Top 10 Stories of the Week! 19/09/16

Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Click on the links for full stories.

This week’s news includes;  the cyber-hacking of Yahoo, Microsoft closing it’s London-based Skype office , Netflix‘s finance move into China and Volkswagen‘s continuing emissions scandal battle.

Opinion articles of the week:

  • How can students turn Brexit to their advantage when applying for training contracts? Click here for more.
  • The irony of the Brexit decision is that it will mean a lot more EU on the UK’s agenda. Click here for more.
  • Donald Trump still thinks he can reach 4% GDP growth. Click here to find out how plausible this claim is.

 

1. FED KEEPS INTEREST RATES UNCHANGED

Minutes from the Federal Reserve’s September meeting show the majority of policy-makers expect a rise in US interest rates by the end of the year. At its meeting, the Fed opted to hold rates between 0.25% and 0.5%. But three officials opposed the decision – the most dissents since December 2014.

The Fed said: “The case for an increase in the federal funds rate has strengthened,” but said it would wait for more evidence of economic progress.

Doug Duncan, chief economist for Fannie Mae, said: “There’s a pretty big dissent. There seems to be a pretty big discussion about the direction on rates. “It’s clear they want to raise rates in December if things don’t deteriorate.”

The Fed said US economic activity had picked up and job gains were “solid” in recent months. The US central bank said it saw near-term risks to the economy as “roughly balanced.” It was the first time it has used that wording since late last year, when it most recently raised rates. The Federal Open Market Committee had decided against raising rates “for the time being,” until there was more evidence of progress towards its employment and inflation objectives.

The committee said it expects inflation to remain low in the near term, “in part because of earlier declines in energy prices”, but that it would rise to the Fed’s 2% target over the medium term. Policymakers have been divided when the next rate rise should be, with stock market volatility, China’s slowing economy, and Brexit among its concerns. (BBC News)

2. YAHOO HACK

Yahoo says hackers stole information from about 500 million users in 2014 in what appears to be the largest publicly disclosed cyber-breach in history. The breach included swathes of personal information including names and emails as well as “unencrypted security questions and answers”.

It did not include any credit card data, the site said, adding it believed the attack was state-sponsored. In July, Yahoo was sold to US telecoms giant Verizon for $4.8bn (£3.7bn).

The FBI has confirmed it is investigating the attack. News of a possible major attack on the technology firm emerged in August when a hacker known as “Peace” was apparently attempting to sell information on 200 million Yahoo accounts.

Yahoo on Thursday confirmed the breach was far bigger than first thought. The data taken includes names, email addresses, telephone numbers, dates of birth and encrypted passwords. Yahoo recommended all users should change their passwords if they had not done so since 2014.

Verizon told the BBC it had learned of the hack “within the last two days” and said it had “limited information”.

The company added: “We will evaluate as the investigation continues through the lens of overall Verizon interests, including consumers, customers, shareholders and related communities.

Reuters reported three unnamed US intelligence officials as saying they believed the attack was state-sponsored because it was similar to previous hacks linked to Russian intelligence agencies. (BBC News)

3. MICROSOFT 

Skype UK office to close

The UK office of one of the world’s leading technology firms, Skype, is to close, it has been reported. According to the Financial Times (FT), the move by its owners Microsoft is likely to lead to the loss of many of the nearly 400 jobs at the London HQ.

The reports that one of the most valuable “unicorns” – those tech firms valued at more than $1bn (£768m) – in Europe is to scale down its presence in London, will come as a blow at a time when the UK is trying to position itself as an attractive option after the Brexit vote.

Asked to comment on the report, Microsoft confirmed that some “globally focused Skype” roles were at risk along with those at another of its businesses, Yammer, as part of a plan to move all London-based employees to its base in Paddington.

The news follows encouraging signs for the British technology industry, which was reported as hosting 18 of Europe’s 47 unicorns in June.

Russ Shaw, who served as a vice president at Skype until it was bought by the US-based technology giant for $8.5bn in 2011, said the move from its current base in Holborn was disappointing. (The Guardian)

Share buy back

US software giant Microsoft plans to buy back $40bn worth of its shares.

The firm did not say how long the repurchase scheme would last. Its previous buyback, also worth $40bn, was announced in September 2013 and is due to be completed by the end of the year.

Share buybacks tend to support a company’s share price and are popular with investors. Microsoft also announced that it was raising its quarterly dividend by 8%, to 39 cents a share. Microsoft shares rose 1% in after-hours trading.

Earlier this year Microsoft announced its biggest ever acquisition – the purchase of the professional networking website LinkedIn – for just over $26bn (£18bn) in cash. That was considered a high price for LinkedIn, which reported an annual loss of $166m.

Microsoft chief executive Satya Nadella said it was part of Microsoft’s transformation into a cloud computing business, providing a range of professional services to clients – including a social network to connect them to each other. (BBC News)

4. SAMSUNG WOES CONTINUE

Samsung has sold at least 1 trillion won (£683m) of shares in four technology companies to raise cash to pay for a recall expected to cost $1bn (£766m). That figure may be set to rise as new reports have surfaced in China of Samsung’s Galaxy 7 Note exploding. The fault had not previously been reported in the world’s biggest smartphone market.

Samsung has sold shares in Seagate Technology, a computer drive maker, chip maker Rambus, Dutch semiconductor manufacturer ASML and Japanese electronics firm Sharp Corporation.

A Samsung spokeswoman told Reuters that the total proceeds from the sales exceeded 1 trillion won. However, the number may be higher. Share documents seen by Reuters showed Samsung was selling about half of its stake in ASML for £518m. The company’s stakes in Rambus, Seagate and Sharp were worth a combined £349m based on closing prices on Friday.

Samsung Electronics and other affiliates of Samsung Group have been divesting from non-core operations as South Korea’s top conglomerate seeks to narrow its focus and secure more resources for its main businesses.

The news comes as reports emerged that the dangerous fault in Samsung Galaxy Note 7 smartphones may be more widespread than previously believed. Two of the devices have reportedly caught fire in China in what, if confirmed, would be the first such incidents in the world’s largest smartphone market.

Samsung said it was investigating one of the reported cases. The South Korean firm had earlier said Galaxy Note 7s sold in China were safe to use.  A user of Chinese social media posted messages on Sunday saying a friend’s Note 7 caught fire over the weekend. (The Independent)

5. LLOYDS  POST-BREXIT PLANNING

Insurance market Lloyd’s of London is working on “contingency plans” to ensure it can trade across Europe when the UK leaves the EU. Chief executive Inga Beale told the BBC that Lloyd’s may set up a subsidiary or branches in mainland Europe.

She estimates that 4% of revenues could be lost after Brexit because Lloyd’s would lose its licence – or passporting – rights to operate across the EU. The fallout from Brexit “is a major issue for us to deal with”, she said.

Lloyd’s, one of Britain’s oldest institutions, is the world’s leading insurance and reinsurance market and houses around 90 syndicates. It focuses on specialist markets, such as marine, energy and political risk, and this year insured the taste buds of a Cadbury’s chocolate taster.

Continental Europe accounts for about 11% of gross premiums written by the London market. Ms Beale told the BBC that Lloyd’s was now “focusing our attention” on maintaining its position in a post-Brexit landscape.

But Ms Beale said Lloyd’s had to respond. “It’s the lack of certainty for our clients. Business cannot hang around,” she said. “Boards are going to insist that they make plans [for life after Brexit]”

Her comments came as Lloyd’s reported half-year pre-tax profits of £1.46bn, up from £1.20bn for the six months last year. Despite the rise, premiums continue to be under pressure, said Lloyd’s chairman John Nelson. (BBC News)

6. VOLKSWAGEN

Volkswagen is facing €8.2bn ($9.1bn; £7bn) in damages claims from 1,400 German investors over its emissions scandal, a state court has said. The regional court in Braunschweig near VW’s Wolfsburg headquarters said it received 750 lawsuits on Monday alone.

A year ago, an investigation in the US found that VW had cheated emissions tests for diesel cars by using special software. VW faces a flood of actions and has set aside €16.2bn to cover the lawsuits.

The scandal broke after an investigation found that many Volkswagen cars being sold in America had software in diesel engines that could detect when they were being tested.

The so-called “defeat device” changed the performance of the engines accordingly to improve results. The German car giant admitted cheating emissions tests in the US and this summer agreed to pay $10.2bn to settle some of its US claims.

Earlier this month, Australia launched legal action against the carmaker and last week asset manager Blackrock and a group of institutional shareholders said they would sue VW for €2bn. (BBC News)

Fixing the problem

Just a tenth of UK Volkswagen vehicles fitted with software to cheat emissions tests were fixed in the year since the scandal broke, figures released by the manufacturer show. The controversy began in September last year when US regulators told VW to recall 482,000 diesel cars after discovering they contained illegal defeat devices.

The US Environmental Protection Agency said the software allowed cars to release fewer smog-causing pollutants during tests than in real-world driving conditions.

Volkswagen said 1.2 million vehicles were affected by the issue in the UK, which is equivalent to nearly one in 10 of the country’s diesel cars. This includes the VW brand, Audi, Skoda, Seat and VW commercial vehicles. Sales of Volkswagen cars in the UK have fallen following the scandal.

In June Volkswagen agreed to settle consumer lawsuits and government allegations in the US by taking steps that could cost the manufacturer £10.9bn. The company has been criticised over its decision to compensate customers in the US with up to $10,000 (£7,700) but not give anything to UK owners. (The Independent)

7. NETFLIX  STRUGGLES TO ENTER CHINESE MARKET

Netflix Inc has made no progress in its plan to enter the potentially lucrative Chinese market as it needs to obtain a government license, its Chief Executive Officer Reed Hastings said on Tuesday.

The video streaming service is seeking to grow its subscriber base abroad to counter slowing growth in its home market of the United States.

The producer of popular TV series such as Narcos and House of Cards has recently entered countries such as Turkey and Poland, but remains absent in the world’s most populous country. Content providers in China face stringent regulations and censorship challenges.

Asked whether Netflix had made any progress in entering China, Hastings told reporters: “No … we are continuing to work on it. Same (problem) it has always been – government permissions, we got to get a specific license in China.” (Business Insider)

Despite this, Netflix boasts far more superior statistics than its competitors with an estimated $6 billion content budget, and 83 million global subscribers. Hollywood reporter believes we could see the beginnings of Netflix monopoly on TV streaming services. Click on the link for more information. (Business Insider)

8. SANTANDER PULLS OUT OF TALKS TO BUY 300 BRANCHES FROM RBS

Santander has withdrawn from talks with Royal Bank of Scotland (RBS) to buy more than 300 branches from the state-backed lender, sources have confirmed.

The decision on the Williams & Glyn network comes as RBS faces a deadline to sell the business by the end of next year under European state aid rules. RBS remains 73% owned by taxpayers after its £45bn bailout during the financial crisis.

The FT reported that the talks stalled over price – with Williams & Glyn originally valued at £1.9bn. However it was understood that Santander’s offer remained on the table. The Spanish-owned Santander tabled a formal proposal to acquire the network in the summer. The RBS branches are due to be rebranded under the Williams & Glyn name next year.

Williams & Glyn would rank as the UK’s seventh largest bank, with about 1.7 million retail banking customers and 2% of the personal current accounts market. The collapse of talks is the latest twist in RBS’s six-year battle to offload the network.

A previous attempt to sell to Santander was aborted in 2012. The separation has already come at enormous cost to RBS, which has spent more than £1.2bn trying to create a robust technology platform for the branches. (Sky News)

9. CARD PAYMENTS OVERTAKE CASH

Cash is now being used for less than half of all retail transactions, new figures show. Debit cards are now increasingly being used even for lower value payments, the British Retail Consortium (BRC) said.

The change was partly the result of contactless technology. Figures for 2015 showed cash was used in just over 47% of all retail transactions, down from 52% the previous year. It was the biggest percentage point drop for five years and means almost 20% fewer transactions are made with cash than in 2011, the BRC said.

Its report looked at the methods of payments UK shoppers are using when buying goods in store and online. Figures last year from the Payments Council have already shown that, overall, cash had been overtaken by card and online transactions measured by value.

Tom Ironside, BRC director of business and regulation, said: “Though the use of cash has been in decline for some time now, this year it has seen a significant dip.

“Crucially, retailers are seeing cash used in under half of all transactions for the first time, marking a real watershed in the payments landscape.

“However, cash remains an important payment method for many customers and will be with us for years to come”. (Sky News)

10. BERNARD MATTHEWS ACQUIRED SAVING 2,000 JOBS

Struggling turkey producer Bernard Matthews has been gobbled up by food industry tycoon Ranjit Boparan in a deal saving 2,000 jobs. Trade union Unite gave a cautious welcome to the move but a senior MP is calling for pensions regulators to scrutinise the implications for the company’s retirement scheme.

The Norfolk-based company was sold by private equity owners Rutland Partners on Tuesday evening, a day after the deal was revealed by Sky News.

A statement from the new owner said the deal ensured Bernard Matthews was well-positioned for growth.

Frank Field, the Labour MP who chairs the Commons Work and Pensions committee, has called for the Pensions Regulator to look into the takeover. That came as Sky News revealed that it was set for a pre-pack administration.Such deals involve a buyer being lined up to take on a company’s assets, but without liabilities such as its pension deficit.

That means current and former employees seeing their retirement payments cut as the pension scheme passes into the hands of the Pension Protection Fund (PPF) lifeboat.

Known for its “Bootiful” advertising catchphrase, Bernard Matthews has been lossmaking for years. The company, which was put up for sale in June, is named after its founder, who in 1950 set up the business by buying 20 eggs and a second-hand incubator. It now operates across 50 farms and breeds, raising and processing more than seven million turkeys in the UK annually. (Sky News)

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