25 Dec 2012

Top UK business stories in 2012: the scandals and highlights

From the euro crisis to Facebook’s IPO, Spain’s banks and the fiscal cliff, 2012 was bursting with business news – even knocking the royal baby off the front pages (on occasion). Here’s the countdown.

From the euro-crisis to Facebook's IPO, Spain's banking woes, and the US

In the UK alone, electrical retailer Comet entered administration bringing a chill to the high dtreet, HP had a very public punch-up with the UK software company Autonomy after its $11bn takeover and the UK government proposed a £1bn business bank to kick-start lending to small businesses.

There was plenty to choose from but the top 10 stories in reverse order below are some of Channel 4 News’s favourites.

10. British bank hijinx

The sheer size and scope of these stories made them stand out: HSBC paid $1.9bn to US authorities over money-laundering claims involving the transfer of billions on behalf of clients in Mexico, Saudi Arabia, Iran and Syria; Standard Chartered was accused of hiding £160bn of transactions with the Iranian government; and a swaps scandal ensnared the big four – HSBC, Barclays, RBS, and Lloyds. While between them the banks allocated about £1bn for mis-sold swaps, a Channel 4 News investigation in December found not a penny in compensation had been paid. Keep your eye out for this story’s return in 2013.

9. JPMorgan and the London whale

JPMorgan’s admission in May that it lost $2bn in six weeks sent bank stocks tumbling. Chief Executive Jamie Dimon blamed “an unbelievably ineffective hedge,” an “egregious” failure in the unit, and Mr Dimon’s own failure to pay attention to trading losses and “some stuff in the newspaper and a bunch of other stuff.” That “stuff” turned out to be positions taken by a single JPMorgan trader in London, known in the bond market as “the London whale”, who placed bets so large they moved prices in the $10tr synthetic credit securities market. JPMorgan is now suing Javier Martin-Artagjo, supervisor of Bruno Iksil – aka “the whale”. Both men have left the bank.

8. Welfare to Work programme

“All your numbers are wrong,” former A4e boss Emma Harrison told Channel 4 News after leaked figures showed the company found work for only four in 100 people. In fact, government figures released on 27 November show just 3.5 per cent of long-term unemployed people found a sustainable job through the government’s flagship Work Programme – about 2 per cent short of the government’s target and worse than the target expected if there had been no government scheme in place at all. The figures covering the 14 months from June 2011 to July 2012 were consistent with those obtained by Channel 4 News for A4e.

7. UBS rogue trader

UBS trader Kweku Adoboli was sentenced to seven years in jail after being found guilty of two counts of fraud linked to a £1.4bn loss which nearly brought down the international bank. The story did not stop there, however. The Swiss banking giant UBS was fined £29.7m by the City watchdog for failings that allowed convicted trader Adoboli to lose their money. Prosecutors claimed Adoboli – who was heavily involved in spread-betting in his spare time – was a gambler who believed he had the “magic touch”. In a rather understated conclusion, Tracey McDermott, FSA director of enforcement and financial crime decided: “UBS’s systems and controls were seriously defective.”

6. Habbo Hotel

A Channel 4 News investigation into the online game Habbo Hotel revealed shocking details including pornographic sex chant on a website aimed at children as young as 13. As a result of Channel 4’s investigation Tesco, Game and WHSmith withdrew Habbo gift cards from sale and the company’s main investor pulled out. Private equity group 3i, which owned a 16 per cent shareholding, said in June: “Following a board meeting today, we have resigned our board position and will cease to be a shareholder in the company.”

5. Tax avoiders

Britons were shocked to find out celebrities like comedian Jimmy Carr avoided paying tax, then angered after revelations international companies Starbucks, Google and Amazon were using legal but undesirable methods to minimize their UK tax payments – and in the case of Starbucks paying no corporate tax at all for years. MPs were indignant. Customers called them “immoral”. By year-end, Starbucks pledged to pay about £20m in corporate tax over the next two years. “Clearly, naming and shaming works,” said Margaret Hodge, chairman of the public accounts committee.

4. Bank of England names Canadian Mark Carney next governor

Bank of Canada Governor Mark Carney was named as the surprise replacement for the next governor of the Bank of England replacing Sir Mervyn King. Mr Osborne says Mr Carney has “got what it takes”, emphasising Mr Carney’s role in protecting Canada from recent years of global economic instability. Mr Carney will become the first non-British governor of the Bank of England in its 318-year history and his nationality caught some by surprise, including our very own Jon Snow who said: “The new Bank of England comes from the colonies! But not just any old colony, but one which has pioneered the best banking regulation anywhere in the world.”

3. G4S security

In what had to be one of the biggest scandals of the year, the military was drafted in to police the Olympics after a G4S duty manager told Channel 4 News that staff contracted to provide security were not trained nor deployed. G4S was later accused of misleading the government and Olympic chiefs over staff recruitment and agreed to pay up to $50m for its failures. In the words of MP Keith Vaz: “The largest security company in the world, providing a contract to their biggest UK client, turned years of carefully laid preparations into an eleventh hour fiasco.”

2. Britain, Greece and the euro

The year started with EU crisis talks to avert a Greek default and ended not too much further ahead. In May, David Cameron hosted a euro crisis summit at Downing Street and in June he pledged that he would not ask British taxpayers to underwrite the debts of ailing banks in Greece. By year end, eurozone members were distributing some £40bn euros in aid. But this Greek odyssey – and Britain’s involvement in it – is set to carry into 2013.

1. Libor, Bob Diamond and the Serious Fraud Office

Allegations of a banking conspiracy resulted in five criminal probes and forced Barclays to pay a record fine of $461m to the US Justice Department and UK FSA. Bob Diamond resigned as chief executive of Barclays in July but denied being aware the Libor scandal was going on at the time. The stakes were raised again in December when the Serious Fraud Office confirmed three British nationals had been taken to a London police station as part of the investigation into the rigging of the Libor interbank lending rate. UBS became the latest bank to be fined – this time £160m by the FSA. The words “tip” and “iceberg” come to mind. Watch out for this scandal to erupt in 2013.