Archive forFebruary, 2017

Tesco to replace 1,700 managers with lower-paid staff

Tesco (TSCO.L) plans to replace 1,700 deputy managers in its chain of Express convenience stores. Their work will be taken by an extra 3,300 lower paid “shift leaders”, increasing staff numbers by 1,600. The retailer said the deputy managers would be offered the new roles, redundancy payments or be redeployed. It comes on top of 1,000 job cuts announced by Tesco in January as part of a plan to cut the number of its distribution centres. Tracey Clements, managing director of convenience stores at Tesco, said: “To help improve our service to customers in our Express stores we are aiming to have more of our colleagues on the shop floor, more often. “We appreciate that these changes will impact our deputy manager colleagues, and will do everything we can to support them throughout this period.”

Business rates a ‘ticking time bomb’ for small firms

Business rates are a “ticking time bomb” for small companies in England which should be offered emergency help, the shadow business secretary has said. Labour’s Rebecca Long-Bailey said many firms faced “cliff-edge” rises when new valuations take effect in April and that the process had been mishandled. The government says it has established a £3.6bn transitional fund to help businesses facing big jumps in rates. A spokesman said the changes meant all businesses would get a “fair deal”. However, Ms Long-Bailey said: “The reality is that business rates are a ticking time bomb. “It cannot be right for smaller town centre retailers to be facing massive hikes while the Amazons and ASOSs of this world have their business rates cut.”

RBS reports ninth consecutive annual loss

Royal Bank of Scotland (RBS.L) has reported a £7bn annual loss as legacy issues continued to dog its performance in 2016. Litigation costs, restructuring charges and other issues all contributed to the bank’s ninth consecutive annual loss. RBS set aside £5.9bn for conduct costs, including provisions for the US fine over mortgage-backed securities. RBS – which is 72%-owned by taxpayers – is also planning cost savings, which will mean job cuts and branch closures.

Forward Diary: 27th February – 3rd March 2017

Company and economic announcements planned for the week commencing 27th February 2017

Barclays reports rise in full-year profits

Barclays (BARC.L) has reported a rise in profits after making “strong progress” in restructuring. The bank reported a profit before tax of £3.2bn for 2016, up from £1.1bn the year before. Its reorganisation has included the sale of its Africa business. Barclays has also been selling off other parts of the business which the bank deems “non-core”, and it said it would bring forward the closure of the unit dealing with this by six months. Chief executive Jes Staley said the “non-core” unit would close on 30 June. “We are now just months away from completing the restructuring of Barclays, and I am more optimistic than ever for our prospects in 2017, and beyond,” Mr Staley said.

Lloyds boosted by lower PPI payments

Lloyds Banking Group has reported a 158% increase in annual pre-tax profits to £4.24bn as a result of a reduction in payment protection insurance (PPI) provisions. Provisions for PPI declined from £4bn to £1bn. However, underlying profits fell to £7.9bn, down from £8.1bn. The UK government’s stake in Lloyds has now fallen below 5% and it has said it wants to return the bank to full private ownership this year. On Tuesday HSBC reported a $7.1bn (£5.7bn) pre-tax profit for 2016, down 62% on the $18.9bn reported a year earlier. The government spent £20.3bn to acquire a 43% stake in Lloyds at the height of the financial crisis.

HSBC shares down as annual profit falls 62%

Shares in HSBC (HSBA.L) have fallen after the bank saw a sharper-than-expected drop in annual profits for 2016. The $7.1bn (£5.7bn) pre-tax profit is 62% lower than the $18.9bn reported a year earlier. HSBC attributed the fall to a string of one-off charges, including the sale of its operations in Brazil. It said its performance had been “broadly satisfactory” given “volatile financial conditions” but warned a rise in global protectionism was a concern. HSBC shares were down by 3.5% in Hong Kong.

Amazon plans 5,000 new jobs in UK

Online retail giant Amazon has said it will create 5,000 new full-time jobs in the UK this year. The firm said it was looking for a range of staff including software developers and warehouse staff. There will be jobs at Amazon’s head office in London, as well as in the Edinburgh customer service centre and in three new warehouses. The recruitment will take Amazon’s workforce in the UK to more than 24,000. Doug Gurr, the head of Amazon’s UK business, said: “We are creating thousands of new UK jobs including hundreds of apprenticeship opportunities as we continue to innovate for our customers and provide them with even faster delivery, more selection and better value.” The company is opening three new warehouses, or what it calls “fulfilment centres”, in Tilbury, Doncaster and Daventry. The extra warehouse space will be used to cope with existing growth and to speed-up deliveries. It will also handle deliveries for third-party retailers, who sell through Amazon’s website and use Amazon for deliveries.

ONS figures show UK spending less on alcohol and tobacco

Families in the UK are becoming more clean-living, with less money being spent on cigarettes and alcohol, but more being spent on going out to restaurants. But the Family Spending Survey from the Office for National Statistics shows little change in spending overall. In the year to the end of March 2016, families spent an average of £528.90 a week, the same as the previous year. The ONS said growth in consumer confidence had levelled off in 2015-16. The figures show that spending on alcohol and cigarettes continued to fall over the period, to £11.40 a week. At the start of the 2000s, families were typically spending nearly £20 a week on such items.

Forward Diary: 20th – 24th February 2017

Company and economic announcements planned for the week commencing 20th February 2017

Yahoo and Verizon ‘near to agreeing revised sale terms’

Internet group Yahoo has reportedly agreed a price cut on its initial $4.8bn (£3.86bn) sale to Verizon. Verizon’s purchase of Yahoo’s core internet arm was put in doubt last year after disclosure of two cyber attacks. Several reports in the US said Yahoo has now accepted a price cut of up to $350m and agreed to share liability with Verizon for potential lawsuits. News of the renegotiated terms was first reported by Bloomberg, which said an announcement could come this week. Verizon wants to combine Yahoo’s search, email and messenger assets, as well as advertising technology tools, with its AOL unit. Verizon bought AOL in 2015 for $4.4bn. Verizon sees mobile video and advertising as new sources of revenue outside an overcrowded US telecoms market.

A third of UK lives on inadequate income, says think tank

Nearly a third of the population of Britain is living on an “inadequate” income, according to research by the Joseph Rowntree Foundation (JRF). In 2014-15, it said that 19 million people were living on less than the Minimum Income Standard (MIS). It said the problem was that household costs have been rising, while incomes have stagnated. The government has already promised to tackle the issue, after Theresa May identified those “just about managing”. It said it was taking “targeted action” to raise incomes. The MIS is set by experts at Loughborough University, and is based on what members of the public think is a reasonable income to live on. Although the precise level depends on individual circumstances, a single person renting a flat outside London is said to need to earn at least £17,300 a year to reach the MIS. For a working couple with two children, living in social housing, each of the individuals need to earn £18,900 a year.

Rolls-Royce reports record loss of £4.6bn

A bribery settlement and the fall in the pound have pushed engineering giant Rolls-Royce (RR..L) to a record loss. The jet engine maker reported a loss before tax of £4.6bn for 2016. Earlier this year, the company agreed to pay £671m to settle corruption cases with UK and US authorities. As most aerospace deals are done in dollars it was hit hard by the post-Brexit vote slump in the pound, and it has written off £4.4bn from currency related contracts. In its statement, the firm said the outlook for this year was for a “modest performance improvement”, while chief executive Warren East said more needed to be done to improve profit margins. “We must ensure our wide ranging business transformation programme delivers the full benefits expected, not only in terms of cost savings but also the cultural and behavioural changes necessary to ensure the transformation is sustained and high standards of business conduct are maintained,” said Mr East. “These are essential if we are to become a more trusted, resilient company.”

The Co-Op Bank puts itself up for sale

The Co-op Bank says it is putting itself up for sale and is inviting offers to buy all of its shares. It says the sale is something it had always considered as a “potential outcome” of its turnaround plan. The banks says its “customer-led ethical position, attractive product set, multi-channel approach and four million customers constitute a strong franchise with significant potential”. The bank is 20% owned by the wider Co-Operative Group consumer business. Dennis Holt, bank chairman, said: “Customers value the Co-operative Bank and our ethical brand is a point of difference that sets us apart in the market. “While our plan has been impacted by lower for longer interest rates, the costs associated with the sheer scale of the transformation and the legacy issues we faced in 2013, there is considerable potential to build the Bank’s retail franchise further using the strength of the brand, its reputation for strong customer service and distinctive ethical position.” The bank said it needed to build its capital base to meet longer term UK bank regulatory capital requirements, but that its capacity to do so had been constrained by the ongoing impact of low interest rates.

Forward Diary: 13th – 17th February 2017

Company and economic announcements planned for the week commencing 13th February 2017

Germany warns the City over Brexit risk

One of Germany’s most senior banking regulators has warned London that it is likely to lose its role as “the gateway to Europe” for vital financial services. Dr Andreas Dombret, executive board member for the German central bank, the Bundesbank, said that even if banking rules were “equivalent” between the UK and the rest of the European Union, that was “miles away from access to the single market”. Mr Dombret’s comments were made at a private meeting of German businesses and banks organised by Boston Consulting Group in Frankfurt earlier this week. They give a clear – and rare – insight into Germany’s approach as Britain starts the process of leaving the European Union. And that approach is hawkish. “The current model of using London as a gateway to Europe is likely to end,” Mr Dombret said at the closed-door event. Mr Dombret made it clear that he did not support a “confrontational approach” to future relations between the UK’s substantial financial services sector and the EU. But he argued there was “intense uncertainty” about how the Brexit negotiations would progress and significant hurdles to overcome. The Bundesbank executive, who is responsible for banking and financial supervision, said he was concerned that the trend towards internationally agreed standards was under pressure. And that Britain might try to become the “Singapore of Europe” following Brexit, by cutting taxes and relaxing financial regulations to encourage banks and businesses to invest in the UK.

Bank of England sees inflation spreading beyond food and fuel

The Bank of England says price rises already seen in food and fuel will spread to other goods later this year. In a monthly report of business conditions, the Bank said the cost of manufactured goods would also rise. Companies which made bets to mitigate against last year’s drop in sterling will soon see those bets expire, increasing their costs, it said. However, more exports and “resilient consumer demand” had encouraged more investment, the report said. “So far, the main effect on consumer prices had been higher food and fuel prices,” said the central bank. “But a wider range of goods prices were expected to be affected over the coming year, causing inflation to rise further.” Rising air fares and food prices helped to push up UK inflation to its highest rate since July 2014 in December. The annual rate of Consumer Prices Index (CPI) inflation rose to 1.6%, up from 1.2% in November, according to the Office for National Statistics. And higher costs for imported materials and fuels pushed up producer prices.

Government criticised over transparency of energy schemes

MPs have said the government must do more to demonstrate the value for money of green energy schemes which are ultimately paid for by bill payers. The influential Public Accounts Committee (PAC) said it was promised in 2014 an annual report on the impact of these policies on energy bills. But it has not seen once since. The PAC also repeated previous concerns about over-optimistic forecasting in the Department for Business, Energy and Industrial Strategy (BEIS). The government’s Levy Control Framework is supposed to control the cost of three low-carbon generation schemes, funded by levies on energy companies, which consumers pay for through their energy bills. The PAC concluded that the framework had “suffered from a lack of transparency, rigour and accountability” and the forecasting of its costs had been poor.

Housing market broken, ministers admit ahead of White Paper

Ministers will admit England’s housing market is “broken” as they unveil new plans to build more affordable homes. The government says 250,000 new homes are needed each year and has admitted it is lagging behind schedule. The new housing strategy for England includes forcing councils to plan for their local housing needs and giving them powers to pressure developers to start building on land they own. Labour accused the government of “seven years of failure” on housing. Communities Secretary Sajid Javid will set out the details of the housing White Paper in a statement to MPs.

Volkswagen faces new front on emissions legal action

Volkswagen faces its first legal action in Germany from a big corporate client over the diesel emissions scandal. Deutsche See, which leases 500 vehicles from VW, said it had been unable to reach an out-of-court settlement, Reuters news agency reported. VW is involved in numerous lawsuits from individual owners, regulators, states and dealers, many of them class-action cases in the US. Deutsche See is one of Germany’s major fish and seafood producers. The business promotes itself as environmentally friendly, and in 2010 won an award for being Germany’s “most sustainable company”. “Deutsche See only went into partnership with VW because VW promised the most environmentally friendly, sustainable mobility concept,” said a statement from the company. German media reported that Deutsche See filed its complaint for “malicious deception” at the regional court in Braunschweig, near Volkswagen’s Wolfsburg headquarters. VW on Sunday declined to comment on the reports. Volkswagen admitted in September 2015 that it had used software to cheat diesel-emissions tests in the US. The company is now embroiled in investigations across the world, and will have to spend a huge amount of money to settle claims and put the engines right. The cost of settlements and fines in the US alone are approaching $20bn.

Snapchat reveals plans for US stock market listing

Snap, the owner of messaging app Snapchat, has publicly filed plans to sell its shares on the US stock market. The California-based tech firm, which allows users to send images that vanish within seconds, is set to be the biggest company to list shares in the US in recent years. Based on previous investments, Snap would be worth between $20bn and $25bn. The company revealed in the documents that it made sales of $404m last year, but a loss of $515m. The company began in 2011 when co-founder, 26-year-old Evan Spiegel, was still at university. It now has nearly 160 million daily users and last year revenues grew by nearly 600%, the listing documents revealed.

Forward Diary: 6th – 10th February 2017

Company and economic announcements planned for the week commencing 6th February 2017

Facebook loses $500m Oculus virtual reality case

A US court has ordered Facebook and other defendants to pay $500m (£395m) after finding they unlawfully used a firm’s virtual reality technology. The jury found Oculus, which Facebook bought in 2014, used computer code belonging to video game developer Zenimax to launch its own VR headset. Oculus said it was “disappointed” and would appeal against the ruling. The case threatened to overshadow Facebook’s latest results, which showed it enjoyed a strong end to the year. Facebook’s net profit more than doubled to $3.6bn in the fourth quarter. The social network was helped by 53% growth in advertising revenues, and said it was on course to hit two billion users in the first half of 2017.

Cross-country commuters to save ‘hundreds of pounds’

Passengers using cross-country train routes could theoretically save up to £260 a journey, under a trial scheme to simplify fares. The Rail Delivery Group (RDG), which represents train operators, says the 16 million fares currently on offer are “baffling” for passengers. It wants to ensure passengers are offered the cheapest possible fares. The trial from May will particularly benefit people travelling between Scotland and south-west England. A traveller buying an off-peak return from Wick, in northern Scotland, to Par, in Cornwall, can currently pay up to £342.50, although in practice few people pay that amount. However, by buying six separate fares for each leg of the journey, passengers can pay as little as £80 for the same trip. The RDG says the potential saving of £262 will soon be offered to customers automatically. CrossCountry Trains, an operator taking part in the trials, may eventually offer savings on other routes as well.