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European Edition
29th July 2021
Regulator proposes new diversity rule for listed firms
The Financial Conduct Authority (FCA) has proposed changes to its listing rules in a bid to improve transparency on the diversity of listed company boards and their executive management teams. It is consulting on rules that would require companies to disclose annually whether they meet specific board diversity targets. Firms would also be obligated to publish diversity data. While the City watchdog will not set quotas as the diversity targets are not mandatory, it will provide a positive benchmark for issuers to report against. The FCA has mooted benchmarks of at least 40% female board representation, with at least one of the senior board positions - chair, CEO, CFO or senior independent director - to be a woman. It would also call for at least one member of the board to be from a non-white ethnic minority background. The FCA also wants to ensure that broader aspects of diversity are considered, such as sexual orientation, disability and socio-economic background. Clare Cole, director of market oversight at the FCA, said: “There is a current lack of standardised and mandatory transparency about diversity on listed company boards, particularly outside the FTSE 350 who do not provide data to the voluntary initiatives in this area.” She added that the regulator’s proposals “are intended to increase transparency by establishing better, comparable information on the diversity of companies’ boards and executive committees.” The FCA consultation on its diversity plans will run until October 22nd.
650k UK firms in ‘serious financial distress’
The number of businesses in significant financial distress has increased by a quarter over the past year to 650,000, according to Begbies Traynor. The report says that while the easing of restrictions rolled out amid the pandemic has helped firms, "constant changes" to lockdown rules have left many struggling to survive. The study also flags a rise in so-called zombie businesses that have taken on unsustainable debt through coronavirus loan schemes which they cannot repay. Julie Palmer, a partner at Begbies Traynor, said: “Although the reopening of the retail and hospitality sector has given the economy a boost in Q2, the number of zombie businesses remains considerable, with many in a fragile state.” She added that while the unlocking of the economy on July 19th “has given many businesses a sense of normality, history suggests that unmanageable levels of debts and subsequent overtrading will eventually take their toll." Ric Traynor, executive chairman of Begbies Traynor, believes the number of businesses becoming insolvent is likely to increase in the latter months of this year and into 2022.
Pub group in tax plea
Pub group Marston's has called for taxes to be permanently cut to help operators which have been hit by the pandemic. Ministers have extended a cut to VAT on cafes, restaurants and hotels by six months until the end of September but some within the industry want the reduction to be made permanent. Marston’s chief executive Ralph Findlay warned that the outlook for the sector remained "uncertain" in the immediate short term and said a government review of the business rates system is "long overdue." He added that the VAT reduction “should be permanent since the hospitality industry remains one of the most heavily taxed sectors.”
ECB to overhaul payment system
The European Central Bank (ECB) will overhaul its payment system to address deficiencies that have led to a string of crashes. The Target system, which handles payments worth nearly €2trn daily, is run by the ECB and the central banks of Germany, France, Italy and Spain. A Deloitte review into the crashes and the operation of the system found six major issues in how Target is run, saying these “either directly or indirectly contributed to the occurrence of the incidents or had an impact on the incidents' severity during their resolution.”
A 'real shooting war' could be the result of cyber-attacks, Biden says
President Joe Biden has said that a significant cyber-attack on the US could precipitate a “real shooting war” with a “major power,” highlighting what Washington sees as growing threats posed by Russia and China. “I think it’s more than likely we’re going to end up, if we end up in a war - a real shooting war with a major power - it’s going to be as a consequence of a cyber breach of great consequence and it’s increasing exponentially, the capabilities,” Biden said during a half-hour speech while visiting the Office of the Director of National Intelligence (ODNI). His comments came in the wake of a string of high-profile attacks on organisations including network management company SolarWinds, the Colonial Pipeline company, meat processing company JBS and software firm Kaseya. Reuters notes that the attacks affected the US far beyond their immediate targets, hitting fuel and food supplies in parts of the country.
Drug companies push back on global tax deal
Pharmaceutical executives, lobbyists and consultants are citing the sector’s involvement in the fight against Covid-19 as they quietly push back against a deal by many of the world’s biggest economies to better harmonize corporate taxation throughout the world. A total of 130 countries have broadly agreed to a deal that would establish a minimum corporate tax of 15% within their countries, so reducing opportunities for international tax avoidance. “We led the world in responding to this pandemic,” is how one drug company executive described a key industry message, reports the Wall Street Journal. Ipsita Smolinski, of US healthcare policy consulting firm Capitol Street, said: “There certainly is a halo from Covid,” but cautioned “I think that halo will wear off.” Richard Collier, who teaches international tax law at the University of Oxford in the U.K., says the industry “has done a lot of tax planning and has put a lot of intangibles into tax havens,” and in the wake of the global tax framework, “The ground has shifted for the worse.”
Lloyds posts half-year profit
Lloyds Banking Group reported a first-half profit this morning and announced an interim dividend, boosted by house buying activity and an improved economic outlook in the UK. The bank posted pre-tax profit of £3.9bn for the six months to June, ahead of the £3.1bn average of analyst forecasts compiled by the bank.
Nokia is firmly back in the global 5G rollout race
Reuters takes a look at how a shifting geopolitical backdrop and cost-cutting have seen Nokia firmly back in the global 5G rollout race just a year after CEO Pekka Lundmark took the helm. The Finnish company has been gaining ground on arch-rival Ericsson, even as both benefit from US pressure on European governments to crackdown on China’s Huawei. “The drastic changes and improved performance under Pekka’s stewardship is clearly evident,” observed Paolo Pescatore, an analyst at PP Foresight. “Opportunities in 5G, misfortunes of others and focus on key products have helped reignite the business.” Lundmark, who became CEO at Nokia last August, has laid off thousands of employees.
Ministry of Defence to acquire steel firm
Steel company Sheffield Forgemasters is set to be nationalised in a £2.6m deal with the Ministry of Defence (MoD), with ministers saying the government intends to invest up to £400m in the business. An MoD spokesperson said a 10-year investment will be used to modernise the plant and its equipment to support its role as a long-term supplier to UK defence. David Bond, chief executive officer at Sheffield Forgemasters, described it as an "important milestone" for the company and UK manufacturing. 
JFAR report identifies key risk hotspots
The Joint Forum on Actuarial Regulation’s (JFAR) annual risk perspective has identified climate-related risk and systemic risk as key risk issues, with long Covid, mental health and the triple lock also noted among areas of potential concern. Mark Babington, JFAR’s executive director of regulatory standards, said: “This year's risk perspective has identified a range of key hotspots . . . that actuaries should consider in the course of their work.” The forum comprises representatives from the Financial Reporting Council, the Financial Conduct Authority, the Institute and Faculty of Actuaries, the Prudential Regulation Authority and The Pensions Regulator.
PwC chair in remote work warning
Kevin Ellis, senior partner and chairman of PwC in the UK, has warned that working from home could hit young professionals' careers. He told the Mail that he believes staff need to be in the office or at a client's premises around three days a week. Pointing to the advantages of being in the office, Ellis said younger staff can learn from their seniors, make useful contacts, and fraternise with colleagues. Ellis said: “I have been very open. I am not telling people to come in. But you need to observe, to network and to socialise. That's why the office is so important.” He added that PwC is “offering the flexibility of home working but with guardrails or you will blight your career.” Ellis also warned that remote working can widen a divide between people across different levels of a company, saying: “Covid has increased the hierarchy massively. When I am working from home, no junior people ever speak to me but they do at work.”
Spain to fine employers that expose workers to heatstroke
Spain’s government is to send letters to thousands of employers to warn them that they face fines of up to €820,000 for exposing workers to climatic conditions that could cause heatstroke and for not providing them with adequate protection. Yolanda Díaz, the country’s second Deputy PM and Labour Minister, said the government would send 137,000 letters to companies whose employees have jobs where exposure to high temperatures is common. Spain’s Labour Inspectorate registered “more than 100 cases of heatstroke and related work accidents in 2019,” Héctor Illueca, head of the department, said during the press conference to announce the proposed penalties.
Ofcom appoints online safety head
Ofcom has appointed Anna-Sophie Harling as its online safety head. She will be in charge of implementing the Online Safety Bill, due to come into effect later this year if approved by Parliament. Ms Harling is currently managing director for Europe at NewsGuard, which audits online publishers for accuracy.
Pandemic hits European football market
Analysis by Deloitte shows that the European football market shrunk by 13% in the first few months of the pandemic, with total revenue down £3.4bn to £22.1bn in 2019/20. Clubs took a financial hit as matches were postponed and, when they eventually went ahead, were played in empty grounds, with this meaning ticket revenue was lost. Between Europe’s five biggest football leagues – the top divisions in England, Germany, Spain, Italy and France –revenue fell 11% to £13.2bn, Deloitte's Annual Review of Football Finance shows. In the English Premier League, aggregate revenue dropped by 13% from a record £5.2bn in 2018/19 to £4.5bn, with this the first ever year-on-year decrease. Reflecting on the findings, Deloitte's Dan Jones said: “It will be a number of years before the full financial impact of the Covid-19 pandemic on European football is known but we're now beginning to see the scale.” Despite the hit from the coronavirus crisis, Deloitte forecasts a “strong recovery” of football revenues in coming seasons, with Mr Jones saying the sport has “shown great resilience.”

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