Top News Stories ~ 18th – 24th January 2021

  1. TWO CLOSED RAIL LINES GET £794M BOOST

Two rail lines, which have been closed since the 60s, have been given a combined total of £794m from the government.

East West Rail, which has been closed since 1968, will connect Oxford and Cambridge, will get the majority of £760m, to open new parts of the line. The Northumberland line, which closed in 1964 as part of a rationalisation of the railway network known as the Beeching cuts, will get £34m for initial work aimed at reintroducing passenger services and will reopen the line between Newcastle-upon-Tyne and Ashington. This will include funds for preparatory works and land acquisition.

Restoring railway lines helps to put communities back on the map. The line connecting Oxford and Cambridge would serve new housing developments which is a great way to get people in and out of the cities.

Although it is hoped that the trains will eventually be operated by battery technology or hydrogen, the trains will initially run on diesel engines. Labour MP Daniel Zeichner argues that we are currently in a time of ‘climate emergency’, and railway lines for diesel trains should not be built. Transport Secretary Grant Shapps argued that, if the lines were electrified, the lines might ‘potentially bypass the overhead wire technology altogether’, and that the lines are being built in a way that could ‘probably’ use the latest technology in the future.

This will create 1,500 jobs, according to the Department for Transport, and will result in a wider economic benefit for the area between Oxford and Bletchley. This is planned to open in 2025. The rail mnister of DfT, Mr Heaton Harris, acknowledged this was an ‘ambitious timetable’.

THOUGHTS AND IMPLICATIONS

As the new rail lines will be built for diesel trains, many have argued this is actually a step back in trying to reduce diesel use. Labour MP Daniel Zeichner argues that we are currently in a time of ‘climate emergency’, and railway lines for diesel trains should not be built.

Bringing 1,500 jobs will create a huge economic benefit. And, with record redundancies being announced, this introduced many jobs in a time it is needed most.

2. NEXT PULLS OUT OF TOPSHOP RACE

Next has withdrawn from the race to buy Sir Phillip Green’s Arcadia brand Topshop. This comes after the fashion chain was named as a fortrunner to buy the brand.

Next, which has 550 UK shops and has weathered the pandemic well, was seen as a good fit to take over the group’s assets. But, Next said they were unable to meet the price expectations of the vendor. It had been bidding in partnership with the US hedge fund Davidson Kempner, which was going to put up most of the money.

According to reports, Authentic Brands, the US owner of the Barneys department store, and JD Sports have tabled a joint offer, while online retailers Asos, Boohoo and Shein are also said to be interested. Shein put an offer of £300m for Topshop and Topman, whilst it is running another process for some other of Arcadia’s brands.

Sir Philip Green bought Arcadia for £850m in 2002, and its collapse was one of the high streets biggest casualties, putting over 13,000 jobs at risk.

THOUGHTS AND IMPLICATIONS

With Next’s exit from the sale process, this will put other bidders in a stronger position, making it “ripe for a buyer to reel it in at a lower price”, according to a restructuring expert. Whether Authentic Brands and JD will top £300m is definitely unclear. If any online clothes retailer is to win, Topshop will give them a new market in having physical stores.

3. NISSAN COMMITS TO UK CAR PLANT

Japanese car maker Nissan has announced that its Sunderland plant is secure for the ‘long term’ as a result of the trade deal reached between the UK and the EU.

Sunderland is Nissan’s UK largest car plant with 6,000 employees and supports nearly 70,000 jobs in the supply chain. 70% of the cars made in Sunderland are exported and the vast majority are sold in the EU.

Nissan had issued stark warnings last year that if the UK left the EU without a trade deal, the resulting tariffs on cars and components would eventually make the Sunderland pant ‘unsustainable’.

Currently, the batteries in the Leaf electric cars are imported from Japan. Shifting all battery production to the UK will mean Nissan avoids incurring tariffs on the 70% of Lead models built for export under the terms of the new trade deal, which states that at least 55% of the cars material value must come from the UK or EU to qualify for zero tariffs when exported to the EU.

Nissan’s chief operating officer Ashwani Gupta has said that the Brexit deal is positive for Nissan and explained that, being the largest automaker in the UK, they are taking this opportunity to “redefine auto-making in the UK”.

Andy Palmer, former boss of Aston Martin, argues that 800,000 jobs are at risk if the UK government does not act now to foster battery investment, as without batteries being made in the UK, the country’s auto industry risks becoming an antiquated relic and overtaken by China, Japan and America and Europe.

“Without electric vehicle batteries made in the UK, the country’s auto industry risks becoming an antiquated relic and overtaken by China, Japan, America and Europe.”

This news came as Nissan paused one of its two production lines in  Sunderland on Friday as disruption at ports caused by the pandemic affected its supply chain.

THOUGHTS AND IMPLICATIONS

This brings an end to nearly five years of uncertainty, and has been greeted with relief. It is also hoped that this will bring more jobs, although Nissan would not confirm if this.

The UK car investment has fallen sharply since the UK voted to leave the EU. In the five years to 2016 it averaged £3.5bn per year. But, in the four years since it has averaged around £1bn – a fall of 71%. The Nissan decision is therefore a very welcome boost to the UK which is in an international scramble for the investment of the future which is happening right now.

4. UK BORROWING BOOMS

Last month, UK government borrowing hit £34.1bn, the highest December figure on record, and the 3rd highest borrowing figure in any month since records began in 1993. Spending on jobs support, including the furlough scheme, was £10bn in the month alone. This came after the cost of the pandemic support weighed on the economy.

Purchases of vaccines, testing equipment and PPE also pushed up borrowing by £9bn. Receipts of income tax, VAT and business rates were all around £1bn less than last December.

The Office of National Statistics has said that the Government borrowing for this financial year has now reached £270.8bn, which is £212.7bn more than a year ago. The Independent Office for Budget Responsibility (OBR) has estimated that borrowing could reach £393.5bn by the end of the financial year in March.

The increase in borrowing has led to a steep increase in the national debt, which now stands at £2.13 trillion. The UK’s overall debt has now reached 99.4% of gross domestic product (GDP) – a level not seen since the early 1960s. However, the interest paid on that debt was just £100m up on last December.

THOUGHTS AND IMPLICATIONS

The UK is definitely not alone in its financial challenges, with many other countries experiencing the same issues. If the government is sensible, then the sums being spent can be paid back over decades in the same way the money spent in World War 2 was repaid. Getting in early could well pay dividends. The average UK gilt repayment profile is the longest in Europe already, at over 10 years.

5. GOOGLE THREATENS TO PULL OUT OF AUSTRALIA

Google has threatened to pull out of Australia after the government announced plans to make the tech giant share royalties with news publishers. Australia’s government believe that Google holds a monopoly over Internet searches and gains customers from hosting news content.

This would be a world-first law which would make Google, Facebook and potentially other tech companies pay media outlets for their news content as news publishers complain tech giants have been distributing and benefitting from their content without paying any royalties. This new law is designed to ensure news publishers are paid fairly. Australia’s parliament still needs to pass the law but are keen to push it through this year.

Google has said that the laws are “unworkable” and has said it will withdraw Google search from Australia.  Google Australia turned over $3.7bn in gross revenue, and $7.7m was from news content. Globally, Google’s revenues amounted to more than £117 in 2019.

Google’s threat to remove its entire search product is its most severe yet. News accounts for just 12.5% of Google searches in Australia, according to lawmakers.

THOUGHTS AND IMPLICATIONS

Evidently, there is no doubt that the implication of pulling Google Search in Australia would be massive. Would the rest of Google’s services, such as Google Maps, Google Docs and Gmail also be pulled?

It is thought that Google and Facebook’s threats show that they put their commercial interests ahead of the democratic processes of the nations they operate in. It seems as though the Australian government has been essentially backed into a corner following the comeback by the giants. Australia have no option but to reject their threats and move forward, or allow the tech giants to dictate terms and surrender our democratic processes to big tech.

6. BOEING TO FLY ON BIOFUEL

Boeing says it will begin delivering commercial airplanes capable of flying on 100% biofuel by the end of the decade, calling reducing environmental damage from fossil fuels the “challenge of our lifetime.”

By 2050, carbon emissions are expected to be halved as part of am industry target. Boeing’s goal is central to this. Boeing’s director of sustainability strategy has said that the Aviation industry is committed to “doing its part to reduce its carbon footprint”.

Currently, commercial flying accounts for about 2% of global carbon emissions and about 12% of transport emissions, according to data cited by the Air Transport Action Group.

Boeing isn’t starting its mission from scratch. In 2018, it staged the world’s first commercial flight using 100% biofuel on a FedEx Corp 777 freighter. Currently, biofuels are mixed directly with conventional jet fuel up to a 50/50 blend, which is the maximum allowed under current fuel specifications. Boeing must now determine what changes to make to enable safe flight on alternative fuels derived from used vegetable oil, waste, sugar animal fats and other sources.

THOUGHTS AND IMPLICATIONS

This is good news, especially with the environmental damage that is being caused by fossil fuels. In 2019, commercial flying accounted for about 2.5% of global carbon emissions.

Biofuels have emerged as one of the most strategically important alternative fuel sources and are considered as an important way of progress for limiting greenhouse gas emissions, improving air quality and finding new energetic resources. With airlines beginning to use biofuels, this could cut ‘flight shame’, which prevents people from wanting to use planes. A number of famous Swedes have stopped flying, including opera singer Malena Ernman, the mother of teenage activist Greta Thunberg who has thrust climate change into the spotlight.

Thanks for reading! If you’re wondering how you can become ‘commercially aware’, check out my blog post on “How To Be Commercially Aware

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A future trainee solicitor encouraging and supporting social mobility, and showing you anything is possible.

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