FTI Consulting News Bytes – 17th February 2023

This week’s news

Lack of financial support sees UK semiconductor bosses threaten to move overseas

CNBC reports that the UK’s semiconductor industry is “crying out” for financial support from the government; insiders have warned that UK-based microchip firms may look to relocate to the US and other countries if the government does not take action. Semiconductor bosses are becoming increasingly frustrated as the UK government is still yet to announce a strategy outlining the UK’s efforts to support the chip industry. Companies including Pragmatic Semiconductor and IQE have warned that they may be forced to relocate to the EU or the US where last year President Biden signed into law the CHIPS and Science Act, a $280 billion package that includes $52 billion of funding to boost domestic semiconductor manufacturing. UK tech industry executives have said that the lack of a similar strategy from the UK government is hurting the country’s competitiveness; nevertheless, they are hopeful the government will commit to significant investment, tax incentives, and an easier immigration process for high-skilled workers.

FCA to gain powers to crack down on BNPL firms

Draft government proposals would give the UK’s main financial watchdog sweeping powers to clamp down on “buy now, pay later” (BNPL) companies in breach of its rules, the Financial Times reports. The proposals, aimed at providing protection for consumers who use the popular but controversial short-term credit product, would enable the FCA to ban BNPL companies from further lending. The move comes two years after an FCA-commissioned review found an “urgent need” to regulate the fast-growing sector, whilst criticism of BNPL loans has been drawn by debt charities, civil society groups and politicians about consumers taking on unaffordable levels of debt. Under the proposed regulations, consumers would be able to bring complaints against BNPL companies to the Financial Ombudsman Service; in addition, lenders would be required to provide customers with more information about their loans.

Should Central Banks be in the payments business?

Last week, it was announced that the Bank of England is drawing up plans to create a new digital pound for consumers before the end of the decade. Following this, Bloomberg Opinion columnist, March Ashworth, has penned an article on central bank digital currencies (CBDCs), challenging whether the state should be in the payments business. CBDCs are more like stolid stablecoins rather than volatile cryptocurrencies per se; nevertheless, Ashworth perceives there to be a real potential for these digital coins to erode free enterprise. Potential benefits of CBDCs include increased abilities for governments to crack down on crime and tax evasion. However, the piece notes that giving government bodies access to personal data is “troublesome”, adding that the prospect of central banks being able to impose negative interest rates and actively reduce people’s savings is “truly scary”.

Liberty Global buys 5% stake in Vodafone

Liberty Global, the US telecoms group, has bought a stake of nearly 5% in Vodafone worth £1.2bn, as it bets on the revival of its UK competitor.  The US telecoms group, which owns Virgin Media O2, joins several foreign acquirers that have built positions in Vodafone. The Financial Times notes that in the past twelve months, Vodafone has battled against an activist campaign, seen its CEO step down, and its value decrease by a third. Mike Fries, CEO of Liberty Global, commented: “The stock’s cheap — it’s an opportunistic and financial investment” adding that his company has $3.5bn in cash to “put to work”. Liberty Global said it would not seek a board seat and was not considering making an offer to acquire Vodafone. The Group has also invested in 75 companies across telecoms, media and infrastructure.

HMRC chases 4,300 social media influencers and online earners over tax

HM Revenue & Customs is writing to thousands of online traders, gamers, and content creators it suspects have not paid the right tax for money earned online, the Financial Times reports. The move forms part of the tax agency’s latest attempts to keep up with the fast expansion of the digital economy. Money earned through online platforms is subject to income tax and has to be declared in a self assessment tax return. However, experts say awareness of the tax due from many people who earn money from online content is low; Jessica Narweh, a business coach and influencer who previously trained as a tax adviser, commented: “It’s not because they are avoiding tax on purpose — it’s because they literally don’t know they should be paying it.” HMRC commented that the letters were “routine activity”, adding that it believes its customers “want to pay the right amount of tax”.

Top Tweets of the Week

• Mark Scott, Chief Technology Correspondent at POLITICO: Stats of the Day: @Facebook confirms it has 255m monthly active users in the European Union, and @instagram has 250m — first time @Meta has ever confirmed those numbers. Takeaway: both FB & Insta must comply with Europe’s content rules as “very large online platforms”
• Ryan Browne, Tech Correspondent at CNBC: Before its calamitous downfall, FTX tapped vulnerable students to promote its service in Europe and Africa. Some were paid, others weren’t. And even after the company collapsed, they’re not giving up on crypto. Great reporting from @SKiderlin: https://t.co/m1x3Se5EAc 
• Charlie Conchie, Investment Editor at City AM:  Atom Bank chief Mark Mullen throws his weight behind a London IPO in an interview with @CityAM: “We are focused on putting the bank in a position where we can list and our assumption, our plan, is to do so in the UK, in London.” Full piece here: https://t.co/vXvlVUi36k

Number of the Week

8,003.66 – The number of points reached by the FTSE 100 on Wednesday, which saw the index pass 8,000 points for the first time in history

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