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European Edition
25th January 2023
Banks call for major changes to UK's accountability rules
Banks are lobbying UK regulators to drastically overhaul the Senior Managers and Certification Regime in order to help boost the City of London's global appeal after Brexit. City Minister Andrew Griffith expects a consultation to begin within weeks, and financial services firms are preparing a case for scrapping the FCA Register altogether and ditching the requirement to certify senior officials below the top ranks as "fit and proper" to hold roles. "It is the right time for government and regulators to review the regime," said Simon Hills, director of prudential regulation at bank lobby group UK Finance.
EU financial services need shake-up to benefit retail investors
A potential ban on commissions paid by banks to financial advisers who sell their products could be part of a wider shake-up of retail financial services in the European Union, the bloc's finance chief said yesterday. Financial services chief Mairead McGuinness is due to announce a new retail investment strategy in April to deepen the bloc's capital market as it faces competition from London since Brexit. This could include the ban on "inducements" or commission as part of efforts to give EU retail investors better value for money.
Capricorn Energy directors quit en masse in victory for activist
The longstanding chief executive and chair of Scottish oil and gas group Capricorn Energy have resigned, along with seven directors, following a campaign by activist investor Palliser Capital. Capricorn's third-largest shareholder has been leading a charge to force the company to abandon a merger with Israeli group NewMed, arguing it does not sufficiently compensate investors.
UK business confidence hits two-year low as recession fears mount
The latest S&P Global/CIPS flash composite Purchasing Managers' Index (PMI) for the UK dropped to 47.8 in January from 49.0 in December, the fastest rate of decline since the national lockdown in January 2021. “Weaker than expected PMI numbers in January underscore the risk of the UK slipping into recession,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “The rising cost of living and higher interest rates all meant the rate of economic decline gathered pace again at the start of the year,” he added. The services sector fared poorly, with activity falling to 48 in January from 49.9 in the previous month. Manufacturing managed better with the PMI rising to a four-month high of 46.7 in January, up from 45.3 in December. However, business optimism for the year ahead improved considerably in January as costs pressures started to wane. John Glen, CIPS chief economist, said: “Optimism among private sector firms was the best for eight months signalling the downturn may not be as long and protracted as feared.”
Fintechs urge government to boost lending to small businesses
The Federation of Small Businesses (FSB) and a group of top fintech firms, including Oaknorth and Atom Bank, have called on Grant Shapps to improve small businesses’ access to borrowing, warning that failure to do so could further damage the UK’s economic growth prospects. City AM said the letter also asks the business secretary to ramp up “data sharing initiatives” and lean on the UK’s open banking regime to help ease the process of borrowing for smaller firms. “There are often too many barriers in place to lenders accessing up to date, accurate data on businesses to make informed decisions, and the application process for SMEs can be too complex and time-consuming,” the firms wrote. The fintechs called on Shapps to help establish an “SME funding passport” containing all standardised financial data needed for underwriting loans to firms to help business borrow with ease. 
Amazon workers take strike action for the first time
Amazon workers in Britain are striking for the first time. Nearly 300 members of the GMB union, out of the 1,000 who work in the company's warehouse in Coventry, are walking out in a dispute over pay. The union is asking workers to be paid as much as their colleagues in the United States, who receive $18 an hour, or £14.65, rather than the 50p-an-hour pay rise that Amazon proposed in an August pay review, which would take the lowest-paid employee to £10.50 an hour. The GMB noted that this would mean workers were paid less than employees at Asda, Disney and Primark, which also operate warehouses in the area. Stuart Richards, GMB senior organiser, said: "Today, Amazon workers in Coventry will make history. They've defied the odds to become the first ever Amazon workers in the UK to go on strike. They're taking on one of the world's biggest companies to fight for a decent standard of living."
Cost of labour in Britain up by 30% since referendum
Research by the UK Trade and Business Commission (UKTBC) reveals that Brexit has been one of the main drivers of a sharp rise in material and labour costs for the UK’s construction sector. D’Maris Coffman, the director of the Bartlett school of sustainable construction at University College London, said the energy crisis had equal weight to Brexit in terms of impact on costs (40%) while the pandemic accounted for the remaining fifth. The UKTBC said the research would deepen growing concerns over labour shortages in the UK.
Fire and rehire should be ‘absolute last resort,’ UK warns
Employers should use “fire and rehire” tactics only as an “absolute last resort” when they change staff contracts, the UK government has said, as it published a draft code of practice intended to strengthen workers’ rights.  The new statutory code is intended to prevent a repeat of what happened last year at P&O Ferries. The company deliberately sought to evade the law by sacking 786 seafarers without due consultation. Plans for a new statutory code will give courts the power to apply a 25% uplift to an employee’s compensation in certain circumstances if an employer doesn’t follow the new Code. Business Secretary Grant Shapps said: “Our new code will crack down on firms mistreating employees and set out how they should behave when changing an employee’s contract.” But TUC general secretary, Paul Nowak, said the rules don't go far enough. Mr Nowak said: "This is a reheated, repeated announcement. A statutory code of practice is not going to stop another P&O-style scandal from happening, and it won't deter bad bosses from treating staff like disposable labour. If the government really cared about workers' rights it wouldn't have abandoned its much-touted employment bill."
MP accuses top London law firms of 'unethical' practices
Conservative MP Bob Seely has accused several London law firms of using the UK court system to silence the press on behalf of “organised crime, authoritarian states, oligarch proxies or corrupt corporations.” The Isle of Wight MP introduced a private members bill on Tuesday in an attempt to crack down on “strategic lawsuits against public participation” – or Slapps. These types of lawsuits usually involve wealthy elites using legal action to try and stop journalists or campaigners from exposing wrongdoing under defamation and privacy laws. Critics say they are an attack on freedom of speech. Mr Seely used parliamentary privilege to single out Harbottle and Lewis, CMS, Carter Ruck and Schillings, all of whom acted against ex-Financial Times journalist Catherine Belton and publisher Harper Collins over a book about oligarchs. Seely told the Commons: “Law firms - unethical law firms in my opinion - offer a one-stop shop to spy, to snoop, to smear and to sue. I think as a business model it is a firm of legalised intimidation, effectively legal gangsterism.”
UK competition watchdog to ease rules on climate change action
The Competition and Markets Authority is to loosen antitrust rules on climate change initiatives in an attempt to assuage business fears that collaboration on climate action could expose them to claims of collusion.
BNP Paribas pledges to slash oil lending by 80% by 2030
BNP Paribas has promised to cut its outstanding financing with the oil extraction and production industries by 80%, to less than €1bn ($1.1bn) by 2030.
HMRC clampdown pushes R&D activity abroad
An increasing number of British firms are moving their R&D activity overseas after a crackdown on tax fraud by HMRC led to delays in processing claims. More than two-thirds (69%) of UK businesses moved R&D activity abroad last year, figures from Ayming’s UK Innovation Barometer show, while a further 70% plan to shift more of their R&D overseas in 2023. Brexit and the UK’s economic downturn have also discouraged research activities. HMRC’s crackdown, however, has seen 35% of businesses face delays in receiving R&D tax relief payments. A UK government spokesperson said: “The government recognises the hugely important role that R&D and innovation play for the economy and society . . . The government will work with industry over the coming months to understand whether further support is necessary for R&D intensive SMEs.”
3M to cut 2,500 manufacturing jobs as consumer demand slows
Industrial giant 3M has announced plans to cut 2,500 manufacturing jobs worldwide as it predicts last year’s fourth quarter slowdown will persist through the first half of this year. The company, which has been battling with higher labour and energy costs, said it would continue to adjust its manufacturing levels and maintain spending discipline until sales volumes bounce back following slowing demand for consumer and electronic items.
Lazard expands venture banking unit as part of private capital push
Lazard is to expand its US venture banking team with a focus on sectors such as technology and healthcare “where innovation and dynamism are the strongest,” the bank’s head of advisory Peter Orszag said.
Arcadia Group close to funding deal with Aviva
Aviva is reportedly close to an agreement with the trustees of the Arcadia Group pension scheme that will guarantee retirement pay-outs to thousands of former Topshop, Burton and Dorothy Perkins employees. Sky News reports that a formal agreement is likely within weeks, with Aviva understood to have seen off competition from rival insurance companies, including Pension Insurance Corporation. The precise structure of the deal between the Arcadia trustees and Aviva remains unclear; however, one insider told Sky News it was expected to involve members receiving full benefits - albeit potentially with more limited future increases than current inflation levels would justify. Arcadia members are certain to receive superior pay-outs to those they would have got through the Pension Protection Fund lifeboat, which effectively guarantees benefits worth 90% of pension pots to unretired members.
Transcontinental supply chain still works despite Russian sanctions
Sanctions imposed on Russian businesses last year threatened to disrupt transcontinental commerce, and although the European Union’s overall imports via rail from China did decline through the first nine months of 2022, some key goods continued to make the journey by train across Russia.  Bloomberg has reported that European imports of some raw materials, especially rare earths from China that are used in modern weapons, are in fact increasing.  “It is astonishing that despite all the sanctions, this supply chain still works,” said Michael Wurmser, the founder of Norge Mining.
US corporate fraud may be greater than thought, study suggests
A study, led by Alexander Dyck, a finance professor at the University of Toronto, suggests US corporate fraud, “like an iceberg,” may be greater than thought. The research found that only about a third of frauds in public companies are ever identified, and that fraudulent activity is more common than previously assumed. About 40% of companies are committing accounting violations and 10% are committing securities fraud, destroying 1.6% of equity value each year — equivalent to about $830bn in 2021. “Fraud is indeed like an iceberg, with significant undetected fraud beneath the surface,” the study says. Reuters notes that the Securities and Exchange Commission (SEC) has stepped up its enforcement of fraudulent activity. In the agency's 2022 report on enforcement actions, the regulator filed 760 enforcement actions and recovered a record $6.4bn in penalties and disgorgement, a 9% increase over the prior year, and included 462 new, or “stand alone,” enforcement actions, a 6.5% increase over fiscal year 2021. “The SEC’s stand-alone enforcement actions in fiscal year 2022 ran the gamut of conduct, from ‘first-of-their-kind’ actions to cases charging traditional securities law violations,” the agency said.

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