to $1 trillion in financing to help all its customers reach net zero carbon emissions by 2050. The Paris Agreement has set a target of reducing carbon emissions to net zero by 2050 but this will take radical transformation. HSBC has numerous clients in oil and gas along with large polluters in Asia, so its commitment is a significant one. It will be using the science-based Paris Agreement Capital Transition Assessment tool (PACTA) to help its clients achieve its goal.
HSBC itself aims to reach net zero by 2030 but is somewhat behind the curve compared to other banks. The bank will also invest $100 million in clean technology and another $100 million in renewable and climate innovation ventures. City A.M looks closer at the plans.
8. JUST EAT TAKEAWAY GRUBHUB DEAL
Shareholders of Just Eat Takeaway have approved its $7.3 billion purchase of GrubHub. The deal is subject to regulatory approval and the approval of Grubhub’s shareholders. It is expected to be completed in early 2021 and would create the world’s largest food delivery firm outside of China, processing a combined 600 million orders annually. Just Eat Takeaway shareholders rejected a new packet for the CEO Matthew Maloney which consisted of a $745,000 base salary plus extras, although the GrubHub deal was not contingent upon this.
Just Eat has been on a merger spree, it only completed its merger with Takeaway.com earlier this year and is now consolidating further. The food delivery industry would inevitably need consolidation as competition increases. The only major profitable delivery firm is GrubHub. Most of the other major firms posted losses of over $100 million last year including Just Eat, DoorDash, Uber Eats and Deliveroo. Companies can remain loss making as long as they keep investors confident in their ability to hold a decent chunk of the market. With an increasing number of competitors however, the spree of mergers we are witnessing now was foreseeable.
9. EASYJET PREDICTS HUGE LOSS
Easyjet has forecasted a huge £845 million loss in 2020, its first full-year loss in its 25-year history. The bleak outlook was coupled with a plea for greater government support to weather the current storm. With an increasing number of countries on the “quarantine” list, travel is steadily declining once again. Over 65% of flight routes in Europe had travel restrictions last month. Easyjet has also predicted very low demand in 2021. It will slash capacity to just 25% of initial plans at the start of next year. Easyjet has already cut 4500 jobs as part of a restructuring and has secured over £1.6 billion in cash through asset sales, loans and shareholder investment. Despite all this, Easyjet is still concerned about its future as industry passenger numbers have been drastically lower than normal for over 6 months. Easyjet turned over £6.4 billion in 2019.
10. OLA SEES LONDON LICENSE REVOKED
Uber’s newest rival, Ola, has found itself in TfL’s sights as the transport authority refused to renew Ola’s London operating license. TfL cites severe failings in passenger safety for the decision. Over 1,000 trips over the past 7 months have been carried out by unlicensed drivers. Furthermore, Ola failed to immediately report breaches. This comes just a week after TfL lost its legal battle against Uber over the same issue of passenger safety. In Uber’s case the court found Uber had made significant improvements and was fit to operate in London.
Ola says it will appeal the decision. The company will be entitled to continue operating as normal while the appeal process takes place. Ola is the newest ride hailing competitor on London, launching in February 2020. The Indian company had already launched in Cardiff in 2018 and has been expanding across the UK.