ReviewUSIS

August 2015 UoSInvestment.com

August 2015

3

UK warned over fresh fears of an imminent attack from ISIS 4

The Calais migrant crisis: an unsolvable dilemma? 6

Why the UK economy is a case of 'interest' 8

Iran welcomes the removal of sanctions 10

Scotland's decision to ban the growing of GM crops 12

The milk war continues as milk is declared cheaper then water 13

Concerns over the commercial potential of drone technology 14

A look at FinTech and how it is changing the way we pay 16

Uber drives a hole through longstanding monopolies 17

Telecare is changing the face of the medical industry 18

Is satellite navigation the future of lunar expeditions? 19

China is at war with its devaluing yuan 20

Barclays is in profit despite huge fines over forex rigging 22

The Libor scandal: what would you do? 23

Investment advice for students: how to build the nest egg 24

Ladbrokes struggles to keep up with competitors 26

Google rebrands name of holding company to Alphabet 27

Hello, and welcome to the August issue of the USIS Review.

It's wonderful to have so many articles for a summer release, so firstly I must extend my thanks to everyone who contributed to this issue. Not many university magazines manage to survive the summer months, and that is purely a credit to our writers!

This month's issue pays particular attention to topics with an overarching moral or regulatory de-bate: the depiction by the media of the migrants at Calais; the risks and benefits of the use of commercial drones; and the implications of the Libor scandal, to name just a few.

Elsewhere in the magazine, the Economics & Global Affairs team take a look at the recent gain in momentum in the UK economy and the removal of sanctions in Iran, while the Special Report examines the UK's response to new fears of an imminent attack from ISIS. The Technology team cover a broad range of topics, including the rise of the FinTech revolution and the power of Uber to penetrate existing monopolies,

With regards to the latest financial news, the Banking & Finance team look at the effects of the devaluing yuan and fines over forex rigging, while the Investments & Strategy team provide an insight into Google's rebranding to Alphabet and Ladbrokes' merger with Coral, as well as offering advice to any students looking to start up an investment portfolio.

I hope that this issue proves to be an insightful, as well as enjoyable, read!

Editor

August 20152 3

Rachel Quartly

Millie Baars, Katie Brookes, Edward Burton, James Burton, Simon Cummins, Charles Montgomerie, Brandon Pieters, Baiju Shah, Martin Smith, Matthew Smith, Michael Sole, Rachel Quartly, Charlotte Ridley, Jordan Waite & Conor Wilde

Ryan Bassindale

Bloomberg, Bloomberg Businessweek, Thomson Reuters, Financial Times, Economist, Investors Chronicle, Wall Street Journal, Investopedia, Mergermarket, Yahoo Finance, Company Press Releases & Company Annual Reports

4 August 2015

The Islamic State of Iraq and the Levant (ISIL, or more commonly known as ISIS) has terrorised both east and west. Their brutality and cruelty is only matched by their hatred for westernised culture. The self-proclaimed 'Islamic State' (or 'IS') is a jihadi extremist group with control over a landmass of over ten million people in Iraq, Syria, Libya and Nigeria.

ISIS members are jihadists, who adhere to an extreme interpretation of Sunni Islam, which they believe justifies their erratic and radical behaviour.

MI5, the security service, is the UK's domes-tic counterintelligence agency, designed to gather information on espionage, assassi-nations and terrorism. The service has re-cently upgraded the UK's threat level from international terrorism to 'severe', meaning that an attack is highly likely. Analysts and the UK Government are considering up-grading this again to ‘Critical’, which would

indicate that a terrorist threat is expected imminently.

Recent events have demonstrated the growing threat from ISIS. The 2013 murder of Lee Rigby, the 2015 Tunisia attack that left 32 Britons dead, the beheadings of western-ers by ISIS, the 2015 Charlie Hebdo shooting and the beheadings in France have all led to the reassessment of the current UK interna-tional terrorist threat level from the security agency.

MI5 has warned that Britain faces its most deadly terrorist threat in a decade. It's not since the dark days following 7th July 2005 that Britain has become so vulnerable and threatened.

To evaluate this threat, it is necessary to an-alyse where the threat originated and what has driven and fuelled such a brutal and cruel force.

ISIS has grown in both size and exposure. Their reach, as a result of their social me-dia prowess, has stretched from the Middle East, through Europe and into the US. Fol-lowing terrorist attacks in France and Tuni-sia, the threat to the UK appears potent and realistic. It seems the cruelty and brutality of ISIS as a terrorist organisation has pen-etrated the very psyche of western culture.

With upcoming national events over the next few weeks, the UK security services have had to realign their objectives and re-assess the safety and security of the gener-al public.. Events marking the Victory over Japan Day on 15th August are expected to be overshadowed by the news from ISIS re-cruiters that Queen Elizabeth is a target for assassination during the events, which will also mark her becoming the longest servic-ing British monarch.

A high ranking official in the security ser-vice has named Greater Manchester, East London and the West Midlands as areas that are continuously being monitored for suspicious activity.

August 2015

IS terrorists could now be in the country or planning on returning to the UK after attending training camps with other ISIS fighters. As a consequence, the UK terror threat was raised from ‘substantial’ to ‘se-vere’ amid fears that British Jihadists could return more motivated, and more radical-ised than before.

It has been claimed by many sources in-side MI5 and the UK Government that IS bombers are in the UK and ready to attack, hence the sudden escalation of the UK ter-ror threat. ISIS recruiters are encouraging British individuals to make lone-wolf style attacks. The influx of students and young people travelling via Turkey to fight for ISIS is overwhelming security services and halt-ing this remains a priority.

ISIS has demonstrated on several occasions that it is much more than a transnational terrorist network. Its command and control style of leadership and propaganda capa-bilities has enabled the organisation to be-come a sophisticated machine that has the ability to take and hold strategically critical areas across the Middle East.

As a natural consequence of their horrific actions, the United Nations has held ISIS responsible for violations of human rights,

perpetrating wicked war crimes and ethnic cleansing on a scale not seen on such a scale since the Rwandan Genocide and the Hol-ocaust. As a result, over 60 countries have declared they are waging a war with ISIS.

Young foreign volunteers quickly become cannon fodder and martyrs for their faith by undergoing training regimes in gueril-la warfare and terrorism, reconnaissance missions and explosives. Ultimately, these fighters will get to a point where they deem it necessary to strap a vest of explosives to themselves, or activate a bomb in a vehicle and, in the name of their faith, detonate their device and blow themselves up and murder all those in the vicinity of the bomb blast.

The militant group is believed to be the world's wealthiest, swiftly overtaking Al Qaeda. The network, which spans the globe, initially relied on wealthy private donors, including some governments in the Middle East keen to oust Syria's President Assad. However, as the years have gone by, the group is now largely self-funding, generating income from extortion, rack-eteering, looting and taking hostages for ransom. The US Treasury estimates that the group may have generated an income of over $100 million. This has been achievable by gaining control of key industries during

their quest to dominate the Middle East and expand the scope of their campaign to encapsulate the entire eastern hemisphere. Through their campaign they have acquired oil refineries that have provided a lucrative source of income.

However, US-led air strikes on oil infrastruc-ture have now diminished such revenue. It has become increasingly clear that, if the allies can cut off the chain of revenue at its source, then this will damage the group's efficiency and effectiveness. As soon as this chain is severed, the group's constant stream of ammunition will be disrupted and its operations would be severely weak-ened.

Since the dawn of time, religion has served as an inspiration to billions of people around the world. However, it has also been one of the major sources of conflict throughout human history. There have been fanatical groups before ISIS and there will undoubt-edly continue to be extremist organisations after ISIS. It is only by defeating this terror network that we can restore confidence and faith in the areas of the world that have suc-cumbed to the control of this terror group. Until ISIS is defeated, it remains difficult to develop areas of the world that have been under the control of this tyrannical regime.

BA Economics

5

August 20156 7

Over the past month, the influx of thou-sands of migrants gathering at the Euro-tunnel terminal in Coquelles, near Calais, has attracted international media atten-tion. Images of damaged wire fences and sprawling queues of lorries on the M20 have become the emblems of a rapidly un-folding migrant 'crisis'. Despite public fears about the potential consequences of the situation in Calais, perhaps no one has been more inundated with concerns than David Cameron. After pledging for more rigor-ous immigration and border controls in his new Conservative government, reports of the chaotic scenes in Calais have not only provoked political disputes regarding im-migration policy; they have also intensified the evolving debate of Euroscepticism. Yet perhaps more telling than any conflicting political views are the disparate portrayals of the migrants, who have at once been de-picted by the media as both the criminals and the victims in this crisis.

Within the area now commonly referred to as 'the jungle', it is estimated that between 3,000 and 5,000 migrants are camping out near Calais. Following nightly attempts by hundreds of migrants to gain access to the Eurotunnel entrance, it is believed that at least nine migrants have died in their ef-forts to cross the Channel. In light of these events, France authorities have been re-

peatedly criticised for insufficient levels of security at Calais. Consequently, 120 ad-ditional security personnel have been de-ployed in the surrounding area and the UK government has funded a £7 million mile-long fence to further increase security at the Coquelles terminal.

The UK Foreign Secretary, Philip Hammond, recently declared that the UK and France had now 'got a grip' on the situation, as the number of migrants arriving at Calais and attempting to make the channel crossing has substantially decreased. But in affirm-ing the rebalance of control and power over the situation, Hammond seems to be using clichéd, political rhetoric, which is conven-iently reductive of the reality behind these events. Whilst new fences and barricades may stem the current flow of refugees at Calais, the crisis at the border is merely a microcosm of a much larger problem en-demic to the EU, and raises further issues about the fair treatment of refugees.

Although the recent media frenzy may sug-gest that the majority of migrants outside of the EU are gravitating towards to the bor-der at Calais, the veracity of this impression is highly questionable. According to official Eurostat figures, more than 200,000 ap-plications of asylum were made to Germa-ny last year by refugees outside of the EU; in the same year, there were only around 30,000 non-EU asylum applicants in the UK.

Additionally, reports of the vast numbers of migrants from North Africa attempting to reach Italy and Greece by sea have high-lighted the subsequent pressure on the Italian and Greek governments to process such a large volume of asylum applications. Under the Dublin Regulation, EU legislation stipulates that asylum seekers must make their applications in the first safe country at which they arrive. In practice, the appli-cation of this law is more complex: with the ability to move freely between countries once within the Schengen area, it is often difficult to determine where an application should legally be made, as many of the ref-ugees travel undocumented between coun-tries. But perhaps, more importantly, these statistics dispel the illusion that the influx of migrants at Calais is unique to the UK and France. The crisis is – on the contrary – a much greater one common to the whole of the EU.

Unsurprisingly, there have been numerous attempts by the public media to sensa-tionalise the events at Calais. In an article of uncorroborated statistics, the Daily Mail made the rather bold claim that approxi-mately seven out of ten migrants at Calais would successfully cross the border into the UK. Without any substantive evidence regarding the number of migrants achiev-ing the channel crossing, these erroneous

assertions seem to contribute to a wider rhetoric of scaremongering surrounding the migrant crisis, amidst concerns of its po-tentially damaging effect on the economic and social infrastructure of the EU.

Employing the hyperbolic language of the tabloids, Philip Hammond suggested that the situation in Calais could catalyse the economic and social decline of an entire continent: 'Europe can't protect itself, pre-serve its standard of living and social in-frastructure if it has to absorb millions of migrants from Africa'. These views have in-stigated a barrage of criticism – most nota-bly from the left. In particular, opponents to right-wing commentators have embraced the opportunity to condemn the language used by Conservative MPs regarding the migrants themselves. David Cameron was publically accused of dehumanising the mi-grants by referring to the assembly at Cal-ais as a 'swarm'. More recently, Hammond was heavily criticised after inferring that the migrants were villainous, asserting that they were 'marauding around the area' for their personal economic gain. Yet although these openly provocative and controversial comments have allowed the left to easily retaliate, a much more significant political debate concerns the factors that have mo-tivated these migrants to congregate in 'the jungle' at Calais in the hope of crossing the border.

The Conservatives and other voices from the right have, rather predictably, adopted an attacking stance on the migrants in as-serting that they are making their perilous, transcontinental journeys in pursuit of the economic benefits on offer in the UK. David Cameron supported this argument in an in-terview which sounded more like an adver-tisement for the splendour of the UK and its economic prosperity, rather than an evalua-tion of a migrant crisis, claiming that there is 'a swarm of people . . . wanting to come to Britain because Britain has got jobs; it's got a growing economy, it's an incredible place to live'. This perspective has helped propagate an increasingly negative view of the migrants, which has been further compounded by the subsequent disrup-tion caused by the events in Calais. Indeed,

following reports that haulage firms and lorry drivers have received fines in excess of £4 million after migrants were found in their vehicles, many people have burdened the migrants with the blame, rather than attacking the government on this argua-bly unjust legislation. And as if the groans of disgruntled holiday-goers were audible above all of this chaos, the Prime Minister has been quick to come to their aid: 'we will do everything we can to help make sure that people can have a safe and secure holiday'.

But as Cameron paves the way for this 'safe and secure holiday' for the British holiday-maker, there is a harrowing sense of irony in this assertion by the Prime Minister, as a very serious migrant crisis persists. In defence of the position of the migrants, several commentators have refuted claims by right-wing politicians that the migrants are motivated by a desire to exploit the economic opportunities within the EU. As a result, many have drawn attention to the highly unsafe and unsecure environments, from which these refugees are fleeing. In-deed, a considerable amount of the refu-gees assembled at Calais are believed to be from war-torn regions or countries of political oppression, such as Syria or Eritrea, and so legitimate claims for asylum could be made. The epithet, 'desperate', which has been repeatedly attributed to the migrants, thus seems a reasonable appraisal of their situation; a situation that has failed to evoke any notion of empathy from Camer-on or his colleagues.

Political debate concerning immigration is a typically contentious subject and the crisis in Calais has markedly divided pub-lic opinion on the matter. Not only have these recent events demonstrated a clear dichotomy between left and right-wing views, the migrants themselves have been at the centre of disagreements regarding their ambiguous position as villains or vic-tims amidst the crisis. Yet despite claims that the situation in Calais is improving, it would be wrong to exclude the much larg-er refugee population across the continent in this discussion, where a migration crisis undoubtedly still persists. Moreover, gov-ernmental reaction to the recent events casts doubt on whether legislation under the Common European Asylum System, regarding the fair treatment of asylum seekers, will be adhered to. It is hard to ig-nore the somewhat nefarious and ruthless overtone in David Cameron's appraisal of the situation, as he asserts that his focus is on 'stopping so many people from travel-ling across the Mediterranean in search of a better life'. Whilst Cameron has openly espoused the prosperity of Britain, it seems almost immoral to then deny those most in need of help the opportunity to experience this 'incredible place to live'. Of course, there is no easy solution to a migrant crisis, but the situation in Calais has highlighted the multiple issues that borders produce in the global community. Building another fence will only exacerbate the problem.

BA English and French

August 2015

August 20158 9

UK

August 2015

UK

Towards the end of July it was revealed that the UK economy had recorded positive growth of 0.7% for the second quarter of the year. This is the tenth quarter in succes-sion, in which the UK has managed to re-cord positive growth, further outlining the strong recovery it has made since the 2008 global recession. At first glance, this figure appears to illustrate that the UK economy is 'motoring ahead', which was the words of the chancellor, George Osborne; but how truthful is this? On the one hand, 0.7% is strong growth for a quarter and equates to 2.8% per an-num on average; a figure that is higher than any yearly growth rate the UK has achieved since 2006. On the other hand, this quarter's growth was heavily fuelled by the service sector; a sector the UK has been so heavily dependent on in the past. Elsewhere, construction output was flat and manufacturing output fell. The failure to improve the growth of manufacturing

output will come as a real concern. The sector is responsible for 10% of UK output and will leave the economy dependant on services to maintain the growth rate in the third quarter. Data from July, however, may still spark some optimism. According to the monthly Purchasing Managers' Index (PMI), manufacturing growth took a small rise with its index rising from 51.4, which was a 26 month low, to 51.9. PMI is a useful indicator regarding the economic health of the manufacturing sector and is based on 5 major indicators; new orders, inventory lev-els, production, supplier deliveries and the employment environment. The small rise in manufacturing output might be enough to allow the economy to be a little less de-pendent on services for the third quarter. This could prove crucial as July's data also showed the growth rate of services to have fallen as employment hit a 16 month low. So whether the UK is 'motoring ahead' right now is all down to a matter of opin-ion. Where some will be satisfied with the encouraging growth rate and the almost non-existent inflation rate, others will be

concerned about the economy's failure to fire on all cylinders or the future struggle that may be faced to maintain growth.

The varying performances between the sectors in the UK economy can perhaps be explained by one main factor; the exchange rate. This summer has seen the pound reach a seven year high against the euro. This has resulted in the cost of imports to be cheap-er whilst exporting has become relatively more expensive and subsequently less at-tractive. With more expensive exports, over-seas demand falls due to the relatively low-er price from competitors abroad, resulting in the reduced growth the manufacturing sector appears to be experiencing.

There are a couple of reasons why the pound is so strong against the euro. One of the biggest influencers has been the Greece crisis where the uncertainty created by the nation's future has led the euro to plummet. For some time now the future of Greece to

remain in the EU has been in doubt; with the Greek economy still very much in debt, negotiations for bailout packages have of-ten been a long-drawn-out process due to the nation's firm stance on their anti-aus-terity policy. Whilst agreements have been reached during the year and Greece's Euro-pean future looks slightly more secure than it did a year ago, the uncertainty which has been created and maintained has lead in-vestors to withdrawing their money out of Europe, leaving the Euro to get weaker as a result. The impact that Greece is having on the euro can be seen when looking at Europe's other performance indicators; in-flation is now steady with an upward trajec-tory, first quarter growth was greater than both the UK and US and unemployment has reached a three year low. Despite these performance indicators suggesting that the European economy is performing to a satisfactory level, the fact that the euro is so weak against the pound just emphasises the influence that the Greece crisis is having on the exchange rate.

The Greece crisis is not the only explana-tion for why the exchange rate is how it is; speculation over the interest rates has also played a part. The UK base interest rate has remained at 0.5% since March 2009, how-ever, over the course of 2015 there has been plenty of speculation that the Monetary Policy Committee (MPC) might be prepared to increase this rate sooner rather than lat-er. This speculation encourages more in-

vestment into the pound as investors will benefit from a greater return if the interest rate does go up, consequently making the pound even stronger against the euro.

Although the UK's influence on the ex-change rate may be limited, their influence on the interest rate is anything but. With inflation remaining stagnant whilst wages experience inflationary pressure, coupled with what appears to be a healthy UK econ-omy, the MPC has a genuine incentive to increase the interest rate for the first time in years. During August, the MPC held a vote to determine whether the interest rate should indeed be increased. The re-sults showed an overwhelmingly one-sided opinion for maintaining the rate by 8 votes to 1, indicating that, if raising the interest rate is going to happen, it will most likely be in 2016. At first glance, it may seem un-clear why the committee are so reluctant to raise the rate, however, with the econo-my growing and wages on the up, risks of high future inflation pose a real concern.

Justification of the MPC's decision can be found when considering other factors, such as the strong pound. With the euro as weak as it is right now, inflationary pressure is reduced from the low demand abroad and so it would take a dramatic increase in do-mestic demand for inflation to reach wor-rying levels. Another element to consider is the falling oil prices, which have benefited businesses with the luxury of lower costs, allowing them to absorb increases in wages, keeping their prices constant. Finally, there is evidence to suggest that raising the in-terest rates too soon could have a negative impact when the economy is finally starting to generate some momentum. Both Cana-da and Sweden were left to dramatically cut their interest rates after a bold rise harmed their economic growth. Sweden, in particu-lar, was hit so hard that its rates are now negative. There will be a point in time, most likely in the next 12 months, where the MPC will have to increase the interest rates. Mak-ing this move too early or too late, however, could undo a lot of the good progress the economy has made lately.

The general outlook on the UK economy is that it finds itself in a much better posi-tion than it was at the time of the recession. Though it can be argued that the progress the economy is making is not consistent through all sectors, it highlights areas for the government to work on. Next quarter's data will be crucial in telling us how much, if any, progress has been made. The bottom line is that the economy is finally starting to build some momentum, although the MPC certainly has some difficult decisions ahead in order to help continue this.

BSc Economics

August 201510

The Joint Comprehensive Plan of Action is a historic agreement which was agreed upon in Vienna on July 14th and negotiat-ed by Iran, the permanent members of the UN Security and Germany. The framework of the deal includes capping Iran's reserves of low-enriched uranium as well as intro-ducing limitations on centrifuge numbers and enrichment levels. It also introduces restrictions on the development and re-search of more advanced centrifuges and the redesigning of the Arak generator to curb the amount of plutonium it produc-es, as well as establishing the timespan for these measures to be in effect, which ranges from 10 to 25 years. In return for complying with these demands, Iran will enjoy a lifting of the sanctions put upon it by the European Union and the United States that have had a detrimental effect upon its economy. With Iran open to the world market, the World Bank has predicted that Iran will speed up its economic recovery through ways such as exporting oil. This will hit other exporters' earnings in the Middle East and North Afri-ca (MENA) region such as Libya and the Gulf States, though importers in regions such as Tunisia and Egypt will be able to take ad-

vantage of the lower world prices to help their economies grow. The World Bank es-timates oil prices will fall by US $10 per bar-rel in 2016 due to the addition of roughly a million barrels of oil per day from Iran's sup-ply. The exporting of oil will raise domestic economic growth in Iran to 5% in 2016 com-pared with 3% this year and GDP growth will reach 8% after 18 more months, the World Bank also predicted. Nevertheless, the agreement, which still needs to be rat-ified, is highly significant geopolitically due to it influencing the balance of economic and political power throughout the Middle East and thus having a global impact.

Shanta Devarajan, the World Bank Chief Economist for the MENA, highlighted the effect sanctions have had on Iran; 'Just as the tightening of sanctions in 2012 led to a sharp decline in Iran's oil exports and two years of negative growth, we expect the removal of sanctions to boost exports and revive the economy'. Since sanctions were tightened in 2011, the Rial, Iran's currency, has lost two thirds of its value against the

dollar due to being unable to access the in-ternational banking system and losing oil revenue. It also led to an unemployment rate of 10.3% and a reduction in GDP of 20%, which put fresh stress on the popula-tion who already had to cope with soaring food and fuel prices.

The removal of sanctions will also improve the social aspects of Iran and reduce its 'brain drain'; the years between 2009 and 2013 saw over 300,000 young adults leave the country looking for a better life than the ones set out for them in their home country. The exodus is so severe that 25% of Iranians which have achieved a post-graduate edu-cation live in OECD countries outside Iran, which has been reported by AL-monitor to be one of the highest in the world. It is so high, in fact, that the World Bank has esti-mated that $50 billion leaves the country annually as people look for jobs elsewhere.

The Energy Information Administration have found Iran to have the fourth largest

11 August 2015

proven crude oil reserves globally and it is roughly predicted to have 157.8 billion bar-rels, which amounts to a quantity capable of supplying China for 40 years. The lifting of sanctions will mean that Iran will have the capacity to produce 800,000 more bar-rels per day within 3 months, according to the International Energy Association, on top of the 2.8 million barrels per day it cur-rently produces. This has led the associa-tion to revise its 2016 forecasts to between $5 and $15 lower per barrel. Oil consumers will be able to use this to their advantage as not only will the oil be cheaper but there will be a more balanced share of the market as both Iran and Iraq seek to increase their production and export oil globally.

Iran has the second largest population in the Middle East after Egypt with a consum-er market of 78.5 million people, therefore its neighbours, such as the UAE and Turkey, will be those who benefit the most from increased trade and investment opportu-nities. The World Bank estimates exports from Iran will increase to 3.5% of its GDP due to trade being cheaper, thus allowing countries such as Britain and India to ben-efit also. As well as countries, international companies such as those in the energy sec-tor will benefit as the Iranian government is looking to secure roughly $100 billion in investment from western firms to contrib-

ute to the $200 billion it needs to upgrade its outdated systems. The market for con-sumer goods from companies, such as Co-ca-Cola or Dell, also looks promising with interest in western trends from Iran's mid-dle income populace, where per capita in-come is higher than Brazil and over half the population have internet access along with a young adult literacy rate of 98% between 15 and 24 year olds. Many other sectors will also benefit, for example Iran's transpor-tation minister announced that over 400 commercial aircraft needs to be replaced over the next 10 years, which could amount to at least $20 billion in revenue for aviation companies, such as Boeing. Countries such as Russia and China are well placed to con-duct business with Iran and are also likely to benefit from Iran's revival, which may cause Saudi Arabia to move away from its dependence on the United States which it uses for defence and a primary market for Saudi oil.

Iran's stock market, currently valued at roughly $100 billion, could be a lucrative op-portunity given that there is no limit on for-eign investment and, due to the sanctions, it is seen as undervalued. If the policies of the current Iranian government are carried through and the market opens up to equal its economy, then returns in investing could be promising with companies currently list-

ed on the Tehran exchange - worth 28% of the country's GDP; a ratio lower than the majority of the popular emerging markets. Due to much of the technical infrastructure already in place, Iran could be seen as an ex-citing opportunity to immediately capital-ise on investment due to both existing facil-ities and a professional workforce, making it less of a risk than other emerging markets. The World Bank suggests that foreign direct investment (FDI) will peak at US$3 billion a year, however with double current invest-ment it is still less than its 2003 peak.

The impact of the nuclear deal cannot be determined by the immediate interests of those who negotiated it, but by the long-term strategic interests of the parties in-volved. Non-western alliances, such as the Shanghai Cooperation Organisation, the Eurasion Economic Union and the New Silk Road, will also be impacted upon by this deal. Turkey, another regional power, will be involved due to it being aligned differently politically but will still be relied upon as a trading partner. Because of the involvement of so many players, the agreement that has been decided on will influence geopolitics and economic development strategy for much of the early 21st Century.

BSc Geography

August 201512 13

According to Richard Lochhead, the Scottish Cabinet Secretary for Rural Affairs, there is no indication of significant demand for GM products by the Scottish consumers and so the Scottish government is not willing to 'gamble' with the future of the country's £14 billion food and drink sector. This has led to Scotland's request that they are excluded from any European consent for the cultiva-tion of GM crops.

Under EU rules, GM crops must be formally authorised before they can be cultivated, however an amendment came into force earlier this year that allowed Scotland to opt out of growing EU-authorised GM prod-ucts.

Lochhead said that Scotland is known glob-ally for its "beautiful natural environment" and that banning the growing of genetical-ly modified crops would protect and further enhance its 'clean, green status'.

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However, not everyone is in agreement with the decision. Scott Walker, the Chief Executive of the National Farmers' Union of Scotland, said in a recent interview with the BBC that 'other countries are embracing biotechnology where appropriate and we

should be open to doing the same here in Scotland'. Walker believes that these crops could have a vital role in shaping sustaina-ble agriculture in the future

Although many scientists and farming or-ganisations are disappointed by the move, green groups have welcomed the decision. Alison Johnstone, a Scottish Green MSP, agreed that the cultivation of GM crops would harm the Scottish environment and its reputation for high quality food and drink. She hopes ministers will go further to challenge large retailers on improving their packaging to indicate whether meat, eggs and dairy products come from animals fed on GM feed.

Anne Glover, professor of biology at Aber-deen University and former Chief Scientific Adviser to the Scottish Government wasn't willing to comment in detail on the ban, but it appeared she wasn't in support. Glover said that it would be difficult to justify a ban on the grounds of safety, as GM technology for plant breeding is globally supported by a scientific consensus with regards to its safety. According to the EU, it is 'safe for hu-mans, animals and the environment'.

Plant scientists outside of Scotland were

willing to comment in more detail and did not hide their thoughts. Professor Huw Jones at Rothamsted Research in England said, 'this is a sad day for science and a sad day for Scotland. GM crops approved by the EU are safe for humans, animals and the environment . . . if approved, this decision serves to remove the freedom of Scottish farmers and narrows their choice of crop va-rieties to cultivate in the future'.

In the short term, the ban will have almost no impact on Scotland. This is because in-sect-resistant maize is currently the only GM crop approved for commercial sale in Europe, but it cannot be grown in Scotland due to the Scottish conditions. However, this may change in the future as a blight-re-sistant strain of GM potato is currently un-der development; if this variety of potato is not permitted in Scotland, scientists believe that Scottish farmers will lose out.

Other countries are embracing biotech-nology where appropriate, but this is not the case in Scotland. It remains to be seen how this will stand them in the future and whether they should in fact have been open to it.

BA Business Management

The milk quota system that was in place for 30 years has been abolished. As a result, dairy farmers are now allowed to produce as much milk as they like without suffering a financial penalty.

This has driven a spike in production, par-ticularly in countries, such as Ireland, Ger-many and the Netherlands, who intend to continue to boost exports of milk and other dairy products to the UK. In turn, this has caused a huge price war over the cost of milk, which has ultimately brought down the price of milk for consumers.

British farmers are now finding that the price they are paid by supermarkets is being driven down further. So now smaller family businesses are finding it particularly diffi-cult to continue to produce milk.

The war of the milk price has been an on-going battle for many years. In 2012, angry farmers protesting at the falling dairy prices in the EU sprayed fresh milk at the Europe-an Parliament and riot police in Brussels.

Previously, the Co-operative Food, ASDA and Morrisons all agreed to raise the pay-ment made for the cost of milk to milk suppliers and ALDI agreed to put in an ad-ditional 1p for each litre of milk purchased. The question is will this trend continue or will the supermarkets focus more on bring-

ing in the customer than protecting the farmers.

Morrisons have pledge to sell a new milk brand, which will see 10p paid per bottle to farmers. The move comes after farming industry leaders met bosses of the super-market chain to discuss the price of milk. Morrisons believe this will help struggling dairy farmers to stay in business following the sharp drop in the amount they are paid.

Farming unions across the UK have devel-oped an action plan following an 'urgent summit' to discuss milk prices. The plan in-cludes calls for labels to show British prod-ucts and long-term contracts for farmers. The action plan is vital as some farmers are now experiencing a 'crisis' after being paid less for their milk than the cost of produc-tion, the National Farmers' Union (NFU) has said.

Many farmers have been organising pro-tests, with demonstrations ranging from re-moving large quantities of milk from shops to blockading distribution centres.

The NFU says the new action plan calls for:

UK farming ministers to meet urgent-ly and for the government to ensure

farmers' contracts are longer term and more fairThe government to 'urgently' ensure la-belling rules mean British products are clear and obvious'Retailers to 'stop devaluing' British food 'purely to get customers through the door'The EU to underwrite the short-term credit position of vulnerable farmers

Farming leaders have come together to urge the Government, retailers and pro-cessors, as well as the EU, not to ignore the warning signs that milk farming is in a state of emergency.

BA Business Management

August 2015

August 2015 15

The air traffic control for this suggested drone airspace would be handled by an automated computer system according to Amazon US. The retailer also citied that the workload of this air traffic control system is the greatest limitation on the airspace capacity. Thus, the drones must be able to talk to each other and avoid each other as the airspace zone proposed gets denser at lower altitudes.

According to Amazon's plans, their drones will be able to update their routes in re-al-time. The customer would be able to choose from a variety of delivery options ranging from 'bring it to me' to nominate their home, place of work or even 'my boat' as a place for the packages to be dropped.

Amazon has set out guidelines that all com-mercial drones must meet if they are to be allowed to fly inside the proposed 200ft air-space zone, which are as follows:

Sophisticated GPS tracking that al-lows them to pinpoint their location in real-time and in relation to all other drones around them.A reliable internet connection onboard that allows them to maintain real-time GPS data and awareness of other drones and obstacles.Online flight planning that allows them to predict and communicate their flight path.

From an independent perspective, these guidelines would allow a centralised air traffic controller to regulate the airspace in real time, much like in commercial aviation. This method is fundamentally a tried and tested one, and so is perfectly viable. Fur-ther guidelines include:

Communications equipment that al-low them to 'talk' and collaborate with other drones in the zone to ensure they avoid each other.Sensor-based sense-and-avoid equip-ment that allows the drones to bypass all other drones and obstacles such as birds, buildings or electric cables.

These last set of guidelines thus allow the drones to avoid collisions with other drones and other aerial and sub-aerial obstacles. Again the method of regulation has much in common with commercial aviation and so is also completely viable.

The other interested party in drone usage are amateur drone hobbyists and model-

lers. Under current US regulations, they are allowed to fly their drones within line of sight up to 400ft as long as they stay away from airports and other out-of-bounds areas. But under Amazon's proposed reg-ulations, drone hobbyists would only be allowed to fly within the new 200ft-400ft corridor if their drones were equipped with the latest hyper-sophisticated gadgetry for autonomous flight. Otherwise, they would have their activities confined to geograph-ically demarcated airfields in relatively unpopulated areas that would be set aside specifically for the purpose.

The second major issue facing commercial drones is battery life, as both budget and high-end drones have an average battery life of about 20 minutes - with some even managing just 10 minutes of flight time. This issue, however, is becoming less of a concern as battery technology is becoming a hive of activity with innovation. One limit to this solution is that the drone will have to be specific to the type of battery the drone manufacturer chooses as many types of battery that work in a variety of ways exist.

Overall, drone technology is fundamental-ly progressing faster than the social regu-lations created by state institutions, to the extent where Amazon is having to create its own regulations to propose to regulatory authorities.

This whole situation, further, can be said to serve as microcosm for our current society, in which technology is progressing so fast that we tend to lack the regulations to con-trol it effectively and safely. This can be also related to the use of big data, social media and the subsequent security concerns. But that is a different story entirely.

BSc Geography

August 201514

Unmanned aerial vehicles (UAVs), more commonly known as drones, are defined as aircraft without a human pilot. Moreover, they are usually controlled either by auto-mated onboard computers or remotely by a pilot on the ground. Drone technology has led to a whole host of social and political is-sues regarding their use both in commerce and in the military. The drones we are most associated with due to their controversy in the news are the ones with military applica-tions, where drone strikes on the Taliban in Pakistan are killing more people than just their intended targets.

Recently, however, commercial drones are stirring up controversy of their own. This is largely due to the regulations surrounding the use of airspace between the commercial use of drones, amateur use of drones and commercial airliners.

With regards to the commercial use of drones, they are being trialled to be used to deliver products to customers as an ex-tra option to either collection or delivery by conventional delivery. This added option of delivery is being trialled right across the globe in the UK and China, but has the most pace in the USA where drone technology is at its most advanced. Advocates of drone

technology and its application in delivery services for retails see it as innovation in the market, while airspace regulators see drones as a nuisance. This aside, drones still need to be dealt with because of their tre-mendous business potential.

The Consumer Electronics Association said the drone market should be worth about $130 million (£86 million) in 2015 - 50% higher than 2014. In a few years this trade association expects it to be a billion-dollar market with an abundance of commercial applications.

Giants such Amazon and Google in particu-lar see drones as future delivery vehicles with business potential. They also have ap-plications outside of delivery that include the maintenance of buildings, architects and even real estate. However, all is not sta-ble in the commercial world of drones as there are two key issues facing them; regu-lation and battery life.

In the US, the Federal Aviation Authority (FAA) has very strict regulations regard-ing airspace around the commercial use of drones and, according to them, the regula-tions for commercial use are strict for very good reasons. They cite that there is much

anxiety in the community about the use of amateur drones and privacy, as most of the craft come equipped with cameras. There-fore the uptake of amateur drones usage heralds security issues in the community.

This first issue regarding regulation is the use of airspace that would be required in a delivery service. To address this issue the US online retailer giant Amazon has called for a separate airspace zone for commercial drone flights that would deliver goods to their awaiting customers. They propose a zone that would have the drones flying be-low normal planes at a height of 61 to 122m.

This segregated civil airspace would carve out a zone below 500ft that would enable drones to fly unhindered and without en-dangering civilian or military planes. This proposal suggests an airspace of below 200ft for low-speed localised drone traffic, such as drones for surveying, filming and amateur usage. The next level between 200ft and 400ft would become a 'high-speed transit space', for drones such as the ones Amazon is aiming for with its future drone delivery plans. A strict no-fly zone be-tween 400ft and 500ft would be used as a buffer zone to all civilian, cargo and military aeroplanes using the space above the 500ft mark.

August 201516

Since the boom of smartphones, the way we are using our phones has changed. Aside from checking our email and social media sites, we are using our smartphones more for banking and looking at portfolios - this is what we call the 'FinTech Revolution'.

A report compiled by Accenture stated that, since 2013, global investment in financial technologies (FinTech) has topped over $4 billion and is still growing, After the finan-cial crisis of 2008, people wanted a better, safer and more convenient way to bank. FinTech keeps rising as the products created by these companies are targeted to a cer-tain group of people that would need tailor made financial technology. One example is an app that facilitates farmers buying and selling their cocoa in Ghana and knowing what the market price of their cocoa is as it is leaving their farms in order for them to get a fair price.

The rise of online shopping is more than a convenience to most and has made retail-ers such as Amazon bigger than tradition-al stores such as Walmart, yet credit card fraud and identity theft are just some of the challenges banks are facing at the mo-ment. eBay, one of the retailers anyone can

use to sell their products, led to one of the greatest innovations in the FinTech indus-try; the rise of PayPal - an online payment system that virtually allows transactions to be completed. It is quick and easy to have payments accepted, without the risk of having credit card and identity details com-promised through third party sellers. The reason behind PayPal's success is quite sim-ply its ease of use and therefore it is largely becoming an online wallet for most. Many high street retailers have started accepting PayPal payments in the United States and the trend is rising across Europe and the rest of the globe. Love it or hate it, Apple Pay and Google Wallet are also slowly being used by many owners of smartphones - with the wave of your mobile across a scanner, you are walking away with your coffee without having reached for your wallet or credit card. This is how FinTech is revolutionising the finance scene. But what about in the de-veloping world?

Smartphones, though slowly creeping into countries such as Kenya, still have a while to go before they can be used effectively for banking. However, an amazing technology has recently emerged in Kenya called MPE-SA. MPESA, so-called after the Swahili for ‘mobile money’, is owned by the largest mo-bile phone provider, Safaricom (a subsidi-

ary of Vodafone Plc) and has been a game changer for the way Kenyans are banking. It has become so big that the large banks have had to incorporate MPESA into their bank-ing structure in order to facilitate the large number of transactions MPESA has. What is unique about MPESA is that it does not re-quire an internet connection to be used and has become the ‘Bank’ for those without bank accounts or access to atm machines. Money in Kenya has started circulating fast-er electronically than the Central Bank of Kenya would have predicted five years ago. It has become the everyday Kenyans’ bank account and wallet; the same way that deb-it cards work.

FinTech has already started integrating into everyday financial transactions and is becoming easier and faster. FinTech compa-nies, such as PayPal, WentWorth (a wealth management company that has more than $1 billion under management) and Stripe, are worth billions of dollars and are grow-ing faster than other competitors in the in-dustry. FinTech could be the future of how we perceive finance.

BSc Economics with Finance

17

Simple, safe, convenient – these are just three of the words you might use to de-scribe Uber, the tech firm that is revolution-ising the taxi industry. Similar to how Airb-nb has changed the way people book hotels, Uber provides an easy way for customers to request a private hire car to their location, often for a cheaper price and with a better quality of journey than traditional taxi ser-vices. Hence, it might come as a surprise that these were the words tweeted by musi-cian Courtney Cobain after an Uber journey in France this June: ‘This is France? I'm safer in Baghdad’. Uber drivers and passengers alike were faced with slashed tires, baseball bats, over-turned cars and riot police during their jour-neys this past June in Paris, as local taxi driv-ers staged their most violent protest to date against the disruptive new firm. After years of experiencing little to no competition from rival firms, taxi drivers are not happy with the arrival of Uber and its superior user experience – from lower prices, to a conven-ient and easy to use app, cashless payments direct to card and effortless driver rating system, allowing users to feed back directly to Uber after their journey. Indeed, it would appear that Uber is light-years ahead of tra-ditional taxi services, and customers have been voting with their feet.Certify reported that in Q1 2015, an average of 46% of total paid car rides in the U.S. were with Uber, compared to just 15% the year before, putting the source of this incredible growth rate down to consumers looking for 'value and convenience'. In some cities, busi-ness people have even been spending more on Uber than they have on traditional taxis, and this growth shows no signs of slowing down. Facing a loss of revenue and market

share, taxi drivers have taken to the streets in protest all over the world.

In May, the United Cabbies Group (a UK taxi driver union) called for London taxi drivers to take to the streets in the hope of causing gridlock across the city, fearing that they'll be forced out of business due to an inability to compete with Uber's lower prices. Mexico City has also seen more violent protests, in a similar vein to Paris, with reports of eggs and flour being thrown at Uber vehicles and windows being kicked in, after local drivers demanded a ‘total halt’ to Uber's operations in the city.

Even if one sympathises with the taxi driv-ers, it's hard to see how violent protests that cause misery for thousands of commuters are the most effective way of airing their views. In fact, it only serves to cause more animosity towards these very drivers, with many users commenting online that the behaviour of taxi drivers has made them more likely to opt for an Uber in the future – in London, Uber even reported a spike in journeys during the protest, as consumers were not able to find an available taxi, and simply ordered an Uber instead. It would appear that, whilst transfixed on causing as much chaos as they can, the carpet is being pulled from beneath the taxi drivers' feet. Rather, it would make more sense for these traditional services to compete on service, rather than trying to block innovative ideas that result in a better product for the end user. After all, taxi drivers are in the hospi-tality industry, and what's the point if the service offered is not the best it can possibly be for the customer? For instance, black cab drivers in London point out that they have an unrivalled understanding of the streets

of the city thanks to the intense examina-tion they have to go through in order to receive their license called ‘The Knowledge’, which they claim makes them best placed to drive customers to their destination. However, it's questionable how useful this is in the post-sat-nav age, since this is now a job Uber drivers can do quickly and easi-ly on their phones. It's clear that tradition-al taxi drivers need to find new avenues of product differentiation, rather than resting on their laurels.

However, it might not be that simple – gov-ernment regulation also plays a role in pre-venting fair and equal competition in the taxi market. Since Uber is not strictly a taxi company (it merely connects customers to self-employed drivers), it cleverly avoids having to adhere to any of the strict regu-lations that govern others in the industry. Whilst cab drivers must pass background checks and pay up to three figure sums for a license to operate, more or less anyone can become an Uber driver – as long as you pass some basic tests. Many taxi drivers are now questioning the value of their investment considering it costs next to nothing to offer the same service via Uber. It's a clear exam-ple of government policy failing to keep up with innovation, and it's costing people their jobs as the industry struggles to adapt – assuming it's willing to.

Either way, it's clear that Uber is here to stay, and there's a reason it resonates with cus-tomers – it offers a better quality service for less money. It is now the job of government to level the playing field and ensure red tape can't be blamed for the stalling taxi industry.

BA Economics

August 2015

August 201518

Skype, FaceTime, Google Hangouts, are all used by billions of people. Indeed, video calling is commonplace; the future has ar-rived. With the advent of connected tech-nology, everything becomes more immedi-ate to the individual. Now, people can use technology to have people deliver food and buy their books, clothes and groceries. They can do their banking, arrange insurance and even look for good schools for their children, all without leaving the house. And now, we can also consult with a doctor.

Telehealthcare, commonly referred to as 'telecare' in the UK, encompasses a number of communication technologies and, in the past few decades, has been predominantly for doctors to communicate with each oth-er or for patients contacting their regular specialist. More recently, services offering one to one consultations over video call for anyone willing to pay have been appearing in both the US and the UK.

But we are now in the age of apps; things are quickly changing. Picture this: you get home from work and are feeling ill. You can either call your GP to hope to get an appointment in the next few weeks. Or you can do what Ms DeVisser, a patient living in America, did: she typed in her symptoms and cred-

it card number and, within half an hour, a doctor appeared on her screen via Skype. He looked her over, asked some questions and agreed she had sinusitis. Within minutes, Ms. DeVisser, had an antibiotics prescrip-tion called in to her pharmacy.

The scope for improvements in efficiency for both clinicians and patients is huge. However, this new technology is facing re-sistance from some areas within medicine. Insurance companies are concerned that telemedicine will actually increase health-care costs, as the so-called ‘worried well’ use their newfound access to contact doctors for trivial complaints. There are also patient safety concerns, specifically the risk of miss-ing a diagnosis when the doctor is not able to lay hands on and examine the patient.

In the US, Medicare is beginning to reim-burse patients for using telemedicine ser-vices, but, in the UK, it remains the remit of private insurance. The NHS, ever cost-con-scious, runs only a few pilot programmes, stymied by concerns that the technology will only benefit those who are already bet-ter off, not the whole public.

Advocates of telecare point to the opportu-nities presented by the huge penetration of

smartphone technologies across every stra-ta of society. As well, quick instant access to a GP consultation at a convenient time and location is an obvious improvement in user experience to the traditional model.

Babylon health, founded in 2013, is one such service based in the UK. Their phone app offers quick consultation with a doctor or nurse, prescription delivery, and will even deliver test kits to the patient's address. The service is offered for a £4.99 monthly sub-scription and then a £29 fee per consulta-tion, with higher fees if a specialist is need-ed. Otherwise, it is also offered as a perk of employer provided health insurance. In some areas, they are also working with the NHS to offer the same services.

The future of medicine is here. Rapid con-venient access healthcare like this is unpar-alleled in the NHS. Going forward, services like these will be commonplace. At reason-able prices, uptake could be huge. Incum-bent insurance companies have already jumped on the bandwagon, as well as new contenders like Babylon. The field is ripe for expansion.

MBChB Medicine

19

There are many groups of teams all over the world dedicated to the various different as-pects of space travel and exploration. This $300 billion extraordinarily complex indus-try explores many aspects of new technol-ogy, however sometimes groups try to ex-ploit the technology that we already have; in this case, satellite navigation.

In order to travel to the moon, the space-craft can't just be pointed toward it and take off; navigation is required. Currently, space-craft communicate with tracking stations on Earth, such as NASA's Deep Space Net-work, to monitor their positions. But these large radio antenna facilities are expensive to run and there are a limited number dot-ted around the planet. If we're ever going to send spacecraft to the moon on a reg-ular basis, we'll need a more autonomous system. This is where satellite navigation comes in.

Vincenzo Capuano of the Swiss Federal In-stitute of Technology in Lausanne (EPFL), Switzerland and his colleagues have figured out a method for this. Spacecraft traveling to the moon could use signals from GPS satellites on the distant side of Earth to nav-igate. The signal is much weaker, but they've calculated that combining signals from US GPS satellites with those from Galileo, a Eu-ropean navigation system currently under

construction, would be enough for a lunar trip. The team is also developing more pow-erful GPS receivers to pick up this weaker signal, which could in turn have benefits on Earth. Standard smartphone receivers struggle to get a location inside buildings or other built-up areas, so new devices could mean better navigation.

The potential implication of this new tech-nology, as with most new ideas, has its pros and cons. With the introduction of the GPS system, money can be saved for the expedi-tion as a whole, as fewer people are needed on the ground to oversee the navigation as-pect. This is because the whole idea of this is that it is cheaper, easier and won't need as many people to man it. The downside to this is that, because it doesn't require as many staff, there won't be as many jobs. This can lead to layoffs and, in turn, unrest within the local community.

The money that this new technology will eventually save means that more space travel can take place in the future as it is now more sustainable. This saved money can also be invested into new technology which can forward the exploration of, not just the moon, but the further solar system.

Because of this, new developing technology expeditions to the moon and other areas of

space could become more frequent. This leads to an increased volume of lunar traf-fic, which could have negative consequenc-es for the environment because of all the pollution and solar debris that comes with it.

The technology used in the development of the sat-nav system can be forwarded to aid other areas of exploration too. Com-municating effectively with astronauts on the moon was an essential part of the Apollo missions. Without reliable radio contact, there would have been no live feed of Armstrong's first steps and, in all likelihood, no first steps at all. According to new research, the next footsteps on the lunar surface could be beamed back to Earth via the moon's very own network of communication satellites. The setup could double as a GPS for moonwalkers. Without it, interesting areas for exploration, such as the lunar poles, which may harbour water ice in permanently shadowed regions, will remain out of reach. The moon's far side is also currently inaccessible without a relay satellite, for it is the ultimate radio dead spot; the only place in our solar system that never faces Earth.

MChem Chemistry

August 2015

August 2015 21

Share prices, currencies and commodities, along with other forms of securities have taken a sizeable hit amid the breaking news that Chinese policymakers have made fur-ther moves and advances to devalue the currency further. Investors have therefore become increasingly worried due to the possibility of a stalling Chinese economy and an impending currency war. This is all occurring despite attempts by Beijing to restore confidence and make assurances to the contrary.

The cumulative drop in the exchange rate is the biggest since China set up its modern foreign exchange system in 1994 when it de-valued the yuan by 33%.The national lender attempted to restore confidence over the healthy position of the yuan. However, this is in contradiction to industrial production figures, export statistics and state-led infra-structure investment figures.

The performance of the US economy over the past five years has changed substantial-ly; it is becoming increasingly stronger and more resilient. This has led to the appreci-ating dollar. However, the Chinese economy has gradually become less competitive and weaker.

China's insistence on continuing to have a large impact on its exchange rate through artificially fixing it at a low level has come

at a price, through competitive devaluation. Its relationship with the rest of the world has been under scrutiny and is severely un-stable with regards to its foreign exchange. A currency war will only serve to exacerbate the problem. Although the winner during devaluation is usually the country that is devaluing, if all countries retaliate, then this will lead to severe imbalances in the terms of trade.

Currency devaluation may lower produc-tivity in the long-term, since imports of capital equipment and machinery become too expensive and this has been seen in Chinese infrastructural investment figures that are below forecast. If devaluation is not

used in conjunction with positive structural economic reforms, this will be to the detri-ment of productivity and output. There is no guarantee that the Chinese central bank has achieved the correct rate. The degree of the devaluation may be greater than or less than desired. This may have longer term im-plications with regards to inflation, capital outflows and foreign direct investment.

Initiating a currency war is likely to lead to greater protectionism. It's this isolationist attitude and retaliation that will continue to impede global growth as well as jeopard-ise international relations at a time when relations between east and west are already volatile.

BA Economics

August 201520

With news that Chinese exports are slow-ing, the Chinese authorities have devalued the yuan in an attempt to reflate export de-mand. With slowing global demand growth and the surging USD, which the yuan is pegged to, Chinese exports are becoming increasingly more uncompetitive. This has led the People's Bank of China (PBOC) to im-plement an artificially lower exchange rate, which has subsequently raised fresh fears of a currency war.

This direct, market-orientated approach by the central bank is known as devaluation. Devaluation occurs when the government deems it in the economy's interest to lower the exchange rate, restoring competitive-ness and creating a Current Account Bal-ance of Payments Surplus.

In the past few years, China's growth has been driven by export-led growth and debt-fuelled investment. Now, devaluation has

direct effects and consequences on both of these factors.

Theoretically, as China has experienced a slowdown in export led growth, the deval-uation effectively makes Chinese goods less expensive in foreign markets, which allows domestic goods to become more competi-tive. This has been demonstrated in differ-ent markets, with particular attention on the Indian textile market and Chinese car manufacturing. Similarly, foreign retailers note that Chinese consumer goods have be-come cheaper, in conjunction with services, products and raw materials. These benefits can also be seen in the tourism market, with international tourists now able to afford more for their money.

However, Chinese importers will notice that they are now facing relatively higher import prices from foreign competitors as they now have to pay more in foreign markets. As a natural consequence, to restore com-petitiveness and equilibrium in a globally competitive marketplace, other countries

will feel the need to reduce their currency to restore their competitiveness. This deval-uation and direct intervention by the PBOC has put enormous pressure and strain on other currencies as exports flatline and, in some cases, decline. As a result, exporters to China, such as the US and the UK will find it harder to sell to Chinese consumers in China. This is particularly the case with luxury items, such as Burberry, Louis Vuit-ton, Chanel and Givenchy as they become relatively more expensive. The race to the bottom accelerates and will soon spiral out of control.

The debt-fuelled investment that has fuelled China's unprecedented growth over the past few decades since the liberalisation of the Chinese economy in the mid-1970s has meant that the country now has a ma-jor debt issue. This debt has been amassed over many years and is owed to various oth-er nations. As a direct consequence of the devaluation, Chinese companies will have to pay more interest on debt in foreign cur-rencies, as the yuan can't stretch as far.

August 201522

Barclays has been handed the biggest UK bank fine in history, as six banks were or-dered to pay $6 billion (£3.9 billion) over fixing the forex (foreign exchange) markets. The Financial Conduct Authority (FCA) in-structed Barclays to pay £284.4 million as part of the British bank's £1.5 billion settle-ment with UK watchdogs and US regula-tors. RBS, JP Morgan, UBS, Citigroup and the Bank of America were also fined by the Fed-eral Reserve, while all but the Bank of Amer-ica were forced to plead guilty to criminal charges and were penalised by the US De-partment of Justice. The bankers involved attempted to manipulate vital benchmarks used by companies around the world as a peg for foreign exchange transactions.

Barclays has fired eight employees as part of its agreement with the New York De-partment of Financial Services (DFS). The bank has also agreed to settle a separate $115 million fine with the US Commodity Futures Trading Commission (CFTC) for manipulating the International Swaps and Derivatives Association fix (ISDAfix), a dollar benchmark used to price certain fi-nancial products. Benjamin Lawsky, head of the DFS, who revealed on Wednesday that

he will step down from the job after four years, said: 'Put simply, Barclays employees helped rig the foreign exchange market. They engaged in a brazen ‘heads I win, tails you lose’ scheme to rip off their clients'.

The four US regulators and the FCA levied $5.7 billion worth of fines for manipulating foreign exchange benchmarks. Addition-ally, UBS and Barclays were ordered to pay $263 million to the Department of Justice because their activity violated agreements signed when the banks were fined for Libor rigging.

Barclays, RBS, Citigroup and JP Morgan also took the step of pleading guilty to conspir-ing to fix prices. The banks were accused of failings that meant their traders were able to club together to rig forex markets as late as 2013; the year after the Libor scandal broke. Authorities said that they had iden-tified instances of market rigging occurring as early as 2007.

Despite these huge fines, which take com-bined penalties over foreign exchange ma-nipulation to $10 billion, shares in the banks surged owing to the relief of investors that

they were not larger. Barclays shares rose more than 3pc, adding £1.48 billion to its value. The bank had set aside more than £2 billion in relation to the probes. Similarly, RBS, which is 80pc owned by the taxpayer, saw a 1.78pc rise in its shares. The bank had set aside £704 million for potential fines, but its penalties on Wednesday totalled just £430 million. Out of the seven banks to have been penalised for currency rigging, Barclays' total fines are the highest.

In addition, the bank is still being pursued by the DFS over potential electronic rigging of currency benchmarks. The regulator is in-vestigating whether the bank's employees set up automated systems to manipulate markets. The DFS does not regulate the oth-er banks involved and thus fined only Bar-clays, but it is also investigating Deutsche Bank over potential automated rigging. Antony Jenkins, CEO of Barclays, said: 'The misconduct at the core of these investiga-tions is wholly incompatible with Barclays’ purpose and values and we deeply regret that it occurred'.

Barclays, unlike the other institutions to have been fined, had not settled with the FCA and CFTC in November, when HSBC was also penalised in a settlement that to-talled $4.3 billion. This meant it only quali-fied for a 20pc settlement discount with the watchdog, compared with the 30pc that the other banks received.

BA Accounting and Financial Management

23

The Libor scandal recently dominated our headlines with all eyes on Tom Hayes’ mis-conduct, a 35-year-old former UBS and Cit-igroup derivatives trader sentenced to 14 years for eight counts of 'conspiracy to de-fraud'.

Despite the substantial repercussions faced by Hayes, the recent scandal was nothing new to the banking industry, nor was it the first time that a hefty sentence has been im-posed in order to make an example of what seems to be a common crime.

Libor is the London Interbank Offered Rate that is responsible for around £200 trillion worth of financial deals. It is an interest rate benchmark, which sets the average price at which a bank is happy to lend to another, and highlights the level of interbank con-fidence in each other's financial health. In simple terms, this is calculated, first, by each bank submitting the rate they are will-ing to lend at. From here, the top and bot-tom quartiles are discarded and an average is calculated to arrive at the Libor rate.

Accusations of manipulation have aris-en due to the fact that the rates set by the banks are estimates rather than set trans-actions. Recent allegations maintain that traders, such as Hayes, from numerous dif-ferent banks, colluded to achieve the final Libor that fitted their requirements.

This practice has been acknowledged by many, with two brokers pleading guilty to fixing the Libor and Lloyds, UBS, I-Cap, J P Morgan, Credit Suisse and RBS all accepting large fines for their role in the fixing. The sheer number of large banks involved in the scandal strongly implies that this fixing ac-tivity was widely known and tolerated, with Hayes himself declaring that he had been taking part in an extensive activity. This, further with findings from an FSA report in 2006, which exemplified that traders were fixing the rates in exchange for favours, shows the frequent occurrence of this crime.

Despite this widespread activity, it seems to be Hayes himself that has bore most of the blame for the scandal. The moral di-lemma underlying Hayes’ trial is of great importance. Was it fair that he was made an extreme public example of, for something that most banks seemed to be engaging in? And why have similar criminals not been punished in the same manner?

Hayes personally argues, 'Not even Mother Teresa wouldn't manipulate Libor if she was setting it and trading it {sic}' and addition-ally maintains that his wrongdoings didn't seem to be an issue since Libor fixing was 'such an open secret'. For those who are quick to criticise Hayes of his crime, I urge you to stop and think how you would act in a similar situation. With everyone aware and accepting of what seems to be a nor-

mal practice, which makes your company millions of pounds, would you stop to think twice?

The fact remains, however, that he still committed a crime in the eyes of the FSA, regardless of how many others were engag-ing in the same type of activities. The judge of the trial, Mr Justice Cooke, admitted that Hayes’ sentence was to serve as an exam-ple to others in the banking industry not to mistreat the trust that the financial system relies on.

This leads us to take a closer look at the sentencing of bankers in similar situations. Nick Leeson received six and a half years after a series of disastrous financial bets, causing the collapse of the old established Barings bank. Similarly, Kweku Adoboli was sentenced to seven and a half years due to losing $2.3 billion for UBS through unau-thorised trading. This has caused his case to be dubbed the 'biggest fraud in British his-tory'. In comparison, Hayes has paid a huge price for misconducts that started before and continued after his working career. He has received a sentence that is more than that of most murderers and rapists. The severity of his sentencing signifies a show of strength from both the government and the FSA and how the world of finance is becoming heavily monitored and regulat-ed. The primary question here is whether banks will ever be so successful without widespread scandals such as this.

For now it is clear that the harsh conse-quences of Hayes’ actions have acted as a wakeup call for all in the financial industry. He hardly poses a threat to society such as that of an axe murder, yet his actions came at the expense and trust of the taxpayer. It shall be interesting to find out how much of his sentence Hayes is required to com-plete, as well as the consequences facing those of the same crime. It seems here that Hayes’ downfall was being too naïve about his actions and the information he recorded about his crimes.

BA Business Management

August 2015

25

versification. For this reason it is one of the most popular investment strategies world-wide. In addition, shares in Blue Planet are roughly 40p, allowing smaller investments to be made using discount online brokers.

However, as an investor, you are still inte-grated into a system designed by brokerage companies to use your money to maximise their profit and minimise their risk. In re-turn for the privilege of an account, you pay both trading fees, either individual or by financial quarter, alongside often losing a percentage of your investment profits. Is it not possible to cut out the middle men?

It is possible to trade directly using the fi-nancial markets, in real time, by spread betting or Contract for Difference (CFD) trading. A CFD is essentially the agreement between an investor and a broker that mir-rors the movement of some form of asset. A company will allow you to deposit a small amount of capital and place such orders on the stock market in real time. These invest-ments are commonly leveraged, meaning that you can essentially borrow money in order to maximise your exposure to a mar-ket. In return, the broker absorbs some of the profits made on the trade based on its 'spread'. Essentially, you begin the trade at a loss and the asset has to move as expect-ed for your investment to even break even.

As it might sound, spread betting and CFDs can be very high risk and, although many traders would disagree with my use of lan-guage, as with any form of gambling, it is in-credibly important to work out exactly how much you are prepared to lose.

In recent years, with the advent of online crowd-sourced funding, a new sector of investment has been created, which com-bines most of the benefits of spread betting

with most of the safety and stability of more mainstream investment strategies. Why put your money in an organisation that is going to invest in other companies, and charge you for the privilege, when you can simply lend to the company itself ?

In addition, many crowd funding websites will do a significant amount of due dili-gence on loan applicants in order to cate-gorise them into risk bands. Returns tend to average at around 6%, having deducted the typical 1% taken by the provider. You can de-posit as and when you have the money and vibrant internal markets for selling on loans means that retrieving your investment in a pinch is relatively simple. Many providers have orchestrated the loaning of hundreds of millions of pounds to small to medium sized businesses. It is also very simple to diversify your portfolio so that you only pro-vide very small amounts of each loan, across a variety of risk bands, minimising your ex-posure to bad debt. Furthermore, you can split your investments across a wide variety of platforms to further minimise risk.

In conclusion, the high fees and financial requirements of traditional forms of long term investment are not suitable for most students and instead they should focus on crowd funding when considering the first steps towards building the nest egg.

BA History and Philosophy

August 201524

Generation Y, roughly those born between 1980 and 2000, have experienced and are expected to continue experiencing, far harsher economic conditions than our par-ents in generation X, roughly 1960 to 1980. For example, the financial crash, and conse-quent reduction in the availability of cheap loans, has blocked many of us from having even the slightest hope of getting on the property ladder before our thirties. This in turn leaves us renting for longer, which in turn reduces our available income, and lessens our ability to save the required cap-ital. In short, our generation needs to get saving earlier than ever. But how?

With a bank of course! That's what they are for! Well, yes and no. For example, in my own case, the saver account that I thought was conveniently supplied by HSBC along-side my normal bank account turned out to pay 0.1% interest. Not fabulous. When I looked for alternate account types, the ad-vertised rates tend to be for 'Premier' or oth-er special accounts and have required levels of monthly or total capital investment that are not practical for students. The best I could find with my bank was 4%, which re-quired a monthly commitment, could not be accessed in an emergency, and only paid out at the end of the year.

The other main idea was to buy stocks and shares. However, this typically requires involvement with some form of broker-age firm or the investment arm of a bank. There are two main ways to do this. The first is as an individual investor. The second is as part of a collective investment fund. I will explore one example of each of these methods and attempt to demonstrate why neither are particularly suitable investment strategies for most students.

HSBC's Invest Direct program is fairly typ-ical in offering to allow you to 'build and manage your own portfolio of securities including UK and US shares, Government

bonds and exchange traded funds'. On first appearances, this appears ideal. A wide range of investment opportunities offered by a large, reputable, organisation. Howev-er, the major drawback is the £12.95 charge placed on every trade or transaction. These fees are present in some form in nearly all brokerage firms or banks as companies and firms attempt to skim the greatest possible profit from investors. When trading with small amounts of money, a relatively large trading fee will offset profit for a long time. In addition, the money that is invested is still liable to all the usual risks of stocks and shares investing. Although students tend to have an advantage over older investors, in that we tend to have more time to research companies, the level of risk in any opportu-nity is always difficult to be certain of.

Collective investment funds are reached in a similar way to individual stocks and shares, via some form of broker. Many of these or-ganisations are essentially companies in themselves and can be remarkably profita-ble. For example, those that invested in Blue Planet investments in 2010, via StockTrade (who were sold themselves to Alliance Trust Savings in May 2015), benefited from a 490.27% rise based on companies as well known as General Motors and as unknown as NXP Semiconductors NV. Obviously this is an outlying value, and not all funds do as well, however the greatest advantage of this method is that it combines the security of a larger fund with professionally guided di-

August 2015

26

The bookmaker Ladbrokes (LON:LAD) has recently confirmed a long expected merg-er with Gala Coral, in a deal set to create a £2.3 billion betting giant. The resulting company, to be named Ladbrokes Coral, will become the high street leader ahead of cur-rent number one, William Hill (LON:WMH). But with worrying falls in profits and tough challenges ahead, will the merger really be able to give Ladbrokes the lift it needs?

The deal comes shortly after Jim Mullen, current chief executive, was appointed with a brief to ‘shake up the business’. Mullen will become the boss of the merged com-pany, while Carl Leaver, CEO of Gala Coral, will be executive deputy chairman. The new company will operate under dual brands and will boast a combined revenue of £2.1 billion and underlying earnings of £392 mil-lion. It is expected that the deal will bring in savings of £65 million a year. To fund the deal, Ladbrokes will offer 93 million new shares to investors, representing 10% of the company. It has also recently cut its full-year dividend of 8.9 pence per share to 3p; a move long called for by many analysts. Un-der the new terms, the private equity own-ers of Gala Coral (including Apollo, Cerberus and Anchorage) will own 48.25% of the new company, with the remainder held by Lad-brokes' shareholders.

The merge will see Ladbrokes combine its 2,100 high street shops with Coral's 1,845, in a bid to save the company from falling further behind its competitors. Nowa-days, high street betting chains are most at risk from internet firms, such as Betfair (LON:BET) and 888 (LON:888), which are

subject to lower tax bills, can compete for business across the world and face few of the fixed costs associated with owning physical stores. As part of its strategic plan, Ladbrokes therefore plans on launching an aggressive online advertising campaign in order to increase its online presence. Cur-rently, Ladbrokes holds only 6% of the UK digital market share, with Coral slightly ahead with 8%. Combined, the two will ri-val market leaders William Hill and Bet365.

Ladbrokes will have to face a number of challenges before it can really focus on its improvement strategy. Most notably, con-cerns over its potential market dominance could result in mass closures of shops and losses of jobs. According to one analyst, as many as 600 shops may have to be sold to appease the Competition and Markets Au-thority (CMA). Any of the closed stores are likely to be of interest to rivals Paddy Power and Betfred and, if purchased, they would again heighten the competition faced by Ladbrokes. With regards to job cuts, Leaver has said, ‘I can't sit here and say that there will be no job losses’.

But how will this move affect the gambling industry as a whole? Aside from fuelling the explosion of online betting, it is also pre-dicted to spark similar deals amongst com-petitors. This comes after higher taxes and tough regulations are forcing companies to look for new ways to strengthen them-selves. Only a month ago, 888 agreed a £900 million takeover of rival Bwin.party (LON:B-WIN), with more consolidations expected in the near future.

Ladbrokes' first half results were released earlier this week and they were disappoint-ing to say the least. Profits had fallen 43% to £24.7 million and its digital business suffered losses of £12 million, compared to profits of £3 million the year before. Al-though the merger may help to improve these figures, Mullen said it may take until 2017 until any real results are seen.

The biggest setback currently facing Lad-brokes may be the recent concern coming from analysts. According to Ian Rennard-son, an analyst from the stockbroker Jef-feries, Coral's online arm is only succeeding because of its casino games; ‘we don't think it is equipped to help Ladbrokes grow its sportsbook’, he says. Jefferies has also stat-ed that Coral is ‘not a perfect fit’ for Lad-brokes and that the deal is ‘make or break’. Following these revelations, many investors have cashed in their shares and share prices plummeted down by 1.89p to 104.71p last week. Even more alarmingly, chief financial officer of Ladbrokes, Ian Bull, has just sold 121,615 of his shares at 105.88p each.

The future is certainly not looking good for Ladbrokes and, if the merger with Coral is to be successful, it will require a strategic plan that delivers both a successful online business as well as satisfactorily resolv-ing the competition issues. Only time will tell whether the odds will again be in Lad-brokes' favour.

BSc Geography

August 2015 27

The Internet giant has taken Wall Street by surprise: Google is rebranding their name to Alphabet. Google's search firm will be the largest asset of the new holding company, Alphabet.

Wall Street were in favour of Google's move, after seeing shares initially rise by 6%, leaving investors feeling happy. Going forward, Google's shares will be converted into Alphabet shares, however, they will re-main under GOOG and GOOGL on the stock ticker symbols. Google's new structure is reported to be similar to that of Berkshire Hathaway (BRK.A), one of Warren Buffett's holding companies. The restructure will create a clean and more accountable busi-ness; investors will receive greater insight into the running of the business, especially when the balance sheet is released in the 4th quarter. This will give investors a bet-ter understanding of how much Google is spending on its 'moonshot' projects. Moves such as these suggest that the company is looking to balance the interests of founders and employees with investors.

The balance sheet will show advertising revenue, search revenue and YouTube reve-nue and will help distinguish the cash cows from the dogs, as well as showing which ones to pursue and which to withdraw.

Larry Page, co-founder of Google, warned that Google was running the risk of becom-ing irrelevant and it would need to rethink its strategy in order to avoid falling behind the speed at which technology is develop-ing. There have been concerns that Goog-le was not transparent enough for today's technology industry, with too many port-folios developing in the company. This was taking the main focus away from the core search engine. Google's strategy was be-coming too complex, with no clear direction and the moonshot projects were becoming too far afield from the main search engine, making it difficult to manage and control.

Google will redirect its focus back to the main Internet products and the portfolios will be obtained by the parent company, Al-phabet. The restructuring strategy has two arms; one, broadband (Google), and anoth-er, investing (Alphabet). This has slimmed down Google, refocusing their core objec-tive on broadband, while Alphabet has taken over the Life Sciences and Calico divi-sions of Google's moonshot projects.

While Page will become the CEO of Alpha-bet, Sergey Brin, Google's other original

co-founder, will fill the role of president. This restructure allows Page and Brin to continue pursuing their aspirations of cre-ating new products and opening up more opportunities for the business. Meanwhile, Sundar Pichai, who has experience of oper-ating Google's core businesses, has recently been announced as the new CEO of Google. Assigning the new CEOs to different port-folios means that more attention can be al-located to each independent profile, giving the business more room to grow and inno-vate without distractions.

This strategy has shown that Google is des-perate not to become Microsoft. It refocus-es Google's main objective to concentrate on advertising, which is different from the strategy of Microsoft. But it may not be that simple; as Microsoft discovered with its Windows business, focusing on one core search firm is risky. When asked about the future of Google, Larry Page said, 'Google is not a conventional company. We do not in-tend to be one', suggesting that they intend to continue to evolve. Google's next obstacle is to prove that its non-core business is prof-itable in the long term and that is an effec-tive use of both time and money.

BA Business Management

August 2015

ReviewUSIS

EditorRachel Quartly

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