The week’s news included; China bans cryptocurrency transactions, Property giant Evergrande may default on $300bn debt pile, UK to ban betting firms from sponsoring football shirts, Aldi trials checkout free stores.
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:
- The Fashion Law – More Companies Are Pledging to Become “Net-Zero,” But What Does That Really Mean?
- City A.M – The tale of Big Tech’s reckoning was spelled out by Rockefeller’s downfall
- Legal Cheek – What makes a good ESG lawyer?
1. DRIVER SHORTAGES
UK drivers are in a frenzy as people panic buy petrol following warnings of shortages. BP was the first to break rank, warning that a shortage of HGV drivers meant it could not supply all of its stations. By Sunday, nearly a third of UK petrol stations had ran out of fuel as drivers filled up their cars and jerry cans en masse. Those stations that had petrol saw hour long queues and some introduced limits on fuelling. We must note however, there is no shortage of petrol in the UK. This drama was sparked only by the temporary logistical issues of transporting fuel to the stations, due to the lorry driver shortage.
The government has been under pressure to act on the HGV driver shortage which has ensued for the past few months. On Sunday, the government announced a temporary visa scheme to make it easier for foreign lorry drivers to come to the UK. Brexit was a key reason for the problem as many drivers returned to their countries while new migration rules make it difficult for foreign lorry drivers to immigrate. The new visa will reportedly enable 5000 drivers to come to the UK for three months. The Road Haulage Association, however, estimates that there is a shortage of 100,000 HGV drivers.
2. CHINA BANS CRYPTO
The Chinese government has officially announced that all cryptocurrency payments are illegal in the country. The announcement was made in a Q&A detailing the government’s guidance on cryptocurrency. It stated all “virtual currency-related business activities are illegal financial activities.” This is the most widespread and significant crackdown on cryptocurrencies and essentially prohibits its use as tender. Foreign exchanges are also prohibited from offering cryptocurrency services to Chinese businesses and customers. The news sent cryptocurrency prices into decline, but the market recovered shortly after.
China’s assault on cryptocurrencies has been gradual. Previously, they closed local exchanges and banned payment service providers from carrying out crypto related payments. In May, the government banned cryptocurrency mining. Fundamentally, the Chinese government sees cryptocurrency as a threat to its control over the economic ecosystem and this move could see the final end of cryptocurrency in China.
3. EVERGRANDE ON THE BRINK
Chinese conglomerate Evergrande has rattled investment markets as the company has failed to meet a payment deadline on its huge $300 billion debt pile. Last week, markets thought a crisis was averted as the real estate giant secured a deal covering a $35.9 million interest payment. Unfortunately, however, a huge $83.5 million interest payment was also due on Thursday and the firm has now missed this payment. Although the missed deadline does not officially count as a default until next month, this is worrying. The company owns over 1300 real estate projects across China, but its influence extends far beyond property. It produces food, drinks, electric vehicles and owns Guangzhou FC, one of China’s most successful football clubs.
Evergrande’s financial problems stemmed from its aggressive borrowing to fund its rapid expansion. Founded in 1996, it is now worth $31.27 billion and is one of China’s largest companies, employing 200,000 workers. Investors were not even informed of the financial difficulties until the news broke and Evergrande’s share price has tanked as a result.
Chinese government agencies have been told to prepare for Evergrande’s collapse but the fallout could be tremendous. The Chinese government has not indicated that it will bail out Evergrande meaning large parts of its $300 billion debt pile may go unpaid. Furthermore, hundreds of projects are unfinished or haven’t been started but people have already paid for the properties. This would undoubtedly have a huge knock-on effect on China’s economy as 90% of the debt is owed to Chinese creditors. Whether the Chinese government takes action remains to be seen.
4. ENERGY FIRMS COLLAPSE
British Gas will take on 350,000 customers of collapsed energy firm People’s Energy. A rapid surge in the wholesale price of natural gas has rattled the energy sector. Energy price caps mean that firms cannot pass these costs onto consumers. Consequently, many smaller energy firms cannot sustain themselves. Outstanding balances and credits of People’s Energy customers will be transferred across to British Gas and customers will face no interruption to their supply.
Two other firms, Avro Energy and Green, also collapsed last week. Their combined 830,000 customers will now also be forced to change suppliers. So far, energy firms accounting for around 5% of the market have collapsed. The government confirmed last week that it would not bail out any distressed energy firms. Ofgem, the UK’s energy regulator, has said more collapses are inevitable.
5. UK TO BAN BETTING SHIRT SPONSORS
The government is set to ban online betting firms from sponsoring football shirts in the UK. This will follow the government’s conclusion in its review of the relationship between gambling and sport. There are an estimated 300,000 problem gamblers in the UK and the pandemic has worsened online betting addictions. The proposed reforms could have significant implications on both football and the gambling industry. Nine of the Premier League’s twenty football clubs currently have betting firms as their front-of-shirt sponsor. Six championship clubs also have gambling firms as their sponsors.
Foreign betting companies use the “white label” loophole to secure lucrative sponsorship deals. The foreign companies partner with smaller firms with UK gambling licenses, and this gives them the right to advertise their gambling services in the UK. According to reports, the government is keen to close this immediately.
6. ASA CRACKS DOWN ON GREENWASHING
The UK Advertising Standards Authority (ASA) has said that it will boost standards to limit greenwashing. Greenwashing involves marketing false or misleading claims about a service or product being eco-friendly. With countless companies pledging to reach carbon net zero and become more sustainable, the ASA has recognised the “significant scope” for greenwashing to occur. The ASA will be conducting reviews across a range of sectors and will issue new guidance for business publishing adverts. Food maker Gousto saw its recent advert banned as it claimed its packaging was 100% plastic free and recyclable. This turned out to be false and the advert was banned by the ASA.
As eco-friendliness becomes more important to consumers, firms will increasingly embellish or mislead customers about their own greenness. It is important that the information consumers receive about products is as accurate as possible. The faster consumers shift towards genuinely eco-friendly products and services, the better it is for our environment. Misleading claims hinder this transition and can have a real environmental impact. The ASA will work in tandem with the UK Competition and Markets Authority who published the Green Claims Code which will help firms avoid breaking the law. The ASA will release its own guidance after its inquiry is complete.
7. MISHCON MERGER
Mishcon de Reya has agreed to merge with Taylor Vinters which will see the creation of legal and consultancy business, MDR Taylor Vinters. Law firm Taylor Vinters specialises in life sciences and has advised on over 160 venture funding rounds last year alone. Taylor Vinter returned over £20 million last year and has seen revenue surge 40% in the past three years.
Mishcon is planning to launch its IPO soon. Under the plans, all Mishcon staff will become shareholders, including trainees and juniors. This makes it only the sixth traditional law firm to go public, following firms like DWF and Ince & Co. Mishcon de Reya turned over £188 million last year.
8. ALDI CHECKOUT FREE STORE
Aldi is trialling its own checkout free store, following Amazon’s Fresh stores which opened in London. Only Aldi staff will have access to the trial and soon new trials with the public will be launched. Customers will only need a smartphone app to enter the store and cameras will track what items they pick up. Once they leave the store, they will be charged automatically via the app and receive their receipt by email. These checkout free stores will employ the same number of staff as a typical Aldi Local store, according to the supermarket. With Tesco trialling its own stores, checkout free stores are likely to be the future of supermarkets. How soon this transition will take place remains to be seen.
9. DERBY COUNTY FC COLLAPSE
Derby County Football Club has fallen into administration. The club has suffered severe financial difficulties due to the pandemic and it is losing up to £1.5 million per month. Administrators have now been called in to determine the best way forward. Derby’s difficultly comes in spite of a £200 million investment by club owner Mel Morris. The club is managed by England legend Wayne Rooney. Derby will now face a 12-point deduction, seeing them fall to the bottom of the Sky Bet Championship.
10. POPEYES COMES TO THE UK
US fast food chain Popeyes is opening its first UK restaurant in Westfield Stratford this year. The chain has begun a large-scale expansion plan as it aims to open 350 UK sites over this decade. Popeyes is a fried chicken chain, and it will compete directly with KFC. Popeyes will also offer drive-thru sites. US fast food chains have gradually been entering the UK market as its increasingly considered a growth market. Wendy’s and Chic Fil A have already recently made inroads into the UK. Popeyes already boasts 3400 restaurants across the globe.