KPMG has been fined £4.5 million over its audit of insurance firm Quindell. The Financial Reporting Council (FRC) has fined both KPMG and audit engagement partner William Smith over misconduct in the year to December 2013. The FRC said: “KPMG and Mr Smith, members of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a member and a member firm and that they failed to act in accordance with the ICAEW’s fundamental principle of professional competence and due care.” “The misconduct related to two audit areas, and included failure to obtain reasonable assurance that the financial statements as a whole were free from material misstatement, failure to obtain sufficient appropriate audit evidence and failure to exercise sufficient professional scepticism.” KPMG was fined £4.5 million, while William Smith was fined £120,000. The FCA started their investigation into KPMG’s 2013/14 auditing in 2015 after almost £1 billion was wiped off the value of Quindell in 2014. When Gotham City Research released a note calling Quindell “country club built on quicksand”, investors questioned the group’s value sending shares in the firm to plunge. KPMG commented: “Audit quality, and professional scepticism in particular, is of paramount importance to our firm. We have cooperated fully throughout the FRC’s investigation, and have already updated our audit processes and procedures to address the areas of concern.” “We regret that some aspects of our audit for the year ended 31 December 2013 did not meet the required standards. As we stated in our audit opinion for the following year, certain information given to KPMG contradicted representations previously made by former members of management. Nonetheless, we accept the FRC’s findings that in two specific areas of the audit, our challenge for the year ended 31 December 2013 should have gone further,” the spokesperson added. The FRC is also investigating KPMG’s auditing of the collapsed firm Carillion.  

The UK remains the top spot for attracting foreign direct investment (FDI), but Brexit uncertainty continues to lessen its lead, according to newly released figures. Last year the UK attracted 6 per cent more FDI developments than 2016, according to figures collated by EY in a survey of 450 global investors. After London, Scotland proved the most attractive location for foreign investment, with a marked rise in particular with respect to research and development projects in the region. A 70 per cent increase revealed Scotland as the best-performing part of the UK, with Scotland’s share comprising 24 percent of the UK overall. However, the UK fell behind France, which grew by 3 per cent, overall lagging behind the European average growth rate of 10 per cent. According to EY’s figures, the UK’s market share fell for the second consecutive year in 2017, and is likely to suffer further falls. As a result, the data revealed that investors were leaning towards Germany for future projects. France followed in second place boosted by the election of pro-business Macron, with the UK coming in at third. Whilst Britain welcome a 22 per cent bolster in foreign investment into digital enterprises, this compared to an average 33 per cent rise recorded across Europe. Investor anxiety with respect to economic uncertainty relating to Brexit was particularly evident in sectors such as financial services, with the number of firms opening headquarters in the UK on the decline. EY senior partner in Scotland, Mark Harvey, said: “Scotland has demonstrated an outstanding ability to attract and drive sustained growth of FDI. “However, the performance of the UK as a whole within Europe is a signal that competition for FDI projects is intensifying and our previous levels of attractiveness are not guaranteed to continue.” He added: “Economic growth (in Scotland) is positive, but sluggish, and access to labour is a recurring challenge that makes it more difficult to expand operations. “Scotland must work increasingly hard, with private and public sectors in partnership, to ensure the pipeline of talent, skills and experience is strong enough to drive business and economic growth in the future.”    

Troubled retailer Poundworld has appointed administrators after rescue talks failed to progress. the discount shop was forced into administration this week after talks with potential buyer, R Capital, collapsed. The unravelling of the chain, which operates some 355 stores across the country, means over 5,000 jobs are at risk. Deloitte, the administrators, have insisted that Poundworld will continue to operate as usual with no redundancies as of yet. It said in a statement: “Like many high street retailers, Poundworld has suffered from high product cost inflation, decreasing footfall, weaker consumer confidence and an increasingly competitive discount retail market.” A spokesperson from TPG, the owner behind the group, said: “This was a difficult decision for every party involved. We invested in Poundworld because of our belief in how the company serves its customers and the strength of its employees. “Despite investing resources to strengthen the business, the decline in UK retail and changing consumer behaviour affected Poundworld significantly.” News of Poundworld’s impending collapse first began circulating last week when another potential buyer, Alteri Investors, pulled out from negotiations. The discount retailer is the latest in a series of UK retailers grappling with an increasingly challenging trading environment. New Look, Marks & Spencer’s, Carpetright and House of Fraser have all announced store closures in recent weeks, prompting concerns about the death of the UK high street as we know it.  

The price of Bitcoin plummeted substantially on Monday morning, after the market reacted to the news of the hacking of South Korean cryptocurrency exchange, Coinrail. A tweet from Coinrail confirming the hack sent the price of Bitcoin down 10 percent on Sunday, loosing $500 (£372) an hour. Some sources have speculated that Coinrail lost cryptocurrencies totaling as much as $40 million in the cyber attack. According to its website, the exchange has already suspended services after the “cyber intrusion,” which led to a number of ERC-20 based tokens being stolen. In a statement, Coinrail said: “70% of total coin and token reserves have been confirmed to be safely stored and moved to a cold wallet [not connected to the internet]. Two-thirds of stolen cryptocurrencies were withdrawn or frozen in partnership with related exchanges and coin companies. For the rest, we are looking into it with an investigative agency, related exchanges and coin developers.” Bitcoin is currently trading at $6783.31, down from its Christmas peak of nearly $20,000. The cyber attack adds to concerns over the vulnerability of said unregulated currencies, in light of weak regulation. Cryptocurrencies remain controversial, with many governments across the globe calling for greater regulation across the market. Back in March, Bank of England Governor Mark Carney spoke out against Bitcoin, calling for a crackdown on deregulated currencies. “The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system,” said Carney at the Scottish Economics Conference in Edinburgh. “Being part of the financial system brings enormous privileges, but with them great responsibilities. In this spirit, the EU and the US are requiring crypto exchanges to meet the same anti-money laundering and counter the financing of terrorism standards as other financial institutions. “In my view, holding crypto-asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach.”

April saw worst month for UK manufacturing in over five years, with a 1.4 percent fall in factory production. According to the Office for National Statistics (ONS), April was the steepest fall since October 2012 and marked the third consecutive fall. “Manufacturing fell in the three months to April with electrical machinery and steel for infrastructure projects seeing reduced production,” said Rob Kent-Smith, the ONS’ head of national accounts. “International demand continued to slow and the domestic market remained subdued. However, oil and gas production grew strongly in the aftermath of the Forties pipeline closure at the end of last year.” The poor results led to the fall in the pound, which slipped 0.35 percent against the dollar to $1.3368. Construction was also weaker than expected for April and grew just 2.3 percent in May. Suren Thiru of the British Chambers of Commerce said: “It is possible that the UK is now moving past the recent sweet spot for exporters, with growth in key markets moderating and the impact of the post-EU referendum slump in sterling, which has helped some exporters, subsiding. The possibility of an escalating trade war has added to the downside risks for exporters.” GDP growth in the first quarter of the year slumped to 0.1 percent. The Bank of England held off from increasing interest rates in May and remains optimistic for positive results. “The very poor set of April industrial production, construction output and trade data can only fuel Bank of England concerns and uncertainties over the economy and there can be no doubt that the [Bank’s Monetary Policy Committee] will leave interest rates unchanged at their June meeting next week,” said Howard Archer of the EY Item Club. “The data also make an August interest rate hike by the Bank of England look a lot more questionable,” he added. The UK trade deficit was also seen to increase to £5.3 billion in April. This is the largest amount since September 2016.  

Amazon (NASDAQ: AMZN) has committed to UK expansion, despite uncertainty surrounding Brexit. The retail giant has said it will create over 2,500 jobs in the UK this year including 650 head office roles. Doug Gurr, the company’s UK and Ireland boss, said: “The UK is a fantastic place to do business.” “We are trying to make sure all the businesses that work with us can continue to operate effectively … We don’t yet know exactly what the rules [on trading after Brexit] are going to be. We will wait and see what happens and adapt as necessary,” he added. The group employed about 24,000 at the end of last year but hopes to increase this number to 27,500 by the end of 2018. Building several new warehouses in the UK, the group hopes to employ experts in speech science and machine learning in order to develop its smart speakers and the Alexa personal assistant. Amazon has invested £9.3 billion in the UK since 2010 and has created thousands of jobs. This is unlike retailers including Tesco (LON: TSCO) and Sainsbury’s (LON: SBRY), which have both cut thousands of jobs this year amid the Brexit uncertainty. CEO Jamie Dimon of JP Morgan (LON: JMC) said that the group may cut over 4,000 jobs in the UK if a suitable Brexit deal isn’t reached. Amazon is currently facing legal dispute over employment rights of delivery drivers. The group has also been criticised over the conditions for workers in warehouses. Gurr has said he is “proud of working conditions across all parts of our business” and said the group runs public tours of warehouses and the public are able to see the facilities for themselves. The Amazon boss has not commented on whether the group plan to buy Waitrose (LON: JLH) in order to expand the business.