Risk Channel delivers the latest, most relevant and useful business intelligence to key decision makers and influencers, each weekday morning.

Google has struck a deal with the UK Government to provide free technology and training for civil servants, raising concerns about the security of UK data on US servers. The agreement, which aims to modernise public services, has been described as "dangerously naive" by Martha Dark, co-executive director of Foxglove. She questioned how the Government could hold US tech giants accountable after granting them access to sensitive data. Peter Kyle, the secretary of state for science and technology, stressed the importance of collaboration with Google, stating that, "wherever possible, UK technology companies—large and small—[will] get a fair shot" at public contracts. However, critics warn that this partnership could lead to dependency on major tech firms and compromise the UK's digital sovereignty.

 

The Guardian

Thompsons Solicitors Scotland has initiated a class action lawsuit against Marks and Spencer following a significant data breach in April, which compromised the personal details of millions of customers. Over 1,000 individuals have already joined the legal action, described by senior partner Patrick McGuire as the "fastest growing case" the firm has ever managed. The breach, attributed to "human error," has reportedly cost M&S around £300m and has left many customers feeling betrayed by a brand they once trusted. McGuire said: "The public are furious with M&S who they saw as a trusted brand while the hackers saw them as an easy target." M&S has acknowledged the incident and is cooperating with regulators, asserting that no usable card or payment details were extracted during the cyberattack.

 

The Scotsman

The European Union has voted to remove the United Arab Emirates (UAE) and Gibraltar from its "grey" list of countries with inadequate money laundering controls, facilitating trade negotiations with Abu Dhabi.

 

Financial Times

Mastercard-owned Vocalink has been fined £11.9m by the Bank of England for failing to comply with a regulatory order to address weaknesses in its risk management framework. The penalty marks the first instance of the Bank fining a financial market infrastructure firm. The Bank highlighted that Vocalink's ineffective controls and governance led to its non-compliance. However, due to the company's cooperation, it received a 45% reduction in the fine, which would have otherwise been £20m. Vocalink acknowledged the issues, stating: "Since then, we've delivered a number of improvements."

 

City AM

Ben Ramanauskas, a senior research fellow in economics at Policy Exchange, warns that the Office for Budget Responsibility (OBR) is overly optimistic about UK productivity growth, which could exacerbate the national debt crisis. The OBR projects that the national debt will exceed 270% of GDP by the 2070s, but if productivity growth remains at the current 0.5%, it could soar to 647% of GDP. Ramanauskas states: "The national debt is already far too high and is set to reach astronomically high levels." He calls for urgent government action to cut public spending, reform the welfare state, and boost productivity through infrastructure improvements and tax reforms. Without these measures, future generations will bear the burden of current spending habits.

 

City AM

The OECD warns that older Britons must work longer to prevent an economic slowdown. The UK's GDP per capita is projected to grow at just 0.41% annually until 2060, nearly half the previous rate. The OECD's Employment Outlook report states: "The United Kingdom is marked [from other rich countries] by the striking contribution that improving older worker employment could make." Currently, only 58% of those in their 60s are employed, and 15% of workers aged 55 to 64 experience job strain, which discourages them from remaining in the workforce. The report suggests that enhancing job quality and implementing policies to encourage the hiring of older workers could significantly improve employment rates. With the state pension age rising to 67, the UK aims to bolster its grey workforce, following successful examples from countries like the Netherlands. Retaining older workers could account for nearly 70% of potential improvements in the UK's overall employment rate.

 

The Daily Telegraph

Employers in the UK are preparing to increase prices for consumers due to higher payroll taxes, raising concerns about persistent inflation. A survey by S&P Global revealed that nearly 50% of firms intend to pass on the national insurance cost to consumers, while 36% plan to reduce headcount. The survey also indicated that over 20% of companies would cut back on investment spending. With unemployment rising to 4.6% and the economy shedding 250,000 jobs in the past year, the outlook for growth remains uncertain. Meanwhile, the Institute of Chartered Accountants in England and Wales reports a decline in business confidence, with the index falling to its lowest level since 2022.

 

The Times

Andrew Bailey, the Governor of the Bank of England, has cautioned the Government against mandating pension funds to invest in UK assets, advocating for a more natural reform approach. Despite the Government's consideration of measures to ensure that pension funds allocate a portion of their portfolios to domestic investments, Bailey stated: "I do not support mandating... I don't think that's appropriate." This comes amid concerns from industry leaders, including Aviva's Amanda Blanc, who likened the Government's approach to using "a sledgehammer to crack a nut." Bailey also highlighted the impact of economic uncertainty on investment decisions, noting that firms are delaying listings and capital raises in London due to heightened global instability.

 

City AM

Britain is at a critical juncture regarding its status as a leading centre for financial services, according to a report from the City of London Corporation. The report suggests that establishing a Singapore-style investment hub could unlock £10bn in investment by 2030. Chris Hayward, Policy Chairman at the City of London Corporation, said: "This is a now or never moment for UK financial services." The report highlights a 4% decline in the UK's market share of foreign direct investment projects since 2017, pointing to the need for a “joined-up, tailored support” system to attract investors and maintain competitiveness.

 

London Evening Standard

The regulation of lawyers in the UK is facing significant upheaval following the resignations of key leaders, including Craig Westwood, former chief executive of the Legal Services Board, and Kathryn Stone, chairwoman of the Bar Standards Board. Stone described the current regulatory structure as "failing," citing a lack of compliance with required standards by both the Bar Standards Board and the Solicitors Regulation Authority (SRA). The SRA, which oversees around 170,000 lawyers, is now led by Sarah Rapson, who has faced criticism for her predecessor's handling of regulatory issues, including the collapse of Axiom Ince, which left £60m of client funds missing. Rapson started her career in financial services and had most recently been a director at the Financial Reporting Council. The ongoing leadership changes have raised concerns about the effectiveness of legal regulation in the UK, leaving many lawyers questioning the value of their contributions to these organisations.

 

The Times

Thames Water has come under fire for refusing to reclaim nearly £2.5m in bonuses paid to senior managers from an emergency loan intended to stabilise the company. The payments, totalling £2.46m to 21 managers, were made on 30 April, just before the company paused its management retention payments plan (MRP) in May. Despite the controversy, further bonuses are still expected in December and June. The situation has raised concerns among regulators, with Ofwat's chief executive, David Black, expressing disappointment over the lack of transparency. Thames Water, which serves 16m customers, is in a precarious financial position and risks being renationalised if it cannot secure additional funding.

 

The Guardian

Futura Medical has undergone a significant leadership change following a profit warning and a sharp decline in share price. Jeff Needham, the chairman, and James Barder, the chief executive, have been removed from their positions at the request of Lombard Odier, the company's largest shareholder with over 28% ownership. Alex Duggan, a former executive at Alliance Pharma, is set to take over as interim chief executive, potentially paving the way for a sale of the company. Following the announcement, Futura's shares rose by 3.1%, although they remain down 78% over the past year due to disappointing sales of its erectile dysfunction treatment, Eroxon.

 

The Times

The Times

Linda Yaccarino has stepped down as chief executive of X, Elon Musk’s rebranded Twitter platform, after two years in the role. Brought in from NBCUniversal to repair strained ties with advertisers, Yaccarino struggled to assert control over a company many viewed as still firmly under Musk's command. Her resignation comes amid renewed scrutiny of X's AI chatbot Grok, as well as broader concerns about Musk's unfiltered use of the platform. Though credited with some progress on the advertising front, analysts suggest her role was largely symbolic. Ms Yaccarino said she was "immensely grateful" to Musk for "entrusting me with the responsibility of protecting free speech, turning the company around, and transforming X into the Everything App".

 

BBC News

Financial Times

The Daily Telegraph

The ninth anniversary of the Brexit referendum marked a significant moment as the Big Four accountancy firms announced reductions in graduate hiring, attributing this shift to advancements in AI. David Goodhart, a prominent writer on socio-economic disparities, highlighted the ongoing blue-collar revolt, suggesting that AI could instigate a white-collar political revolution. Research from Focaldata indicates that high-income areas, particularly in London, are most vulnerable to job losses due to AI. The top constituencies at risk include Richmond Park and Hampstead & Highgate. As the graduate earnings premium diminishes and student debt rises, the stability once associated with white-collar jobs is under threat. Goodhart warns that "automation may be the final straw before white-collar Britain goes into full political and economic revolt," indicating a potential shift in societal dynamics.

 

The Times

Close Brothers is restructuring its premium finance division to enhance profitability by shifting focus from personal insurance lines to commercial products. The bank aims to prioritise business insurance, including property and liability coverage, which it believes offers better risk-adjusted returns. This strategic move is expected to shrink its premium finance loan book by 30% over the next three years, resulting in a short-term profit hit. The bank anticipates saving £20m annually by 2030, despite incurring £15m in costs for this transition. Close Brothers is also awaiting a significant ruling from the Supreme Court regarding motor finance, having set aside £295m in provisions for potential costs.

 

City AM

Asda is restructuring its management by merging the roles of section manager and trading manager into a single manager position, resulting in redundancies across its 700 larger supermarkets. This move aims to "take out complexity" from the business, with around 20% of store management being promoted to the new role. However, some managers will be made redundant, with reports of staff receiving brown envelopes indicating they are on gardening leave.

 

The Daily Telegraph

Shein has confidentially filed for an IPO in Hong Kong, as its London listing prospects diminish. The Singapore-based fast-fashion retailer submitted a draft prospectus to the Hong Kong Exchange and sought approval from the China Securities Regulatory Commission (CSRC). Despite previously aiming for a London IPO, regulatory hurdles, particularly concerning risk disclosures related to supply chain issues in Xinjiang, have stalled progress. It is thought that Shein still favours London for its IPO, and views the Hong Kong filing as a strategy to pressure UK regulators.

 

City AM

The British Beer and Pub Association (BBPA) has warned that one pub will close every day this year, with a projected 378 closures across England, Wales, and Scotland. The increase from 350 closures last year is attributed to rising costs, with £1 of every £3 spent on pints and food going to taxes. Nigel Farage, leader of Reform, described the situation as an "absolute tragedy," highlighting that the rise in National Insurance contributions has severely impacted profits. Tim Martin, CEO of Wetherspoons, called for tax equality with supermarkets to prevent further closures. Emma McClarkin, BBPA's chief executive, said: "For many, it's impossible to make a profit," leading to the potential loss of nearly 6,000 jobs.

 

The Daily Telegraph