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European Edition
22nd January 2025
 
THE HOT STORY
Bridgewater founder Ray Dalio warns of UK ‘debt death spiral’
The billionaire founder of hedge fund firm Bridgewater Associates has warned of a “debt death spiral” for the UK. Ray Dalio told the FT the UK needs to cut its budget deficit through either tax rises or spending cuts before the cost of borrowing becomes insurmountable. “When you get to the point that you have to borrow money to service the debt and interest rates are rising, so that debt service payments rise, so you need to borrow more money to pay them, you’re in what the markets call a death spiral,” he said. “As those risks increase, everybody looks at that need to borrow more money at higher interest, which creates [a] self-reinforcing debt deterioration cycle.”
REGULATION
Ministers force out chair of UK’s competition regulator
The chair of the UK Competition and Markets Authority (CMA) has been forced out by the Business Secretary, Jonathan Reynolds, for not being sufficiently focussed on growth. Marcus Bokkerink was appointed in 2022 and could have served a five-year term. Former Amazon UK boss Doug Gurr is expected to take over as CMA chair in the interim with eyes now on whether CMA chief executive Sarah Cardell adjusts her approach. Tom Smith, competition lawyer at Geradin Partners and former CMA legal director, said the move came as a surprise. “Government seems to be sending a strong signal, especially about merger control,” he added. “It is tempting to say that now would be a good time to file a merger at the CMA.”
EU moves to ban forever chemicals
The European Commission plans to propose a ban on PFAS, known as 'forever chemicals', in consumer products, with exceptions for essential industrial uses. These substances, which do not decompose in the environment, are linked to health risks such as liver damage and testicular cancer. The proposal follows support from Denmark, Germany, the Netherlands, Norway, and Sweden for a broad ban nearly two years ago. However, the finalisation of the ban may take until next year as essential exemptions, including asthma inhalers and semiconductors, are determined. Companies could face significant litigation risks over PFAS exposure, with settlements in the US exceeding $11bn. Hélène Duguy from ClientEarth warned of potential legal actions against companies downplaying the risks associated with PFAS.
The FCA isn’t working — it should be broken up
Philip Augar says the Financial Conduct Authority's brief should be cut back to consumer protection and its competition and growth, and market oversight and enforcement objectives, moved to other bodies.
COMPLIANCE
FRC finds UK firms struggle with climate reporting
Since the introduction of mandatory Climate-related Financial Disclosures for large companies in the UK in 2022, the Financial Reporting Council (FRC) has found that while firms are attempting to comply, the quality of their reporting remains inconsistent. The FRC's survey revealed that "reporting quality was inconsistent," indicating that many companies listed on the Alternative Investment Market or privately held are struggling to meet the national standards. This review marks the FRC's first assessment of reporting quality since the new requirements were implemented. Sarah Rapson, Executive Director of Supervision, said: “As many AIM and large private companies continue to consider the impact of climate on their strategy, operations and people, the importance of robust frameworks that support preparers to assess risks and opportunities will continue to grow. This review provides clear examples for preparers that will enable them to meet these new Companies Act requirements. As reporting continues to mature, this review will provide a benchmark for organisations to build upon.”
CORPORATE
Compulsory liquidations soar to new heights
The Insolvency Service has reported a significant rise in compulsory liquidations, reaching 3,320 in 2024, and marking a 14% increase from the previous year and the highest level since 2014. Tim Cooper, president of R3, said: “Compulsory liquidation levels have increased compared to last year as creditors pursue the debts they are owed.” While overall insolvencies decreased by 5% from the previous year's peak, analysts remain cautious about future trends. Jeremy Whiteson from Fladgate cautioned that the current figures might represent a “temporary relaxation” as concerns grow around the impact of rising minimum wage and national insurance costs, particularly in the retail sector, which saw a 30% month-on-month increase in insolvencies. David Kelly from PwC UK anticipates further insolvency filings in early 2024 as businesses reassess their financial positions. Meanwhile, the number of personal insolvencies also rose by 14%, climbing from 103,434 to 117,947, as consumers grappled with escalating debt due to higher interest rates. 
Mulberry Group's FD to resign
Mulberry Group has announced the resignation of finance director Charles Anderson effective January 31. The decision follows the company's recent efforts to streamline operations after reporting a wider first-half loss. Anderson, who joined Mulberry in 2019, will remain until August 1 to facilitate a smooth transition. The company is currently searching for his successor. New CEO Andrea Baldo, appointed in September, is leading the charge to revitalise the struggling luxury handbag maker, which has faced multiple takeover bids from its second-largest shareholder, Frasers.
TAX
Trump threatens to double tax rates for foreign companies
US President Donald Trump has instructed the Secretary of the Treasury to investigate whether any foreign company, or individual, should face higher taxes because American corporations or citizens are being unfairly taxed overseas. Under Section 891 of the US tax code, the president has the power to double the rate of tax on foreign nationals and corporations if they judge that the countries they hail from are unfairly taxing American interests overseas. Trump also withdrew support for last year’s OECD global tax pact, which allows other countries to levy top-up taxes on US multinationals. Grant Wardell-Johnson, global head of tax policy at KPMG, said: “Ultimately we are seeing international taxation moving from a multilateral domain to a bilateral one based on strong unilateral assertions. It is a new taxation world.”
INVESTMENT
UK companies on list of top R&D spenders almost halves in a decade
The number of British companies among the top 2,000 global R&D spenders has nearly halved over the past decade, dropping from 118 in 2013 to just 63 in 2023.
ECONOMY
Warning lights flash over jobs market
The British Chambers of Commerce (BCC) has raised the alarm about the UK jobs market, indicating that "warning lights" are flashing due to rising unemployment and falling vacancies. Recent data shows a 4.4% unemployment rate for the three months leading to November, up from 4.3%, alongside a significant drop of 47,000 payrolled workers in December, marking the largest decline since November 2020. Despite wage growth of 5.6% in regular pay, the BCC warns that businesses face increasing employment costs, particularly with Labour's plans to raise national insurance contributions and the minimum wage in April.
WORKFORCE
Commerzbank employees are worried about job cuts report
Reports that Germany's Commerzbank is considering cutting thousands of jobs as it contends with an unwanted advance from Italy's UniCredit have unsettled staff, a senior trade union official has said. Frederik Werning, a Verdi trade union official and a member of the supervisory board at Germany's second-largest lender, said rumoured redundancies reported in the Financial Times on Saturday, citing two sources familiar with the matter, had caused "uncertainty among employees." The union's "absolute priority" was to "consistently represent and defend employees," Werning said.
UK’s labour market tsar calls for crackdown on bogus self-employment
The government must act to stop sham self-employment if it wants its flagship overhaul of workers’ rights to succeed, warns Margaret Beels, the independent director of labour market enforcement.
FRAUD
New powers to tackle Covid fraud
The government is introducing measures to combat benefits fraud, which may include revoking driving licences for repeat offenders with debts exceeding £1,000. Work and Pensions Secretary Liz Kendall stated that the legislation aims to impose "greater consequences for fraudsters who cheat and evade the system." The proposed law would also empower the Public Sector Fraud Authority to investigate complex fraud cases more effectively, potentially saving taxpayers £1.6bn over five years. However, privacy advocates have raised concerns about the invasion of financial privacy, labelling the plans as "mass financial surveillance powers." The government has assured that it will not directly access bank accounts but will instruct banks to provide necessary information.


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