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European Edition
12th February 2024
Water company bosses could lose bonuses over sewage spills
Executives at water companies could lose their bonuses if their firms cause environmental damage, with Environment Secretary Stephen Barclay saying it is time bosses "took responsibility" for illegal sewage spills. Mr Barclay, who says “tougher action” is needed to tackle "poor performance" by water companies, said bonuses should be blocked where firms have committed "serious criminal breaches." Arguing that “no-one should profit from illegal behaviour,” he added that in such cases, “there is no justification whatsoever for paying out bonuses." Regulator Ofwat will consult on details of the proposal later this year, including to define the criteria. If it gives the plan the green light, it would affect bonuses for the 2024/25 financial year. While Labour said it has been calling for Ofwat to be given the power to block bonuses since last year, the Liberal Democrats said they have been calling for the ban for even longer.
EU antitrust regulators to consider big tech's digital ecosystems in investigations
EU antitrust regulators will now consider the digital ecosystems and impact of free products or services offered by Big Tech companies in their investigations. The European Commission has updated its rules to account for the changing tech markets and the exchange of user data for free products or services. The update will allow regulators to define a company's market power based on multisided platforms, digital ecosystems, and free products. Market share can be determined by sales, capacity, active users, or website visits. The update also emphasizes non-price elements such as innovation, reliable supply, and product quality. The inclusion of imports and their impact on EU businesses is another new element in the assessment.
EU lawmakers and governments reach deal on gig workers' rights
EU lawmakers and governments have reached a watered-down deal on the rights of workers at Uber, Deliveroo, and other gig companies. The deal does away with proposed criteria to determine whether an online company is an employer, instead relying on national law, collective agreements, and case law. Governments will define the employment criteria for online workers, which can be challenged by companies. The burden of proof will be on companies to show that their gig workers are not employees. The deal also prohibits important decisions, such as firings, from being made by automated systems or algorithms. The agreement still needs to be endorsed by EU governments before becoming law. Lobbying group Delivery Platforms Europe expressed disappointment, stating that more could be done for platform workers. The deal aims to provide fair labour conditions for up to 40 million platform workers in Europe.
European Court of Justice annuls €3.4bn state aid for KLM
The European Court of Justice has annulled the approval for €3.4bn of state aid received by KLM during the COVID-19 crisis, following a case filed by Ryanair. The court found the support from the Dutch government to be unfair competition. The European Commission, which granted the state aid, was censured by the court for not properly investigating whether only KLM and its subsidiaries would benefit from the support, rather than also Air France and the holding company Air France-KLM. The court concluded that Air France-KLM and Air France could indirectly benefit from the state aid. Both the European Commission and KLM have the option to appeal the ruling. The ruling follows a similar decision made by the EU court regarding state aid to Air France.
Ashley sues Morgan Stanley over $1bn trading dispute
The Sunday Times looks at the legal dispute between Mike Ashley and Morgan Stanley over a $1bn trading dispute. The legal battle, set to begin at the High Court, involves Ashley's company Frasers Group and Danish investment bank Saxo, with Morgan Stanley acting as a wholesale funder for Saxo. Ashley accuses Morgan Stanley of inducing Saxo to breach its contract with Frasers and causing loss by unlawful means. The dispute arose after Morgan Stanley issued a demand for almost $1bn in collateral from Saxo, which had a complex series of bets on the share price of German fashion brand Hugo Boss. Ashley believes Morgan Stanley's margin call was motivated by a desire to profit from market volatility. Morgan Stanley denies any wrongdoing and says Frasers has never been its client. The bank said: “Frasers has never been a client of Morgan Stanley. This claim is contrived and without merit, and we will defend it vigorously.”
Employment rate falls to its lowest in a decade
Employment levels in the UK's private sector have dropped to their lowest in a decade, reaching 98.77 on BDO's employment index. The decline is attributed to uncertainty surrounding the economy, high interest rates, and weak consumer demand. Starting salary growth has also slowed, and permanent hiring has been in contraction territory since October 2022. Meanwhile, a report by the Chartered Institute of Personnel and Development (CIPD) reveals that employers believe that pay in private firms will rise by 4% in 2024, while pay increase expectations in the public sector have fallen from 5% to 3%. It was also shown that 60% of employers surveyed by the CIPD reported hard-to-fill vacancies, while one in five expect significant problems filling vacancies in the next six months.
Investment banks cut vacancies by up to 75%
Investment banks in the UK have significantly reduced their job vacancies, according to analysis from recruiter Morgan McKinley and website Vacancysoft, with openings at Citigroup, Barclays, JPMorgan, Morgan Stanley, and HSBC falling by an average of 50%. Citibank experienced the largest drop, with a 75% decrease in vacancies. The decline in hiring comes amid a dip in corporate deals which has impacted the banks' revenues. The cutbacks in hiring come alongside a number of job losses, with Citi and Barclays having announced cuts already in 2024 and Goldman Sachs and Morgan Stanley announcing job losses last year.
Amazon staff to strike over Valentine's Day period
Over 1,000 Amazon staff are set to stage a three-day strike at the firm's Coventry site over the Valentine's Day period. Members of the GMB union are locked in a pay dispute with their employer and the new wave of industrial action takes place from 13 to 15 February, after workers voted to back an extension of strikes earlier this year. The trade union previously said Amazon had "refused" to increase pay when the cost of living crisis began. Amanda Gearing from the GMB, said that members are campaigning for £15 per hour, to help with rising costs and reflect the physical and repetitive nature of the job.
Economy hit by recession and rising inflation
Official figures due this week are set to show that the UK economy saw a recession at the end of last year and a rise in inflation at the beginning of 2024. Office for National Statistics (ONS) data is expected to show that inflation rose to 4.2% in January, up from 4% in December. Separate ONS data is predicted to show that GDP shrank by 0.1% in the fourth quarter of 2023, with this following a 0.1% contraction in GDP in Q3. This would equate to a technical recession, which is defined as two consecutive quarters of negative growth. Despite this, Paul Dales of Capital Economics remains optimistic, saying: “The good news is that any recession will be tiny and may already be nearing an end.” He added: “We think the economy will recover over the coming quarters.”
Barclays to buy most of Tesco’s banking business for £600m
Tesco has announced that it will sell its existing retail banking operations to Barclays for around £600m, with a further £100m in cash to follow "after the settlement of certain regulatory capital amounts and after transaction costs". The transaction includes £4.2bn of credit card receivables, £4.1bn of unsecured personal loans and £6.7bn in customer deposits. The transaction is expected to complete in the second half of 2024. The companies will also enter into a 10-year deal that allows Barclays to use the Tesco brand to market and distribute credit cards, unsecured personal loans and deposits
Big Four cut vacancies as advisory demand eases
Analysis from labour market analytics website Vacancysoft shows that the Big Four have not only announced job cuts in recent months but also scaled back their UK vacancies. The report shows that while firms ramped up hiring during a post-pandemic boom in demand for advisory services, they are now starting to cut back. PwC reduced its vacancies to 786 in 2023, with this down nearly 60% on the 1,949 recorded the year before. EY’s vacancies fell by 55%, from 1,699 in 2022 to 766 last year. Deloitte posted 721 vacancies, with this just under half of 2022’s total, while KPMG reduced vacancies from 2,111 to 1,800, a decline of 15%.
Citigroup considers cutting 51 roles in London wealth business
Citigroup is considering cutting 51 roles in its London wealth business, which would affect about 10% of the unit's staff. The cuts are part of CEO Jane Fraser's strategy to boost returns and improve efficiency. The majority of the roles being eliminated are from the assistant vice president to director level, with 21 roles in the private bank division. Citigroup's wealth management operations are a key focus for the firm, and last year it hired Andy Sieg to reshape the division. The unit's efficiency ratio has increased to 99% in the fourth quarter, higher than the previous year. Citigroup is also undergoing a broader restructuring, aiming to cut 5,000 jobs by the end of Q1 and eliminate a total of 20,000 roles in the coming years.
Hunt under pressure to give manufacturing firms tax breaks
A group of business leaders has urged Jeremy Hunt to help manufacturers in the wake of a global supply chain crisis, calling on the Chancellor to introduce preferential tax treatment for the sector. The Independent Business Network (IBN) says the Treasury should set up special industrial zones where companies are encouraged to invest through lower regulatory requirements, faster planning and reduced business rates. It also called for a 15% rate of corporation tax rate for manufacturers, a higher threshold for when they start to pay VAT, tax relief for employers that create new manufacturing jobs, and lower business rates for companies which invest in larger factories.
Amazon criticised over VAT checks
Amazon has been accused of hurting small businesses by withholding payments as it conducts strict VAT checks required under UK laws. The checks, introduced in January 2021, are aimed at ensuring proper tax accounting by sellers. However, the process has led to cash flow crises for many small businesses, with funds being frozen for months. Thousands of British merchants have been caught up in the checks and sellers have complained of poor contact from Amazon and frozen fees, potentially leading to fines from HMRC. The row has caught the attention of government officials, with Kevin Hollinrake, the Enterprise Minister, urging Amazon to unfreeze the funds of affected sellers. Amazon has defended its actions, saying that all online stores are required to collect and remit VAT on transactions involving overseas sellers.

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