Business News (May 2017)

Phone switching made easy

Switching mobile phone providers could soon be a matter of just sending a text message to your provider in a simple one stage process under plans drawn up by regulator Ofcom.

By removing long drawn out telephone conversations with current providers, or using other methods to “un-lock” mobile phones, your provider could simply provide you with a code to switch providers – saving money and increased phone bills.

According to research by Ofcom, customers have shown their support with the proposals and would welcome the change. Customers have complained about not only the speed that the change takes place, but have also highlighted hidden costs incurred whilst waiting for the process to complete with the old system, more often than not ending up with additions to their bills or loss of service. Research has recently shown that up to 38% of customers have experienced difficulties one way or another during the switch from old to new providers. The report also showed that 1 in 5 customers had lost service, whilst 1 in 10 could not get in touch with their provider or had been able to keep their mobile telephone number.

The current system is time consuming, and customers wishing to change their providers must in the first instance contact their current provider and advise them that they are looking to leave. It is often at these times that your provider will ask many questions as to why you have made the decision to leave and then bombard you with other plans or offer you incentives to keep you as a customer making what could be a very quick conversation into a long debate. This can be very frustrating.

The new system would be simple just by sending a text to your current provider; they would then forward to you response with a passcode. This passcode would then be sent to your new chosen provider and potentially within 24 hours the switch could have taken place, whether you were taking your current telephone number with you or not.

If the proposed plan is successful, new rules would be introduced with regards to excessive notice period charges. This would be a big change to the current rules and regulations, where you could find yourself paying for two mobile phone contracts for a period after you have switched providers. Ofcom originally wanted the new providers to take full responsibility throughout the process of the switch. Ofcom have concluded that this system would be costly, and the option to switch by text would be more beneficial to everyone’s pocket.

It is estimated that there are 47 million mobile phone contracts running in the UK today, and reports have shown that approximately 5.9 million customers have never changed their providers or thought about changing in the previous year.

This probably won’t do Vodafone any favours, as they have just announced a substantial loss in 2016/17 or €6.1 billion (£5.2 billion) due to fundamental changes to its Indian business and the subsequent loss of revenues as a result. Vodafone have also announced a 16% drop to €1.2 billion (£1 billion) on revenues in the UK, with a further 3.3% reduction as a result of organic losses.

But it’s not all doom and gloom for Vodafone, if some of their recent suggestions and notions come to plan. Vodafone know that there is a gap in the services that they provide, and want to monetise their current customer database. Talks between Liberty Global, the owners of Virgin and Vodafone have taken place with plans to introduce a joint venture to include a fixed line and TV service.

Principal Analyst at Ovum, Darious Talmesio has described the UK as a “Black Sheep” because of the lack of fixed line and TV services, unlike its main competitors. “There is certainly an interest from both parties in doing something about it, it is just a matter of time, whether that’s next year or the year after.”

Last year, Vodafone were presented with a record fine of £4.6 million by Ofcom after it had come to light that Vodafone had mis-sold to customers, provided inaccurate bills and their poor handling of complaints (see Business News (30th October – 12th November 2016)). Vodafone have since confirmed that they experienced issues during an IT migration which involved the movement of several million customer accounts and approximately one billion individual data of customer fields from seven billing and service platforms.

Things are looking up

London’s main share index is going from strength to strength following the US Presidential uncertainties and scepticism referring to the ability to deliver tax and regulatory reform. The UK pound has grown against the US Dollar following days of political uncertainty surrounding President Trump’s administration and the recent investigations and sacking of FBI Director, James Comey, causing a slump and a six-month low in the value of the US Dollar.

Reports have shown that with the current news coming out of America it could potentially see the pound strengthen further. Smith’s Group, Chief Financial Officer, Chris O’Shea has stepped down from his position leaving behind the biggest faller this week on the index down 2.8%.

The British pound had recently seen its value against the American dollar increase to above $1.30. once this news had been received the price of the pound increased by another 0.5% As recently as Thursday it achieved its highest value yet of $1.3048 to the £1. This was after the announcement of retail sales figures that were unexpectedly high, however this value dropped later in the day. By Friday the dollar was trading at $1.3029 to the euro, while you could get 1.1643 euros to the pound a slight reduction. The pound finished at £1.3004 against the dollar an increase of 0.27% overall.

April saw a rise of 2.3%, this was a greater rise than previously predicted. There was a predicted minimal rise since sales had fallen in March by 1.8%. The pound sterling has now increased by approximately 6.5 percent against the dollar since January. It is trading at 12.5 percent below where is was prior to June’s Brexit vote. After the Brexit vote the pound had dropped to a three-decade low against the dollar.

Don’t bank on it

Fred Goodwin who was formerly the Royal Bank of Scotland’s chief executive has done his best to avoid being in the public eye for much of the last ten years. He has only appeared to contest privacy injunctions and to debate shrubs with his neighbours. The former chief executive now must reappear in the public spotlight as he attends a London courtroom.

In 2008, there was a financial crisis that the bank is now going to have to recall. Initially the bank seized the opportunity for an emergency rights offering, having done this the bank was then nationalised only a few months later, with a record £45.5bn needed to complete the bailout.

Fred Goodwin’s role in this will be to appear and give evidence to the court. After the bailout, Mr Goodwin endured serious consequences, his knighthood was revoked and for a number of the UK’s investors he became the pantomime villain. The investors had bought shares during the emergency offering, they are suing as they believe these were miss-sold.

“I definitely want to see it in court, just to see the events and what comes out as Fred sees it, Fred and all the directors, they’re the ones running the bank at that time. They’re the ones that should know the true picture, and they’re the ones that should answer.” Said John Greenwood, who was a civil engineer, he invested much of his pension in shares only to lose it.

On June 8th Mr Goodwin is scheduled to appear in court, he along with a handful of former bank executives with face as many as 9000 shareholders, this will involve 18 corporate investors, many employees and the remainder will be RBS customers. Three of the former executives to appear as well as Goodwin will be Tom McKillop who was the banks former chairman, Guy Whittaker the former financial director and finally Johnny Cameron the previous investment banking chief. They will be dissecting the worst period in the bank’s history.

It has been 10 years since Mr Goodwin resigned from his position within the RBS. During his resignation, he apologised for his role in the demise of the RBS. Mr Goodwin had previously worked for National Bank Australia had a reputation for cost cutting and being ruthlessness. When he first arrived at the RBS he moved them from being a small-time lender to being one of the biggest banks in world. In 2007 Goodwin was at the forefront of the RBS’s purchase of ABN Amro, this involved three different banks and cost a total of £61bn, this turned out to be a disastrous purchase.

RBS Collapsed due to the large amount of debt accrued through Mr Goodwin’s spending spree. The government has the expectation that it will lose money through the bailout due to the RBS not posting any sort of financial profit for over nine years.

“The trial is a chance too good to pass for people wanting to hit back and get him in the courts; especially as he’s laid low in recent years, It could be more about getting him in court than recovering money from a past investment.” This was said by Thorsten Beck, who is a professor of banking and finance.

Feeling the pinch

British consumers feel the decision for Britain to leave the European Union will see the cost of living rise with rising costs of food and services. It has been reported that nearly 50% of British customers feel that the decision to leave will have a negative impact.

A survey undertaken by Mintel’s British Lifestyle has been released, the survey tracks consumer spending across the UK’s major markets and has reported that more that 80% of UK customers are in fear of further price rises on goods and services following Brexit, whilst 59%’s growing concerns are related to the price hike in the cost of everyday groceries with the average UK household paying approximately £21.00 more in their food bills in 2017.

More than a third of consumers are concerned about the rise in the cost of a holiday and 26% are worried about the rise in the cost of shoes and clothing.

Inflation was seen to hit its highest level since September 2013 to 2.7% in the first three months this year. Economists are expecting to see the squeeze in average household incomes which will hit consumers spending and slow the economy’s growth.

Mintels, Senior Consumer Lifestyles Analyst, Jack Duckett has underlined the concerns with the post-Brexit rise in prices by saying, “Mintel research underlines particular concern about the rising cost of in-home food, and inflation is undoubtedly going to squeeze household budgets, however, broader consumer confidence is still relatively strong. Despite rising prices, most people still expect their finances to hold up well over the next year.”

Although consumers have these ongoing concerns, it has recently been reported that consumer spending rose by 3.7% in 2016 reaching £1.2 trillion with retail figures from the Office for National Statistics showed sales jumping by another 2.3% in April 2017 with the notice that UK consumers being more resilient to price hikes than originally feared.

Recent figures have been positive, some analysts have concerns and further warned that the figures are volatile and must not be taken as positives – a report from Samuel Tombs of Pantheon said, “The data often is volatile around this time of year, suggesting that the ONS’s adjustment methodology fails to adjust fully for the boost to spending over the holidays.”

Business News (April 2017)

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