Monthly Archives: February 2016

Morrisons signs deal to sell food to Amazon customers

Alexander Tredwell – Leaders in Specialist Professional Recruitment

Morrisons will supply groceries to Amazon customers in the UK under a new deal with the US online giant.

The supermarket said it will supply products for the Amazon Prime Now and Amazon Pantry services.

Amazon Pantry was launched in the UK last year, escalating competition with the big four supermarkets, but did not offer fresh food.

Under the new deal, Morrisons will supply fresh, frozen and non-perishable goods to Amazon customers.

The expanded Amazon service will be available later this year.

Analysts at Shore Capital said there was “strategic merit” in Morrisons exploring a commercial tie-up with Amazon.

Ocado has a 25-year agreement with Morrisons to run the supermarket’s online delivery service.

The supermarket also said it will expand the geographical coverage of by taking space in Ocado’s distribution centre in Erith, southeast London.

However, Morrisons said of the Erith deal: “This amended agreement is subject to detailed terms being agreed and will only proceed if it enables Morrisons to achieve profitable growth online. There can be no certainty that an agreement will be concluded.”

Shares in Ocado fell 9.7% to 254.3p in afternoon trading, while Morrisons’ shares rose 4.9% to 197.2p.

David Potts, chief executive of Morrisons, said: “This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months.”

This agreement will sound a warning to the big on-line grocers that Amazon means business as a destination for UK online grocery shopping.

It currently has a small food delivery business but it has big ambitions and this tie-up is an important step in realising them.

Morrisons was relatively late to online delivery so have little to lose to the new entrant as they only have 3% of the market themselves but it may worry Tesco which has over 40%.

Morrisons will also gain an important new channel for its food manufacturing business and will at a stroke essentially become a food wholesaler to Amazon.

It will further sour the relationship Morrisons has with Ocado who currently supply delivery services. Morrisons chief executive, David Potts was already unhappy with the deal struck by his predecessor, Dalton Philips, as the Ocado network doesn’t serve key areas such as the North and Scotland – Morrisons heartland.

There is a crumb of comfort for Ocado in that Morrisons has agreed to take up capacity in Ocado’s new fulfillment centre in Erith – a move it had been delaying.

Ocado will also provide logistics to send online orders to be picked and delivered locally from Morrisons stores in the North.

However, those concessions will be eclipsed by the boost this deal give’s Amazon’s designs on the UK grocery market.



Thousands told their pension savings could be at risk

Alexander Tredwell – Leaders in Specialist Professional Recruitment

Thousands of workers who have been encouraged by the government to take out pension plans could be at risk of losing their savings, the industry regulator has told the BBC.

It follows fears that dozens of companies providing auto-enrolment pensions are too small to survive.

The BBC has also uncovered evidence that employers and workers are being deliberately misled by some providers.

The government said it was aware of the issue and was planning to take action.

Independent experts claim the problem could affect up to a quarter of a million people a year who are putting their savings into so-called master trust pensions.

Such schemes are popular with the 1.8 million small employers with fewer than 30 staff who are currently signing up under the auto-enrolment programme.

“There is a risk of these schemes falling over; there is a risk that members might lose their money,” said Andrew Warwick-Thompson, executive director for regulatory policy at the Pensions Regulator.

However, he said that all savings invested with asset managers in schemes regulated by the Financial Conduct Authority (FCA) would be safe.

This will be “the vast majority of cases”, he said.

The regulator also raised concerns about some of those in charge of such pension schemes.

Some of the small pension providers “may not be run by competent people”, said Mr Warwick Thompson.

Even where directors are qualified, providers do not always make it clear where the savings are invested, or who owns the schemes.

Worse than that, the BBC discovered that at least one master trust appears to be providing misleading information online.

On its website, My WorkPlace Pension claims to have £50m of pensions under management, handled by the respected city firm Old Mutual.

When the BBC questioned the whereabouts of that money, My WorkPlace Pension admitted it actually had no such assets at all.

Subsequently, Old Mutual told the BBC that it was not handling the company’s account, and asked for its name to be removed from their website.

A spokesman for My WorkPlace Pension called Tony – he would not give his surname – explained that the business was not yet live, although it was close to launching.

However, the BBC has seen a letter suggesting the scheme was being actively marketed as far back as September 2015.

According to Companies House, MWP Ltd is 50% owned by Gavin McCloskey. He and an associate, Anthony Okeke, were previously directors of another firm which sold sports fashion wear.

Its trading name was one that McCloskey might now be regretting.

They called the business “Wide-Boys R Us” – possibly a joke at the time, but one that does not sound so amusing when you are in the serious business of selling pensions.

Unlike big pension providers – known as contract-based schemes – master trusts are not regulated by the FCA. Instead they are overseen by The Pensions Regulator (TPR), which provides a much lower level of supervision.

“There’s not so much member protection in the master trust world, versus contract-based schemes,” said Nick Keppel-Palmer, the strategy director of Husky Finance, an independent advisory service for small employers.

“If they go down, the members’ money won’t be protected.”

However, the government said it was aware of the issues related to some master trusts and was working to protect employees’ savings.

“We are determined to ensure the necessary protections are in place,” said Baroness Ros Altmann, the pensions minister.

“Doing nothing is not an option, as ensuring long-term security and protection are paramount in pensions.”

Those whose savings are invested in mainstream City firms have much higher levels of protection, thanks to FCA regulation.

Some such savings are also protected under the Financial Savings Compensation Scheme (FSCS), but only up to a limit of £50,000.

Companies with more than 50 employees are currently excluded from this.

However, the FCA is consulting on whether FSCS protection should now be extended to larger companies.

  • one of the larger master trust schemes to provide a pension
  • Report any concerns about your pension scheme to the Pensions Regulator
  • See the Regulator’s website for further details of the Master Trust Assurance scheme.

At the moment, anyone who registers with HM Revenue and Customs (HMRC) can set up such a pension scheme. They do not need to have any particular qualifications for the job, nor do they need to have any financial assets.

The only criteria are that they need to be a “fit and proper person”.

However, in its guidance, HMRC says it assumes that anyone registering will be fit and proper – unless it has information to the contrary.

“It is very easy to register as a pension scheme with the tax authorities, and that’s part of the problem,” said Malcolm Small, chairman of the Retirement Income Alliance.

The Pensions Regulator has a similarly light touch. It says it cannot endorse or recommend any particular pension scheme, and it “has no responsibility for checking that master trust schemes’ claims are accurate before they are launched”.

Critics say that is evidence that the regulator needs reform.

“The Pensions Regulator doesn’t have the power to scrutinise how these pensions are sold. As a result, I think there’s a problem,” said Mr Keppel-Palmer.

In a report for the industry, Mr Small claims only around 10 master trusts are reliable operators – out of a total of 80 – because many are too small or not sufficiently profitable.

One provider investigated by the BBC – Smart Pension – admitted that it was unlikely to make a profit for several years to come.

But it said it had set up a special fund to ensure its members’ money was safe.

Of the master trust providers registered with the Pensions Regulator, only five have currently been given a “kite mark” known as the Master Trust Assurance Framework.

These are the official government-backed scheme, National Employment Savings Trust (NEST); NOW: Pensions; SEI Master Trust; The People’s Pension and Welplan.

The Treasury has also said it is looking at whether supervision of master trusts should be beefed up. It is considering whether there should be an approved list of providers – what it calls a “whitelist”- to make choosing a pension company easier.

Such moves are likely to be welcomed by the regulator.

“We would like to have a strategy in place, where if there was a mass failure of a number of these small schemes, we’re all ready to move in, and we have a plan of action in place,” said Mr Warwick Thompson.


HSBC to keep headquarters in London

Alexander Tredwell – Leaders in Specialist Professional Recruitment

UK banking giant HSBC has announced it is to keep its headquarters in London.

Concerns about stricter UK regulations led Europe’s biggest bank to launch a review into whether to move elsewhere, with Hong Kong seen as the most likely alternative.

But the bank said it had decided unanimously against the move and that London “offered the best outcome for our customers and shareholders”.

The decision was seen as a vote of confidence for the UK.

The bank has had its headquarters in the UK since 1993 but makes most of its money overseas, and Asia accounts for the majority of its profit.

Douglas Flint, the chairman of HSBC, told the Today programme: “London offered the best of both worlds for us. HSBC at its heart is a bank focused on trade and investment flows.

“The UK is one of the most globally connected economies in the world with a fantastic regulatory system and legal system and immense experience in dealing with international affairs,” Mr Flint said.

“The government’s made very clear its commitment to ensuring that that UK remains a leading international financial centre … We’ve ended up with the best of both worlds – a pivot to Asia led from London.”

HSBC is understood to have paid about £30m to advisors to help it reach the decision to remain based in London.

HSBC shares rose 1% in morning trading in London to 444.8p, but have fallen 17% this year. The bank’s Kong Hong-listed shares closed 4% higher on Monday.

However, analysts at Investec said HSBC’s decision was “regrettable” because it faced tighter regulations and the cost of the UK bank levy.

“We see HSBC’s announcement as a missed opportunity,” said Investec analyst Ian Gordon.

HSBC had been paying £1bn a year through the UK banking levy before the government changed the tax last year.

Mr Flint said “it was important that there was a change in the scope of the levy”.

“A levy based on an international balance sheet was a disincentive for a global group, and we made that point ever since the start of the levy. It was good to see that the scope of the levy changed to being a domestic impost, and that was important,” the HSBC chairman said.

However, Mr Flint denied that HSBC had forced the government’s hand in changing the banking levy.

“We had no negotiation with the government. The government was well aware of our view, and indeed the view of many other people who commented upon it, but there certainly was no pressure put, or negotiation.”

He added that the regulatory regime had “not been softened”.

HSBC’s decision was based on “a generational view” and not on “short-term dynamics”, Mr Flint said.

“It [the decision to stay] was based on a very thoughtful perspective on how economics will play out over the next 20 [to] 25 years,” he said.

HSBC said that London had an “internationally respected regulatory framework and legal system” and added that it also was “home to a large pool of highly skilled, international talent”.

It was therefore “ideally positioned to be the home base for a global financial institution such as HSBC”.

Part of the review was considering whether the increased regulation of the banking industry in the UK – in particular the increased tax burden – warranted moving elsewhere.

But in the last Budget, the Chancellor George Osborne introduced a gradual reduction in the bank levy on balance sheets – a move which particularly affected HSBC, because of its large balance sheet.

In 2014 it paid £750m of the £1.9bn raised by the government through that particular tax.

For HSBC itself, the decision wasn’t just about the tax environment in the UK.

There was also the problem of the regulatory environment in China – with the central bank causing nervousness among investors and volatility in the markets after intervening in the stock and currency markets.

Poorer news about the Chinese economy also focused minds at HSBC’s Canary Wharf headquarters in London’s docklands.

One interesting point to make about the decision is that whatever fears HSBC has about Britain possibly leaving the European Union, London’s attraction as a financial capital was more significant.

Which raises a challenge for those who argue that businesses could quit the UK if Britain were to leave the EU.

The board added that it had also decided to end the practice of reviewing the location of the group’s headquarters every three years, and would only revisit the matter if there was “a material change in circumstances”.

It stressed that Asia remained “at the heart of the group’s strategy” and that it was putting “particular emphasis on investing further in the Pearl River Delta and ASEAN region”.

Hong Kong’s Monetary Authority (HKMA) said it respected HSBC’s decision.

“The HKMA appreciates that for a large international bank such as HSBC, relocation of domicile is a very major and complicated undertaking,” said Norman Chan, its chief executive.

The Treasury welcomed the move.

“It’s a vote of confidence in the government’s economic plan, and a boost to our goal of making the UK a great place to do more business with China and the rest of Asia,” a spokesperson said.

The CBI business lobby group also said the announcement was “good news” because strong banks were “critical for the British economy”.

That sentiment was echoed by the BBA, the banking industry body and TheCityUK.

In line with other banks, HSBC shares have fallen sharply this year.

The stock is down 18% since the start of the year and more than 30% from last April, when the review into where to base its HQ was first announced.

The bank will report full-year results on Monday, 22 February. It is in the process of implementing a $5bn (£3.4bn) savings drive and cutting 8,000 jobs in the UK.


Lord Turner warns of indefinite low rates

Alexander Tredwell – Leaders in Specialist Professional Recruitment

Former City regulator Adair Turner has warned that without radical policies, the UK economy could be stuck with low interest rates “almost indefinitely”.

He told the BBC “interest rates in the UK may not go up beyond 2% by 2020”.

The Bank of England’s rate has been at the record low of 0.5% since March 2009.

Lord Turner also warned about the dangers of peer-to-peer lending, which matches individual borrowers with lenders.

Peer-to-peer lending is one of the fastest-growing areas of financial services, which appeals to borrowers who have been turned down by High Street banks and savers prepared to take greater risks to make bigger returns.

“The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses,” he predicted.

“You cannot lend money to small and medium sized enterprises without someone doing good credit underwriting.”

But Christine Farnish, independent chair of the P2PFA, the industry body representing peer-to-peer lending, said Mr Turner’s comments “fly in the face of the evidence”.

“Since the industry began, default on loans are low, measuring between 2-3%,” she said.

“We only lend to creditworthy consumers and established small and medium-sized enterprises. Strict credit underwriting rules apply to all our members and this should not be confused with higher-risk forms of crowdfunding or lending to sub-prime customers,” she said.

Lord Turner also said that the possibility of the UK leaving the European Union “would be adverse for the UK economy” and was already “causing major destabilisation at a global level”.

“There is a great deal of nervousness that a UK vote for Brexit [to leave the EU] is another layer of uncertainty in an extremely uncertain world – uncertain economically and uncertain politically.”

It comes less than a week after Bank of England deputy governor Ben Broadbent told BBC Radio 5 live that the expected referendum was not yet causing problems for the UK economy.

“We have not yet seen, regarding investment intentions, any weakening of those of late, but obviously it’s something we watch pretty closely,” he said.

Lord Turner was chair of the Financial Services Authority until its abolition in 2013.

You can hear more of his BBC interviews on Wake Up To Money and Radio 4’s Today programme.


Ford to cut jobs to save $200m in Europe

Alexander Tredwell – Leaders in Specialist Professional Recruitment

US car giant Ford has announced plans to cut jobs and save $200m (£138m) a year in Europe.

The carmaker said it was launching a voluntary redundancy programme and improving manufacturing efficiencies.

It also said it would focus on its most profitable models, such as sports utility vehicles (SUVs).

Ford Europe returned to profit for the first time in four years in 2015, as the parent group recorded record profits of $10.8bn.

This represented a “good first step”, said Ford Europe executive vice-president Jim Farley.

“We are absolutely committed to accelerating our transformation, taking the necessary actions to create a vibrant business that is solidly profitable in both good times and down cycles.”

The jobs are likely to go at Ford’s main European centres in the UK and Germany, said the BBC’s employment and industry correspondent, John Moylan.

“It is thought the jobs will be in administration, sales and marketing type functions and not at car or engine production plants,” he added.

The carmaker also said it would be launching seven new or redesigned vehicles this year, including a Focus RS and new Kuga and Edge SUVs.

Ford Europe has closed a number of plants as it struggles to turn around heavy losses. Last year, the company made an operating profit of $259m in Europe, compared with a loss of $598m in 2014.

Ford currently employs 13,890 people in the UK.


Sainsbury’s to ‘future-proof’ with £1.3bn Argos deal

Alexander Tredwell – Leaders in Specialist Professional Recruitment

Sainsbury’s aims to “future-proof” its business with the £1.3bn offer to buy Argos owner Home Retail Group.

Chief executive Mike Coupe said the deal would allow consumers to shop “whenever and wherever” they wanted.

“We can bake a bigger cake and do a better job for our customers than we can do as separate businesses,” he told the BBC.

Sainsbury’s made an offer worth 161.3p a share for Home Retail on Tuesday.

The offer represents a 63% premium to Home Retail’s closing share price on 4 January when the supermarket’s interest was revealed.

Why does Sainsbury want to buy Argos?

Sainsbury’s approached the owner of Argos and the Homebase DIY chain in November, but was rebuffed by Home Retail’s board.

The deal will depend on the sale of Homebase that Australia’s Wesfarmers has agreed to buy for £340m.

Steve Clayton, head of equities research at Hargreaves Lansdown, described the offer as a “bold play” by Sainsbury’s.

“It is looking to buy a struggling business when the supermarket itself is fighting strong headwinds,” he said.

“The takeover will be a considerable strain on management time when they already have quite a lot on their plate.”

Like-for-like sales at Argos fell 2.2% in the 18 weeks to 2 January amid intense competition in the retail sector.

Home Retail shares, which had traded at about 100p before the approach by Sainsbury’s, were flat at 152.8p in afternoon trading, while Sainsbury’s rose 2.1% to 249.8p.

John Rogers, Sainsbury’s chief financial offer, said he was confident that shareholders in both Sainsbury’s and Home Retail would back the deal.

The £120m of annual savings expected by 2019 was also a “conservative” figure, he added.

Sainsbury’s expects to make savings by moving some Argos stores into supermarkets as leases expire, as well as removing “duplication and overlap” and selling its own clothing and homeware ranges through Argos.

However, it said making these changes would cost it £140m in the first three years.

Sainsbury’s had until 17:00 on Tuesday to make an offer for Home Retail.

It now has three weeks under takeover rules to carry out due diligence on the Argos owner, meaning it must make a firm offer by 17:00 on 23 February or walk away.

Under the cash-and-shares deal, Home Retail shareholders would receive 0.321 new Sainsbury’s shares and 55 pence in cash for each share.

To reflect the proceeds of the Homebase sale, investors would also get about 25 pence per share and payment of 2.8 pence in lieu of a final dividend.

The chain’s shareholders would own about 12% of the combined group if a deal progresses.

Home Retail said it “believes in the prospects for the standalone company”, but that the possible offer provides an “attractive opportunity” for shareholders.