The round-up of the stories that a budding Student Lawyer should be aware of this week. Sign up here to get these updates in your inbox every week.
Article by Shreya Dristi (2nd yr LLB student at Durham University)
The COVID era has negatively impacted many sections of the retail industry as noted by the closures of shops and increase in retrenchments and numbers of employees being furloughed. The lockdown restrictions led to many retail giants being forced to decrease their ‘brick-and-mortar’ presence, especially clothing companies. An example of this was seen with Zara’s closure of up to 1200 stores worldwide in June. Clothing companies have arguably been “the worst hit during the pandemic” as stated by the Office for National Statistics (ONS); noted by volume of sales of clothing shops in July which remained 25.7% lower than in February.
There has been a significant recovery of business in the retail industry as The ONS stated that retail sales increased by 3.6% between June and July. Additionally, sales have increased 3.2 % in July 2020 compared with July 2019. July 2020 was the second consecutive month of growth following three months of decreased sales in accordance with data collected by advisory services firm KPMG and the British Retail Consortium. This was also noted by Ruth Gregory, senior UK economist at Capital Economics who expressed that the “recovery of physical shops was more impressive that the headline figure and that shoppers are starting to High Street”.
However, Paul Martin, UK head of retail at KPMG is less optimistic about this recovery as he expressed that “shoppers are still focussed on life at home for the most part” despite the reduction in social distancing restrictions and a return to a degree of normality. This is reflected in retail sectors which have experienced growth including house improvements and ‘working-from-home’ products such as furniture, computer equipment and home accessories. However, it is evident that shoppers remain hesitant to buy luxury items, as seen with the decrease in sales of jewellery and watches, clothing, and footwear as well as health and beauty products.
Despite the optimism shown in the figures, another important overarching factor to consider is the effects of the recession currently faced by the UK economy due to the pandemic. The ONS reported that the GDP of the UK fell in the second quarter by 20.4% which is the biggest quarterly decline since the publishing of comparative reports in 1955. With the economy being in its weakened state and “with the furlough scheme unwinding”, there will be a larger “scrutiny on disposable income”, hence adversely affecting retail businesses as explained by Mr Paul Martin. This view is shared by Helen Dickinson, the chief executive of BRC who expresses that the volatile economic situation “continues to bear down on consumer confidence, with some retailers hanging by only a thread in the face of rising costs and lower sales”.
Article by Andrew Dewey (2nd yr LLB student at Reading University)
Since Rishi Sunak’s decision in July 2020 to abolish the Stamp Duty Tax on properties up to £500,000, which will see the average Stamp Duty bill fall by £4500, the housing market appears to have been temporarily revitalised. According to the property website Rightmove, July saw more than £37bn worth of property sales made, up from £12bn from July 2019, which is the highest figure in over a decade.
However, despite the success of Sunak’s decision, Estate Agents are not feeling completely confident about the future. Estate Agents fear that when the abolition is lifted on 31st March 2021, the housing market will plummet due to all of the sales happening during the non-stamp duty period and the market will slow dramatically.
Moreover, Estate Agents are also fearing for the younger generation. According to the Resolution Foundation, it is believed that it will be harder to gain a house deposit for a number of reasons. Firstly, despite the record number of house sale value in July 2020, the average house price for this period was at a record high of £320,265. This record price, coupled with the many job cuts across the country and the Resolution Society’s prediction of a decrease in wages, will make it extremely difficult to save for a deposit. To put things into perspective, in the 90’s it would take an average couple, who save 5% of their earnings, 4 years to save for the average deposit price. Post coronavirus, it is estimated it would now take 21 years.
The Estate Agent’s fear is not just specific to the residential market. There is also a lot of speculation surrounding the commercial real estate market. According to Derwent London, a UK based property investment company, the commercial real estate market will undoubtedly change post Covid-19.
More companies are now opening up to the idea of ‘flexi working’ and are happy to allow more staff to work from home. Derwent London believes that the companies who have signed long commercial leases can potentially sub-let their office space at a discounted price. In turn, this would make it harder for landlords to attract tenants at the ‘normal’ market price.
The realities of these fears have already started to be seen. For example, the petroleum company BP is in the process of reviewing its global real estate portfolio. Experts believe that the company could lose up to 50% of its property portfolio as a result of working from home.
Of course, this not only leaves estate agents in fear, but it also affects the landlords that they work closely with. Landlords are left with the choice of re-thinking the way they price property lease and win tenants or simply sell off parts of the property they own. The US property company REI has opted for the latter and is already trying to sell off an office property before any tenants have moved in. I believe that this is the start of a new trend for landlords post Covid-19 and will ultimately result in the reshaping of the real estate market.
Article by Sofiya Stanchak (3rd yr LLB student at the University of Surrey)
Despite Boris Johnson’s positive attitude towards securing a trade deal with the European Union as soon as possible, following talks this week it seems that there may be no trade deal by the December deadline.
The EU would like to have a trade deal with the UK by October, but if that is not achieved by the 31 December then the UK would have to trade with the EU on WTO (World Trade Organisation) terms. This means that most UK goods would be subject to tariffs until a free trade deal is agreed upon with the EU. However, the UK has said that if a deal is not reached by December then talks will not continue.
After the seventh round of negotiations this week, Michael Barnier, lead negotiator for the EU, said that trade talks ae actually going backwards and ‘’at this stage, an agreement between the UK and the European Union seems unlikely’’. However, David Frost, Chief UK negotiator, said that agreement was ‘’still possible’’ but cautioned that it ‘’will not be easy to achieve’’.
The main issues that are preventing an agreement being reached for the UK is that the EU is not willing to commit to paper areas of agreement until issues such as fishing, and state aid are overcome. For the EU the main issues are that the UK want the benefits of the single market without paying the membership fee or signing up to its rules. Nonetheless, both sides do insist that they want a deal.
There has been progress in other areas such as energy co-operation, participating in union programmes and anti-money laundering but vital subject areas such as access to UK and EU fishing waters have had ‘’no progress whatsoever’’. The next rounds of talks is due to being on 7 September in London.
Article by Francis Louis (1st yr LLB student at a London university)
Last month, Goldman Sachs finalise a deal with the Malaysian government to stop impeding charges and legal suits against the firm and its partner. The deal is a major step toward resolving the scandal surrounding 1MDB that had hounded the firm’s reputation. This deal would see Goldman paying $2.5 billion while guaranteeing the return of $1.4 billion of seized assets from 1MDB around the world. While this might leave the firm opened to risk due to the fluctuations of 1MDB asset price, the firm released a statement clarifying whereby there has been due diligence on the asset acquired by authorities and guaranteed stakeholders that the risk of exposure is low.
With that, some would argue that it wasn’t a good deal for the Malaysian government because the compensation was low. Malaysia’s former Attorney General, Tommy Thomas wrote that the deal was hasty and one-sided. He opined that Malaysia could have gotten compensated up to $7 billion if the cases were to be brought to court. However, Malaysia’s Finance Minister believes that even if it was tried in court, the government wouldn’t have been able to receive such compensation due to legal limitation on the Criminal Court and the process would be lengthy. Hence, Goldman’s deal wasn’t ideal for Malaysia but a good outcome for Goldman.
The 1MDB case with Goldman concerns the firm’s involvement in facilitating with embezzled funds and fraud. The money raised through the bond sales was used to fund ‘The Wolf of Wall Street’ and purchased yacht. However, the firm denies any knowledge of the wrongdoing in the proceeds of the fund. The firm claims that it had been deceived by 1MDB on the intention to raise the funds. Nevertheless, whether Goldman was deceived will be unknown.
Article by Konstantina Nouka ( LLB student at University of Reading and aspiring international law and human rights barrister)
We have long associated the impact of the Covid-19 pandemic with hospital admissions and with people losing their lives. However, as we now know the pandemic has affected our society in many more ways; one of the most heavily-affected industries being the air-travel sector.
Ryanair, one of the most famous and cheap airlines globally, announced that it is about to cancel almost one in five flights scheduled for the first months of autumn. This decision resulted from the fact that people do not book flights as much as they used to due to fear of sudden quarantine restrictions. This is especially evident when we consider that most of the flights that will be cut include flights to France, Spain, Ireland and Sweden. Obviously, this is not a surprise, since people will not risk travelling and then having to stay at their residences for 14 days as this means that this will have a serious impact on their income, as they will be unable to attend work.
However, EasyJet is one more airline that shows signs of being impacted by this historical pandemic. EasyJet took the hard decision to close three of its UK bases, including the London Stansted, and this will unfortunately lead to 670 people losing their jobs. But when it comes to losing jobs, American airlines are in a worse position and an example of that is United Airlines which announced that 36,000 employees are in risk of losing their jobs. Moreover, American airlines have also tried to push for early retirement in order to cut down their expenses.
Therefore, if all the above are considered, it is obvious that the airline businesses are suffering greatly. But what is the solution to this problem? There is no perfect answer to this question since a balance needs to take place in order to protect the health of the citizens and also protect airlines and tourism. However, a solution that some experts are in favour of is establishing Covid-19 testing facilities within the airports in order to test passengers coming from countries that would otherwise have quarantine restrictions imposed to them.