This article is part of our Commercial Awareness Update archive but don't worry; we've got plenty of resources for you to explore. The latest Commercial Awareness Update is available as a podcast, Thinking Commercially. Find it on Spotify, Apple Podcasts or Google Podcasts. To improve your commercial awareness more broadly, take the Bright Network Academy Commercial Awareness course.
As a Bright Network member, you can also sign up to receive weekly updates straight to your email inbox by heading to your career preferences section and ticking the Weekly Commercial Awareness Updates box.
In this week's update, we discuss UK's latest trade deal, Hermes and the gig economy, Google's latest results and Cambridge University's big donation.
UK Switzerland Trade deal
The UK has ratified a trade agreement with Switzerland to continue trading as usual after Brexit. The continuity deal comes less than 50 days before the UK is due to leave the EU and aims to alleviate some of the potential disruptions for businesses post Brexit. Switzerland is a valuable trading partner of Britain, with around £32bn in trade between the two each year, with about 15,000 British exporters trading within the country. Liam Fox, International Trade Secretary, has stated that the deal would continue the “preferential trade that we have” and that this deal was of “huge economic importance to UK businesses.”
With 46 days to go until the UK leaves the EU, there are currently signed continuity agreements with The Faroe Islands, Eastern and Southern Africa, Switzerland and Chile. As it currently stands, Britain is tied to around 40 EU trade agreements covering 70 countries, so the UK will aim to replicate or improve on those trade agreements before it leaves - if it drops out of the EU with no deal on 29th March, this won’t be possible and will lead to heavy disruption.
Companies to Watch
Delivery firm Hermes has completed a deal with GMB union to offer its staff a new “self-employed plus” status, which will guarantee wage rates, give workers paid holiday and also paid leave. Previously, its workers were classed as self-employed and were paid for the deliveries they completed (the “gigs” they did), not their time. Under the new agreement, Hermes’ 15,000 delivery drivers will still have autonomy to deliver parcels in whichever order they want in the area they operate; but new drivers will have more specific routes defined for them.
The current drivers have the option to take up the new agreement but can also retain their existing status. The deal is seen as ground breaking within the “gig economy”, which has received negative press around worker exploitation in recent months. Many suggest this is a good compromise that gives workers flexibility, but also guarantees them more of a voice. However, some have suggested that the deal may have certain tax implications, which could raise questions over “sustainability”.
French bank Societe Generale will cut €500 million in costs from their investment bank as their revenues in the division have declined and fluctuating markets have caused difficult conditions. This comes after rival French banks and many in America have announced dips in revenue, especially in their fixed income divisions (these are mainly trade bonds, but also commodities and currencies). The largest French bank, BNP Paribas, described recent activity as “extreme market conditions”, which is making investors hesitant.
In recent years, big banks have been building out other departments, therefore becoming less reliant on their investment banking divisions. A good example of this is Goldman Sachs’ retail offering, Marcus, in the UK.
The streaming giant, Spotify, has revealed plans to expand into the podcast industry, with the founder and chief executive, Daniel Ek stating his intent. Ek went on to state that he believes that soon “more than 20% of all Spotify listening will be non-music content”. In light of this revelation, the Swedish streaming service has bought two podcast firms, Gimlet and Anchor, with Gimlet rumoured to have cost Spotify €230m (£202m). But that’s not all, there are further plans to spend up to €500m (£439m) on future acquisition - this investment will allow Spotify to move away from its core service to give it room for growth in audio, allowing them to scale their business entirely. This news came as Spotify announced their first ever quarterly profit which was €94m (£82m) with total monthly user numbers rising 29% year on year, reaching 207 million in the fourth quarter. Total revenues have risen by 30% to reach €1.5bn (£1.3bn). Keep an ear out for Spotify in the upcoming months with their planned expansion.
Alphabet, Google’s parent company, is the latest tech company to announce strong investment results as it earned $39.27bn in the last quarter of 2019. Revenue in the last three months of the year were 22% higher than the same period from the year before, while additionally creating a profit of $8.9bn. This is a sharp turnaround from 2017 where they suffered a $3bn loss after incurring a one-off tax charge of $9.9bn. This year, analysts predicted that the tech giant would have a new income of $7.7bn. Despite Google exceeding expectations, its share price sank 3% after trading. At the same time, costs have risen, as the fee that Alphabet pays to companies, including Apple, for Google to be the default search engine rose from $6.6bn in the same period last year to $7.4bn this year - a steep rise of 13%. Furthermore, advertising revenue has jumped 20% since last year, reaching $32.6bn, along with Google’s amount earned per click dropping 29%. This has led to rising concerns amongst investors that the firm may be losing its dominance to rivals.
Cambridge University's Big Donation
Cambridge University has received the largest single donation to a UK university by a billionaire businessman and alumnus of the university. David Harding, a British philanthropist, gifted £100 million to the university, allocating £79 million to provide fully funded scholarships for the most gifted PhD students, £20 million to benefit undergraduates and £1 million to attract undergraduates from under-represented groups. St Catharine’s College, where Harding studied, will receive £25 million of the donation to support postgraduates attending the college. The university currently has a target of increasing postgraduates in residence by 13% from 2016 to 2021. The Vice Chancellor of the University stated that “We are determined that Cambridge should nurture the finest academic talent, whatever the background or means of our students, to help us fulfil our mission” and this donation will enable Cambridge to offer that to their students.
We're delighted that PwC is partnering with us for this month's Commercial Awareness updates. Their purpose is to build trust in society and solve important problems for their clients, helping them tackle business challenges and improving how they work. They have graduate and undergraduate opportunities in Assurance, Actuarial, Consulting, Deals, Legal, Tax or Technology. Check out their profile.