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

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; Tesco & Unilever in price dispute, Snapchat plans IPO, HP & Lloyds announce job cuts and Amazon launch music streaming service.

Opinion articles of the week:

The Cabinet minister have warned that a hard Brexit to cost UK up to £66 billion a year. Click here for more.

Former Bank of England Governor Mervyn King has claimed that the plunge in the pound is a “welcome change” for the UK economy. Click here for more.

The Bank of England has claimed that EU cities cannot replace London as a financial centre. Click here for more.

 

1. TESCO UNILEVER PRICE DISPUTE

Issues surrounding the supply of leading brands including Marmite to Tesco have now been resolved, Unilever has said.

The supermarket giant and the UK’s largest food manufacturer had been locked in a battle over wholesale prices. Unilever had wanted to raise its prices by about 10% to compensate for the steep drop in the value of the pound.

But Unilever had to give some ground, the BBC understands. Brands including Hellmann’s Mayonnaise had been removed from Tesco’s website. Tesco had earlier on Thursday halted online sales of top-selling goods produced by Unilever such as Persil washing powder, Ben & Jerry’s ice cream and Marmite yeast extract spread.

The BBC understands that those products should be available on the Tesco website again in the coming days. Supermarket chain Asda said it too had successfully negotiated with Unilever. Supermarkets frequently renegotiate supplier prices, but it is unusual for a dispute to be made public.

Sterling has dropped by about 16% against the euro and 19% against the dollar since the UK’s vote in June to leave the EU. The sharp drop has left suppliers and retailers dealing with the effects of higher bills for imported goods.

Unilever is the UK’s biggest grocery manufacturer, but as many of its products are made outside the UK, it had argued it should be getting more.

Supermarket profit margins have already been squeezed by a long-running price war as the big established retailers try to stem the loss of market share to discounters such as Lidl and Aldi. (BBC News)

2. SAMSUNG LOSES $18bn IN SHARE PRICES AS GALAXY NOTE 7 PRODUCTION IS HALTED

Samsung has permanently ended production and sales of its Galaxy Note 7 smartphones after reports the device was catching fire, the company said on Tuesday, ending one of the most humiliating episodes in the electronic giant’s history.

Shares of the South Korean firm closed over 8 percent lower on Tuesday after the company asked its global partners to stop sales and exchanges of its exploding Galaxy Note 7. Samsung announced the shuttering of Note 7 productions after the close in South Korea. The company’s shares closed at 1,545,000 won with around $18 billion being wiped off the value of the company, according to Thomson Reuters data.

Samsung said on Tuesday that it was asking all carrier and retail partners around the world to stop sales and exchanges of the Note 7 while it investigates the handset’s battery problems. The firm is in the middle of a global recall in which it is replacing Note 7 handsets with new ones. But there have been reports of a handful of the replacement smartphones also catching fire, with one incident taking place on a Southwest Airlines plane.

Before the recall happened, analysts were expecting Note 7 shipments to total between 15 million and 19 million over the third and fourth quarter of 2016 and the first quarter of 2017. And the lost opportunity could total around 10.7 trillion won ($9.5 billion), based on 16 million units in foregone Note 7 shipments, according to Nomura.

Apple shares rally

Samsung’s loss could be Apple’s gain, according to analysts. Shares in the U.S. technology titan closed 1.74 percent higher on Monday on the hopes that Samsung customers might defect.

“Most of them will go to Apple. Those are premium customers who prefer a premium brand,” Neil Shah, research director of devices and ecosystems at Counterpoint Research, told CNBC by phone, adding that Samsung shipments are likely to fall for 2017.And the recall saga could also weigh on Samsung’s broader portfolio of devices, which includes its flagship Galaxy S7 and S7 Edge. Analysts said that the loss of reputation with this could impact the upcoming flagship Galaxy S8 which is set to be released in the first quarter of 2017. (CNBC)

 3. SNAPCHAT

Snapchat is preparing for a “mega unicorn” flotation on the stock market that could value the five-year-old mobile app known for its disappearing photos at as much as $25bn.

The company behind the app, which its 26-year-old founder Evan Spiegel created at his Stanford University fraternity house in 2011, is said to have appointed Wall Street banks Morgan Stanley and Goldman Sachs to lead its initial public offering (IPO) on the New York stock exchange as early as March 2017.

If the Los Angeles-based firm goes ahead with the flotation it will be the biggest technology IPO for years, and could pave the way for other bigger tech firms to go public. There are a string of “mega unicorns” companies, defined as those valued at more than $10bn, looking to realise their founders’ and investors’ wealth by floating on the stock market. Among those waiting in the wings are Uber (which was last valued at $68bn) and Airbnb (worth $30bn at its last investment round).

The flotation of parent company Snap Inc, which was valued at $18bn at its last funding round, will be the largest social media IPO since Twitter floated in November 2013. Since then Twitter has suffered, with its shares falling from a high of $69 to $17.80 on Thursday. The 140-character messaging company has been struggling to find itself a buyer as it fails to build revenue and grow its user base.

A Snap flotation would turn Spiegel and co-founder Bobby Murphy into multi-billionaires. At a $25bn valuation the founders’ stakes in the company, which recently changed its name to Snap Inc as it moves away from chatting to photography, would be worth almost $4bn each. It would vindicate Spiegel’s decision to reject a $3bn takeover by Facebook in 2013, when Snapchat had yet to make any revenue.

Since then Snapchat has grown its daily user base (of mostly teenagers and young adults) to 150m, and hopes to generate advertising revenue of more than $350m this year, a big increase on the $59m it earned last year as it further explores partnerships with brands including Burberry, Tiffany and KFC.

The firm recently launched a new service, called Snap Audience Match, that lets marketers match consumers’ email addresses and phone numbers with Snapchat’s user data in order to deliver targeted ads.

The appointment of a suite of banks to prepare for an IPO, which also including Barclays, Credit Suisse, JP Morgan, Deutsche Bank and Allen & Co, was earlier reported by the Wall Street Journal and Bloomberg. (The Guardian)

4. TAXES: UBER & FACEBOOK

Uber

Uber’s main British business paid only £411,000 in tax last year while the commission fees from thousands of drivers in the UK disappeared into a controversial tax structure in the Netherlands.

The latest accounts for Uber London Ltd show the UK company’s turnover doubled to £23.3m last year, but all of this income was earned by providing unspecified “support” to other companies within the taxi-app group, and not from driver commissions.  After deducting expenses, this small subsidiary, which employs 105 staff, made a profit of £1.8m and paid tax of £411,000.

Meanwhile, accounts for the company’s international sales hub in the Netherlands reveal that commissions from drivers in London and scores of other cities around the world were booming in 2015, pushing revenues up to $520m (£420m).

This was more than seven times the figure for 2014. Passengers pay their fares directly to drivers, who automatically hand over a commission fee to Uber that ultimately appears in the group’s Dutch accounts.

Uber International BV is one of a handful of companies in the Netherlands that together form the core of the group’s complex tax planning arrangements, helping minimise its tax bills around the world. (The Guardian)

Facebook

Facebook’s UK business generated an £11.3m tax credit last year, despite the world’s largest social network making a global profit of $6.19bn (£4.97bn), according to the latest company accounts.

The credit at Facebook UK Ltd can be offset against future tax bills and is likely to raise further questions about whether the $370bn US company is paying its fair share towards Britain’s public finances.

Until April, all Facebook’s UK advertising sales were routed through its operations in Dublin, reducing the UK tax bill. Activities at Facebook UK, meanwhile, were confined to selling “sales support, marketing services and engineering support” to other companies within the Facebook group.

But in that month, Facebook’s UK sales activity was transferred from Dublin to London, following the then chancellor George Osborne’s introduction of a punitive rate of tax for multinationals deemed to be artificially shifting British sales overseas.

Ahead of the change, turnover at Facebook UK Ltd doubled in 2015 to £210m, but this did not include a penny of the hundreds of millions of pounds in sales income that the wider group is estimated to have received from British advertisers.

Losses for Facebook UK increased from £28.5m to £52.5m in 2015. As a result, the accounts showed that Facebook UK ended the year with a tax credit of £11.3m, compared with a tax bill of £4,327 in 2014. The company reported a £4.2m tax charge for 2015, as well as £15.5m of deferred tax credits, linked to staff share awards. Last year, Facebook UK paid employees £71m in share awards.

The accounts show that Facebook UK expanded dramatically last year, doubling staff and turnover, in advance of the group abandoning its controversial tax structure for British advertising sales. The number of people working for the business grew from 362 to 682 in 2015, including the addition of 200 staff within its software engineering team. Since then, a spokesman for the company said headcount has grown further, with more than 1,000 people employed by Facebook in the UK. (The Guardian)

5. HP ANNOUNCES A FURTHER 4,000 JOB CUTS  

HP told analysts during its HP Securities Analyst Meeting that it isn’t finished shrinking the company’s workforce. It still plans to cut another 3,000- 4,000 jobs over the next three years.

The company also told Business Insider in an emailed statement:

“As part of our plan, during the next three years, we expect to implement both labor and non-labor restructuring activities, including 3,000 to 4,000 people exiting the company between FY17 and FY19. The range is related to the outcome of key outsourcing decisions. HP has strong record of success in placing employees in outsourced roles to mitigate the headcount number.”

HP is the PC and printer company created after HP split into two companies in November 2015. Just before the split the company said it planned to trim 3,000 jobs in 2016, a goal its CEO Dion Weisler confirmed to analysts in February. This will be an additional up to 4,000 jobs over the ones cut in 2016, the company said.

Prior to the split, HP had years and years of layoffs, cutting its workforce by more than 55,000 people, since 2012.

Since the split, both companies have continued to shed workers. At one point, the combined company employed about 300,000 people. (Business Insider)

6. LLOYDS BANK CUTS 1,200 JOBS

Lloyds Banking Group announced plans to axe another 1,230 UK jobs as it progresses a restructuring programme aimed at cutting costs and improving returns.

The job losses will fall across the bank’s group operations, retail, customer products and marketing, finance and risk divisions, and affected staff are being briefed by their line managers.

“Where it is necessary for employees to leave the company, it will look to achieve this by offering voluntary redundancy,” Lloyds said. “Compulsory redundancies will always be a last resort.”

The Unite union branded the job losses as “horrific”.

Lloyds announced in July it would be cutting a further 3,000 jobs and closing an additional 200 branches amid a more testing economic environment caused by Britain’s vote to quit the European Union.

So far this year, Lloyds has already said it would cut about 4,000 positions from its 75,000-strong workforce and has closed nearly 100 branches this year. The bank said its cuts programme is part of a streamlining package first announced in October 2014.

The UK government owns around 9% of the bank, which had to be rescued during the financial crisis. Last week, the government ditched plans to sell its remaining stake in Lloyds to members of the public, blaming market volatility. Chancellor Philip Hammond said the stake will instead be sold through a “trading plan”, with small tranches of shares sold to institutional investors. (IB Times)

7. ASDA EMPLOYEES MAKE PROGRESS IN £100  MILLION EQUAL PAY CASE

A landmark employment tribunal case has ruled that thousands of lower-paid female workers can proceed with their claims for equal pay against Asda in the UK’s biggest-ever private sector equal pay case.

The decision by the employment tribunal in Manchester will allow more than 7,000 female staff members who work in Asda stores to compare themselves to higher-paid men who work at warehouses.

If the claims are successful, female workers could collectively recover more than £100m in back pay going to 2002, as well as get pay rises in the future. The women feel they are paid less than their men colleagues, despite their roles being of equal value.

Lauren Lougheed, a lawyer in the employment team who is representing the claimants, said the judgment was a “dramatic victory” for workers.

She said: “Asda tried to argue that because the shops and distribution centres were in different locations, with different pay arrangements, that Asda could pay the men what they like.

“However, the employment tribunal found that Asda, the employer of both men and women, could have made sure that there was equal pay between men and women if they wanted to, but chose not to.”

“This judgment will have far reaching implications on other supermarket equal pay claims including those we are bringing on behalf of about 400 Sainsbury’s workers who are in a similar situation.”

Asda responded that it will continue to strongly dispute the claims, adding the outcome of the tribunal on Friday was a “technical issue” and did not “determine the eventual outcome of the case”. (The Independent)

8. AMAZON LAUNCHES MUSIC STREAMING SERVICE

Amazon will give Spotify and Apple a run for their money in the world of music streaming with the launch of a long-rumoured streaming service.

Amazon Music Unlimited will offer access to music for as little as $3.99 (£3.26) per month in the US and is incorporating the service into its Prime offering, which already gives customers a vast array of services such as delivery and video streaming.

For users not signed up to Prime, it will be priced at $9.99, exactly that of Spotify and Apple Music. That will go down to $7.99 for Prime subscribers, while the $3.99 price is reserved for those subscribing via Amazon Echo, its smarthome speaker with AI voice assistant.

The addition of music streaming to Echo adds another string to its bow in a bid to create the smart home of the future as it faces new competition from Google which last week launched its own voice activated home speaker.

But, by wrapping it up under the Prime banner at a cheaper price, it’s just another reason for people to sign up to the monthly subscription service which is priced at £79 per month in the UK and includes a host of benefits.

It will also launch a family subscription in the coming months, letting a number of different users sign up collectively for less – $14.99 for six people. That’s the same as Spotify and Apple Music.

The service is initially available in the US only, but will roll out to the UK, Germany and Austria by the end of the year.

For more on the new service and how Amazon Music stacks up against its competitors click here. (City A.M)

9. PURE GYM ABANDONS IPO PLANS

Britain’s largest gym chain will pull its planned London listing tomorrow after concerns from board members over challenging initial public offering market conditions.

Pure Gym had planned a £190m share sale and it is understood that the company had gathered sufficient investor interest for the proposed listing.

Although the company declined to comment, sources close to Pure Gym told City A.M. that company executives had become increasingly nervous about pushing the button on a listing given current market conditions.

The company, which is owned by funds who are advised by CCMP Capital Partners and Hermes GPE, announced last month its intention to float on the London Stock Exchange in a listing that would have been one of the largest offerings since the Brexit vote.

Last week Premier Asset Management announced its intention to list on the Aim market. Although there have been seven listings already during the third quarter of 2016, six of them have been on London’s junior stock exchange. (City A.M)

10. DRIVERLESS CARS BEGIN TESTING ON UK STREETS

Driverless cars began their first public trials in the UK last week.

The demonstration of the autonomous electric vehicles took place on the pavements of Milton Keynes.

These tests will be the culmination of an 18-month research project which involved virtually mapping the town and updating regulations for driverless vehicles.

US technology giants including Google and Uber have demonstrated their own driverless vehicles on public roads, but this system was developed in the UK by the Oxford Robotics Institute and one of its spinout companies, Oxbotica.

The system uses cameras and LiDAR detection technology to navigate a small electric car around the streets.

The Transport Systems Catapult, a not-for-profit research centre set up by the government which led the Milton Keynes trial, is developing an automated vehicle test and integration facility, which universities and start-ups will be able to use to develop driverless technologies. (Sky News)

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