The week’s news included: Uber to give employment benefits to all UK drivers, Visa facing antitrust investigation in the US, Natwest facing criminal charges for failing to flag £264m in cash deposited into a customer account.
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 – Why the Premier League TV rights bubble really might be about to burst this time.
- Law Careers.net – The law firm as a business
- Retail Gazette – Why is fast fashion booming if Brits want a sustainable future?
- City A.M – Non-fungible tokens – looking at the legal issues.
- Sky News – Why is HSBC saying ‘au revoir’ to the bulk of its business in France?
1. UBER TO GIVE UK DRIVERS EMPLOYMENT BENEFITS
Uber has announced it will guarantee its UK drivers minimum wage, holiday pay and pensions. This follows the landmark ruling last month in which the Supreme Court found that Uber drivers were considered as workers, not self-employed contractors.
Uber’s 70,000 drivers will now receive a minimum of £8.72 per hour, the National Living Wage and will receive a pension. Couriers working for Uber Eats will not however, be considered workers as the ruling did not extend to them.
Uber has said the move will not see an increase in prices for passengers. This comes as a surprise as courts in California also found Uber drivers to be workers and prices subsequently increased.
The implications of the Supreme Court ruling last month on the gig economy are enormous. Large firms in the gig economy are often unprofitable and benefit hugely from hiring “self-employed” contractors. Pensions, holiday pay and minimum wages are huge expenses for companies, which gig economy firms tend to avoid. This ruling sets boundaries for what relationship can be considered self-employed. Some firms, like Just Eat, are moving away from the gig economy model but for others, it’s an essential aspect of their business models. particularly those with Gig economy firms will likely be combing over their contracts with their “contractors” and seeking to ensure they escape the scope of this ruling.
2. VISA UNDER INVESTIGATION
Payment processor Visa is facing a US investigation into alleged anti-competitive practices in its debit card business. The US Department of Justice will investigate whether merchants are restricted from routing transactions through cheaper alternative card networks. This investigation will cover both online and physical stores. Visa had already been planning to ramp up its network fees throughout Europe but there are concerns Visa is abusing its dominant position globally.
Payment processors are feeling the heat from all sides. Visa’s main competitor, Mastercard, is facing a huge £14 billion lawsuit in the UK for overcharging customers with transaction fees. In December, the UK Supreme Court allowed this case to be heard and laid the foundation for the largest group action lawsuit in British legal history.
3. NATWEST FACING CRIMINAL CHARGES
The Financial Conduct Authority (FCA) is bringing criminal proceedings against Natwest for significant breaches of money laundering regulations. Natwest, formerly RBS, failed to monitor and scrutinise £264 million that was paid in cash into a single UK account between 2011 and 2016. In total, £365 million was deposited in the account over the period. Natwest could face unlimited fines if convicted as well as serious reputational damage.
This is the first time the FCA has sought to bring criminal action against a bank. This is however, an unprecedented case. The sums passing through the account were so large that the monitoring systems and controls were critically ineffective or simply not in place. While the FCA is not planning to withdraw Natwest’s licenses, the impact of a criminal conviction could be severe. Natwest Group has around 19 million customers throughout Europe.
Separately, the UK government sold a £1.1bn stake of NatWest and now holds under 60% of the bank. RBS was bailed out by the government in 2010 during the financial crisis.
4. GOVERNMENT TO CLAMP DOWN ON BIG FOUR
The UK government has unveiled plans to overhaul the audit sector and clampdown on the Big Four accountancy firms. Under the plans, the Financial Reporting Council will be scrapped and replaced by the Audit, Reporting and Governance Authority (ARGA). ARGA will have greater powers, such as the ability to force auditors to resubmit accounts without court orders. The proposals would also see company directors face significant fines for inaccurate accounts. The Big Four accountancy firms would be obligated to make their audits more rigorous. If these measures fail to improve standards the Big Four could even face limits on the number of FTSE 350 firms they audit.
These measures follow a series of high-profile collapses where auditors failed to pick up on serious financial problems. Such collapses include Carillion, BHS and Patisserie Valerie. The government is now entering a 16-week consultation period on the plans.
We explored in our insight article whether a wholesale breakup of the Big Four was a good idea.
5. LONDON HOLDS FIRM IN FINANCE
London financial sector has retained its spot as the second largest financial centre in the world, according to the Global Financial Centres Index. Only New York comes ahead of London in the rankings. Other competitors such as Shanghai, and Hong Kong are however, drawing closer to London. There were concerns Brexit could see business flowing out of London towards other European destinations such as Frankfurt. While there have been large chunks of financial services business moving to Europe, London remains highly attractive. The issue of regulatory equivalence with the EU still hangs over the UK and its something the government is keen to resolve.
6. GOOGLE REDUCES APP STORE FEES
Google Play will slash its commissions from in-app purchases by 50% following an ongoing dispute with app developers. The tech giant currently takes a 30% cut of all digital in-app purchases. From July 1 it will reduce the fee to 15% for the first $1 million of revenue generated. After the first $1 million, the 30% charge will continue to apply. Apple implemented a similar policy for its App Store in November 2020.
Both Google and Apple are locked in legal disputes over competition complaints from developers. Most notably, Fortnite maker Epic Games has sued Google and Apple in both the EU and the US. It is clear both Google and Apple are attempting to mitigate concerns before regulators clampdown.
7. MORGAN STANLEY OFFERS BITCOIN ACCESS TO CLIENTS
Morgan Stanley is offering its wealth management clients access to Bitcoin funds. The investment bank Stanley becomes the first major US bank to take this step as client demand increases. Initially, only clients with $2 million in assets at the firm will have access to three Bitcoin funds. Various other restrictions will apply for investment firms and investors. Morgan Stanley is being cautious in its offering to limit client exposure to risk. Although Bitcoin’s gains have been astronomical over the past year, it is still volatile. Daily drops and gains of 10%-15% are not uncommon. This follows Bank of New York Mellon’s move to allow its asset management clients to hold, transfer and issue cryptocurrency using their accounts.
Morgan Stanley clients will have access to the funds from next month. The bank will, however, not offer direct investments in Bitcoin or other cryptocurrencies. Morgan Stanley, one of the bulge bracket investment banks, has $4 trillion worth of assets in its wealth management division.
8. EPIC GAMES EPIC VALUE
Fortnite maker, Epic Games, is finalising a $1 billion fund raising round, giving it a value of $28 billion. The company has been going from strength to strength over the past few years. Fortnite in 2019 racked up $1.8 billion in revenue. It currently has 350 million accounts across the globe. Then in April 2020, video calling app Houseparty took flight, securing 50 million sign-ups in a month. An alleged data scandal scandal however, later saw users leave Houseparty in droves. Epic also owns Unreal Engines which is a 3D tech platform used by gaming developers. All of these streams saw Epic turn over $4.2 billion in 2019 and high expectations from 2020. Investors are understandably excited about the growth potential of Epic.
Epic Games is currently engaged in legal action against Apple and Google over alleged uncompetitive practices by the tech giants.
9. GOLDMAN SACHS WORKING CONDITIONS SURVEY
A Goldman Sachs working conditions survey issued to first year analysts was leaked, and the results were damning. The analysts complained of 98 hour working weeks on average, along with a severe deterioration in physical and mental health since starting. 100% of respondents expressed work having a negative impact on relationships, while 75% had sought or considered mental health support due to the stress. The primary driving factor of the exceeding long hours is the pressure to meet tight deadlines. This has been exacerbated by a recent boom in activity for investment banks. 100% of respondents had frequently experienced unrealistic deadlines. One of the most scathing quotes from the survey was “I’ve been through foster care and this is arguably worse”.
This survey is particularly concerning as Goldman Sachs has faced a tragedy driven by its gruelling work environment. In 2015, a 22-year-old analyst at the firm sadly took his own life. Following this, the bank vowed to take action and improve pastoral care. Although there were only 13 respondents in this survey, it looks as if nothing has changed.
Despite this, many are somewhat unsympathetic to the complaints. Those senior in the industry stated they have all done those gruelling hours and it is something of a rite of passage. Furthermore, they highlight there are thousands lining up for the positions and these analysts are paid very handsomely. Financial News London outlines the criticism of the complaints in its article.
You can view the working conditions full survey here.
10. THORNTONS SHUTS DOWN
Chocolate maker Thorntons has announced that all of its 61 shops will close permanently. Stores are currently shut due to the pandemic, but its financial position has deteriorated severely, despite a boost in online sales. Consequently, none of its stores will open. The decline for the chocolate maker has been gradual. In 2011 it boasted 364 stores but has shut over 80% of these over the past decade. It had even sought to launch its own chain of cafes but this plan was shelved due to the pandemic. Thorntons will however, continue to operate online and will sell its products to supermarkets. Thorntons was founded in 1911 and posted a pre-tax loss of £35 million last year.