The week’s news included; Kwarteng sacked as BoE bond buying programme ends, Criminal barristers accept new £54m legal aid deal, Apple fined $19m for not including chargers with iPhones.
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:
- Retail Gazette – Can Sephora crack the UK this time round?
- BBC News – Will the UK financial chaos spark a wider meltdown?
- Sky News – Tax U-turns will come at high political price for Liz Truss – but alternative might be more painful
- City A.M – Sanctions on Russia are on a collision course with Europe’s green ambitions
- The Guardian – Truss is frantically blowing on the embers of neoliberalism. But it is a funeral pyre
1. KWARTENG SHOWN THE EXIT
Former Chancellor Kwasi Kwarteng has been sacked following the meltdown caused by his controversial mini-budget. Liz Truss announced his sacking last Friday and revealed his replacement, former health secretary, Jeremy Hunt. Hunt becomes the UK’s fourth Chancellor in just four months. The appointment of Jeremy Hunt is considered a huge shift given that Hunt is economically to the left of the party. It could see a significant departure from Truss’ original economic plan. In any case, the political turmoil has caused irreparable scars to the UK’s international standing.
The reaction of financial markets has been the main cause of Kwarteng’s and now seemingly Truss’ demise. This latest announcement did little to restore confidence. Truss even U-turned on the plans not to increase corporation tax to 25% from 19%, another headline announcement in the mini-budget. Although the U-turn on corporation tax will save £18 billion, there still remains £25 billion of unfunded tax cuts so markets are not convinced that the government can proceed. On Friday, the pound tumbled to $1.12 and the yield (interest rate) on government bonds rose to 4.85%.
Even if the government reverses all tax cuts, the damage has already been done. Mortgage products have already been pulled and mortgage rates have already risen sharply, adding huge pressure to home owners and buyers. Renters will also be affected if landlords pass these rising costs on to them. The Bank of England has already spent £20 billion to buy bonds and stabilise markets, further increasing inflation. Has there ever been a more catastrophic honeymoon period for a new PM and Chancellor? Probably not.
2. BOE ENDS BOND-BUYING PACKAGE
The Bank of England has ended its bond-buying programme after spending £19.3 billion to stabilise financial markets. Kwasi Kwarteng’s mini-budget created a market crisis and posed an existential risk to pension funds which held UK government bonds (gilts). The Bank of England subsequently pledged to buy up to £65 billion in government bonds to steady gilt prices and restore market confidence. The measures were successful, and they brought gilt yields down, but they have been steadily creeping up again as the two-week programme drew to a close. The bond buying programme has now ended and investors are waiting anxiously to see how the market moves. The Bank of England has ruled out restarting the programme. Sky News breaks down the bond buying programme in more detail.
3. US LABOUR LAWS TO DISRUPT GIG ECONOMY
The US Labor Department unveiled new plans which will see many gig economy workers treated as employees as opposed to independent contractors. These plans will significantly affect companies like Uber and Lyft whose business models rely on this flexibility. The US Labour Department says that companies are “misclassifying workers as independent contractors”. This is leading to exploitation of vulnerable workers and denying them basic rights such as minimum wages. Although the plans are still in a proposal stage, both Uber and Lyft shed 10.4% and 12% off their share prices respectively. Investors are concerned this will detrimentally impact gig economy firms, increase costs and even affect long-term viability.
4. BARRISTERS ACCEPT NEW LEGAL AID DEAL
Criminal barristers have agreed to an increase in legal aid funding, following strike action. Members of the Criminal Bar Association voted in favour of a £54 million package. This amounts to a 15% increase in fees applied to the “vast majority” of backlogged cases as well as new cases. Only 57% of members voted in favour of suspending action and accepting the deal but a sizeable 43% rejected it. While the CBA is pleased that a deal was reached, they note that the underlying causes of the industrial action “have not gone away” as “the criminal justice system remains chronically underfunded”. Barristers’ legal aid fees had been cut and frozen for 25 years. Junior legal aid barristers earn typically under £20,000 a year and can even earn as low as £10,000. This has led to an exodus in the sector and now only 4% of criminal duty solicitors are under 35 years old.
5. APPLE FINED FOR SELLING IPHONES WITHOUT CHARGERS
Apple has been fined $19 million in Brazil for selling iPhones without a charger. A Sao Paulo court ruled against Apple in a group action lawsuit against the tech giant. Apple has been ordered to give all customers in Brazil who recently purchased an iPhone 12 or 13 a charger and include chargers in all new sales going forward. Apple has not sold iPhones with chargers since 2020 due to environmental reasons. The court found that Apple’s decision to sell phones without a charger constituted an “abusive practice”. This is because customers are required to buy a second product in order for the first to work. The tech giant will now appeal the decision.
6. MUSK UNDER INVESTIGATION
Elon Musk is under federal investigation over his $44 billion acquisition of Twitter. Musk recently announced that the deal was back and is attempting to close the deal before the end of the month. A recent filing shows that Twitter requested details of communications between Musk and the US Securities and Exchange Commission regarding an investigation. Musk did not provide the requested information and claimed he had “investigative privilege”. Details of the investigation have not been disclosed so commentators are speculating on precisely what Musk is being investigated for. It is possible however, that this could add another twist to the ongoing saga between Elon Musk and Twitter.
7. ROYAL MAIL SLASHES JOBS
Royal Mail has announced that it will cut 10,000 jobs as losses ballooned to £350 million. The postal company blamed strike action for its poor finances along with lower volumes of parcels being sent. Royal Mail workers undertook strike action for eight days over the past few months over pay and conditions. The Communication Workers Union is seeking a pay rise for members in line with inflation. Royal Mail has offered an increase of up to 3.5%, if changed working conditions are accepted. CWU has not accepted the offer and more strikes are scheduled. Royal Mail says the strikes so far have cost the company £70 million.
The job cuts will be made through redundancies and other means. Around 6000 workers will be made redundant. For the remainder of cuts, the company will not replace leavers and cut temporary staff. Royal Mail employs 140,000 people.
8. NETFLIX LAUNCHES ADS SUBSCRIPTION PLAN
Netflix will launch its new subscription plans which include adverts in November. The plan will cost £4.99 per month, significantly cheaper than its standard £10.99 plan. Adverts will feature on up to five minutes per hour of viewing. The cheaper plan will suffer from a limited number of TV shows due to licensing restrictions. Up to 10% of shows currently available on Netflix will be unavailable on the ads plan. Users will also be unable to download titles on this plan. It is hoped that the ads plan will help generate improved revenue despite the platforms falling subscriber numbers. Netflix lost nearly 1 million subscribers in Q2 and investors’ confidence in the streaming giant is dwindling.
9. MARKS AND SPENCER SPEEDS UP STORE CLOSURES
Marks and Spencer is ploughing ahead with plans to shut 67 large stores within the next five years. This forms part of the previously announced plan to close 110 stores. Despite the closures, 104 new M&S Simply Food stores will open as the company enjoys steady growth in its food business. The larger department stores set to close offer all of M&S’s range but show “lower productivity”. Instead of targeting five years to close these stores however, M&S will aim to close them within just three years. With rising costs and a steady consumer shift to online shopping the retailer is keen to pull back on their large brick and mortar sites. M&S has not detailed how many jobs will be affected or in what locations.
10. OXFORD STREET STORES RAIDED
American candy stores on Oxford Street have been raided and £200,000 worth of counterfeit goods were seized. Over 14,000 items were seized from just two stores. Some of the products included illegal vapes and fake designer goods. This formed part of a wider raid on seven candy stores on Oxford Street. There has long been concern that the sites have been used for money laundering and tax evasions. Some 30 stores are being investigated for evading £8 million in business rates. Westminster Council had previously undertaken a raid on other stores, seizing £575,000 worth of counterfeit goods.
