Fallout from government turmoil continues

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7th July 2022

Bite-sized business news from the UK and beyond

Good morning After a one-year pandemic-related delay, the 2022 Women’s Euros kicked off yesterday with host nation England beating Austria. The tournament is expected to be viewed by a record breaking audience:

Around 500,000 tickets have been sold, more than doubling the record 240,000 fans who attended the 2017 edition in the Netherlands.
The tournament will air in 195 territories and is expected to bring in more than 250m viewers, up from 178m in 2017.

Today's stories

Fallout from government turmoil continues
UK watchdog investigates Microsoft $70bn gaming acquisition

POLITICS
Fallout from government turmoil continues

What happened?
Calls continued to grow from within the Conservative Party for Boris Johnson to resign as PM following Tuesday’s resignation of chancellor Rishi Sunak and health secretary Sajid Javid. As a result there are potential changes in line for UK tax rates and changing sentiment over the value of the pound.

Fresh into his new role the chancellor is dropping hints that tax cuts could be on the way
The new chancellor Nadhim Zahawi said that ‘nothing is off the table’ when considering tax cuts to boost household income amid the cost of living crisis.

Changes to the tax regime – raising corporation tax, freezing income tax thresholds and a new health and social care levy - by predecessor Rishi Sunak means that total tax as a % of GDP is forecast to reach 36% by 2025, the highest since the 1940s.

In his resignation letter Sunak acknowledged that he and Johnson wanted to create a 'high-growth, low-tax economy' but disagreed on how to get there.

The new chancellor says he wants to make the UK more attractive for global investment with a low tax environment. To that end he's considering cutting VAT, income tax and corporation tax.

But critics argue that increasing household income when the supply of goods is constrained could push up 40-year-high inflation even further.

The political uncertainty is weighing on the foreign exchange market: The pound has been drifting lower in recent months as investors are concerned over the growth prospects of the UK economy. Yesterday it fell by 0.4% to just below $1.19 against the US dollar. That’s a level last seen at the onset of Covid in March 2020. It’s also a low zone that hasn’t been seen across the last 20 years other than Covid and now.

A weak pound has its pros and cons: It means that imports become more expensive, for example petrol becomes more expensive. It also means that British tourists get less for their money when buying abroad. But on the plus side British exports can become more attractively priced for international customers.

Other stories to keep you in the loop

Boris Johnson refusing to step down despite cabinet revolt
Lloyds Bank boss: 80%of Brits have less than £500 in their account
Just Eat US subsidiary Grubhub signs deal with Amazon
UK opens investigation into Amazon’s marketplace practices
American tourists to the rescue as Trainline brightens its outlook for the year
Airbnb London prices soar as UK eyes curbs in tourist haunts
Crisis hit Sri Lanka asks Russia for help to buy fuel
Rihanna becomes youngest self-made female billionaire

TECH
UK watchdog investigates Microsoft $70bn gaming acquisition

What happened?
Yesterday the CMA, the UK’s competition regulator, launched an investigation into Microsoft’s takeover of Activision Blizzard the video game giant behind ‘Call of Duty’ and ‘World of Warcraft’.

How did we get here?
Microsoft started 2022 by announcing it had offered $70bn in an all cash deal to buy Activision, the biggest deal in not only the tech juggernaut’s history but also the gaming industry.

The rationale was to add to the company’s gaming credentials, which already includes the Xbox games console, and compete against Meta in the race to build virtual worlds aka the metaverse.

But regulators are concerned over what the deal could do to competition
A tie up of Microsoft and Activision would create the third-largest gaming firm in the world by revenue. The CMA said it’s working with its counterparts across the globe to decide if the deal would reduce competition and therefore be bad for consumers through higher prices, lower quality or less choice.

Zooming out: Microsoft’s Big Tech peers have increasingly found themselves in the regulator hot seat. Regulators across the world are who have scrutinised Alphabet, Meta, Apple and Amazon could give Microsoft trouble as they look to rein in anti-competitive consolidation in the tech industry.

Stat of the day

British Airways has announced it will cut a further 10,300 short-haul flights until the end of October, scrapping 13% of its flight schedule for the peak summer holiday season

Interesting links from around the web

Relaxation tips: how to actually switch off and relax on holiday
'Zoom firing': Are virtual layoffs the future?
Changing this 1 word in your thoughts can boost mental resilience, psychologists say

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Fallout from government turmoil continues

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