The week’s news included; US stripped off AAA rating, Wilko on the brink of collapse, Adidas rakes in €400 million from Yeezy sales, Uber posts first ever profit.
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:
- City A.M. – Climate investors will flock to the EU if we keep dulling our green ambitions
- BBC News – What has gone wrong at Wilko?
- CNBC – The robots are coming — and the companies building them are looking for workers
- City A.M. – The Bank of England needs to stop rising interest rates to avoid a painful recession
1. US STRIPPED OF AAA CREDIT RATING
The US has been stripped of its AAA credit rating by rating agency Fitch. Credit ratings reflect a country’s creditworthiness and ultimately impact the cost of borrowing. The US now has a credit rating of AA+, one grade beneath AAA. Fitch attributed the downgrade to “steady deterioration” in governance standards over the past 20 years. It also expects the US to fall into recession later this year and notes an overall deterioration in the economy. AAA is Fitch’s highest rating and now only 10 countries hold this rating. The Secretary of the US Treasury Janet Yellen has criticised the move, calling it arbitrary.
2. WILKO ON THE BRINK OF COLLAPSE
High street retailer Wilko is on the brink of collapse. Wilko is preparing to call in administrators as it failed to find emergency investment to stay afloat. Discussions are ongoing with potential buyers and investors. Wilko has been hit by rising energy costs and increased interest rates. Last year, the retailer announced 400 jobs and was considering entering a company voluntary arrangement to help improve its financial position. Now, all 12000 jobs at its 400 UK stores are at risk. Wilko posted a £37m loss last year.
3. JD AVOIDS FINE OVER COMPETITION BREACH
The CMA has let JD Sports off the hook with regards to a breach of competition law with Leicester City FC. JD avoided getting fined for colluding with the club to restrict the sale of Leicester City football gear in the 2018/19 season. JD agreed with Leicester to stop selling their branded clothing for that season and not to undercut the club’s sale price going forward. This constituted a breach of competition law and the CMA fined Leicester City £880,000. JD however, reported the breach to the CMA. Last week the CMA concluded that JD would benefit from their Leniency Programme and receive immunity from CMA fines on this matter.
4. BOE RAISES INTEREST RATES
The Bank of England has raised interest rates for the 14th consecutive meeting. Interest rates now sit at 5.25%, up from 5%. The Bank of England keeps raising rates to battle inflation which remains stubbornly high at 7.9%. This is well above the Bank’s target rate of 2%. The Bank’s bosses have said that rates will not be cut until there is solid evidence that inflation is slowing.
The latest interest rate increase however, puts further pressure on households and borrowers as the cost of borrowing becomes more expensive. There is growing criticism that raising rates will hamper economic growth and push the UK into recession. Many analysts argue that the impact of a recession on UK households and the economy will be far worse than current inflation levels.
5. MR BEAST SUES BURGER CHAIN OPERATOR
Jimmy Donaldson, better known as Mr Beast, is suing the company running his fast food chain. Mr Beast is the world’s most popular YouTuber with over 172 million subscribers. In 2020, he opened a fast food chain, MrBeast Burger, in collaboration with Virtual Dining Concepts. Since then, there have been hundreds of negative reviews complaining that the food served at the outlet is “low quality” and “inedible”. Donaldson is now suing Virtual Dining Concepts for harming his brand by serving such poor food. Furthermore, some food is served in unbranded packaging and with ordered items missing. Donaldson is seeking to terminate his agreement with Virtual Dining Concepts. He is also claiming that he has not received any of the millions of dollars of generated income. Virtual Dining hit back at MrBeast claiming that his claims are “meritless”. They also accused him of bullying tactics in an attempt to terminate his binding agreement.
6. ADIDAS SELLS OFF YEEZY STOCK
Despite the surrounding controversy, Adidas pulled in €400 million from the sale of Yeezy trainers following the termination of their relationship with Kanye West. This is the first release of Yeezy stock for sale since the breakup. Adidas cut ties with West in November after a series of offensive and controversial rants. More drops of the trainers are expected to follow. The sportswear retailer could have lost up to €1.2 billion had it decided not to sell the stock. Adidas has however pledged to donate some of the proceeds to anti-hate charities. Ultimately however, the sale will help bolster its balance sheet which has suffered immensely. Adidas now expects a €450 million loss for the year if it decides not to release any more trainers. This is a 35% smaller loss than initially anticipated in May. Adidas is still facing legal action from shareholders over their engagement with Kanye West in the first place.
7. KHAN EXPANDS ULEZ SCRAPPAGE SCHEME
Sadiq Khan has announced a major scrappage scheme designed to help Londoners adapt to the expansion of the ultra low emissions zone (Ulez). After defeating a legal challenge, Ulez will expand across the whole of Greater London from 29 August. Drivers of high emission cars will face a £12.50 per day charge to drive within Greater London. Khan has announced that affected drivers will now be entitled to a grant of up to £2000 to help with the cost of a new car. Drivers of wheelchair accessible vehicles will see grants available rise from £5000 to £10,000. Furthermore, small businesses and sole traders can get up to £21,000 to trade up to three vans. Charities can get up to £27,000 to replace up to three minibuses.
This follows pressure from Labour Party leader Keir Starmer to review the expansion of Ulez. Around 700,000 vehicles in London are expected to be non-compliant with Ulez pollution requirements. The cost of the scrappage scheme is roughly £160 million, which includes an additional £50 million to fund these changes. With the latest changes to the scheme coming in from 21 August, critics argue this is too little too late.
8. BA STAFF TO RECEIVE PAY RISE
BA staff are set to receive a 13% pay rise, bringing an end to. Around 24,000 workers will receive the pay rise and also a £1000 one-off payment. Pandemic pay cuts in 2020 have also been reversed. Pilots and management will be excluded from this pay deal. This brings an end to months of disputes between the airline and workers. BA also recently reached a deal with ground handlers to avoid a strike. The airline industry is bouncing back from the depths of the pandemic. IAG, the company that owns British Airways recently posted record half-year profits of £1.1bn, due to rising traveller numbers and higher fares.
9. UK FINTECH
The UK remains the top fintech hub in Europe despite a huge decline in investment. Fintech investment dropped 57% to £4.6 billion in the first six months of the year, according to KPMG. This is however, in line with a global slowdown in fintech investment in 2023. Globally, there were deals worth $52.4 billion in the first half of 2023, down 18% from the second half of 2022. This is primarily due to rising interest rates across the world making borrowing to fund deals more expensive. Furthermore, fears of recession have dampened demand for deals.
The UK still remains the most attractive for fintech investment and brought in more investment than any other region in Europe. In fact, UK fintechs accounted for more than half of all of Europe’s investment.
10. UBER POSTS PROFIT
Uber has posted a profit for the first time in its history. The ride-hailing giant’s operating profit reached $326 million in the second quarter. This was thanks to a huge 22% boost in customer trips compared to last year. Customers worldwide took 2.3 billion trips using Uber in the three months to July. Drivers are also making record earnings too, collectively making $15.1 billion in the quarter. This profit compares to a $713 million loss in the same period last year.
