Business News (September 2018)

AI could usher in the four day week

The TUC are using its annual conference call to the government, in an attempt to encourage businesses to agree to their current workforce to work less but for the same wage. Their notion is that the introduction of new artificial intelligence, robotics and automation technologies could not only provide a £200 billion UK economy boost, which would in turn possibly release pressures on the work force, it would end up making way for a four-day working week within the next 10 years.

Cardiff based company IndyCube have implemented this work ethic over the last 18 months. Although the transition to the new working arrangements met complications, the work has paid off and they are reaping the rewards – they have since expanded their business outside of Wales.

Mark Hooper, Founder of IndyCube was pleased with their progress to date. “We felt we had an opportunity to prove something, that you can be as productive in four days as five, and it has been worth it.”  Employees at IndyCube have praised their bosses for making the changes. The extra time available to them during the week has improved elements of their own personal and family lives. According to a survey by the TUC, 1.4 million workers across the UK work a 7 day week. The results also showed that 51% of people surveyed in fact feared that only the managers and shareholders would benefit from any new technologies that would be introduced.

The thinktank Centre of Cities published a report earlier this year, stating that 3.6 million jobs across the UK could be replaced by machines by 2030.  Frances O’Grady, the General Secretary of the TUC since 2013, emphasised that previous unions had fought hard for 2 day weekends and long working hours to be limited, and that the new 4 day working week would be the next challenge that the TUC will meet. “We know that some people are pessimistic about whether technology will make their lives better, but technology could be a force for good, we can also make everyone’s working lives better and richer.”

Debenhams now on the ropes?

High street retailer Debenhams have published a statement reassuring investors about its financial affairs, while at the same time announcing a fall in annual profits that had been forecasted this June. Profit margins have been released which show a figure of £33 million, compared to the £35-40 million forecast. Debenhams have reassured investors that the figures are in line with the current market forecasts.

Debenhams shares fell last weekend by 16% after they appointed KPMG to help improve their market performance, maximise the value of its shares and protect its employees. Its net debt has been estimated to be approximately £320 million, which falls within forecasts and allows for “significant headroom” for the £520 million that has been agreed under the current loan agreement in place. Debenhams have stated that their current financial position is strong and are in a comfortable position ahead of the Christmas period.

Sergio Bucher, its Chief Executive said that although the retail market has been challenging and had other deteriorating trends throughout the summer, the start of the new season has shown positive signs, and the company will be able to sustain profitability, improve performance and continue their plans to cut costs and boost sales.

KPMG have not ruled out the option of a Company Voluntary Arrangement (CVA), and have many other potential measures under consideration to help the business. Debenhams have already issued three profit warnings within the last financial year, and the value of their shares have decreased by two thirds since January.

In August, Debenhams announced that 80-90 positions at their headquarters would be lost in a bid to cut costs. This followed the announcement earlier this year that they planned to cut up to 320 management jobs within their stores. Debenhams are also looking to sell off their Scandinavian department store chain, Magasin du Nord in a further bid to raise funds, at a price of perhaps up to £200 million.

Traditional high street retailers are facing troubled times at present, with the House of Fraser recently entering administration, and Mark and Spencers announcing their intention to close up to 100 shops across the UK. Debenhams are not looking to reduce their stores, and rather than looking at closures, they are focusing their efforts on food, beauty and improving their online presence. Mike Ashley, owner of Sports Direct and who saved House of Fraser, owns just under 30% of Debenhams is understood to be keeping a close eye on the developments at Debenhams.

Volkswagen suffers for its omissions on emissions

History is about to be made in the German courts, in the first case against a car manufacturer and the ongoing diesel scandal. Volkswagen are facing costs of up to €9.2 billion (£8.2 billion) in damages, with investors making claims against the company due to the scandal regarding VW’s falsification of emissions data.

VW were aware of the emissions figures discrepancies, and misled their customers and motor trade markets. In 2015, Volkswagen’s shares crashed following the disclosure of the emission scandal. A total of 1,670 claims seeking compensation have been made by shareholders, following the decline of Volkswagen’s share price by nearly 40% since the scandal first erupted back in September 2015. So far, Volkswagen has faced fines and penalties of €27.4 billion to date.

The Deka Investment Fund, who are bringing the case to the courts, has outlined a further 1,600 claims. 50 lawyers have been instructed to conduct the proceedings, due to the size of the hearing and the interest it has attracted. Court officials have made the decision to move the case to a nearby conference centre in a bid to facilitate the hearing.

Volkswagen have said that they believe that they complied with their obligations in a correct manner, and feel confident of the proceedings they are set to face; the ongoing case is not expected to conclude until 2019. It is believed that former executives from Volkswagen, Porsche and Audi are currently involved with the ongoing criminal investigations following further information received. Volkswagen have already admitted they were liable for the diesel emissions crisis.

Network Rail begin properties sell-off

Network Rail have agreed to sell their commercial properties for £1.46 billion to outsourcing company Telereal Trilium and a Blackstone Group partner. It has been revealed that up to 5,200 properties across the UK will be sold. The buildings in the sale include converted railway arches.

Network Rail have confirmed that the proceeds made from the sale will be used to help fund its plans to upgrade and pave the way to make major improvements for passengers and reduce the need for taxpayers to fund the work. Both companies will hold equal stakes following the sale, with the intention to remain owners of the estate in the long term with Telereal overseeing the sites in terms of property management.

Energy boss has high flying plans

The founder of Ovo Energy, Stephen Fitzpatrick and former owner of a Formula 1 team has announced his plans to compete in the race to develop and build inter-city flying taxis. “We are investing in all the technology evolution taking place in aerospace but we are trying to apply that to something that’s real world and is possible to execute four years out,” he added: “We are not waiting for huge changes in existing regulations.”

Fitzpatrick’s, self-funded flying company, known as Vertical Aerospace plans to offer short-haul piloted inter-city flights that can carry several passengers within the next 4 years. The initiative began in 2016 and has since employed 28 experienced aerospace and technical experts with backgrounds from Airbus, Boeing, Rolls-Royce, Martin Jetpack and GE.

The race for inner-city flights has seen entrepreneurs within the technology, aerospace and automotive fields come up with innovative ideas to eventually introduce pilotless, autonomous aircraft; Fitzpatrick’s believes that to move forward and to meet safety regulations, he will introduce piloted aircraft with fixed wings that can be added to existing plans and inventions.

Vertical Aerospace want to target the busiest air routes across the globe with an aircraft that does not require a runway and has a 500 mile range. Within the next decade we can expect to see more companies in competition with each other, with the launch of autonomous flying vehicles from both Airbus and Uber who both are looking to develop an intercity fleet of flying taxis. The Volocopter is based on a drone – it’s body resembles a small helicopter, powered by 18 rotors. Its chief competitor is a concept called Aeromobil, a stretch-limousine that changes into a fixed-wing craft. The designers of many of the envisaged services plan to use on-demand technology via the use of smartphones and smart devices.

Vertical conducted an unmanned test flight, using a single-passenger prototype VTOL on a Gloucestershire airfield following flight approval from the Civil Aviation Authority. Their next move is to produce a fixed-wing version that a pilot can manoeuvre with a vertical take-off capability and to have the room to carry passengers. Working closely with aviation regulators, the work is hoping to pass the first stage by 2022. Once the initial stage has been completed, Vertical will look to extend their range of aircrafts, and plan to introduce small elements of autonomous flights and expand their serving routes.

Fitzpatrick has good form for developing new ideas within areas in which he has no previous technological background. For many years he studies the energy markets before he launched his own energy firm Ovo in 2009. Ovo now has over 680,000 customers across the UK and 2.5% of the domestic retail energy market, as well as providing 1,200 jobs to the economy.

Fitzpatrick’s introduction to hardware and product engineering started when he became the owner of Formula 1 team Manor Racing, albeit for a short while. It was at this time that he noticed that the advances in racing cars also applied to those in aircraft. These advances included the use of high powered batteries to hybrid power trains, the use of new structural materials such as carbon fibre and incremental improvements in design. “The technology we were using in Formula 1 was just too high-spec to be applied to the challenges of the typical road car,” according to Fitzpatrick.

“What you can get from an F1 engine has more power density per kilo than a jet turbine,” he said.

Cadburys begins stocking up as Brexit looms

Chocolate manufacturers Cadbury have taken their own steps to protect themselves from Brexit. Mondelēz International, Cadbury’s owner has announced that they have started to stockpile ingredients such as chocolate and biscuits in the case of a no-deal Brexit.

President of Mondelēz International, Hubert Weber, said that the measures that they have taken are part of their contingency plans that could affect the manufacture of the leading brand. Weber understands that the UK is not able to provide the essential ingredients required. “Like the whole of the food and drink industry in the UK, we would prefer a good deal that allows the free flow of products, as that would have less of an impact to the UK consumer.” Even so, Weber is planning for contingencies.

“However, we are also preparing for a hard Brexit and, from a buffering perspective for Mondelēz, we are stocking higher levels of ingredients and finished products, although you can only do so much because of the shelf life of our products.”

It is feared that shoppers may have to face higher prices and have less choice if a Brexit deal is not agreed. Mondelēz International receives 40% of its revenue from Europe, as well being Mondelēz International’s largest global division. It is understood that businesses within the industry are starting to stockpile ingredients and supplies, as well as making no-deal plans.

Stockpiling has also been considered in the medical industry. Matt Hancock, the Health and Social Care Secretary is keen to stockpile drugs, medical devices and other supplies should a no-deal scenario arise. Astra Zeneca has warned that if a no-deal Brexit is announced, many medicines that are from the EU may not be readily available for UK patients.

According to reports, the food and drink industry across the UK have varying but considerable concerns regarding the Brexit deadline of 29th March, and businesses are taking their own steps to protect themselves.

 

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Business News (August 2018)

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