The week’s news included; Kwarteng’s mini-budget sparks market meltdown & BoE steps in with £65bn bailout, Wall Street firms fined $1.8bn for using unmonitored devices & apps, Divorces spike after law change.
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:
Opinion articles of the week:
- BBC News – Pay gap: Will Gen Z salary-sharing on TikTok make a difference?
- Sky News – UK economy: How might the government balance the books?
- City A.M.- Low tax regimes only matter as much as their longevity
- The Guardian – Why employers still can’t get staff back to the office
- Legal Cheek – Does size matter for law firms?
1. ECONOMIC MELTDOWN
Kwasi Kwarteng’s mini-budget induced a economic meltdown last week as hundreds of billions of pounds were wiped off UK’s financial markets. In the mini-budget, Kwarteng announced an enormous £45 billion package of tax cuts, paid for entirely by fresh borrowing. Liz Truss pitched the cuts as necessary to spur economic growth but markets were left baffled as to the logic of the plans. The pound sank to record lows and UK stocks and bonds nose dived. At least $500 billion has been wiped off the UK’s stock and bond markets since Liz Truss became Prime Minister and things look to be getting worse.
As UK markets plunged and UK government bonds lost value, this severely impacted pension funds. Pension fund managers had to put up cash to cover the lost value of government bonds (gilts) in their portfolio. Occupational pension funds hold £385 billion of gilts. This created a “material risk to UK financial stability” and the Bank of England was forced to intervene. The Bank will now buy £65 billion in government bonds, essentially restarting quantitative easing to stabilise gilt prices. Had the Bank not stepped in, funds would have continued selling off gilts and increased the risk for pension funds to collapse.
Furthermore, an extremely rare and direct warning came from the International Monetary Fund (IMF) over Liz Truss’ plans. They advised against the “large and untargeted fiscal packages”. Even the former Bank of England governor, Mark Carney, criticised the government for “undercutting” other economic institutions who are trying to cut demand and inflation. The government’s tax cuts directly oppose the work of these other bodies by attempting to boost demand. This means the government and its economic bodies are essentially cancelling each other out in some regards.
2. OPTUS AUSTRALIA HACK
Australian telecommunications firm Optus has been hit by a cyber attack which has seen the data of 10 million customers stolen. This is the largest data breach in Australia’s history and affects around 40% of Australia’s population. Optus is Australia’s second largest telecommunications firm and is a subsidiary of Singapore Telecommunications Ltd. The hackers demanded $1 million in cryptocurrency as a ransom and periodically published data samples online. Customers’ names, home addresses, passport numbers and driving licence numbers were all compromised. Optus has said however, that no payment details or account passwords were stolen in the breach. Relevant authorities have been notified. BBC News looks closer at the breach.
3. WALL STREET FIRMS FINED $1.8BN
A range of Wall Street banks have been fined a whopping $1.8 billion by US regulators over widespread use of unmonitored communication channels. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) found that bank workers regularly used personal devices and apps to discuss regulated business. Conversations on these platforms were not recorded or preserved, contrary to regulatory rules. This hindered regulators from conducting investigations. 16 different companies were named included Barclays, Goldman Sachs, Morgan Stanley and Bank of America. The CFTC issued penalties of $710 million and the SEC fined the companies $1.1 billion.
4. MORTGAGE DEAL REMOVALS
A record number of mortgage deals were pulled by lenders last week due to concerns about rising interest rates. 935 mortgage products were removed from the market on Tuesday. This smashed the previous removal record of 462 products when the first lockdown was announced. In total, 1600 products were pulled last week or around 40% of products. The concerns amongst lenders were sparked by the mini-budget and the following market shock. Lenders felt unable to price their products as interest rates are set to rise rapidly. Lenders who pulled or paused their mortgage offerings include; HSBC, Santander, NatWest, Virgin Money, Halifax and Skipton Building Society. Interest rates rose to 2.25% and they are expected to rise as high as 6% next year. For households on variable mortgages, this could see their monthly mortgage repayments double. The UK regulator however, has ordered lenders to explain themselves and what their plans are for returning products to market.
Prior to last week’s offer pulls, mortgage approvals rose significantly as buyers sought to secure deals before interest rates rise again. In August, approvals were up 16% to 74,300. This trend is likely to stop as lenders become tighter with their criteria.
5. TIKTOK DATA LAW BREACH
TikTok is facing a £27 million fine for allegedly breaking UK data protection law. The social media giant is accused of processing children’s data without parental consent. This included sensitive “special category” data such as racial data, religious beliefs, biometric and health data. TikTok also failed to provide “concise, transparent and easily understood” data protection information. The Information Commissioner’s Office (ICO) issued a “notice of intent” over these alleged breaches which could see TikTok fined up to £27 million. The ICO will consider any comments from TikTok before issuing its conclusion.
6. JD FINED OVER PRICE FIXING
JD Sports, Elite Sports and Rangers FC have been fined over £2 million for fixing prices of products. The UK Competition and Markets Authority found that JD and Elite Sports fixed the prices of Rangers-FC replica kits and merchandise between 2018 and 2019. This conduct broke competition rules and the trio were fined following the conclusion of the CMA’s investigation. All three parties admitted wrongdoing. Both JD and Elite Sports received a discount due to their cooperation. JD was fined £1.485 million, whereas Elite Sports and Rangers FC were fined £459,000 and £225,000 respectively. JD will not appeal the decision as per the terms of their settlement.
7. NO FAULT DIVORCES SOAR
Divorce rates have soared to their highest level in 10 years following the introduction of no fault divorces. Between April and June there were 33566 divorce applications, largely under the no-fault divorce law. This is a 21% increase from the same period in 2021. The no-fault divorce law allowed for divorces without assigning blame. Prior to this change, couples could only divorce if adultery, unreasonable behaviour or desertion could be proven. The new legislation also introduced a 20 week reflection period between starting proceedings and applying for an order.
8. BAN ON JUNK FOOD DISPLAYS
Shops in the UK are now banned from displaying junk food near entrances and tills. Any products that are high in fat, salt and sugar are all affected by the ban. The plans are designed to help tackle obesity in the UK. A proposal to ban multibuy offers on junk food will be postponed until October 2023. This would include all buy-one-get-one free offers. This delay is to avoid putting additional pressure on families already struggling with the cost of living crisis.
9. TRILLER SETTLES TIMBALAND AND SWIZZ BEATZ LAWSUIT
Social media app Triller has settled its lawsuit with Timbaland and Swizz Beatz over alleged missed payments. The pair claimed Triller owes them $28 million in missing payments from the acquisition of the producers’ webcast series, Verzuz. Timbaland and Swizz Beatz launched Verzuz during lockdown in 2020 and it became hugely popular. Timbaland and Swizz Beatz claimed that Triller missed payments and failed to adhere to a settlement agreement. Now, Triller agreed to settle the case and bring an end to the saga. The terms of the settlement have not been disclosed. See our previous top 10 for more information on the lawsuit.
10. REVOLUT SECURES FCA CRYPTO APPROVAL
Revolut has secured full regulatory approval to provide cryptocurrency services in the UK. The Financial Conduct Authority granted full permission to the fintech firm after operating for months on a temporary permission. Revolut’s initial application was not adequate and the FCA required them to improve their anti-money laundering systems and controls. 37 firms have obtained full regulatory approval to provide crypto asset services. Revolut is still yet to obtain a full UK banking licence but is ramping its regulatory framework to achieve this.