Top 10 Stories of the Week! 14/11/16

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;  Google announces new UK headquarters, Snapchat begins IPO process, Three suffers cyber attack and Staples announces UK store closures.

 

Get our Top 10 Stories and insights straight into your inbox by subscribing to our mailing list here.

 

Opinion articles of the week:

  • Trump’s plan to rebuild America will be a lot harder to pay for than it sounds. Click here for more.
  • Ernst & Young say 83,000 City jobs could disappear if the EU takes a hardline post-Brexit. Click here for more.
  • Business Insider claims that Apple should buy Snap (owners of Snapchat). Click here for more info.

1. GOOGLE UK INVESTMENT

Google is to open a new headquarters building in London which could see 3,000 new jobs created by 2020. The news comes as a major boost to Britain’s technology sector. Sundar Pichai, the chief executive of Google, told the BBC that the UK was still an attractive place to do business.

He said open borders and free movement for skilled migrants were “absolutely” important to the success of the technology sector in the UK. It was Mr Pichai’s first European broadcast interview since he became chief executive last year.

Sources at the technology company also said if barriers were thrown up to skilled immigration following the vote to leave the European Union, some of Google’s investment could be at risk.

Turning to the “fake news” controversy in America – and choosing his words very carefully – Mr Pichai said that, at the margin, false stories about Donald Trump and Hillary Clinton could have affected the outcome of the US election as the margins were “very narrow”.

And that it was important that companies like Google and other social media businesses promoted “accurate” stories to their billions of users.

Although Google refused to be drawn on the cost of the UK investment, development experts said the new building in King’s Cross and the cost of employing thousands more staff was likely to put the figure at over £1bn. At present, Google employs around 4,000 people in the UK, a figure that could now rise to 7,000. The office space owned by Google in King’s Cross will more than double. (BBC News)

2. SNAPCHAT BEGINS IPO PROCESS

Messaging app Snapchat has filed confidentially with the Securities and Exchange Commission (SEC) for an initial public offering (IPO), sources familiar with the situation said on Tuesday.

The filing puts the Venice, California-based company one step further towards its IPO, which sources say could come as soon as March and value it at $20 billion to $25 billion, making it one of the biggest technology offerings in recent years. The Wall Street Journal also reported those details, and sources close to the situation confirmed the Journal report to CNBC.

Under the U.S. Jumpstart Our Business Startups Act, companies with less than $1 billion in revenue can secretly file for an IPO, allowing them to quietly test investor appetite while keeping financials confidential.

Snapchat started in 2012 as a free mobile app that allows users to send photos that vanish within seconds. It has more than 100 million active users, about 60 percent of whom are aged 13 to 24, making it an attractive way for advertisers to reach millennials.

Awash in venture funding, the company raised $1.81 billion in May, which valued it at about $20 billion, media reports said at the time. But investors worry that Snapchat’s advertising sales, which began last October, is the company’s only significant revenue source.

Snap in September starting describing itself as a camera company and earlier this month it debuted its $130 video-camera sunglasses. The glasses are equipped with a camera that connects wirelessly to a smartphone to take and send “snaps” — the company’s terms for video and photo messages sent on its app.  (CNBC)

3. VOLKSWAGEN TO CUT 30,000 JOBS

Volkswagen and its labor unions agreed to cut 30,000 jobs at the core VW brand in exchange for a commitment to avoid forced redundancies in Germany until 2025, a compromise which leaves the carmaker’s profitability still lagging rivals.

The turnaround plan announced on Friday will lead to 3.7 billion euros ($3.9 billion) in annual savings by 2020 and lift the Volkswagen (VW) brand’s operating margin to 4 percent that year, from an expected 2 percent in 2016. That target still remains below rival European carmakers such as Renault and Peugeot Citroen , which is targeting an operating margin of 6 percent in 2021.

VW, Europe’s largest carmaker, is seeking to move beyond an emissions-cheating scandal that has tarnished its image and left it facing billions of euros in fines and settlements. The cuts came with a management pledge to create 9,000 new jobs in the area of battery production and mobility services at factories in Germany as part of efforts to shift toward electric and self-driving cars.

Some experts argued the cost cuts were not deep enough. Spending on R&D and staff across VW’s automotive operations has been growing for years with the need to overhaul the cost base dating back to before the diesel emissions scandal broke 14 months ago.

With 610,000 workers globally, VW last year built slightly fewer vehicles than Toyota which has 350,000 staff. The German company has also been slow to cease production of unprofitable vehicles in its 340-model range.

VW’s labor leaders said management had agreed to avoid forced redundancies in Germany until 2025, a step which clears the way to cutting 23,000 jobs via the more palatable methods of buyouts, early retirements and reducing part-time staff. (Reuters)

4. THREE MOBILE SUFFERS CYBERATTACK

More than 133,000 customer accounts were breached by fraudsters in an attempt to upgrade and steal phones to sell them on, Three has said. The UK mobile phone network provider said no financial information such as bank account details were accessed.

However, contract and billing data as well as details like job and marital status may have been obtained. Eight customers have been unlawfully upgraded to a new device and in total, 133,827 accounts were breached.

Dave Dyson, chief executive of Three, which has nine million customers, said: “We believe the primary purpose of this was not to steal customer information but was criminal activity to acquire new handsets fraudulently.” In a statement, Mr Dyson apologised and said that the company was contacting all customers concerned.

He said: “Once we became aware of the suspicious activity, we took immediate steps to block it and add additional layers of security to the system while we investigated the issue.”

This week, the National Crime Agency confirmed that three people had been arrested in connection with the data breach, including two men from Manchester and one man from Kent. All three have been released on bail pending further enquiries. (BBC News)

5. METRO BANK, DELOITTE AND SETL ARE TESTING A BLOCKCHAIN-BASED CONTACTLESS CARD

Metro Bank, Deloitte and blockchain startup Setl have created a card for making simple contactless payments such as buying a morning coffee, using the distributed ledger technology (DLT) in a trial that’s understood to be the first of its kind.

The card has been tested by 100 people as part of the City watchdog’s fintech sandbox and works in the same way as a contactless credit or debit card for users.  However, the technology bypasses clearing through a bank and the transaction appears instantly in both the customer’s and merchant’s bank accounts.

The firms believes it can also reduce the costs of fees associated with accepting the cards for retailers while being more secure than traditional cards.

The card works by users verifying who they are with Deloitte’s Smart Identity, a blockchain-based prototype for creating a digital identity. This works with Setl’s own blockchain, which uses a digital currency that is backed by Metro Bank deposits.

Setl believe the card has the potential to disrupt retail banking by making it easier for challenger banks to launch a card as they would not have to partner with clearing banks. Now, there are ambitious plans for further testing and a goal of early next year to launch a full product.

The project came about through the Financial Conduct Authority’s regulatory sandbox which is designed to let firms create and test new technology with a close eye from regulators. It last week revealed Setl was one of 18 firms which were successful in joining. (City A.M)

6. SHELL AXES GLASGOW JOBS

Shell is to axe its Glasgow operation with the loss of 380 jobs as a new report warns of a “boom/bust” cycle in the oil industry. The cuts are in response to the low oil price – which is already hurting the Scottish economy amid thousands of job cuts in North Sea production.

Shell said the decision to close its finance operation in Glasgow, which will take place by 2018, came about as it was taking “difficult choices” in order to remain competitive.

The oil market has suffered from oversupply over the past two years, with the price of a barrel of oil from more than $100 in mid-2014 to less than $30 at the beginning of this year. As a result, companies have dramatically cut investment in new projects.

But a new report from the International Energy Agency (IEA) warns that more money must be invested to avoid a swing back to under-supply in the market.

It says that if new project approvals remain low in 2017 it is “increasingly unlikely that demand … and supply can be matched in the early 2020s without the start of a new boom/bust cycle for the industry.”

Investment peaked at $780bn (£624bn) in 2014, dropping by $200bn (£160.5bn) last year, and is predicted to fall another $140bn (£112bn) this year, the IEA says. Approval of new conventional crude projects was the lowest since the 1950s, the agency said in its World Energy Outlook report. (Sky News)

7. TESLA SOLAR CITY MERGER

Elon Musk’s Tesla Motors Inc. officially moved beyond cars and became a clean-energy company Thursday, as shareholders overwhelmingly approved the acquisition of SolarCity Corp. The deal, valued at about $2 billion, will integrate the maker of all-electric cars and batteries with the installer of rooftop solar panels. More than 85 percent of Tesla shares voted in favor of the merger.

The deal, which sparked controversy over debt and corporate-governance concerns, is a win for Musk’s vision of Tesla as one-stop shopping for consumers eager to become independent of fossil fuels. Now comes the task of integrating two companies that have a track record of fleeting profits and frequent fundraising needs–not to mention thousands of employees.

Tesla plans to leverage its formidable brand and retail network with SolarCity’s network of rooftop solar installers and recently announced a “Solar Roof” product. It’s not clear what role Lyndon Rive, SolarCity’s chief executive officer and Musk’s cousin, will play in the combined company.

It wasn’t clear when the merger will officially close. SolarCity is expected to cease being a stand-alone brand, as Tesla markets its Powerwall battery for the home as a Tesla Energy Product.

During the course of his five-month campaign for the merger, Musk revealed the solar roof product on the “Desperate Housewives” set at Universal Studios in Los Angeles last month. Musk said Thursday the product will be equivalent in cost, or slightly cheaper, than a normal roof and that installations will begin in volume in mid-2017.

Musk owns 21 percent of Tesla and 22 percent of SolarCity, making him the largest shareholder of both companies. He and Antonio Gracias, who also serves as director at both companies, recused themselves from a board vote on the takeover July 30.

Tesla rose 2.6 percent to $188.66 at the close Thursday, while SolarCity gained 2.9 percent to $20.40. At those prices, the all-stock deal values the solar company at $20.75 a share, a 1.7 percent premium over Thursday’s closing price. The premium was about 35 percent when first announced in late June. (Bloomberg)

8. SSE PROMISES WINTER ENERGY PRICE FREEZE

Big Six energy provider SSE has become the first major supplier to promise a price freeze this winter, capping them at their current levels until “at least” next April.

SSE supplies energy to more than 8m customers in Britain and Ireland. The group’s statement on household gas and electricity prices follows recent speculation that the UK’s major suppliers have been eyeing up price freezes for the first time in three years.

A rise in wholesale prices make household energy hikes more likely in the New Year, switching site Energy Helpline said earlier this week, and average energy prices have risen seven per cent in two months this autumn, according to MoneySuperMarket.

MoneySavingExpert knocked SSE despite the pledge. “This may seem good news on the surface but anyone on SSE’s standard tariff is almost certainly already overpaying, possibly by £100s a year, so people shouldn’t see this as a message to rest on their laurels,” said Guy Anker, managing editor of MoneySavingExpert.

“The way to save is to urgently lock in to a cheap fix, with urgent being the key word. The price of the cheapest new customer deals is soaring – up for a typical household by £100/yr in the last 6 months.”

This week, research from price comparison site uSwitch found a third of working families were already struggling to foot their energy bills, despite there being no “major” price hikes for almost three years.

Shortly before SSE’s statement, renewable power firm Good Energy became the first supplier to guarantee it will not raise its gas and electricity prices this winter. The green energy provider, which has more than 72,000 electricity customers and 43,000 gas customers, has promised to freeze its prices until the beginning of March at the very earliest. (City A.M)

9. STAPLES UK STORE CLOSURES

Office stationery brand Staples will disappear from the UK high street after its US owner sold the struggling business.

Staples Inc, which had put its European operations under review in May to save cash after authorities blocked a merger with Office Depot, said the struggling UK operation was bought by restructuring specialists Hilco Capital for a “nominal sum”. It has over 100 stores in the country and employs more than 1,100 staff.

Hilco, known in retail circles for its rescue of HMV, said while it would phase out the Staples brand in the UK over the coming months it did not yet know whether there would be any impact on the workforce.

Hilco’s Paul McGowan said: “While retail in the UK has been challenged recently, a team led by retail veteran Alan Gaynor will work alongside the existing management team to build a plan for success for the business.”

Staples has been battling stiff competition from supermarkets and in the digital marketplace in the UK, where it has been offering a price match pledge.

The digital age has also been blamed for taking its toll on the business, which recorded a pre-tax loss of £5m in its latest annual accounts to January 2015. (Sky News)

10. ASDA QUARTERLY SALES FALL FOR 9TH CONSECUTIVE QUARTER

Asda has reported yet another sizeable drop in sales. The struggling retailer has posted a like-for-like sales drop of 5.8 per cent in the three months to the end of September.

This is the the ninth quarterly fall in sales in a row for the company which is suffering due to intense price competition from discount retailers such as Aldi and Lidl. The retailer has made some improvement, however. In the previous quarter, Asda’s sales fell by 7.5 per cent.

Phil Dorrell, partner at Retail Remedy, said that the company’s decision to skip Black Friday was “the right decision”, given the pressure that the retailer is currently under. “Given today’s results Asda will be praying for a ‘Christmas Made Better’,” he said.

“Sales performance behind competitors and slumping market share are no way to head into the golden Christmas quarter. By now Asda had promised a turn in fortunes thanks to Project Renewal, however an inward looking retailer will get the same results it’s always had.

“Steering clear of Black Friday again is the right decision, bringing focus on good value through everyday prices suiting the demographic rather than getting drawn into what has become a fortnight of margin erosion and bringing sales forward.”

Discounters are increasingly moving in on Asda’s territory; the retailer sits at the bottom end of the market, and is threatened by Aldi, which has ambitions to gobble up 10 per cent of the grocery market as a whole. (City A.M)

Be the first to comment

Leave a Reply