1. Google Reveals Plans for Investments of $13bn in the US
This year Google intends to invest approximately $13bn dollars in the US to construct data facilities and new offices.
In a Company announcement on February 13th, 2019, Sundar Pichai, the CEO of Google, said:
“Today we’re announcing over $13 billion in investments throughout 2019 in data centers and offices across the U.S., with major expansions in 14 states. These new investments will give us the capacity to hire tens of thousands of employees and enable the creation of more than 10,000 new construction jobs in Nebraska, Nevada, Ohio, Texas, Oklahoma, South Carolina, and Virginia. With this new investment, Google will now have a home in 24 total states, including data centers in 13 communities. 2019 marks the second year in a row we’ll be growing faster outside of the Bay Area than in it.”
The news from Google comes at a time when US business spending has declined due to the trade war.
The US Federal Government has scrutinised major tech businesses, like Google, suggesting they have not strengthened nor supported the economy enough in terms of generating new jobs and levies.
Despite the criticism, Mr. Pichai, in the Company’s announcement, said that during the span of 2018 Google had expanded its business by employing over 10,000 people and investing more than $9bn in the US.
The firm also said it will be increasing its renewable energy investments: “Our data centers make a significant economic contribution to local communities, as do the associated $5 billion in energy investments that our energy purchasing supports.”
On the other hand, Google’s plan for further expansion has sparked public disputes regarding gentrification concerns.
Gentrification means changing a less wealthy region or neighborhood into something that conforms to middle-class standards.
In October 2018, Google scrapped plans to build a business incubator campus to help new, starting companies in Berlin.
Anti-gentrification protesters opposed the move because of Google’s reputation with accusations of tax evasion claims and the improper handling and storage of personal data.
However, Ralf Bremer, Google’s Berlin Spokesperson, reported that meetings with local charities had pushed the tech giant to abandon the plans of building the campus allowing the charities, Betterplace and Karuna to make use of the area for humanitarian work.
The proposed investments come at a time when Google’s parent company Alphabet announced a 22% increase in Q4 sales, charged by an upwards surge of online advertising, and an increase in Q4 profits to well over $35bn.
Despite these rises, dividends dropped by 3% in after-hours trading as spending rose to 7 billion dollars. Alphabet said spending was due to several business decisions such as the investments in facilities for data and new offices and content research for online services.
Alphabet’s primary focus is online advertising; however, it has started to venture and delve into other sectors such as personal health and innovations in automotive technologies.
Calls for increased protection of public data have seen Google come up against scrutiny on the way it handles user data.
Despite this issue, there are virtually no indications that these issues are damaging the company. After a complete year, revenue excluding taxes came in at over $30bn, a dramatic difference from around $12bn in 2017.
2. Amazon Scraps Plan to set up a second HQ in NYC
On Thursday 14th February 2019, the multinational technology company, Amazon, aborted plans to set up a second HQ in New York City, slashing 25,000 job opportunities as a result of fierce opposition from lawmakers, trade and labor unions, and local protestors who said that the initiative would drive house prices up and overall cause gentrification.
“After much thought and deliberation, we’ve decided not to move forward with our plans to build a headquarters for Amazon in Long Island City, Queens. For Amazon, the commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long-term. While polls show that 70% of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City.”
Rivals to Amazon’s headquarter proposal, together with American politician for the Democratic Party, Alexandria Ocasio-Cortez, insisted that the flow of new Amazon employees being paid high salaries would drive housing costs sky-high, forcing low-earning locals to move elsewhere and increased crowding on public transport would put a greater strain on New York’s infrastructure.
Activists also argued against the promised 3 billion-dollar subsidies that state officials had offered Amazon because it is the world’s biggest e-commerce marketplace.
Amazon’s reverse decision was celebrated by Mrs. Cortez who has a reputation in the US for her libertarian stance on politics.
“Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world.”
On the other hand, the present Governor of New York City, Andrew Cuomo, said that Amazon’s presence could have produced annual profits of up to 30 billion USD, and would have aided the growth of the economy.
Various advocates of Amazon, including business executives, were shocked by the decision.
“This is a loss for New York and Long Island and will make it harder to attract major employers and jobs here in the future. Amazon should come to Long Island. We would welcome the jobs.”
Following Amazon’s decision to drop the plans, anxiety spread concerning the type of environment that tech businesses face in New York. Executive Director of Tech: NYC, Julie Samuels said:
“Amazon’s decision to withdraw from New York is no doubt a blow to our local economy and the tens of thousands of people the company would’ve employed here. New York City is today one of the most dynamic tech hubs in the world, but there is no guarantee we will maintain this status in the future, which makes this news so disappointing. It’s especially disappointing given the overwhelming support for the deal and there can be no doubt that bad politics got in the way of good policy here.”
3. Lagging Growth Rates for Britain’s Economy for the First Time since 2012
The end of 2018 saw the drowsiest economic growth rates in the UK since 2012.
Rob Kent-Smith, Head of GDP for the Office for National Statistics, said:
‘GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining. The UK’s trade deficit widened slightly in the last three months of the year, while business investment again declined, now for the fourth quarter in a row.’
Read the full GDP Monthly Estimate report here.
The ONS suggests that the decreased manufacturing of vehicles is one of the factors to blame for the UK’s stunned economic growth.
Why has Nissan scrapped plans to invest in its Sunderland factory?
Nissan, the car manufacturing giant, announced on February 3rd that it would produce its latest SUV X-Trail model in Japan rather than its factory in Sunderland because of the unpredictability and worry caused by Brexit. The UK’s withdrawal from the EU has made it difficult for businesses to plan ahead, forcing them to take preventative measures and decisions.
Gianluca de Ficchy, the Europe Chairman for Nissan, said:
‘While we have taken this decision for business reasons, the continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future’
Two days prior to Nissan’s statement, the Japanese-EU free trade deal sprung into motion which dismissed the 10% tax on all imported Japanese vehicles.
‘The EU and Japan’s Economic Partnership Agreement entered into force on 1 February 2019. EU firms already export over €58bn in goods and €28bn in services to Japan every year.
In the past European firms faced trade barriers when exporting to Japan, which made it hard for them to compete.
The trade agreement with Japan:
- removes these barriers
- helps us shape global trade rules in line with our high standards and shared values
- sends a powerful signal that two of the world’s biggest economies reject protectionism’
For many Japanese firms, the UK was considered a portal that granted access to the EU markets, especially since Margaret Thatcher, the former UK prime minister, pushed for manufacturers to locate their factories in Britain.
Nissan is also handling the backlash from former CEO Carlos Ghosn’s arrest in Japan following charges of financial malpractice and on suspicion of masking financial losses of over 16 million dollars with company funds.
Nissan and it’s partnering company Mitsubishi thereupon fired Mr. Ghosn as CEO of the company following the charges, in fear that it could damage the company’s branding.
The media in Japan claimed that Ghosn had confessed to waiving a percentage of his payroll in order to avoid claims from Nissan investors that he was earning more money than necessary.
Nissan’s X-Trail car is assembled and produced in spots all over the world and is regularly assessed in relation to shifts in business sentiments and the current political climate. Therefore, because the possibility of the UK crashing out of the EU without a deal exists then businesses such as Nissan have started to relocate to avoid harsh tariffs and increased costs for their consumers.
The fast crash of diesel sales in the Eurozone has shocked many businesses not just Nissan alone.
The public scandal involving Volkswagen’s emission levels and consequent scepticism surrounding the impact diesel has on the environment has caused severe damage to Jaguar Land Rover’s sales and manufacturing figures.
As things are with the global trade markets and the sheer uncertainty of the final impact Brexit will have on trade, Nissan’s decision to scrap plans of investing in its Sunderland plant was not uncalled for.
The heart of the matter is that Brexit is deterring companies from investing further in the UK. Businesses perceive this uncertainty as too much of a risk, making it safer to retreat altogether.
Two days prior to Nissan’s statement, the Japan-EU free trade deal sprung into motion which over a ten-year period, will gradually see a dismissal of the 10% tax on all imported Japanese vehicles.
This could act as a disincentive for Japan to produce its cars within the EU, therefore Japanese vehicles that are imported to Europe may have fewer taxes compared to vehicles manufactured in Britain.
What does the Office for National Statistics have to say?
The ONS has said that:
‘Growth in the production sector fell by 1.1% in Quarter 4 (Oct to Dec) 2018, as all four sub-sectors contracted. The last time all production sub-sectors contracted was Quarter 1 (Jan to Mar) 2009. It was the second consecutive three-month fall for manufacturing, as contraction in 10 of its 13 sub-industries resulted in overall growth of negative 0.9% in manufacturing.’
The ONS findings indicate that Brexit has caused widespread unease and uncertainty within business spending and it seems that their contingency plans involve relocating a portion of the manufacturing process outside the UK.
In the last three months of 2018, vehicle production figures dropped by 4.9%, manufacturing also declined by 0.9%.
The growth of the UK economy was likely to slow down but analysts were not anticipating this rate of deceleration.
The quarterly growth was less than the predicted 0.3%. As reported by the Office for National Statistics, at the end of the year GDP dropped by 0.4%.
The last time manufacturing, construction and service figures all declined simultaneously was in 2012.
Despite the bleak findings from the ONS, it does not necessarily imply that a recession is on the way.
These are first quarter preliminary figures, therefore as time progresses so will the accuracy of the GDP indicate the condition of the UK economy.
With the ONS verdict hinting at a slow rate of economic growth for 2019, company spending has been damaged by the uneasiness brought about by the Brexit negotiations.
Towards the end of the fiscal year 2018, automotive production figures fell by 4.9%, construction dropped 0.3% and investments made by firms fell by 1.4%.
Where does the Bank of England stand in all of this?
The Bank of England, on 1st November 2018, said:
Over the recent past, consumption growth has been a little stronger than expected, while business investment has been weaker than expected. Over the forecast period, consumption is projected to grow modestly relative to historical rates, broadly in line with real incomes. Growth in business investment is expected to be subdued in the near term and then to pick up as Brexit-related uncertainty – which is dampening investment growth.
The Bank of England suggests that there is a 25% chance of the UK economy descending into a recession, however, some economists raise the point that the Brexit negotiations have yet to be concluded, meaning that a customs union with the EU could still be in sight.
Additionally, the US-China trade war has slowed the global economy down and Brexit has affected business decisions triggering the start of contingency plans.
Mark Carney, Governor of the Bank of England, said:
‘Brexit can lead to a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities. […] The Bank of England estimates that a 3% drop in Chinese GDP would knock one percent off global activity, including half a percent off each of UK, US and euro area GDP, through trade, commodities, and financial market channels.’
How has the UK’s trade been affected?
The ONS said: ‘The total trade deficit widened £8.4 billion to £32.3 billion between 2017 and 2018, due mainly to a £7.2 billion increase in services imports.’
The UK sterling also fell as a result of the backlash from the economy’s slow growth, to below $1.29 and €1.14.
Brexit discussions linger over the British pound which could affect trading in the coming future.
Philip Hammond, Chancellor of the Exchequer, argues the case that the UK economy has done well despite the Brexit concerns, saying:
‘A robust performance for the UK economy in 2018, which is all the more remarkable given the uncertainty around the Brexit process.’
4. Next Carmaker to Flee from UK Amidst Brexit Fuss: Honda
Multinational Japanese car manufacturer Honda has announced it will terminate its manufacturing plant in Swindon two years from now; cutting over three thousand jobs. The company’s decision, along with numerous other car firms comes just before the Brexit 29th of March deadline.
1.5 million UK vehicles are manufactured at the base in Swindon by Honda. The company claimed the decision had nothing to do with the Brexit commotion but has more to do with shifts in trade deals such as the EU-Japan trade agreement, new emissions regulations for diesel cars. All these factors are pushing car manufacturers out of the UK.
The UK was commonly regarded as a bridge that connected Japanese car manufacturers to the rest of the EU. However, the backlash from Brexit has brought about condemning insults from European officials, the UK Prime Minister Theresa May’s struggle to please the House of Commons with a proposal deal and recently multiple Labour MPs have resigned from their Party in a move they claim is “the first step in leaving the old, tribal politics behind”. So Brexit seems to be tearing the UK apart from the inside out.
During a news conference, Takahiro Hachigo, the CEO of Honda said:
“As you are aware, the four-wheel vehicle industry is facing a turning point. Under these circumstances, in order for Honda to survive, we need to provide our products in a speedy manner to meet our customers’ needs and to keep on creating new value towards the future.”
Honda has also announced it will end the manufacture of its Civic model both in Turkey and the UK. This is the latest business decision following the scrapping of Nissan’s X-Trail model in Sunderland.
By 2021 Honda’s Swindon plant, which produced over 150,000 vehicles last year, will have shut down and moved out of the UK.
Other electronic firms from Japan, such as Panasonic and Sony, have also decided to relocate company HQs to Europe.
The UK Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, said that Honda’s ruling would be highly damaging for the economy.
“This news comes on top of months of uncertainty that you as manufacturers have had to endure about Brexit and about our future relationship with the EU […] a situation in which our manufacturers don’t have the certainty that they need about the terms under which over two-thirds of our trade will be conducted in less than 40 days’ time is unacceptable. It needs to be brought to a conclusion and without further delay.”
As reported by Japan’s embassy in the UK, nearly a thousand Japanese businesses have their foundations in the UK, which have hundreds of thousands of employees and have invested millions into the British economy.
5. Saudi Arabia invests $20bn in Pakistan
The Crown Prince of Saudi Arabia, Mohammed bin Salman has signed Memorandums of understanding (MOU) that point towards an investment of around 20 billion US dollars in Pakistan’s economy, which is in need of financial support.
What exactly is an MOU?
An MOU or Memorandum of understanding is a non-legally binding deal involving two or more parties that informally lays out the terms and conditions of an agreement, as well as the obligations of the parties involved. An MOU creates the foundation for the creation of a subsequent legally-binding agreement.
The preliminary agreements also indicate an 8-billion-dollar investment in the city of Gwadar’s oil refinery.
Pakistan is dealing with financial hardship. It has a total remainder of 8 billion dollars saved for foreign reserves and is seeking assistance.
Imran Khan, the Prime Minister of Pakistan, has been scouting for financial support from other nations due to the build-up of pressure from the bailout package that Pakistan could require from the IMF (International Monetary Fund).
Pakistan has so far been given a $6bn loan by Saudi Arabia, but moreover, is struggling for an economic bailout for the 13th time since the 80s.
The support has not been well received by other nations which criticised Saudi Arabia’s involvement with the assassination of the nonconformist reporter Jamal Khashoggi.
Prime Minister Khan said: “So Saudi Arabia has always been a friend in need which is why we value it so much.”
Pakistan is Prince Salman’s first stopover on his tour of Asia which will see him visit India and China within this week. It is an attempt on Saudi Arabia’s part to rebuild its global profile following Khashoggi’s murder.
This partnership is equally beneficial to both countries. They have a well-established history regarding a military connection and Prince Salman’s visit happens to occur during a period when international relations in the area are changing.
6. UK MPs Call for Tougher Regulations on Facebook
Various members of Parliament have concluded that the social network giant, Facebook, needs greater regulation, with immediate measures taken to stamp out fake news.
A committee in the Houses of Commons has settled that Facebook’s CEO, Mark Zuckerberg, has slipped up on his administration of the company and the prevention of deceptive fake news.
The committee suggested that fake reports from external sources have compromised the validity of democracy in Britain.
On February 13th, 2019, the Head of Facebook’s Cybersecurity Policy, Nathaniel Gleicher said:
“To ensure that we stay ahead in rooting out abuse we’re investing heavily in building better technology, hiring more people and working more closely with law enforcement, security experts and other technology companies.”
The UK Committee for digital culture, sport and media concluded that social network companies are incompetent in countering and blocking damaging content that emerges, for example, propaganda that attempts to manipulate the outcome of elections, and the unethical handling of personal data.
Damian Collins, the Committee’s spokesman, said:
“We need a radical shift in the balance of power between the platforms and the people. The age of inadequate self-regulation must come to an end.”
“Companies like Facebook exercise massive market power which enables them to make money by bullying the smaller technology companies and developers who rely on this platform to reach their customers.”
Facebook denied the committee’s allegations that it had violated regulations concerning data protection, however, it emphasised its joint concerns regarding misinformation and safeguarding elections from corruption.
European and US legislators are struggling to understand all the associated hazards posed by global social network firms.
Germany has led the criticism and retaliation against Facebook, charged by the Cambridge Analytica scandal that involved the unlawful and unconsented collection of millions of Facebook profiles. Recently Germany has demanded Facebook to cut down its store of personal data.
In January 2019, Marco Rubio, a senior US senator, introduced a piece of legislation that would attempt to give social media users a higher level of control over their personal data.
Facebook went under the spotlight after Christopher Wylie, an inside source, claimed that a vast number of users’ data had been gathered by Cambridge Analytica.
What is Cambridge Analytica? A UK based firm, Cambridge Analytica specialised in political advertising and data analysis which was charged with manipulating the outcome of political campaigns by unlawfully collecting data from Facebook.
The CEO of Facebook, Mark Zuckerberg, then said sorry to its users for a breach of confidence regarding the scandal and has since rejected invitations to meet with UK MPs, something which the Committee did not take lightly.
Damian Collins said:
“…we think these issues are so serious and they affect not just the way individual products work but in many — the culture of the company, its attitude towards the data of the users who use the platform that the most appropriate person is the person who in a way is the kind of beating heart of the company that its founder Mark Zuckerberg.”
Nevertheless, Facebook claimed it had collaborated with the Digital, Culture, Media and Sport Committee by responding to hundreds of questions regarding the scandal and sending various representatives to testify and offer evidence where necessary.
Facebook said it had reshuffled the entire authorization process of all political advertisements and is working on stricter rules for the type of content that can be published.
The UK committee said that the sheer level of influence and control that big global tech firms possess pose a real danger to communities worldwide. Disinformation, fake news and the harvesting of personal data lead to the spread and exposure of damaging content through the Facebook platform to millions of users.
7. Swiss bank UBS faces €4.5bn fine from French court following accusations of tax evasion
UBS Group AG, a multinational investment bank originally established in Switzerland, was found guilty of tax fraud and then charged with a hefty €4.5bn fine by a court in France on the 20th February 2019.
The Swiss Bank’s shares dropped by nearly 3.5 percent, however, it has refuted any malpractice and said it would appeal the court’s decision.
Christine Mee, the presiding French court’s Judge said: “The concealment of assets and the unpaid taxes caused financial damages of an exceptional nature given the longevity and size of the fraud […] The court can only conclude that UBS consistently put its own financial interests over the sovereign rights of the French state.”
The French judicial system is coming down hard on illegal financial offences such as tax evasion and money laundering.
EU bankers will examine the verdict very carefully after the financial crisis increased the tension from compliance regulations regarding illegal misconducts and the laundering of money.
The fines, which surpass UBS’s $4.9bn net earnings for 2018, combine around 3.6 billion euros and further charges of 800 million euros to the state of France.
“The verdict also lacks proof and a credible methodology for the calculation of the fine and damages. The charges of laundering the proceeds of tax fraud are without merit, as the predicate offence of an original tax fraud of French tax payers was not proven. UBS respected and followed its obligations under Swiss and French law as well as the European Tax Savings directive, which came into force in 2004.”
The total sum of the fine is unprecedented for France and far more than the $2.45 billion UBS reserved to safeguard against possible financial damage caused by lawsuits and administrative terms.
The French legal hearing comes after a 2009 prosecution in the US in which UBS was fined over 700 million dollars and in 2014 a German penalty fine of around 300 million euros.
The judgment signifies the end of an inquiry of 7 years and multiple scrapped settlements.
Prosecutors in the French court said that UBS covered the expenses of golf, music and hunting events for Swiss bankers in order to solicit customers and offered financial advice regarding methods of tax evasion.
UBS attorneys said that French prosecutors did not provide evidence of the alleged cases of customers encouraged to tax evade.
The French prosecutors said that UBS had methodically endorsed tax evasion and money laundering on an industrial level.
According to the law in France, convicted money launderers could be penalized half of the laundered amount. UBS clients are predicted, by French prosecutors, to have concealed billions of euros through tax evasion schemes.
The French prosecution said that bankers working for UBS would give out anonymous business cards and worked on computers installed with software that kept data untraceable.
Nearly all half a dozen former UBS directors were sentenced to time in prison and charged with hefty penalty fines.
Shares in Swedbank Slump Lower as Money Laundering Scandal Looms
Swedbank’s shares fell by roughly 7.2 percent on Thursday 21st of February 2019, after a report surfaced connecting Swedbank with Danske bank over money laundering malpractices.
The Danish Danske Bank is under inspection within five nations regarding unusual deposits from Russia amounting to over 200 billion dollars.
A day prior, Swedish media said there was evidence that revealed around 4 billion dollars had been moved to and from Swedbank and Danske bank accounts during an 8-year period, causing Estonian authorities to inquire into the accusations.
On Thursday 21st of February, the Financial Supervisory Authorities of Estonia and Sweden, in a joint statement said:
The Estonian and Swedish FSAs have today agreed to initiate a joint investigation with the purpose of closely examining the information reported by SVT. The Latvian FSA and the Bank of Lithuania has also agreed to participate in the investigation with whatever assistance that might be needed by the Swedish and Estonian authorities.
Erik Thedéen (Director General of the Swedish FSA): “The information disclosed by SVT is very serious and together with our Estonian colleagues we will thoroughly investigate the matter to make a comprehensive and in-depth assessment.”
Birgitte Bonnesen, the CEO for Swedbank has said: “preventing and averting money laundering is one of the bank’s most important responsibilities.”
On Wednesday 20th of February shares in the Swedish bank dropped by roughly 14 percent, the largest decline since the global financial crisis of 2008.
Experts outlined the greatest threat that Swedbank could face is from Hermitage Capital’s CEO, Bill Browder. His recent focus is aimed at uncovering corruption in the financial industry.
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