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European Edition
20th November 2023
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Businesses 'must take risks to progress'
A survey by PwC of over 3,900 companies worldwide found that three-fifths view generative artificial intelligence as a good opportunity, but 37% believe they are highly or extremely exposed to cyber risks. Additionally, a quarter of respondents felt their organisations were very exposed to geopolitical conflict. Sam Samaratunga, global and UK head of risk services for PwC UK, said: “In a world that is persistently in a state of flux, it is clear that organisations need to transform, with new and emerging technologies playing a critical role in that transformation. So it is no surprise that cyber and digital risks are top-of-mind in 2023, with those leaders responsible for managing risk ranking cyber higher than inflation. However, the survey highlights that if organisations don't take risks, they will not progress.”
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NMC Health censured by FCA over $4bn accounting scandal
The Financial Conduct Authority (FCA) has censured NMC Health, the collapsed FTSE 100 company, following an investigation into the company's accounting scandal. The FCA found that NMC Health had misled the market about its debts, understating the amount by as much as $4bn and operating dual sets of accounting records. The company, founded by Bavaguthu Raghuram Shetty, was based in the United Arab Emirates and operated in 19 countries. The alleged fraud left unsecured creditors suffering a shortfall of up to about $4.7bn. The FCA identified three areas of concern: accounting malpractice, unreported supply chain finance facilities, and publishing false or misleading information about the group's debt position to investors. The FCA concluded that NMC Health had committed market abuse by publishing false or misleading information. The administrators, Alvarez & Marsal, continue their investigations and court claims, including against EY, NMC's former external auditor, to recover money for creditors.
FCA accused of 'astonishing' data grab in new plans
The Financial Conduct Authority (FCA) is facing criticism for its plans to collect personal data from consumer credit companies. The FCA is consulting on the proposal, which would require lenders to provide information about their customers, including personal details and loan information. The aim is to improve the FCA's oversight of the sector and reduce the need for ad hoc data requests. However, industry representatives have expressed concerns about the burden this would place on small and mid-sized companies. "We are highly concerned that these proposals will see the FCA seek personal financial details about every user of consumer credit in the UK," Jason Wassell, CEO of the Consumer Credit Trade Association, said. "The level of detail proposed is astonishing." The FCA defended its plans, stating that good-quality data allows them to identify potential issues within firms and the wider market.
Ministers urged to go ahead with BNPL regulation
Ministers are wobbling over a promised crackdown on "buy now, pay later" credit, according to Britain's biggest consumer groups. Citizens Advice, Which? and MoneySavingExpert have united to warn the government that scrapping regulation of lenders such as Klarna would "spell disaster" for borrowers. Early in 2021, the government promised to regulate checkout lenders as a priority. However, reports have emerged that ministers intend to ditch the rules. Treasury officials are said to be concerned that the crackdown could encourage a number of the industry's biggest players to quit the UK market. But Citizens Advice, Which? and MoneySavingExpert say that stopping or even delaying regulation of checkout loans would be disastrous because it would result in more people falling into financial hardship.
FCA targets businesses over churn of reporting officers
The Financial Conduct Authority (FCA) targeted hundreds of businesses last year in a crackdown on money laundering reporting officers, according to Financial News. The regulator was concerned about the high turnover of these officers, which could indicate a deficient work environment or a lack of resources. The FCA wrote to 643 companies, requesting an explanation for the short lengths of time employees held the role.
Interview: Hywel Ball – EY UK Chair
Hywel Ball, the UK Chairman of EY, is interviewed by the Sunday Times’ Jill Treanor. Ball says the government’s failure to overhaul the regulation of auditors with a new regulator, the Audit, Reporting and Governance Authority, is a missed opportunity to bolster investor confidence in British companies. "It is disappointing to see the lack of progress. I hear the political statements about no red tape and less regulation but I personally think we need smarter regulation, not no regulation. To deliver deep capital markets, I think it is really important."
Employees can sue employers for work-related stress, judge suggests
People who suffer work-related stress can now sue their employers for disability discrimination, according to a judge's ruling. The ruling could lead to a surge in disability discrimination claims related to stress at work. An NHS worker, Debra Phillips, successfully sued her employer, Aneurin Bevan University Health Board, for disability discrimination. The judge found that Phillips had clear medical records showing she suffered from stress. The ruling highlights the duty of employers to make reasonable adjustments for employees experiencing disabilities, including mental health problems. The ruling also emphasizes that a formal diagnosis of a mental illness is not required for a tribunal to consider an employee as disabled. Phillips's case will proceed to a full tribunal. The ruling has significant implications for employers and the tribunal system.
Dozens of councils face equal pay challenges
The GMB union is looking to bring equal pay claims against dozens of local authorities after spearheading legal action in Birmingham. A 2012 ruling from the UK Supreme Court found a group of mostly female staff at the council were not given bonuses handed to employees in traditionally male-dominated roles. This cost the city £1.1bn and the GMB’s action resulted in additional claims worth up to £760m. This tipped Britain’s second-biggest city into bankruptcy and with local government finances already in jeopardy the chance of further action thrusting councils into bankruptcy is high.
UK bank employees face higher taxes, threatening London's status as a financial centre
UK bankers are facing higher taxes due to the government's policy of freezing income tax thresholds and increasing National Insurance contributions. This has led to a significant jump of 11.2% in the average tax collected per UK bank employee in 2022 compared to the previous year. The survey conducted by UK Finance reveals that the UK is becoming less competitive as a location for banks compared to other financial centres. The tax burden on UK bank employees is now £42,420 per employee, including income taxes and National Insurance contributions. PwC warns that London's status as a global financial center is at risk. The freeze on income tax and national insurance thresholds, known as fiscal drag, allows the government to extract more revenue without policy changes. The report projects a higher total tax rate for London-based banks in 2024 compared to other major financial centres. Andy Wiggins, tax transparency leader at PwC, emphasized the importance of maintaining the competitiveness of the UK banking sector for economic growth and investment.
Future Fund start-ups failing faster than rivals
Companies backed by Rishi Sunak's £1.1bn Covid tech fund are raising less funding and going bankrupt at a faster rate than rival firms, raising questions about whether the scheme will net a profit for the taxpayer. An analysis of the Future Fund by RSM found that the 1,191 companies that received taxpayer loans under the scheme grew more slowly than a control group of peers. The £1.1bn fund, set up when Mr Sunak was Chancellor, was praised for helping loss-making start-ups stay afloat during a pandemic credit crunch in 2020. However, a string of failures and worsening funding conditions has led to questions about the scheme. "The amount of money raised by Future Fund companies had fallen by 22% in 2022, while a 'counterfactual' group of similar companies not backed by the scheme grew funding by 4%," according to the RSM report commissioned by the British Business Bank. Future Fund companies outperformed the control group in 2021 before performance deteriorated last year.
Europe needs its own SEC, says Christine Lagarde
European Central Bank president Christine Lagarde says Europe needs its own version of the US Securities and Exchange Commission and a unified stock exchange to raise enough money to meet the challenges confronting the region. A powerful overarching regulator would have the power to oversee and maintain a unified capital market, Lagarde said, with such a change needed to meet the challenges of “deglobalisation, demographics and decarbonisation.” She also suggested that Europe’s stock exchanges could be unified under a single group to improve access to liquidity for listed companies.
Citigroup to announce major lay-offs and job assignments in restructuring
Citigroup is set to announce a major round of lay-offs and job assignments as part of a sweeping restructuring plan. The restructuring is expected to result in significant changes within the company. The details of the lay-offs and job assignments will be revealed on Monday. "We are committed to streamlining our operations and improving efficiency," said a spokesperson for Citigroup. The restructuring plan is aimed at positioning the company for future growth and profitability.
Former MI6 chief issues warning over AI
Sir Alex Younger, the former "C" of MI6, is urging European regulators to collaborate with open-source intelligence firms to address the national security threat posed by artificial intelligence (AI). Younger warns that autocrats and hostile states can exploit AI for disinformation, influence campaigns, and interference in elections. He emphasises the need for the West to accelerate research and reform intelligence services to leverage advances in the private sector.
AI executive quits over copyright row
A senior executive at London-based artificial intelligence start-up Stability AI has resigned in protest because the company uses copyrighted work to train its models without paying for it or getting permission from the holder. Stability previously responded to the US copyright office with the argument that “AI development is an acceptable, transformative and socially beneficial use of existing content that is protected by fair use.” But Ed Newton-Rex, the company’s head of audio, said: “Companies worth billions of dollars are, without permission, training generative AI models on creators’ works, which are then being used to create new content that in many cases can compete with the original works. I don’t see how this can be acceptable in a society that has set up the economics of the creative arts such that creators rely on copyright.”
Misconduct scandal left CBI facing disproportionate scrutiny, says boss
CBI chief executive Rain Newton-Smith says the group has come under disproportionate scrutiny after a misconduct scandal that pushed it to the brink of collapse this year as companies cut ties.
MPs urge national security check on Barclay family’s Telegraph deal
A group of Conservative MPs is urging the government to use the UK's national security laws to investigate the Barclay family's attempt to regain control of the Telegraph newspaper group with funding from an Abu Dhabi royal family member and RedBird IMI, an investment vehicle headed by former CNN boss Jeff Zucker that is also part-backed by Abu Dhabi-based International Media Investments. Lloyds Banking Group took control of the group in June after the family failed to reach an agreement over more than £1bn in unpaid debt. The MPs said in a letter: “Material influence over a quality national newspaper being passed to a foreign ruler at any time should raise concerns, but given the current geopolitical context, such a deal must be investigated.”
Brexit has boosted wage growth in the UK, economists say
A crackdown on uncontrolled immigration from the EU has boosted wages for UK based workers, economists have said. Figures last week showed that wages, excluding bonuses, were growing at a near-record pace of 7.7%. Mabrouk Chetouane, the head of global market strategy at French investment bank Natixis, explained that labour supply has been cut massively due to Brexit. “It creates an imbalance that continues to fuel wage growth and this situation is here to stay.” Jack Kennedy, a senior economist at hiring website Indeed, said he believed Brexit was “certainly likely to be a contributory factor” towards faster than expected wage growth for lower-skilled jobs. “A lot of the lower paid sectors are seeing pretty strong rates of wage growth of between 7% and 10% in our data.”

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