Eau Dear: 10 Things We Learned This Week

Inflation Breaches 10%

Forecasters have been forecasting double-digit inflation this year, but it has arrived sooner than predicted. Figures from the Office of National Statistics showed that food prices pushed inflation in July to 10.1% — the highest level in 40 years. With energy prices due to rise again in October, Bank of England predictions of 13% inflation by the end of the year are starting to look on the hawkish side. And this wasn’t the only gloomy news from the ONS this week. Given this ratcheting inflation, its employment data showed that ‘real pay’ has dropped at the fastest rate on record, with salary increases failing to keep pace with the price of goods and services.

CEO Have Feelings Too — but it’s OK to Laugh at Them

Ah, the pitfalls of LinkedIn. It isn’t just jargon-filled posts extolling the benefits of corporate purpose and tips on how to cascade relevant information more efficiently. The most viewed post this week was no doubt from Braden Wallake, CEO of US marketing firm HyperSocial. After making two staff redundant he posted an ill-judged video, explaining how difficult this was for him too, while shedding a tear or two. This ‘crying CEO’ soon went viral, attracting 10,000 comments, and more than 50,000 ‘responses’ — most of which, it is fair to say, were not ‘likes’. Instead, the CEO was mercilessly mocked for his tone-deaf and somewhat self-centred approach. But unlike most social media pile-ons, this one has a happy ending — or ‘positive outcomes’ in LinkedIn-speak. One of the fired workers has been inundated with job offers which has put a smile back on the crying CEO’s face. Wallake says the public humiliation is worth it if his staff find new jobs. Very on-brand for LinkedIn.

The UK isn’t the Only Country with a Housing Crisis

A picture can speak louder than words, and one photograph this week encapsulated the housing crisis in Ireland, with more than 150 potential tenants queuing to view one three-bed terraced property in Dublin being let for €1,850 a month. Unlike the UK, the Irish economy is booming with its low corporation taxes regime attracting many tech and pharmaceutical companies, with their young and well-paid workforces. Many have bought properties creating a severe shortage of suitable rental accommodation. This is pushing rents sky-high and creating serious supply issues. Some estate agents in the city have introduced a lottery system for viewing after receiving more than 1,200 applications per property. Homelessness is also rising, with many younger workers, particularly those not in a position to buy, unable to find accommodation.

WeWorking From Home

Elsewhere, Silicon Valley is now trying to ‘solve’ the housing crisis in the US. Adam Neuman, the co-founder of lightly controversial WeWork has attracted funding for his start-up Flow, which aims to “change the dynamics” of the rental market with community-driven branded residential units. The start-up has attracted a $350 million investment from US venture capital company Andreessen Horowitz – its largest ever investment too, in an environment where VCs are tightening their belts. Flow has however received a fair amount of criticism, not least for a lack of detail on how this might actually operate in practice. The website currently features just the slogan: “Live Life In Flow” and a launch date of 2023. We wait to see if residential beer taps will be enough to solve the rental market.

London Hosepipe Ban as Capital Floods

Thames Water is the latest water provider to impose a hosepipe ban. This was announced on the day parts of the capital flooded, as the latest heatwave broke with storms and torrential rain. The ban, enforced from August 24, comes after months of little rain and will affect 10 million customers who could be now be fined up to £1,000 for breaches. Similar action has been taken by five other water companies across the South of England, Yorkshire and Wales. There was some criticism for Thames Water which has the worst record on leaks out of all nine water companies in the UK, losing more than 600 million litres of water a week, largely due to ageing pipes. Amid fears of ongoing climate disruption, future droughts and costly infrastructure repairs, shares in this company have dipped in tandem with its reservoir levels.

Regulators Hit Gambling Giant with Record Fine…

Entain Group, the company behind of some of the UK’s largest gambling firms, including Ladbrokes, Coral, Gala and Foxy Bingo, received a £17 million fine from The Gambling Commission over “completely unacceptable” safeguarding failures. This is the second time the company has fallen short of its rules this year, and it has received a stark warning from the commission that it could lose its license if further breaches occur. Regulators said the company had not done enough to tackle gambling addiction or prevent money laundering. Government proposals to reform the industry had been due this June, but as with inflation, energy prices, social issues, salaries and climate change, to name a few, the white paper must simply wait as the Tory party leadership campaign continues to take centre stage.

… But are Criticised for Failing to Act on Investment Scandal

The FCA has been accused of “hanging investors out to dry” after failing to act on warnings about the property investment scheme Blackmore Bond. This company collapsed in 2020 amid allegations of suspect sales tactics and inappropriate payments, with 2,000 investors losing £46 million. According to the BBC Panorama programme, regulators were repeated warned about ‘boiler room’ sales tactics three years earlier but did not intervene. This scandal could have further political ramifications (but this too will probably have to wait), as the programme claimed warnings were escalated to the FCA’s then-chief executive Andrew Bailey, now governor of the Bank of England. Blackmore sold so-called ‘mini bonds’ which invested in UK property developments, promising returns 10% a year. Under FCA regulations such schemes should only be sold to experienced investors not marketed to ordinary consumers.

Liontrust Investors Face Losses on Made.com

Shares have collapsed in the newly-floated online furniture company Made.com, making it the worst-performing float of 2021, according to AJ Bell. The company was co-founded by Brent Hoberman of lastminute.com fame and styled itself as “digitally native lifestyle brand”. But it isn’t just investors who bought at the IPO who might lose out. It has emerged that Majedie Asset Management, now a subsidiary of Liontrust, was one of the main backers when the company floated in June last year, buying £50 million worth of shares. Prices have since fallen from 200p a share to just 9.9p. It is estimated that this could cost Liontrust £58 million as the fund manager still owned almost 8% of the company at the start of August.

Designer Fashion Brand Embraces Reebok Owner

Ted Baker, the troubled UK fashion retailer, has agreed to a cut-price £211 takeover by Authentic Brands Group, the US group that owns Reebook, Juicy Couture, as well as image rights of Elvis Presley, Mohammed Ali and Marilyn Monroe. Ted Baker — one of the most recognisable designer brands on the British high street — has been beset by problems, with its share price collapsing in 2018, amid difficult trading conditions. Its reputation was tarnished in the wake of the MeToo revelations after staff complained about a culture of ‘forced hugs’, which ended with founder Ray Kelvin leaving the company. The emergence of accounting issues led to a string of profit warnings and the company posted losses of £38.4 million earlier this year.