The week’s news included; Verizon sells Yahoo for $5 billion, Amazon pays no EU tax on €44 billion revenue, Uber takes $600m hit from Supreme Court ruling, Goldman Sachs launches crypto desk.
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:
- City A.M – Britain is sitting on a mountain of debt – but there is a way to climb down.
- BBC News – Rental market unusually uncertain, Nationwide says.
- CNBC – 3 important differences between bitcoin and dogecoin, according to experts
- Sky News – GDP is set for a historic bounce-back but the coming decade will be no roaring ’20s.
1. FOREIGN TRAVEL LIST REVEALED
The UK government has unveiled its travel traffic light system, laying out various restrictions for travelling abroad. Foreign travel for non-essential purposes is currently illegal but from 17 May there will be a relaxation of the rules.
The system stipulates green, amber, and red list countries. Travellers to green list countries will not need to self-isolate upon return. Only twelve countries have been added to the green list. Australia, Brunei, Falkland Islands, Faroe Islands, Gibraltar, Iceland, Israel, New Zealand, Portugal, Singapore, Sandwich Islands and St Helena all made the cut. Many of these destinations have some restrictions for foreign travellers while Australia and New Zealand do not allow any foreign visitors. There are currently 40 red list countries (link). Visiting a red list country will require travellers to self-isolate in a government hotel for 10 days upon return. Only UK residents can travel from red list nations to the UK. There are over 100 amber list countries all of which require self-isolation at home upon return.
The government has been admittedly cautious with putting countries on the green list. Understandably, the travel industry has criticised the list, claiming its overly cautious given the data. Popular destinations like France and the US are still on the amber list and viable holiday options are sparse. Travel industry players claim this is an opening “in name only” and warned that UK citizens could be missing out. The government has rightly justified its decision, saying that most other countries have not had as a successful vaccination programmes as the UK. It is, therefore, not necessarily safe to allow significant foreign travel. Furthermore, the mixing of people from different countries at airports risks variants spreading to travellers and being brought back to the UK.
2. PELOTON PANIC
US fitness company, Peloton, is recalling its treadmills in the US and UK after technical faults caused the death of a six-year-old child. Peloton also received 72 reports of other injuries such as broken bones. It was found that display screens could fall off mid-exercise. 125,000 of its Tread and Tread + treadmills will be recalled.
In March, following the death of child, Peloton warned parents to keep children away from the treadmills. The US Consumer Product Safety Commission (CPSC) launched an investigation into the matter. Peloton then offered to voluntarily recall the treadmills and agreed to stop sales and provide refunds to customers. Peloton expressed regret that it had not recalled the machines sooner.
This recall has seen its share price tank. Over $4 billion was wiped off its market cap, representing a 14.6% share price decline.
3. VERIZON SELLS YAHOO
Verizon has announced that it will sell 90% of its stake in Yahoo and AOL for $5 billion. The business will be sold to Apollo Global Management and Verizon will retain a 10% holding. The sale includes many well-known brands such as TechCrunch, Yahoo Finance and Engadget. Verizon had already sold off HuffPost to BuzzFeed last year as it looks to shift elements of its online businesses. It has not enjoyed the success and profitability it had hoped for. Many of its projects and subsidiaries have failed to compete with the giants in the online media and entertainment industry, so Verizon is gradually pulling out. Verizon sells the businesses at a significant loss, down $4 billion from the $9 billion its paid for the businesses. The deal is expected to be finalised in late 2021.
4. AMAZON PAYS NO EU TAX
Amazon’s latest filings show the tech giant generated a record €44 billion in revenue across Europe last year but did not pay any tax. Its European entity based in Luxembourg, Amazon EU Sarl, posted a €1.2 billion loss last year, hence it was not eligible to pay tax. Amazon channels most of its European sales, including the UK, through this entity.
Furthermore, Amazon has been given an additional €56 million tax credit to its mountain of credits. Amazon EU Sarl has €2.7 billion in credits that can be used to offset any future tax bill, should it make a profit. Unsurprisingly, politicians have staunchly criticised Amazon’s tax practices and renewed calls for a global tax overhaul have begun. In the UK, Amazon saw its income spike 51% last year due to increased online shopping in the pandemic. The tech giant insists it pays all the tax it is required to pay and has invested over €75 billion across Europe over the past 10 years, creating thousands of jobs. The Fair Tax Foundation found that globally, Amazon paid just $3.4 billion in tax on nearly $1 trillion of revenue and $26 billion of profit last decade.
5. UBER TAKES HIT FROM SUPREME COURT RULING
Uber has taken a $600 million hit from the Supreme Court ruling obliging the company to provide its drivers with employment rights. The court ruled that its drivers were workers, not self-employed contractors and were entitled to minimum wage and holiday pay. Uber quickly agreed to provide its 70,000 drivers with these employment rights. This $600 million cost, however, stems only from historical claims from drivers and there are still significant future costs expected for providing these rights to drivers going forward. The total cost for Uber is likely to run into billions.
Despite strong demand for its food delivery service, Uber posted a $359 million pre-tax loss last quarter. It hopes for a surge in demand for ride-hailing as economies begin to reopen.
6. PANDORA’S LABORATORY
Pandora will exclusively use laboratory-made diamonds instead of mined diamonds. This is in response to concerns over environmental and human rights issues in the mining industry. Diamond mining production fell 27% since its peak in 2017. Last year, 111 million carats of diamond were mined, according to official sources. Laboratory-made diamonds are significantly cheaper than mined diamonds and are indistinguishable from mined diamonds for the lay person.
Laboratory-made diamonds aren’t without their own issues as they require high amounts of energy to produce. Despite this, this pales in comparison to the decimation of landscapes for mining and human rights abuses that can be prevalent in the industry. Furthermore, renewable energy can be used to produce laboratory-made diamonds, making them more sustainable.
Pandora’s diamonds will be made in the UK and its first sales will also be in the UK. Pandora is the largest jeweller in the world and turned over $3.1 billion last year.
7. GOLDMAN SACHS UNVEILS CRYPTO TRADING TEAM
Goldman Sachs has officially launched its cryptocurrency trading desk, according to an internal memo. The investment bank has traded two bitcoin-linked derivatives. These derivatives were futures and non-deliverable forwards.
Futures and forwards are regulated derivatives that allow investors to bet on whether an asset will appreciate or depreciate over a given time frame. Crucially, investments in derivatives are financial contracts that operate outside of the market of the underlying asset. So, no money would actually be invested in Bitcoin itself by Goldman Sachs.
Although the bank is not buying the currency, this is a huge stamp of approval that Bitcoin is a viable investment product. Previously, there had been staunch criticism of the volatile currency but as the market has begun stabilising. Goldman’s cryptocurrency trading teams sit within the global currencies and emerging markets trading division.
8. ISSA BROTHERS AGREE TO SELL PETROL STATIONS
The Issa Brothers’ EG Group have offered to sell 27 petrol stations in order to allow their £6.8 billion acquisition of Asda to pass. Last month, the Competition and Markets Authority (CMA) provisionally approved the takeover on the condition that competition concerns in 36 areas of the UK were addressed. EG Group operates 395 stations in the UK, while Asda owns 323. There are concerns that in areas where EG and Asda are in close proximity, customers could see higher prices. All indications show that the CMA is comfortable with EG’s plan to sell petrol stations and will provide an update in a few days.
9. SELFRIDGES EXPANDS RENTAL SERVICE
After launching its in-store rental service last year, Selfridges has announced it will now offer the service online too. The department store set up a collaboration with clothing sharing platform HURR allowing customers to rent high end clothes for up to 20 days. Previously, this could only be done in store whereas now, customers can browse and rent online.
This new rental service also forms part of a drive towards greater sustainability in the fashion industry. The impact of ‘fast fashion’ has been devastating on the environment and wear-it-once items are a huge contributory factor. The rental market for clothing is growing and could prove a useful tool in combating the environmental harm of fashion. This gives the retailer access to customers who typically cannot afford to buy their products, generating crucial revenue. Prices start at just £20 for a four-day rental.
The coronavirus outbreak has required retailers to innovate in order to draw in customers and stay afloat. World renowned retailers like Selfridges are no exception. Last year, the iconic department store slashed 450 jobs due to the pandemic. High end department stores have been more acutely affected by the pandemic due to the lack of wealthy tourists who often bolster the books with big spending. With foreign travel beginning to open up, this could soon provide welcome windfall for the sector.
10. DEBENHAMS FINAL CLOSURES
Debenhams has announced that it will shut down all of its remaining stores next week. Some stores opened in April to sell off remaining stock. By 15 May, all of the Debenhams stores will be closed, with the loss of 12,000 jobs in total.
Debenhams brand has been bought by Boohoo for £55 million so it will still be available online. As for Debenhams on our high streets, this comes to an end after over two centuries. The company was founded in 1778, selling fabrics, bonnets, and parasols. In recent years however, it went into a tailspin from which it could not recover. As of 2020, Debenhams had a huge £600 million debt pile. In the year to September 2018 however, the store posted a record £491.5 million loss and went into administration in 2019.