The week’s news included; BlockFi collapses as FTX fallout continues, TotalEnergies scraps £100m UK investment due to windfall tax, Savage X Fenty settles consumer protection lawsuit for $1.2m, Shein overtakes Zara as most popular retailer.
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 Guardian – The reality of Brexit is biting hard. Poor people are suffering most – and now everyone can see it
- Retail Gazette – Joules: What went wrong?
- City A.M. – Britain needs more safe and energy efficient homes, but targets miss the point
- CNBC – Why labor economists say the remote work ‘revolution’ is here to stay
1. GOOGLE TO APPEAL €4BN EU ANTITRUST FINE
Google has announced that it will appeal its record €4.34 billion EU antitrust fine. In 2018, the tech giant was found to have breached competition law by agreeing exclusive pre-installation of Google apps including, Search, Chrome and Youtube, with manufacturers of Android phones. This unlawfully reduced choice for consumers in the mobile search engine market. In September 2022, the EU General Court heard Google’s first appeal and reduced the fine by 5% to €4.13 billion. Google has said it would now appeal to Europe’s highest court, the European Court of Justice. It rejects the claim that it harms competition and says “there are areas that require legal clarification” by the ECJ. The tech giant said that through its Android system it has supported thousands of successful businesses in the mobile space, boosting competition in the market.
2. BLOCKFI COLLAPSE
Cryptocurrency lender BlockFi has fallen into bankruptcy due to its heavy exposure to the FTX collapse. FTX had bought BlockFi earlier this year after it faced financial troubles at the outset of the current cryptocurrency market downturn. Consequently, FTX was BlockFi’s second largest creditor, and it owes the exchange $275 million. With FTX now under bankruptcy protection, the company will be seeking to recoup losses from debtors, including BlockFi. BlockFi has now filed for Chapter 11 bankruptcy, protecting itself from creditors and safeguarding its customers. There is concern that the collapse of FTX will affect many other firms and lead to a market meltdown. So far however, the wider impact has not been as severe as feared. Check out our article exploring the FTX collapse.
3. TOTALENERGIES CUTS NORTH SEA INVESTMENT
French oil and gas Giant TotalEnergies has announced that it will slash £100 million of new spending in the UK North Sea following the extension of the windfall tax. In the Autumn Budget, the Energy Profits Levy was hiked from 25% to 35% until March 2028. This was designed to help plug a £50 billion blackhole in government finances and fund support for households through the cost of living crisis. The levy was applied to oil and gas giants as they’ve enjoyed bumper profits due to the war in Ukraine. TotalEnergies made net profit of $6.6 billion in Q3 of 2022. The company is one of the largest oil and gas producers in the North Sea in Scottish waters.
The Autumn Budget has triggered a reaction from energy producers in the UK. BP and Shell have also announced that they will review their investments in the North Sea. SSE has said it will review its green projects due to the new levy on electricity generators. Many oil and gas industry insiders have said the new tax hikes are “extreme” and given the rapid changes in tax burdens pose a threat to the industry. The reaction shows the difficult balancing act governments must make when raising taxes to raise funds.
4. RING FENCING RULES RELAXING
The UK government is set to relax ring-fencing rules meaning banks will not be required to separate their retail and investment banking services so strictly. Ring-fencing was initially introduced after the 2008 financial crisis. It was designed to prevent retail banking customers from being exposed to risky investment banking failures, as happened in the run up to the crisis. Retail banking includes operating savings accounts and giving small businesses loans whereas investment banking includes activities like brokerage services, underwriting and facilitating mergers and acquisitions. Banks are required to keep their retail businesses financially, organisationally and operationally separate from their investment banking businesses.
The government now looks to change these rules. The largest banks are still likely to face strict ring-fencing rules but smaller lenders may see these rules relaxed or removed. This forms part of the government’s post-Brexit deregulation strategy to encourage investment and business in the UK. Relaxation of the rules has long been requested by banks given the introduction of other measures, such as increased capital ratios, to prevent another financial crisis.
5. JOULES RESCUED BY NEXT
Next has bought collapsed retailer Joules out of administration. Joules fell into administration last month as sales have been hit heavily by the cost of living crisis and it failed to secure emergency funding to continue operating. Six years ago, Joules was worth £140 million when it floated and it acquired a new £20 million head office just last year. Last week however, Next bought a 74% stake in Joules for £34 million, saving the business from total failure. Under the deal, 1450 jobs will be saved across 100 Joules stores. 19 stores will be closed, seeing 133 jobs lost. An additional £7 million will be paid to acquire the Joules head office. Next will sell Joules branded products on its own online platform from 2024. Next is slowly emerging as a retail saviour as it also bought Made.com out of administration last month. It also bought a 44% stake in JoJo Maman Bebe in April.
Law firm Slaughter and May is advising Next on its purchase of Joules, while Shoosmiths has been advising Joules throughout the process.
HSBC has announced that it will close 114 branches in the UK. The bank blames a significant drop in footfall and an increased take up of online services. This trend is universal across retail banks and has been exacerbated by the pandemic. HSBC reported that footfall at 75% of the branches set to close have halved over the past five years. HSBC’s 327 remaining UK branches will receive new investment. HSBC had already announced 69 branch closures earlier this year. There are concerns however, that the rapid closure of bank branches is leaving vulnerable customers who can’t easily access online platforms without local banking services. Over 5200 bank branches have been closed since 2015.
This news came as HSBC announced that it would sell its Canadian business for £8.4 billion. Royal Bank of Canada is buying HSBC Canada and will take on its 130 branches and 780,000 customers. HSBC is looking to reduce its global presence. HSBC had already revealed plans to cut its retail banking arms in the US and France. The Guardian looks closer at the internal and external tensions facing HSBC.
7. BALENCIAGA SUING SET DESIGNERS FOR $25M
Balenciaga is suing production company North Six and set designer Des Jardins over its controversial ad campaign. Paperwork regarding a Supreme Court ruling about child pornography was left in one of the images produced for Balenciaga’s campaign.
This latest campaign featured a messy office space with paperwork scattered across a desk. One piece of paperwork, however, was the 2008 United States v Williams Supreme Court ruling which rejected the promotion of child pornography as protected free speech. The campaign was produced by North Six and Des Jardins. Balenciaga claims it had no knowledge that such paperwork was included and did not authorise this. They claim the designers have brought Balenciaga into disrepute by associating the brand with this ruling. They also argued that North Six and Des Jardins acted in a malevolent way at or at least, in extreme recklessness. Consequently, Balenciaga are seeking $25 million in damages.
Both Des Jardins and North Six. Des Jardins says the documents were sourced from a rental company, so they were not responsible for the images. Balenciaga was aware of this and selected the images for its campaign. Furthermore, Balenciaga staff were at the shoot and overseeing the set. North Six said they “did not have creative input or control over the shoot as they were not on set.
The luxury fashion house is already in hot water over a separate ad campaign that featured inappropriate images of children. The campaign featured children with teddy bears dressed in fetish clothing. Balenciaga accepted that this was a wrong choice, and a failure in assessing and validating images.
8. FENTY SETTLES CONSUMER PROTECTION LAWSUIT
Rihanna’s Savage X Fenty has settled a consumer protection lawsuit for $1.2 million. The fashion label allegedly misled consumers about its renewal prices and processes. VIP member customers were not informed about recurring charges and were not given options to consent for automatic renewal fees. Under California law, which Savage X Fenty is subject to, automatic renewal charges must be disclosed “clearly and conspicuously” by all consumer-facing businesses. Advertising watchdog TINA.org filed a complaint against Savage X Fenty with the Federal Trade Commission and three Californian County District Attorney’s Offices. Savage X Fenty agreed to make changes to their website and pay $150,000 in restitution to previous or current VIP members. The company will also pay $1 million in civil penalties and $50,000 in investigative fees.
9. SHEIN OVERTAKES ZARA
Shein has overtaken Zara as the world’s most popular fashion brand. According to data from money.co.uk, Shein is the most searched fashion company across 113 countries across the world. Zara is the second most searched fashion retailer globally, securing searches across 26 countries. This illustrates Shein’s growing global presence. It’s cheap prices and strong marketing strategy has led to its meteoric rise. In 2021, the retailer giant turned over $16 billion and earlier this year, achieved a $100 billion valuation.
Shein has come under fire however, on a number of grounds. Shein produces over 300,000 new styles yearly. By comparison, the next highest retailer, Boohoo, produces just 18,000 new styles. Aside from the environmental impact of such a churn of fast fashion, investigations have alleged that its cheap prices are the result of inhumane working conditions. A recent report showed workers are paid 3p per garment and work 18-hour days. Workers can be docked two-thirds of their daily wages if they make a mistake or if garments are returned by customers.
10. FOUR DAY WORKING WEEK
Over 100 companies in the UK have permanently adopted a four-day working week without a reduction in pay. Four-day weeks were trialled during the pandemic to see whether a shorter week would lead to increased productivity and better employee health and morale. Employees would work between 32 and 35 hours without a reduced pay pack. It appears to have been successful as now more than 100 companies have implemented four-day weeks permanently. The initiative has been driven by the 4 Day Week campaign. The 100 companies which have signed up to the campaign include Atom Bank and marketing company Awin. Awin reported better customer service, employee retention and wellbeing following the change. Collectively, over 2600 workers are now on four-day weeks under the scheme. Another 70 organisations are currently trialling four-day weeks over six months.
Interestingly, the offer of a four-day week without a reduction in pay has been proposed as an alternative to a pay rise. With inflation topping 10% many employers can’t afford to increase wages by this amount. Advocates of a four-day week have pitched this as a solution. While a four-day week will take time to become the norm, it could certainly become much more common over the coming years.