The week’s news included; Meta ordered to sell Giphy, Goldman drops plan for retail bank expansion, UK economic outlook downgraded, Kanye West buys Parler.
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:
- Charged Retail – The rise and fall of Asos: Has fast fashion lost its appeal?
- LawCareers.Net – What’s the supply chain crisis?
- City A.M. – Can anyone survive the cacophony of politics by Twitter and Whatsapp?
1. LIZ TRUSS RESIGNS
Prime Minister Liz Truss has resigned after just 44 days in office, marking the shortest premiership in British history. In her speech she noted that she could “no longer deliver the mandate” on which she was elected. Ultimately, she was the architect of her own demise. She and her former Chancellor, Kwasi Kwarteng, unleashed radical unfunded tax cuts, largely for the wealthiest, without warning. This spooked financial markets and caused the pound to crash, drew criticism from the IMF and forced the Bank of England to buy government bonds to prevent an economic collapse. From this point onwards, it was a political death spiral for Liz Truss.
A leadership election within the Conservative party is now underway. The new leader will be selected by the end of the coming week. Rishi Sunak, Penny Mordaunt and astoundingly, Boris Johnson, are all front-runners to replace Truss. Labour and other opposition parties are demanding a general election.
Commentators across the world have slammed Liz Truss and the Conservative Party for engineering this unstable political and economic environment. This will be the UK’s fifth prime minister in six years. We could even see yet another Chancellor, which would be the fifth in five months. Even a Russian Security Council official mocked Liz Truss, tweeting “Bye, bye Liz Truss, congrats to lettuce”. This makes reference to a lettuce that was placed on a live stream next to a picture of Liz Truss asking the question “Which wet lettuce will last longer?”. In just 44 short days, Liz Truss has done significant damage to the UK’s international reputation, and this won’t be repaired any time soon.
2. META ORDERED TO SELL GIPHY
Tech giant Meta has accepted defeat in its battle to acquire GIF platform Giphy. Meta bought Giphy for $400 million but the UK Competition and Markets Authority launched an investigation into the deal. The regulator expressed concerns that the deal would lessen competition in the social media GIF and display advertising market. Meta holds nearly 50% of the UK’s £7 billion display advertising market. Adding Giphy to the portfolio would give them too much dominance in the field. The CMA issued an order to sell Giphy in November 2021. After an unsuccessful legal wrangle and further review, last week, the CMA issued its final verdict against Meta and maintained its position. Meta has said it was disappointed in the decision but accepts it as the final verdict. Meta will now work with regulators to divest the business. Check out our article exploring the decision.
3. INFLATION HITS NEW HEIGHTS
Inflation in the UK spiked to 10.1% last month, raising fears of significant interest rate hikes. September’s inflation figures are up 0.2% from August. This was largely driven by a huge 14.5% increase in food and drink prices compared with the same month last year. The market chaos stemming from the mini budget along with these high inflation figures is putting increasing pressure on the Bank of England. The Bank of England will continue to raise rates to combat inflation and it is expected to increase them to 3.25% at its next meeting. Households are already facing dramatic increases in mortgage rates so further rises could spark a housing crisis and a deep recession. The new Prime Minister certainly has a huge job on their hands.
4. BARCLAYS FINED £50m
The Financial Conduct Authority has fined Barclays £50 million for failing to disclose fees paid to Qatari investors during the 2008 financial crisis. Barclays was one of the only banks not to receive a bailout during the crisis and questions were raised over how this was achieved. It emerged that Barclays had struck a multibillion-pound investment deal with Qatar to secure emergency funding from the major Barclays shareholder. Barclays received £3.95 billion from Qatar but had sent £322m in hidden fees along with other discrete favourable benefits to Qatar through “bogus” advisory service agreements. Last week, the FCA confirmed that these fees were not disclosed to the markets or investors, contrary to regulations.
5. GOLDMAN SCALES BACK RETAIL BANKING PLANS
Goldman Sachs is pulling the plug on its retail banking expansion ambitions. Its retail bank, Marcus, has proved popular since its launch in 2016 but still ended up taking significant losses. Marcus secured 15 million customers and $110 billion in deposits. Marcus had even teamed up with Apple in 2019 to launch an Apple card account. This venture did not prove profitable and missed revenue targets. Goldman Sachs will now focus on servicing existing retail customers and will not seek to expand to the mass market. Goldman had hoped their digital bank would be a mainstream consumer bank, but CEO David Solomon confirmed this was no longer the plan and the bank would change its strategy, focusing on existing customers only.
6. NETFLIX EXPANDS PASSWORD SHARING CHARGE
Netflix has revealed that users across the world will be charged for sharing passwords from 2023. Users who share passwords will face an additional fee if accounts are accessed from locations outside of the primary users’ address. Netflix has already tried this in Central and South America, charging $2.99 for password sharing. The plans to roll this out globally were revealed in a recent shareholder letter.
Although Netflix has suffered a rough 2022, things may be turning around. Netflix gained 2 million subscribers last quarter, a welcome change after posting declining user numbers for the previous three quarters. Despite the good news, they still remain Disney Plus. Netflix was usurped as the largest streaming site earlier this year. It is hoped however, that the new cheaper ads-based option will help bring in many new users.
7. UK CREDIT OUTLOOK DOWNGRADED
Another credit rating agency has slashed the UK’s economic outlook. Moody’s has changed the UK’s outlook from “stable” to “negative”. This is an assessment of the UK’s credit worthiness and economic strength. Consequently, a poorer rating affects the cost of borrowing for governments from international markets. Moody’s blames the UK’s political instability and “persistent” inflation for the lower outlook. The UK did, however, maintain its Aa3 credit rating score, Moody’s fourth highest rating. Moody’s does not believe the UK’s current creditworthiness has declined substantially but believes that it could do so within the next 12 to 18 months. Moody’s downgrade follows a similar move by Fitch earlier this month.
8. LONDON SME COLLAPSES
53,000 small to medium enterprises (SMEs) have collapsed in London in 2022 alone. Rising labour and energy costs have hammered businesses and pushed many firms under. The figures mark a 40% increase from 2017. Collapses in London alone are double those in Scotland, Wales and Northern Ireland combined for 2022. Rising interest rates are likely to further exacerbate the financial woes of companies and depress economic growth.
9. KANYE BUYS PARLER
Rapper and entrepreneur Kanye West is set to buy right wing social media site, Parler, for an undisclosed sum. Founded in 2018, Parler proclaims itself as a platform for free speech. It recently found itself at the centre of controversy when it was used by perpetrators to plan and discuss the attack on the US Capitol last January. Apple and Google removed the site from their app stores and Amazon took down the site by banning their account with Amazon Web Services. After introducing content moderation, Parler came back online. The takeover deal with Kanye has been hailed as “groundbreaking” by Parler. The deal is expected to close by the end of 2022.
This comes as a range of organisations have been cutting ties with West as he makes increasingly controversial statements. West was banned from Twitter and Instagram following a recent tirade. JP Morgan and Balenciaga also cut ties with West over the matter. Check out our article exploring the legal discussion regarding censorship on social media.
10. ASOS LOSSES
Asos has posted a £32 million loss in the 12 months to August as the cost of living crisis bites. Shoppers have cut back on spending as inflation hits a 40 year high and fashion retailers often feel these spending changes most acutely. Asos’ loss compares to a £177 million profit last year. The retailer expects to make a loss over the next six months. Asos is now hoping to turn its fortunes around by rearranging its business model and supply chains. It remains optimistic that it can achieve a turnaround despite the challenging economic environment. Investors have been bearish on Asos, as its share price has tanked 80% this year alone. Last week however, Mike Ashley’s Frasers Group upped his stake in Asos to 5%, becoming the retailer’s fourth largest investor.