Commercial Awareness: M&S & Next in Competition, Casual Dining Group Administration & More
What’s been happening in the commercial world since last week? Read on to find out!
Government Gives First Project Birch Loan
The government has handed out its first taxpayer-funded bailout under the Project Birch scheme. Celsa Steel – the UK’s largest manufacturer of steel reinforcement products has been awarded £30m as a bailout after the government decided it was strategically important to the British economy. Celsa Steel has sites in South Wales which employs 800 of its 1,000 UK-based workers.
The loan is expected to be repaid in full and has been given with an attached series of legally binding conditions. These concern commitments to protect jobs and initiatives against climate change such as net-zero targets as well as restraints on executive pay and bonuses. It is also likely that bailouts under the Project Birch scheme will include a stipulation that the government will take a stake in the company if loans are not paid back.
It should be noted that this is one of the smallest bailout requests. Tata Steel has requested a £500m government bailout and Jaguar Land Rover is reportedly seeking a loan of around £1bn.
Talking point: Which industries do you think are most likely to seek to receive funding via Project Birch? Why might the government choose not to give Tata Steel a bailout of £500m?
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Casual Dining Group Goes Into Administration
The Casual Dining Group (CDG), which operates restaurants under the Bella Italia, Café Rouge and Las Iguanas names, has fallen into administration. 1,900 of its 6,000 staff will lose their jobs however 159 out of 250 of the CDG’s outlets will remain open. Most of those closing are in England. Administrators are seeking offers for all or for parts of the remaining business and have reportedly received multiple bids.
This is not the only casualty in the food hospitality industry in recent weeks. Byron Burger brought in administrators, putting 1,200 jobs at risk and Upper Crust’s owner, the SSP Group, which is a constituent of the FTSE 250 index, has announced 5,000 job cuts.
M&S and Next Competing to Buy UK Operations of Victoria’s Secret
In June, Victoria’s Secret put its UK arm of 25 stores and 800 employees into administration. The American lingerie, clothing and beauty retailer has reportedly received three bids for its British division, with M&S and Next catching media attention.
For M&S, acquiring Victoria’s Secret would open it up to a younger consumer. However, given M&S already controls 27% of the overall lingerie market and 36% of the bra market, the Competition and Markets Authority may step-in to prevent the acquisition. It is expected that M&S would offload the Victoria’s Secret stores, including concession stands in their own shops. It should be noted though that the US parent company controls online sales even in the UK so M&S as well as Next, which relies heavily on digital sales, may want to change the terms of purchase.
Both companies, if successful in their bids, may want to consider some of the ethical and reputational issues surrounding Victoria’s Secret to see what plans the US parent company has for re-marketing the lingerie brand.
Talking point: Which company do you think should acquire Victoria’s Secret? What are the pros and cons of each?
UK Government Takes a £400m Stake in OneWeb
The UK government has agreed to put £400m into the London start-up OneWeb, a business that provides broadband from space. This is a joint venture with Indian telecoms company Bharti, with the government expected to take a 45% stake. The proposal is still subject to US court approval but is expected to close before 2021.
The deal includes a pledge to bring manufacturing of OneWeb’s satellites to the UK as a boost to jobs in research, development, manufacturing and exploitation of novel satellite technologies and has been endorsed by the Unite trade union, which represents many aerospace manufacturing workers.
The government is rumoured to be planning the UK’s own sat-nav technology, after Brexit banned it from using the EU’s Galileo sat-nav system. Some space experts have been sceptical about the suitability of OneWeb’s technology for navigational purposes.
This marks the government’s first ‘high-risk, high-payoff’ investment since coronavirus, representing ‘the scale of Britain’s ambitions on the global stage’ (Alok Sharma, Secretary of State for BEIS).
The Collapse of Wirecard
Last week, the Financial Conduct Authority (FCA) suspended Wirecard’s UK operations, following the arrest of ex-CEO Markus Braun on suspicion of fraud and a $2billion hole in the digital payment company’s accounts in Germany. In the UK, Wirecard Card Solutions Ltd, a wholly-owned subsidiary operated with an e-money license, leaving customer funds unprotected by the Financial Services Compensation Scheme.
This left millions in the UK without access to their money or ability to make payments through apps relying on Wirecard’s technology such as Pockit and Revolut. EY has now been sued after negligence allegations that following routine audit procedures could have uncovered the alleged fraud several years ago. The electronic payments processer and financial services provider’s share value dropped by over 72% following the reports of the missing $2billion and as of late June, the company remains bankrupt citing ‘over-indebtedness’.
Words: Holly Porter
Missed last week’s update? Read it here!
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