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European Edition
10th June 2021
FTSE firms call for audit reform delay
Over two-thirds of senior finance professionals from UK-listed firms believe the government should delay implementing reforms to audit and corporate governance by two years. The survey by audit technology firm Galvanize found a key reason for the demand was that organisations needed to invest more in technology to keep up with UK audit reform, anticipating that this would take more than two years to fully implement. The UK government’s department for Business, Energy and Industrial Strategy (BEIS) published the consultation white paper for reform of audit and corporate governance in March after reviews by the Competition and Markets Authority (CMA), Sir John Kingman and Sir Donald Brydon each recommended an overhaul. “With or without a delay in this reform, there’s no question that Brexit and the pandemic have already strained business and this will only add further pressure,” observed Keith Fenner, international managing director at Galvanize, adding “Organisations must now invest in technology to create a strong foundation of controls, leading to better visibility of risk, reduced failures, and better overall performance to help drive our collective economic recovery.”
Fierce competition for workers drives pay surge for top talent
Pay across key UK sectors, including construction, hospitality, engineering and pharmaceuticals, is up by an average of 13% so far this year compared with a year ago, according to recruiter Manpower Group. The company said competition for top talent is so intense that two in every five job offers are being met by a successful counter-offer by the candidate’s current employer. Jason Greaves, of Manpower, said: “The boom in hiring means the UK, in a lot of skillsets, is now facing an acute talent shortage. Even pre-Covid there was already a skills shortage in engineering, procurement and driving, and that has been exacerbated now. We’ve never seen this level of pay rises before. We’ve had skills shortages before, but the organisation's grasping for talent now is as great as it has ever been.” The HR industry itself is facing pressure, with earnings growing by 5% or more as recruiters require more staff to cope with increasing demand.
Over half a million people in rich countries lost their jobs in April
More than half a million people in rich countries became jobless in April as the economic fallout of the pandemic continued, according to the latest data from the Organisation for Economic Cooperation and Development (OECD), which reported that the joblessness rate in the OECD’s 30 member states rose to 6.6% during the month, from 6.5% in March. The total number of unemployed in OECD countries reached 43.781 million in April, up by 722,000 from the previous month.  The jobless population in seven major countries - Canada, United States, France, Germany, Italy, Japan and the United Kingdom - increased by 234,000 to 21.7 million. The global economy is expected to grow faster this year following the rollout of COVID-19 vaccines and fiscal stimulus in major economies, the OECD said. “Global economic growth is now expected to be 5.8% this year, a sharp upwards revision from the December 2020 Economic Outlook project of 4.2% for 2021.”
Full picture on gender pay gap in Autumn
Analysis by PwC shows that gender pay gaps within UK businesses are continuing to shrink, from an average gap of 14.3% in 2018 to 12.5% in the year to the end of April. Average gender bonus gaps have also narrowed, to 33.6% from 37.6% since 2017. However, more than three-quarters of firms delayed reporting their latest data after the government's Equalities Office granted businesses a six-month extension earlier this year. Katy Bennett, inclusion and diversity director at PwC, said: "We know from our own research that women are more likely than men to have lost their jobs or experienced reduced hours or pay as a result of the pandemic and also to be more fearful for their future job security. In reality, with so many companies still to disclose their gender pay gap, it will only be after October that we get a true picture of this year's reporting. This data will also likely give us a much richer picture of the impact that the pandemic has had on women compared to men."
Pimlico Plumbers' boss says “No jab, no job”
Charlie Mullins, the chairman of Pimlico Plumbers, has told new applicants they must have had at least one COVID-19 vaccine to be eligible for a job. Mr Mullins decided to go ahead with the policy after speaking with lawyers. He said: “This is the first time since the pandemic began that our recruitment ads will make it clear to anyone applying that they must have had at least one jab. I know there are critics out there painting this as a human rights issue, but all I want is to ensure both our people and our customers are safe and to give them added confidence in this business.”
Tax reforms result in a net loss for the UK
Analysis by Tax Watch contends that the G7 agreement on a global minimum corporation tax rate will see lower UK tax bills for US tech giants. The think tank concluded that the tax rate for Amazon, Facebook, Google and eBay from Pillar One – which is aimed at making firms pay tax in the countries where they have users - would be below or at the same level as their current UK tax liabilities. But with the local Digital Services Tax removed, the overall effect would be a tax cut. Pillar Two - the 15% global minimum corporate tax rate - will enable the UK to collect more tax from its own large corporations, but will have no impact on US-based companies, Tax Watch argues. Tax Watch is a UK charity that says it is "dedicated to compliance and sound administration of the law in the field of taxation." Its backers include Julian Richer, of Richer Sounds, and James Timpson, of the eponymous shoe repairer. 
Hospitality will be slowest sector to recover
The hospitality sector will need until the second quarter of 2023 to recover fully, according to the British Chambers of Commerce (BCC). This is over a year longer than the wider UK economy, which is expected to return to its pre-COVID-19 size by the first quarter of next year. Manufacturing, however, would recover more quickly, the BCC said, returning to its pre-crisis size by the end of this year. The BCC said the UK economy would expand by 6.8% this year, assuming the government sticks to its road-map for reopening. This is a less optimistic forecast than the Bank of England, which expects growth of 7.25%.
HMRC set to recover £1bn of fraudulent furlough cash
HMRC has indicated that in excess of £1bn of fraudulent or mistakenly claimed furlough cash is set to be recovered over the next two years. More than £60bn has been claimed by employers since the introduction of the scheme in March last year. Janet Alexander, an official at the tax office, said authorities will launch a small number of criminal investigations relating to serious fraud. It comes after HMRC chief Jim Harra said in September that the amount of fraudulent or mistaken furlough claims could amount to as much as £3.5bn.
Brussels demands Germany recognise supremacy of EU law
The European Commission has retaliated after Germany’s constitutional court ruled that the European Court of Justice (ECJ) had overstepped its powers by backing the European Central Bank’s quantitative easing and bond-buying last May. Brussels has now started infringement proceedings against Germany demanding case law is changed to recognise the primacy of the ECJ. The ruling by Germany’s federal constitutional court established “a serious precedent” that other EU member states could use to challenge the supremacy of the ECJ over national courts, the commission said. A commission spokesman observed: “The German courts thereby deprived the judgment of the European Court of Justice of its legal effect in Germany, breaching the principle of the primacy of EU law," adding that the decision by the German court was a “violation of fundamental principles of EU law,” even though the ruling was resolved without stopping the ECB’s efforts to stimulate the eurozone economy.
Woman wins case over headphones at work
A woman has won a case over using headphones to listen to music at work. A judge at an employment tribunal ruled that by not allowing Misbah Hanif to listen to music, her bosses “deprived her of a coping mechanism” that helped manage her anxiety. “The disadvantage was more than minor or trivial because anxiety had the potential to affect [her] productivity at work, as well as her mood,” observed employment judge Adele Aspden. Hanif, who worked as presenting officer in the Department for Work & Pensions’ office in Stockton, Teesside, is now set to receive compensation. Employment tribunal rulings do not create legal precedents.
LME scraps plan to close Ring
The London Metal Exchange (LME) has bent to lobbying from dealers and dropped plans to close its historic Ring trading floor permanently. The Ring is Europe’s only remaining open outcry market and is used to set prices for industrial metals. It has been shut since March last year because of COVID-19, forcing the exchange to move to electronic trading. It will now reopen in September with official prices, which are fixed each day at lunchtime, to be set through open outcry; closing prices will be fixed at the end of the day using electronic trading.
Denmark cracks down on crypto-traders
Denmark is cracking down on crypto-traders after finding that two-thirds of local transactions made using cryptocurrencies aren't properly taxed. The Danish tax ministry says the country's century-old existing tax code isn't designed to deal with crypto-assets, including a heightened risk of fraud. The specific challenges that cryptocurrencies pose to taxation authorities are first of all to be defined, the ministry said, and then changes to legislation can be considered. Danish tax minister Morten Bodskov said the goal is to be “vigilant and ensure that our rules are up-to-date and limit errors and fraud.” About 16,000 people and companies in Denmark traded cryptocurrencies between 2015 and 2019; of those transactions, two-thirds weren't accompanied by an accurate tax filing.
Lenders want proof of private equity’s intentions
With ESG-linked loan issuance hitting $87bn during the first quarter, triple the amount over the same period last year, lenders are growing wary about relying on the word of borrowers that they are meeting ESG targets. Now, three industry associations that represent underwriters, law firms and asset managers in Europe, the United States and Asia have revised their sustainability-linked loan principles, requiring borrowers to obtain independent, external verification of their performance against the targets. "The biggest criticism we hear is the problem of having data to assess the situation," said Armin Peter, head of sustainable banking and global head of debt capital markets syndicate at UBS.
French replaces English as official EU language - for six months
A senior diplomat has told Politico that French will replace English as the European Union’s official ‘working language’ when France takes over the EU presidency in 2022. During France's first presidency since Brexit, Emmanuel Macron’s government intends to push the country's native tongue as the 'lingua franca' of Brussels. All high-level meetings of the Council will be conducted in French instead of English during the presidency, which will last six months. In addition to meetings, letters, minutes and notes will also be in French.

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