28th February 2022
Bite-sized business news from the UK and beyond
Good morning The weekend is generally quiet for business news but due to the war in Ukraine the past 48 hours have seen (amongst other things):
- Swift moves – Russian banks banned from global payments system
- Knowingly undersold – John Lewis ends century long price promise
Russian banks banned from global payments system
What’s going on?
After much debate the UK, EU, US, and Canada have agreed to ban some Russian banks from the global financial messaging system called SWIFT.
Why is this important?
Since Russia’s invasion of Ukraine almost a week ago Western allies have dropped a series of heavy sanctions on Russian banks, businesses and individuals. But banning Russia from SWIFT was seen by many as a step too far. However over the weekend an agreement was reached to expel some Russian banks from the system.
What’s SWIFT? Created in 1973 the Society for Worldwide Interbank Financial Telecommunications (SWIFT) runs a messaging service that enables transactions across over 11,000 banks and institutions around the world. It makes sending cash between countries fast and easy and is used by every single country, bar North Korea.
Russia is a major user of SWIFT, it’s estimated that around 1% of all transactions involve the country and it ranks sixth in global users. Cutting it out of SWIFT would make doing international business more difficult.
The UK and Ukraine were all for doing this but other allies including the EU and US were more reluctant. That’s mainly because Russia is the EU's main supplier of oil and gas, and at a time when energy prices are at record highs, governments are keen to avoid any supply disruptions.
Also the US was concerned that booting Russia out of SWIFT could see it move economically closer to China, for instance by developing together an alternative payment system that could one day uproot the US dollar as the world’s most preferred currency.
The list of which banks will be removed from SWIFT is expected this week, but some argue that it’s a diluted sanction and all Russian banks should be banned.
There are also doubts of how big a punishment it is as there are workarounds. For example, Russian banks might route payments via countries that have not imposed sanctions, such as China, which has its own payments system.
John Lewis ends century long price promise
John Lewis is scrapping its ‘Never Knowingly Undersold’ promise this summer, acknowledging that consumers have changed the way they shop. First introduced in 1925, the retailer pledges to refund customers the difference if they find the same item on sale elsewhere cheaper within 28 days.
But it didn’t apply to online shopping which, in an age of ecommerce, makes the slogan outdated. Almost a third of non-food sales are done online and high street retailers have been losing market share to the likes of Amazon for years.
John Lewis says that instead this year it will invest £500m in keeping prices low, a 25% increase on 2021. It will also expand its ‘Anyday’ value range which was introduced last April and has clocked up sales of £125m so far.
But how much will ‘Never Knowingly Undersold’ be missed? In reality the pledge was rarely used by shoppers – less than 1% - with it being little more than a marketing ploy. MoneySavingExpert founder Martin Lewis says that it gives an arguably false impression that John Lewis is cheap as only a minority of consumers are price sensitive enough to care which allows John Lewis to charge what it likes to everyone else.
Stat of the day
An estimated 6 out of 10 Ikea purchases are impulse buys
Other stories to keep you in the loop
- Russian airlines to be banned from most European airspace
- Sanctions spark Russia bank run fears as country braces for ‘free fall’ in rouble
- Russia restricts social media access
- Norway's sovereign wealth fund to vote against Apple management's pay plan
- Berkshire Hathaway profits soar but Warren Buffett bemoans lack of good deals
- Convenience chain McColl’s battles administration fears
- Mike Ashley's Frasers Group buys Studio Retail saving 1,500 jobs
Interesting links from around the web