The week’s news included; Pfizer vaccine breakthrough, Asian nations officially create world’s largest trade bloc, EU set to limit UK legal & financial services access post-Brexit, JD-Footasylum block overturned,
Opinion articles of the week:
Opinion articles of the week:
- City A.M – Will Black Friday save the retail industry?
- Forbes – Innovate Or Die: How A Lack Of Innovation Can Cause Business Failure.
- BBC News – How will Joe Biden change US trade relations?
- The Independent – Tax people who work from home 5% to support at-risk jobs, says Deutsche Bank
1. PFIZER MAKES COVID VACCINE BREAKTHROUGH
Pharmaceutical firms Pfizer and BioNTech announced they made a significant breakthrough in creating a Covid vaccine. Trials showed their vaccine was 90% effective at preventing the contraction of Covid-19 without any notable safety concerns. Tests were run on 43,500 people across six countries but there are still challenges ahead. The firms are gathering enough safety data to satisfy regulators before the vaccine can be approved. Experts cautiously optimistic about its success.
The UK has already bought 40 million doses with 10 million likely to be received before the end of the year. Each person requires two doses, so 20 million UK residents will be covered by the ordered batches. 100 million doses will go to the US while 200 million will go to the EU. Pfizer hopes to supply 1.3 billion doses next year.
A truly global roll out will be tough. The vaccine must be stored at -70C, so in the developing world, ensuring vaccines are properly stored, particularly in rural areas, poses a huge challenge.
On the business side, Pfizer and BioNTech’s share price soared 10% in response to the news. Cinema chains, hotels and airlines all saw double digit share price growth in response to the news. Video conferencing platform Zoom, however, saw its share price tank by 15%. Peleton, Netflix and Amazon all saw their share prices dip. Markets anticipate more people returning to some semblance of ordinary life as the vaccine is rolled out, meaning less virtual meetings and activities.
2. ASIAN MEGA TRADE DEAL
Last week, Asian countries formed the biggest trading bloc in the world, leaving the US out of it. Fifteen nations signed the Regional Comprehensive Economic Partnership (RCEP). The deal will remove tariffs on a variety of imports within the next 20 years. There are also clauses covering services and intellectual property. This deal took 8 years to negotiate and members account for 29% of global GDP. Signatories include: China, Japan, South Korea, Australia, New Zealand and the ten members of the Association of Southeast Asian Nations (Asean). India did not join due to concerns over the potential impact on local producers, but is still welcome.
The US was initially looking to join a similar trade deal in the Trans-Pacific Trade Partnership under Obama. In 2017, however, Trump withdrew from the pact. The US sought to combat China’s growing economic control of the region through the TPP, but Trump expressed concern over the impact on US workers.
RCEP members are home to over 33% of the world population and the block’s economic size exceeds the EU’s and even the US-Mexico-Canada free trade zone. There is every chance this deal could be Asia’s start to becoming the economic powerhouse of the 21st century.
3. EU SHUTS OUT UK SERVICES
The UK’s legal and finance industries were dealt a blow as the EU limits post-Brexit access to markets. In the legal sector, the Law Society of Ireland held that solicitors seeking access to EU markets via Ireland must have a physical establishment in the country.
Many solicitors hurried to register their England-based solicitors in Ireland ahead of Brexit to retain the right to practice within the EU. In 2018, the number of England and Wales solicitors admitted to the Irish roll soared by 163%. Now, these solicitors will not receive practising certificates unless they can establish an Irish presence in the next six weeks.
In the finance sector, it appears that EU will not grant the UK regulatory equivalence post-Brexit. Regulatory equivalence is granted where the EU considers a country’s regulatory framework equivalent to its own. This gives financial players in non-EU countries access to EU markets. Without equivalence, UK firms may have to obtain approvals and exemptions from each member state. Such options do not provide cross-border EU wide access. Furthermore, some EU nations require a certain level of presence in the country to receive access, which could involve moving numerous workers from the UK. This creates huge logistical issues for businesses. Considering the UK’s financial service industry accounts for nearly 7% of the UK’s GDP, resolving this issue will be critical for the health of the sector.
4. EU IMPOSES US TARIFFS
The EU is to impose tariffs on $4 billion of US goods over unlawful subsidies for US aerospace firm Boeing. This follows US tariffs on $7.5 billion worth of EU products October in 2019. US officials claimed that the EU had issued unlawful subsidies to EU based aerospace firm Airbus. Both sets of tariffs have been authorised by the World Trade Organisation. This is because both sets of subsidies were illegal, entitling the injured party to impose additional tariffs on exports from the injuring party.
The EU’s tariffs have been imposed on a wide range of goods from tractors to tobacco. The US’s tariffs last year were imposed on products such as whiskey, wine and cheese. US officials have complained that the subsidies in questions have already been repealed so are disappointed that the tariffs are still being applied.
The dispute over subsidies to Boeing and Airbus has been raging since 2004. Joe Biden’s presidency could see the end of the saga, but his stance has not been made clear yet.
5. JD OVERTURNS FOOTASYLUM MERGER BLOCK
JD has won its appeal against the Competition and Markets Authority’s (CMA) decision to block its £90 million takeover of Footasylum. The Competition Appeals Tribunal held that the CMA had acted irrationally in its decision to block the merger. The CMA failed to make proper inquiries into Footaslyum and failed to take into account key market factors. For example, that JD and Footasylum are not just in competition with each other but also the sportswear brands they resell. Nike and Adidas both have direct-to-consumer sales of their products which act as substantial competition in the market. These factors amongst others led the CAT to its decision. The CMA will consider whether to appeal the decision.
6. VIAGOGO-STUBHUB DEAL
In order to keep its £3 billion takeover deal alive, Viagogo has offered to sell StubHub’s business outside of North America. The UK CMA provisionally blocked Viagogo and StubHub’s takeover deal due to concerns over its potential impact on customers. These giants would hold 90% of the UK ticket resale market and a merger could weaken competition and service quality for customers. Viagogo conceded and has submitted plans to only takeover StubHub’s larger US and Canadian businesses. StubHub’s UK and Spanish businesses would be sold to a buyer with various conditions.
Both Viagogo and StubHub are reeling from the pandemic as practically all live events have been cancelled. The CMA recognised this but did not deem it proper to lower standards. The CMA will review the proposals and give its final decision by 9 December.
7. AMAZON FACES EU ANTITRUST CHARGE
Amazon has been charged by the EU with abuse of dominant market position. The European Commission alleges that Amazon uses data obtained from sellers on its platform to its own advantage in sales of its own-brand products. The tech giant allegedly monitored sensitive third-party sellers’ details such as page visits, sales figures, and shipping information. Amazon would then undercut the best-selling products with its own-brand products. Furthermore, sellers who opt to use Amazon’s logistics in selling goods allegedly get preferential treatment on the Amazon platform, breaching competition law. This follows numerous complaints from traders on the Amazon platform.
There is concern that Amazon wields too much power over the sellers who rely on their Marketplace for business. By adopting practices that force sellers to use Amazon, this undermines competition within the market. If Amazon is found to have breached competition law, the tech giant could face a fine of up to 10% of global annual turnover, roughly $19 billion. Amazon has firmly rejected the charges and will challenge the EU’s move.
8. BORIS BILL DEFEATED
Boris Johnson’s controversial Internal Market Bill has been overwhelmingly struck down by the House of Lords. Clauses in the Internal Market Bill would give the UK the (domestic) right to ignore any EU tariffs applied in Northern Ireland, to protect the integrity of United Kingdom. This however, is a clear breach of the Brexit Withdrawal Agreement and international law. The government have openly admitted that the clauses do break the law. Peers in the House of Lords voted against the plans by 433 to 165, and 407 to 148, in the first and second vote, respectively.
The Bill will return to the House of Commons in December, and MPs may reinsert the rejected clauses. It is worth noting however, the House of Lords can only scrutinise and cannot effectively stop a bill becoming law. It can frustrate and delay a Bill and urge the elected House of Commons to reconsider. The Conservative dominated House of Commons are likely however, to stick with the Bill as it stands.
9. DOORDASH IPO
US takeaway delivery firm DoorDash filed for its IPO last week. The GrubHub competitor boasts 18 million customers and 1 million deliverers. It is the largest food delivery firm in the US, holding 49% of the market. DoorDash turned over $1.9 billion in the nine months to 30 September, up nearly 400% from last year. Like its competitors, DoorDash is a loss-making company but losses are narrowing. Losses shrank by over 60% in the period, down to $149 million. DoorDash will go public by the end of 2020 but details of how much they seek to raise are not yet clear. In its most recent fund raising DoorDash was valued at $16 billion.
10. REDUNDANCIES ON THE RISE
314,000 redundancies were recorded in the three months to September, a record high. This has been attributed to employers anticipating the end of the furlough scheme on 31 October. Now however, the government has just extended furlough until March 2021, but employers had already made redundancy plans. Unemployment figures also rose significantly, up to 4.8%. The Bank of England said it expects unemployment to peak at 7.75%.