Summary

• The WHO is currently exploring the possibility that China’s wildlife farms may be at the origin of the COVID-19 pandemic. Others have more specifically suggested that the country’s lucrative fur industry is a likely source.
• Mink, the animals most widely-bred for their fur, are especially susceptible to contracting the disease and are the only species known to infect humans. Coronavirus cases have been reported across hundreds of European mink farms.
• The European and North American fur industries have been on the decline for years, with a number of major companies going bust. The mass culling of mink to stave off the spread of the virus in Europe and the resulting bans on fur production have hit the industry hard.
• Despite the risks posed by mink farming, China has done little to regulate its fur industry, which is the world’s largest. In fact, Chinese producers are making the most of the global fall in production and rising prices.
• Concerted efforts by lobbyists to rebrand the company as sustainable, and the recent announcement of a new mink vaccine may be sufficient to rescue Europe’s fur trade unless action is taken to shut it down for good.
• The risk of recurring pandemics in the near future remains high so long as toxic industries such as factory farming and the fur trade continue to exist.

Introduction

A WHO delegation to Wuhan has recently announced that Wuhan’s infamous seafood and live animal market, long presumed to have been the source of the COVID-19 pandemic, may merely have served as an early super-spreader event. One prominent theory the team is investigating is whether the virus in fact originated in China’s extensive network of wildlife farms before being carried to the market.

Wildlife farming involves the capture and breeding of wild animals for a broad variety of uses, including food, fur, medicine, experiments, the pet trade and entertainment. A 2017 report by the Chinese Academy of Engineering valued the industry at 520bn yuan, or £57bn.

It goes without saying that the conditions in the farms are hellish, with animals confined to tiny cages and deprived of all needs bar the minimum required to keep them alive. This industrial, 21st century effort to domesticate wild animals is seen as more cost-efficient and lucrative than trapping them in the wild, and has been subsidised by the Chinese government and promoted as a way to alleviate rural poverty.

If the farms were indeed the source of the virus, this would make COVID-19 just the latest disease suspected to have made the leap to humans through intensive animal farming.

Animal exploitation & pandemics: a brief history

Factory farming is one of the biggest risk factors for epidemics and pandemics. Reasons for this include overcrowded, stressed, poorly-nourished and selectively-bred animals with low genetic diversity; unhygienic conditions; the overuse of antibiotics; and the proximity of this population to humans. The risk of a virus successfully infecting a new species is increased with the degree of contact; therefore, animal agriculture heightens this risk.

Leading origin theories for some of the 20th century’s largest pandemics point the finger at animal farming.

The Spanish Flu, possibly the most deadly pandemic in modern history, has its origins in birds, and one leading hypothesis is that it emerged from North American poultry farms. Almost all cases of flu pandemics among humans – including some of the deadliest of the twentieth century – have been caused by descendants of the Spanish Flu virus, having mutated in pigs and poultry to produce new strains along the way. One form infected captive pig populations and later recombined with both human and avian flu to produce a new type of swine flu, which resulted in another pandemic in 2009.

SARS, a coronavirus responsible for a 2002-4 epidemic mainly in China, is believed to have originated in palm civets (also known as civet cats), which have been bred for meat and the production of an expensive coffee known as ‘Kopi Luwak’. The production of this coffee involves such cruelty that even its first importer to the West has since called for the end of the industry, yet it is still being sold to wealthy tourists in destinations such as Bali (in the UK, Harrods sells it for £500 per 250g bag). An alternative hypothesis, however, suggests that the roots of SARS lie in the Chinese fur industry.

MERS is a relatively new coronavirus which is far deadlier than COVID-19, but less transmissible, with cases having been mostly localised to Saudi Arabia. While the virus is still not fully understood, it is known to infect humans via camels, which are bred and farmed on the Arabian peninsula for milk, meat, leather and racing.

Meanwhile, the emergence of COVID-19 in China came fresh on the back of an epidemic of African Swine Fever, which resulted in the culling of over half of the country’s 440-odd million pigs. Although this particular virus does not affect people, a senior Russian epidemiologist has said that mutations which could lead to human infection are possible.

How new viruses emerge

New viruses tend to evolve in two ways:

Mutation: As a virus replicates, mutations can occur along the way. These can alter its characteristics, such as the severity of an infection. An accumulation of mutations can enable a virus to reinfect a host (for example a pig or human) since their antibodies fail to recognise its newest incarnation. These changes can also undermine vaccination programmes.

Recombination: This is when a host is simultaneously infected with two different viruses of the same family, leading to the production of unique viral offspring. So it may well be possible, for example, for a virus to emerge with the transmissibility of coronavirus and the lethality of MERS, if a host is infected with these viruses at the same time. Recombination can happen across species, with the risk being higher the greater the degree of contact.

Captive populations are ideal sites for recombination. A hypothesis under active investigation is that the virus that has caused the COVID-19 pandemic was the result of recombination between coronaviruses circulating among bats and pangolins, with the pangolin strain contributing the elements required to penetrate human cells. The 2009 Swine Flu pandemic is thought to have resulted from a complex recombination in pigs between two pig strains, an avian strain and a human strain. Pigs’ susceptibility to these different types of flu has led to them being called ‘mixing vessels’. However, since they are animals which are intensively farmed in appalling conditions the world over, the odds of them contracting multiple viruses simultaneously are high.

Mutation and recombination can both produce viral strains that have the ability to infect new species, such as that which gave rise to COVID-19.

China’s wildlife trade

Despite having encouraged the growth of wildlife farming in recent years, within the first few months of the pandemic, the Chinese government shut down almost 20,000 sites rearing animals for food. It issued a list of animals which from then on could be legally consumed. Off the list are bamboo rats, porcupines, peacocks and dogs. The government said that dogs could now only be considered pets, in accordance with the ‘progress of human civilisation’ and changing cultural values in China.

However, many animals can still be reared for consumption, including tortoises, ostriches, deer, crocodiles, salamanders, and numerous species that are extensively farmed in the UK and Europe. Meanwhile, the changes failed to curtail any other form of wildlife farming. The condition of the 10,000-odd bears kept on Chinese bear bile farms is likely to deteriorate since the government recommended bear bile as a treatment for coronavirus. Likewise, monkeys can continue to be captured and bred for medical research labs at home and abroad, with the COVID-19 vaccine quest increasing demand. China, along with Mauritius, is a leading exporter of monkeys for vivisection, supplying 80% of the tens of thousands of monkeys imported to the US prior to the pandemic.

Perhaps most noticeably, however, the changes do nothing to address the most lucrative form of wildlife farming: the fur trade. On the contrary, by classing mink, foxes and racoon dogs as ‘special livestock’, the changes only seal their fate.

COVID-19 & the Chinese fur trade

China is the world’s leading producer of fur, rearing over 40 million animals for their pelts in 2019. It is a sector worth 389 billion yuan (£43 billion) a year – that’s 75% of all the country’s wildlife farming. The number of fur farms in the country mushroomed in the 2000s, with European companies facilitating this by supplying mink for breeding and even running joint venture farms in China. And far from being shut down, the fur trade in China is now experiencing a pandemic-induced boom.

The French environmentalist publication, Reporterre, among others, suggests that the pandemic’s origins lie not just in China’s wildlife farms, but more precisely in its fur industry. Its investigation found:

• The three main species bred for fur in China (mink, foxes and raccoon dogs), are all highly susceptible to coronavirus.
• In the top mink farming region of Shangdong, the production of mink fur dropped dramatically by 55% in 2019 (from nearly 15 million mink pelts in 2018 to 6.5 million the following year). After being pressed on this, trade representatives claimed this was merely the result of market stagnation and overproduction.
• Mink have been inexplicably left out of studies on the origins of COVID-19.
• The fur industry may not only be the origin of COVID-19, but the source of the 2003 SARS outbreak too, as ‘China manoeuvred to incriminate the civet, a species of marginal economic importance’ and whose numbers are dwarfed by that of animals bred for their fur, ‘in order to divert attention from and protect the fur industry’.

It has been established that mink are particularly susceptible to coronavirus and transmit it easily among each other. In their recent report, the WHO names the animals as possible ‘intermediate hosts’ which first allowed the virus to spillover to humans; the other contenders are rabbits and raccoon dogs (both widely bred for their fur), pangolins, which are used in traditional medicine, and cats. It recommends that surveys be carried out on animals ‘bred for fur such as mink and racoon dogs’, since there has been a ‘massive’ undersampling of potential hosts. The report was followed by further criticism of the Chinese government’s obstruction and the the lack of access to full data.

Since mink are the only animals so far confirmed to be capable of transmitting the virus to humans, the Chinese government’s failure to thoroughly investigate and rein in its fur trade betrays its eagerness to protect its multi-billion pound industry.

While COVID-19’s full origin story remains inconclusive, scientists have nevertheless highlighted the risks of people being infected by captive or runaway mink, in particular, the threats that mink variants could pose to vaccine efforts. If there were strong reasons for shutting down parts of China’s wildlife industry, there are overwhelming reasons to shut down its fur farms.

COVID-19 & the European fur trade

In Europe, mink’s susceptibility to coronavirus has devastated the fur industry, with infections reported in over 400 of the continent’s 5,000 mink farms, as well as a number of significant mutations. Governments have responded with mass culls, including the slaughter of Denmark and the Netherlands’ entire mink populations. As the world’s top producer of mink pelts, this is ultimately expected to be the death knell of the Danish industry. In fact Kopenhagen Furs, which is the biggest fur auctioneer in the world and reportedly accounts for 40% of Denmark’s production, announced its closure within the next 2-3 years

Yet the industry was on the decline in Europe even before COVID-19 reared its head. Despite growth in demand for fur in the early 2010s, primarily driven by Chinese buyers, the expansion of Chinese mink farming and fall in fur prices had a major impact on European producers. By 2019, mink fur production in Europe and North America dropped 25% year-on-year, with some banks being unwilling to continue financing ailing businesses. In Poland, a major fur-producing country, a third of the country’s farms closed down between 2015 and 2020.

Since the start of the pandemic, public health concerns associated with mink farming have precipitated bans and suspensions in production across the continent. Europe’s fur industry is now on its way out, and it’s time to put the boot in once and for all.

New bans on fur production

In June 2020, the Netherlands announced all mink farms must close permanently by March 2021, bringing forward its phase-out plans by two years. Meanwhile Ireland is expected to ban mink farming by the end of the year, with the 120,000 mink on Ireland’s three remaining fur farms ordered to be culled.

Poland, the world’s third biggest fur producer, is in the process of passing a ban – although rabbits will be excluded from its scope. Similarly, Hungary announced a ban due to ‘animal welfare concerns’ and public health risks, but inexplicably excludes chinchillas.

In September, France declared an end to mink farming, yet is dragging its heels and wants to postpone the closure of its four remaining farms until 2025.

Denmark, Sweden, Belgium and Italy have all made more lacklustre announcements: mink farming will be suspended in these countries until 2022.

As we can see, the changes don’t spare all fur-bearing animals, and while the Chinese fur trade is horrific, many exposés by undercover activists shed light on equally harrowing scenes in European fur farms. These include cages littered with dead or dying animals, starvation, and cannibalism. Filthy conditions, sick and injured animals, cages barely large enough to move in, and animals driven to madness, aggression and self-mutilation are the norm.

Despite having banned fur production in the UK 20 years ago, rabbits are still farmed in the country, with fur being passed off as a mere ‘by-product’ of meat. Campaigners are currently fighting against one franchiser’s proposals to build more such farms in the UK.

Industry survival strategies: mink vaccines & greenwashing

As it clambers to maintain a foothold, the fight against the European fur industry is far from over. And its salvation may come in the form of a vaccine.

The Russian veterinary and agricultural agency Rosselkhoznadzor has just announced the creation of a successful vaccine for mink, foxes and other animals, known as Carnivak-Cov. Mass production expected to begin this month. Breeding facilities in various countries, including prominent fur producers such as Greece, were said to have ‘expressed interest’.

Meanwhile, the US firm Zoetis, which calls itself as the ‘largest global animal health company’, is still working on its own a vaccine for animals including mink. Medgene Labs, a much smaller US company, has also been developing a vaccine. If the mink coronavirus vaccines prove viable and affordable, they may be enough to rescue the decaying industry from its death throes.

Mink are already vaccinated against many diseases. In the US, fur farmers are said to be precariously dependant on just one vaccine supplier, United Vaccines, a US company which specialises in producing vaccines for the global fur trade.

The concerted efforts of fur industry representatives such as the International Fur Federation, Fur Europe and British Fur Trade Association over the years to promote fur as ethical, natural and sustainable are also likely to present further obstacles to change.

And while mass mink culls have taken place in Europe, ‘little action’ has been taken in China against its mink farms. In fact, the culls have caused the global price of fur to shoot up by a third, which has been fully taken advantage of by Chinese producers. The year’s events will likely leave China the world’s biggest producer of mink pelts, overtaking Denmark’s plummeting output. This only adds further credence to the theory that the state has been protecting the country’s fur trade and shielding it from the scrutiny of COVID-19 investigators.

The COVID-19 vaccines: why we can’t technofix our way out of a pandemic

The various human coronavirus vaccines now being used are likely to shield us from the worst of the disease. However, neither the human nor animal vaccines should signal a return to business as usual.

For one, the virus could evolve as it seeks to ‘get round’ the inoculation drive, meaning there is likely to be a sustained effort to develop vaccines that are effective against new strains for years to come.

The risks of mutation and recombination as the virus continues to infect captive populations, whether intensively-reared animals such as those held in the UK’s expanding network of megafarms, or humans kept in institutions such as prisons or detention centres, remain high. Various strains of COVID-19, as with other coronaviruses, are highly unlikely to just disappear. So long as there are vast pools of captive animals, viruses will simply continue to evolve – even if the original strain becomes less deadly.

This risk of mutation or recombination is particularly high as long as fur farms continue to operate, given mink’s susceptibility to the disease. Attempts to develop a vaccine for farmed mink are aimed at propping up an industry that may well be the origin of the pandemic. Capitalism has always seen animals as commodities and intensive farming is merely an extension of this mentality. As long as resources are injected into the survival of this system, our species is being committed to successive plagues, and we have no control over what form they will take, nor how deadly they will be.

Today, our species may be considered to be at the height of medical and technical skill, but we can’t break the current bind with more vaccinations, antibiotics and steroids – for either humans or livestock. Despite the staggering scientific advances of the past 200 years, the conditions that make us vulnerable to pandemics are arguably more present than ever: dramatic changes to ecosystems, and the massive growth in industrial animal farming.

By upsetting the balance, encroachment into wild spaces increases the risk of viruses and other pathogens infecting new animal species, while the growth in intensive animal agriculture provides the perfect environment for their leap to humans. The frequency of ‘spillover events’ in which pathogens jump from animals to humans, has doubled or even trebled in the past 40 years, and this has been linked directly with the conversion of forested areas to livestock production.

From ‘virus factories’ to a sustainable future

Following Denmark’s national mink cull, stories emerged of the animals resurfacing from their graves and contaminating the local groundwater. A striking metaphor perhaps for a toxic industry that needs to be laid to rest once and for all.

Many former wildlife farms in China are now being subsidised for conversion to other uses, such as mushroom-farming and brewing. Mushrooms are popping up, quite literally, in former cages where once sad and terrified wild animals were raised to be eaten. This must happen in fur farms too.

The European fur industry is slowly dying, it just needs a push. Recognising intensive animal farming as a major source of pandemics, particularly the vulnerability of mink farms to COVID-19, is the first step. Humane Society International is pushing a #FurFreeBritain campaign to ban the sale of fur countrywide, and there’s no better time to back this demand. But ending the industry in one part of the world will not safeguard us from future coronaviruses. It must be wiped out everywhere, along with all other forms of animal exploitation.

See here for part two of our series on the fur trade, which explores the marketing strategies used by the industry to maintain consumer demand, and maps the companies and lobbyists sustaining the fur trade in Britain and abroad.

Illustrations by Lanternfish.

The post Animal farming & COVID-19: from China’s wildlife trade to the European fur industry appeared first on Corporate Watch.

As part of this, we have profiled MSC, one of the world’s biggest shipping companies. You can read our profile below. Click here to read the full ENCO report.

ENCO will be holding a webinar on the report on Wednesday 27 January, 4-5.30 pm. To attend, please register by email: contact(at)corpwatchers(dot)eu

MSC and container shipping: spilling, polluting and exploiting

The Mediterranean Shipping Company (MSC) is one of the world’s biggest shipping companies. Its massive vessels transport containers full of goods across the globe, spewing out pollution as they go and making a fortune for its owners, the billionaire Aponte family. The expansion of ports and ‘mega-corridors’ are good news for them: more ports and more trade means more shipping. They also make money directly from their investments in the ports themselves. Following on from Re:Common’s report on the ‘New Silk Road in Italy’, we now look at MSC in detail, looking at the company’s operations, the people behind it and its devastating impact.

MSC is most famous for its cruise ships. Its MSC Cruises division carries passengers – mostly Europeans – around the globe in its huge ships offering cinemas, Cirque du Soleil shows, water parks, mini-Legolands, and celebrity chefs and hairdressers. Football fans may also know MSC as a sponsor of the Sorrento, Napoli Chelsea or Paris Saint-Germain teams. Cruise ships are renowned for producing enormous quantities of pollution, in the form of NOx, sulphur dioxide, particulates, sewage and of course huge quantities of carbon dioxide. It has been estimated that one cruise ship emits as many air pollutants as five million cars going the same distance.

However, the bulk of MSC’s money comes from the less glamorous world of container shipping. Global capitalism depends on shipping. Around 80% of world trade is carried on the seas and oceans. The majority goes by container ship. Food, car parts, stuff from Amazon – if you’re buying something that was made overseas, there’s a good chance it was brought on a container ship. And what ships. MSC’s biggest ship, the Gulsun, one of the largest in the world, is 400 meters long with 232,618 gross tonnage.

The environmental impact of these vessels is colossal. NGO Transport & Environment reckons MSC is Europe’s eighth biggest corporate polluter with its ships emitting 11m tonnes of C02. MSC and Ryanair are the only companies in the top ten that aren’t running coal-fired power plants. Statistics of environmental impact from the sector are stunning. Shipping accounts for around 3% of global CO2 emissions, and its contribution is expected to rise significantly. Of total global air emissions, shipping accounts for 18 to 30 percent of the nitrogen oxide and 9% of the sulphur oxides.

MSC ships have also been involved in specific environmental disasters. In 2010, for example, the MSC Chitra collided with another ship off the coast of Mumbai and spilled 700 tonnes of oil into the sea. Mangroves and marine life were “completely wiped out” in nearby areas, according to the Times of India. MSC then fought attempts to make it pay compensation in court.

Image of the Chitra Shipping Disaster from https://shipwrecklog.com

Containers can also fall from the ships. In the last two years, MSC ships have lost 270 containers in the North Sea and 20 containers off the coast of South Africa. After the North Sea spill the Dutch Coast Guard issued a warning that three containers contained hazardous, potentially explosive materials.

The effect of the Cruise division is also severe. In 2019, the MSC Opera collided with a small tourist boat and damaged the quayside of Venice’s Guidecca Canal. Residents had long been calling for such ships to be banned due to the damage and flooding they were causing and protests after the MSC crash led to the government banning them from the centre of the city.

Meanwhile, the COVID pandemic has highlighted treatment of workers, with management insisting some workers stay on board ships without pay.

The shipping cartel

Shipping is dominated by a few very big companies. The top 10 control 84% of the market. Not only that, they have joined forces through three mega alliances. MSC is the second biggest container shipping company after the Danish company Maersk. Together, they have formed the 2M alliance, sharing ships and space on each other’s vessels, and working together to ensure they are not sailing more ships that are needed. The also cooperate with Korea’s Hyundai Merchant Marine Co and Israel’s ZIM Integrated Shipping Services on certain routes.

This last point is crucial with the industry hit by the Covid-19 pandemic. After the financial crash of 2008, the major shipping companies competed with each other by investing in larger ships and dropping prices to attract business. But trade didn’t grow as they had hoped and the companies found they had too many ships and too little cargo. South Korea’s Hanjin shipping went bust as a result.

That’s where the alliances come in – by agreeing to collaboratively manage the amount of space they offer, the companies can keep prices, and therefore profits, higher. Market analysts reckon this should enable most of them to survive the contraction in world trade caused by covid.

The Apontes

Image from Thomas Sampson/AFP via Getty Images

So who is behind MSC? Step forward ‘Captain’ Gianluigi Aponte. Born in Sant’Agnello near Naples, Italy, but based in Geneva, Switzerland, he started MSC in 1970 with one small ship. Right place, right time: globalisation got going and suddenly cargo ships were in high demand.

Gianluigi Aponte was born from a family that – already at the beginning of the last century – operated small boats for the transport between Naples Calata Porto, Massa and Sorrento. Before the Second World War, his parents moved to Somalia, where they ran a hotel. Following the death of his father in Mogadishu, Gianluigi returned to Sorrento with his mother Gina Gatti. After completing the nautical institute, he meets Rafaela Denat, daughter of the Swiss banker Dominique Denat, and moves to Geneva. Here, after a brief experience in an investment bank, he founded his first maritime transport company together with his father-in-law, who became a business partner. The business started covering the transport route connecting Italy with Somalia. MSC’s first freight ship was called Patricia, after Rafaela’s mother, while the second was called Rafaela. It was 1970, and in a few years Mediterranean Shipping expanded its fleet and routes, in a few decades becoming the MSC giant.

MSC ports and terminals worldwide. From: https://www.tilgroup.com/terminals

Gianlugi and wife Rafaela are reckoned to be worth $8.7 billion, putting him at number 230 on Forbes’ billionaire list. Now 80, Gianluigi stopped being CEO of the company in 2014 and now oversees it as its Chairman.

Keeping it in the family, his son Diego Aponte is now President. Daughter Alexa is the Chief Financial Officer, while her husband is Pierfrancesco Vago, the Executive Chairman of MSC Cruises. The MSC Zoe, which spilt chemicals into the north sea last year, was named after their daughter, as is the voice-activated digital personal assistant developed by the company.

MSC businesses: shipping, ports, lorries, cruises, ferries… and an island

Container shipping makes up the bulk of MSC and the Aponte’s business activity. Here are some stats: it is the second largest container cargo business worldwide, with operations in 155 countries, employing 47,000 staff across 510 vessels. MSC boasts it has shipped “almost every conceivable type of cargo to destinations all around the globe”. Its customer list is likely to be long and to include pretty much every major company that makes something and ships in by sea.

A few we have found include: fruit firms Carlo Porro and Agricola Famosa, plus Exporters and growers of Australian citrus fruits; Sucafina, a coffee company in partnership with Nestle and accused of some pretty dubious labour practices, and lots of chemical and petrochemical manufacturers.

As well as shipping goods, the Apontes also run and own terminals at ports to process the containers on and off ships, through its Terminal Investment Ltd business, which the Apontes co-own with Singapore’s sovereign wealth fund and investment firm Global Infrastructure Partners. They are spreading across the world, with 39 terminals in 26 countries.

Terminal Investment Ltd global footprint

Then, once the goods have been unloaded, MSC’s Medlog Transport and Logistics business transports them from ports to warehouses or wherever else they need to be sent. The division now works in 70 countries.

MSC is also moving into islands. The company has bought Ocean Cay, a small island in the Bahamas and is making it into a luxury tourist resort. It holds a 100 years concession for the island, which will provide a docking point for MSC cruises along their Caribbean routes. In a nice piece of greenwashing, MSC has established a marine protection park at the island for coral and marine environment protection. Presumably the potential damage that may be caused by immense cruise boats docking on the island will not be part of the display.

Where’s the money?

Switzerland. Or, to put it another way, we don’t know. Because MSC is privately-owned by the Apontes and Swiss-registered it does not have to publish financial results that give a picture of its overall affairs. Records in the UK company register for their UK operations show Gianluigi and Rafaela are the ultimate owners of the MSC group through the Swiss-registered holding company MSC Mediterranean Shipping Company Holding SA. However we do not know exactly how the money travels through the MSC group as accounts are not published.

The estimate used by financial analysts for MSC’s overall annual revenue is $28 billion but we do not have any details for how much profit it makes from this. Of course, these numbers were posted before Covid-19 hit. But while MSC will take a serious hit from the pandemic, they are not expected to be finished by it. And if smaller rivals go down, MSC may be able to take their old business.

MSC Cruises is the only division that publishes financial results, perhaps because it is the only part of the business that raises financing through public debt markets that require more financial disclosure. These show it is a relatively small part of the overall group, but a rapidly growing one, at least pre-COVID. The cruise business’ revenue increased from €1.9bn in 2016 to €3.2bn in 2019. In 2019 MSC Cruises made a profit of €405m from this. Revenues and profits will have been hit by COVID but MSC has started operating cruises again and appears to be hoping to go back to something like normal business in the next year.

The bigger MSC shipping division does not appear to have borrowed through financial exchanges. The big question then is who is providing the financing for such a capital intensive business. MSC is unlikely to be funding its infrastructure simply through its profits or from money invested by the Apontes. Banks, possibly Swiss banks, would be a good bet, but thanks to the secrecy provided by Swiss regulations, we do not know.

The supply chain

Who else gains from the MSC’s work? Its ships are made by the world’s major shipbuilders, including the Chantiers de L’Atlantique shipyard in Saint-Nazaire, France, the Fincantieri shipyard in Monfalcone, Italy and South Korean giants Samsung Heavy Industries and Daewoo.

MSC lists over 570 ships on its website and just over half of these are owned by MSC itself. The others are owned by a multitude of different shipping companies from over 25 countries, with Germany the biggest single provider. Over 99 of MSC’s 570 Cargo ships are owned by 27 different German companies. Of these, 12 are owned by NSB Group, a large ship management company, which owns more of MSC’s cargo ships than any other company. Ironically NSB group boasts sustainability as being at the top of their agenda, despite the catastrophic consequences the industry has on the planet.

Based in Athens, Contships management is another leading provider of MSC ships, owning nine of MSC’s cargo ships in total. Curiously, leading arms company BAE Systems also owns an MSC ship, through its BAE Systems South Alabama subsidiary. The ship operates under the name “MSC Alabama”.

The insurance industry also makes good money from MSC and other shipping companies. We have found British companies insure 80% of MSC’s cargo ships. These companies include Britannia Steamship Insurance, London P&I, North of England P&I, Shipowners Mutual P&I, UK P&I and West of England P&I. The rest of the fleets are insured by Norwegian & Swedish insurance companies: Skuld P&I (Norway), Gard P&I (Norway) and Swedish Club.

All ships fly the flag of the country they are registered to. Although the majority of MSC’s cargo ships are owned by companies registered in Europe, many fly the flag of Liberia or Panama. This is part of the concept called the “flag of convenience”, when a ship flies the flag of a country other than the country of ownership. This allows companies to cut registration costs and exploit lenient regulations in relation to labour laws, tax and more. Due to this, more ships are registered in Panama than anywhere else in the world. The MSC Zoe for example, which despite being owned and run by the Swiss-based company MSC, it’s registered in Panama and flies their flag.

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Waterstones staff are demanding to be paid the living wage. Management say the company can’t afford it but an investigation by Corporate Watch has found:

• Waterstones’ new owner – US hedge fund Elliot Advisors – has set up an offshore financing scheme that could see it make £17 million a year from the bookseller.

• The highest paid director’s £1.6 million pay packet is over 100 times more than staff on the minimum wage receive.

• Elliott Advisors is a notorious ‘vulture fund’, chasing the debts of crisis-hit countries like Argentina. It is run by Paul Singer, a US billionaire and major conservative donor who has funded Donald Trump, George W Bush and the Koch brothers.

In short, Waterstones sums up capitalism in Britain today: billionaire owners and millionaire executives living off a workforce on poverty wages.

We put all the points below to Waterstones. It did not dispute the figures but a spokesperson said: “we pay our booksellers as much as it is prudent to do, with a particular commitment to a progressive pay scale” (you can read the full statement below).

How much would it cost?

In response to a petition from staff, backed by prominent authors, Waterstones Managing Director James Daunt said the company was “simply not profitable enough to wave the magic wand and shower gold all around”. He explained:

“If you raise the bottom level really significantly, then everybody all the way up the company has to go up, and then we go bust, which isn’t very helpful”.

To assess this claim, let’s start by estimating roughly how much paying the living wage would cost Waterstones.

The latest Waterstones accounts show the company paid its 3,000 employees a total of £56 million in 2018. Let’s accept Daunt’s point that pay scales should rise proportionally all the way up the company and say they’d go up by 10% across the board (the difference between minimum wage of £8.21 an hour and the living wage of £9).

That means the company would pay staff around £6 million a year more. Let’s be generous to the company and bump that up to £7 million, given its London staff would get the London Living Wage of £10.55.

Waterstones made £16 million profit after tax in 2018, down from £18 million in 2017. Take that £7 million off, and those profit figures remain healthy at £9 million and £11 million respectively.

It’s true the company faced bankruptcy a few years ago and Amazon isn’t going away anytime soon. So Waterstones’ management want to keep a healthy profit margin while times are good. But look closer at those profits and they would be even higher were it not for annual payouts being made to the group’s owners.

Showering the gold

Last year, Waterstones was bought by US-based hedge fund Elliott Advisors from the previous owner, Russian billionaire Alexander Mamut (who has retained a minority stake in the company).

No accounts have since been published but company records show the kind of sums that Elliott plans to extract from the company.

A note at the end of the latest available Waterstones accounts filed with Companies House says the hedge fund is investing in Waterstones by lending it £60 million. It is presumably also putting money into the company’s shares (or ‘equity’ in the jargon) but details of this are yet to be published.

Elliott is lending that money to Waterstones at an interest rate of around 7%. A simple calculation estimates Waterstones will have to pay out around £4 million a year in interest as a result.

Look at previous years and Mamut had also put money into Waterstones through loans at roughly the same interest rate. In 2018, Waterstones paid £4 million out as interest on loans to companies also controlled by Mamut, with £5 million in 2017 and £6 million in each of the two years before that.

Without such big payouts to its owners, Waterstones’ profits would have looked even healthier: £20 million last year and £23 million in 2017. This would have given the company a lot more financial wiggle room to increase staff pay.

Alright at the top

Where else could savings be made to enable to afford the living wage staff demand?

Waterstones’ accounts show two directors between them made £2 million in 2018. The highest paid director – presumably Daunt – alone made £1.6 million from the company last year, up £170,000 from the previous year. This is over 100 times more than a full-time Waterstones worker on the minimum wage will bring home. One director – again, presumably Daunt – was also paid a bonus of £1.2 million (read more on this from author Chris McCrudden here).

Given Daunt has said those demanding living wage are “preach[ing] to the converted”, would he or his colleague at the top be able to survive on a meagre £600,000 a year from now on?

If so, let’s do a quick back of the envelope calculation: throw in a million a year from the boss’ salary, accept slightly lower profits, stop paying out £4 million a year to owners and £7 million a year doesn’t seem so unaffordable.

James Daunt, waterstones.com

A quick caveat before we move on: at least some of the interest paid to the Mamut companies appears to have been used to pay off loans those companies were themselves taking from banks or other third parties. So not all of that will have been profits enjoyed by Mamut.

It’s hard to know the full details of where the money went under Mamut because he ultimately owned Waterstones through a company registered in the British Virgin Islands, as the last page of accounts downloadable here explain. The BVI is a so-called ‘secrecy jurisdiction’ as well as a tax haven, which does not require accounts to be disclosed. If you work for Waterstones and want us to look into this in more detail, get in touch.

But Waterstones’ new owners are aiming to pocket all of the £4million set to be paid out to them – and, as we will see below, much more.

The magic wand of finance

Why is Elliott investing its money as loans? Why saddle your own company with annual interest payments?

Until the next set of accounts come out we won’t know for sure what’s going on. But the latest we have say Elliott Advisors have set up two shell companies to manage their investment in Waterstones – the catchily-titled Book Retail Bidco Ltd and Book Retail Investco Ltd, which is based in Jersey.

We’ve found Book Retail Bidco is also racking up debt – but this time through the International Stock Exchange in the Channel Islands.

A listing there shows Book Retail Bidco Ltd has issued £129 million in bonds with a whopping 13% interest rate. This looks a lot like the quoted Eurobond dodge we’ve covered before: these bonds will be bought by other companies owned by Elliott. The money Book Retail Bidco received from this will be invested in Waterstones. We’ve already seen it has lent it £60 million so the other £70 million may have been invested in shares.

Book Retail Bidco will either pay out interest on the bonds to the other Elliott companies in cash every year or, more likely, ‘accrue’ it, to be paid out at a later date.

Either way, every year this interest gets taken off the UK profits of both Book Retail Bidco Ltd itself and the corporate grouping it is part of, which includes Waterstones. As a result the total tax bill of the Waterstones business is slashed, while its owners, thanks to a legal loophole called the quoted eurobond exemption, enjoy tax free payouts.

And what payouts: 13% of £129 million amounts to around £17 million a year. The Financial Times reckoned Elliott plans to bulk Waterstones up for a few years (for example through the recent acquisition of Foyles) and then sell it to the highest bidder. If so, expect the interest to accrue each year, to be paid out as part of the price Elliott – if successful – sells the company for.

A price which, let us not forget, will be thanks to the hard work of the staff currently being paid less than the living wage.

All the way up

Who’s ultimately benefiting from all this? Step forward Elliott founder and billionaire “vulture capitalist” Paul Singer, described by the Independent as “a pioneer in the business of buying up sovereign bonds on the cheap, and then going after countries for unpaid debts.” Targets have included Argentina, Peru and Congo-Brazzaville, who a company of Singer’s successfully took to court for $39 million.

Paul Singer, elliottmgmt.com

A long-term Republican, Singer has donated millions to, among others, George W Bush, Rudy Giuliani, and the Koch Brothers – whose foundations and think tanks push right-wing causes such as low taxation for the wealthy.

Another of Singer’s causes is, you guessed it, Donald Trump. Initially an anti-Trump guy, Singer quickly changed his tune after the presidential election, giving $1 million to Trump’s inaugural committee.

We put all the points regarding finances and future payouts to Waterstones and Elliott Advisors for comment. A spokesperson from Waterstones said:

“We have answered the petition directly, noting that we pay our booksellers as much as it is prudent to do, with a particular commitment to a progressive pay scale. The retail high street is under extreme pressure, with many highly respected companies closing, and many more in dire straits. Having come close to bankruptcy ourselves, we understand acutely the need for proper prudence. We are fortunate now to be able to invest sensibly in new shops, in refurbishments, in logistics and, above all, in our booksellers. In doing this, we are building a solid business for the future, perhaps not with as fast progress on pay as you wish but – in today’s world – the tortoise is likely to beat the hare.”

The post Waterstones paying millions to US ‘vulture fund’ owners while denying staff living wage appeared first on Corporate Watch.

Towards the end of last month, Deliveroo told the world how much money it had made in 2016. The results were … mixed. Sure, a lot more people are using the company to order food. Accounts filed at Companies House show Deliveroo made £128m from delivering restaurant food to people in their homes. That’s six times as much as the year before, with the company now doing business in 140 cities in 12 countries.

But it then paid £127m to deliver that food – the majority of which would have gone to paying the couriers – leaving the company with just £1.1m.1 The company also spent £142m on so-called “administrative expenses” such as marketing, software development, legal fees and paying all the extra staff2 it takes to expand the business. All in all it was left with an eye-watering overall loss for the year of £129m.

This lack of profitability has not deterred investors, who continue to be smitten by the app-based firm set up by ex-investment banker William Shu. A few days after these results were published, the company announced a bevy of massive investment funds had ploughed around £285m into the company, in return for stakes in it.

That takes the total Deliveroo has received from venture capitalists, tech entrepeneurs and the like to over £600m in the five years since it was founded. Investors are taking a punt that in a few years the company will be doing well enough for them to sell their shares for many times the amount they originally paid for them, most likely by ‘going public’ and allowing its shares to be bought and sold on the stock market (for more on who these investors are, see below).

Who’s making what?

The road to the fabled ‘Initial Public Offering’ may be a rocky one. Deliveroo is struggling to turn a profit even as couriers complain about stingy pay rates and take the company to court for more employment rights.

The company says it values its workers of course. Martin Mignot, who represents lead investor Index Ventures on the Deliveroo board of directors told the Telegraph that, with riders in short supply, failing to keep them happy “would kill their business model.”

In practice, the Independent Workers of Great Britain union said earlier this year that some couriers were being paid less than minimum wage, and that all were being denied access to even the most basic employment rights such as holiday pay and maternity pay.

Could Deliveroo afford to do better? Earlier this week Dan Warne, managing director for the UK, told MPs that if the company were forced to give workers basic rights it would have to charge customers an extra £1 per delivery.

He’s likely talking about Deliveroo satisfying the workers’ demands and producing the bumper payouts its shareholders are expecting from the company’s expansion across the globe. It may not be possible to do both.

For the moment, couriers could point to the £180m sitting in the company’s bank accounts, according to the last accounts. As we have seen, Deliveroo has paid its couriers somewhere around £120m in 2016, so it could double their pay for a year without increasing any of its prices and still have around £50m left over (and that is probably a low estimate of the company’s cash pile given last month’s investment round pumped another £285m in).

Covering wages from cash injected by investors is not a long term solution – at some point the company has to cover the costs of paying couriers from its own operations. As explained below, the company accounts do not disclose enough information to show how close the company is to being able to do that.

But couriers could also point out that management is already getting their hands on this cash. While Deliveroo has not yet paid out any dividends to its shareholders, the 2016 accounts show the highest paid director – presumably Shu – made £125,000 in salaries and bonuses, up 22% from the year before. That’s not megabucks for a tech supremo but it’s a lot more than the people delivering the food are getting.

Together, “key management personnel” – presumably including UK boss Dan Warne – were paid £1m in 2016, up from just £212,000 the year before. On top of this certain lucky staff members were given £4.5m worth of Deliveroo shares to cash in at a later date – by which time they’ll hope the shares are worth much more.

Chasing value

As well as agitating workers, Deliveroo already has a range of well-funded corporate rivals, with Uber and Amazon among those trying to muscle in. That’s another reason to think delivering food from restaurants a difficult business to make a lot of money from right now.

So what do the investors know that we don’t? In the UK, Deliveroo publish ‘consolidated’ accounts3 – which group all its operations4 around the world into one set of results. So they only tell us how Deliveroo is doing overall, not in individual countries. That means we can’t tell from these figures how much money it is making in the UK, the country where it started and has been operating for the longest. So it may be that it is making decent money here, which would be plausible given the scale of the business and the time it has had to make it more efficient, for example by tweaking its algorithms to eke out more deliveries from its couriers in a shorter space of time. This is certainly the gloss the Deliveroo management are putting on the results.

Wherever the business is, the costs involved in expanding – setting up new offices, marketing the service to new restaurants, hiring new pools of drivers, adapting and developing the software and so on – should lessen in time.

So its backers may be confident that in ten years’ time, Deliveroo’s superior software and strategy will have helped it dominate the market, as well as expanding it by luring more restaurants to either start delivering to people’s homes, or dispense with their in-house delivery drivers. With less competition and a popular product, Deliveroo could whack up the commission it charges restaurants.

The financiers may also be betting on Deliveroo’s more grandiose ambitions. Martin Mignot told the Business Insider website the company’s mission is to: “make on-demand food so much more convenient and better than it actually makes less sense for people to cook at home”, adding the “vision” “is all about reducing costs for restaurants”.

This is where the ‘Deliveroo Editions’, or ‘RooBox’, project comes in. Deliveroo are setting up multiple kitchens in shipping containers; its partner restaurants supply the recipes and the chefs to cook in them. Meals are then couriered straight to people’s homes. It allows restaurants owners to deliver without having to set up and run an actual restaurant, while Deliveroo has a monopoly on all the deliveries that ensue. Deliveroo already operates a number of RooBox sites in London and Brighton, with plans for plenty more – although it is starting to meet opposition from some councils over planning permission and noise complaints.

The accounts show £13m was invested in “Driver and restaurant equipment” last year. Expect the next accounts to show Deliveroo’s infrastructure to have increased significantly. One former courier told Corporate Watch the London RooBox he delivered from was “rammed” with orders on Friday and Saturday nights – and thanks to its financial backers, Deliveroo has enough cash to rapidly expand this part of its business.

Investors may also be interested in the underlying technology and potential to expand the model beyond food delivery. A source close to UK private equity group Bridgepoint, which owns the sandwich chain Pret A Manger as well as a stake in Deliveroo, told the Financial Times that Deliveroo’s order tracking technology “would make the company ‘strategically interesting’ to larger firms, whether they wanted to deliver restaurant food or other goods and services.”

There’s also automation – robots taking over people’s jobs, either delivering orders or cooking food in those Rooboxes. Shu says the company is “closely monitoring the space”.

Then there’s the money to be made from all the information Deliveroo is collecting. Like most tech companies, Deliveroo wants customers’ data, both to improve its service and to sell on. Their Terms and Conditions say that they pass it on to “carefully selected third parties, including marketing and advertising companies”. And all that data on customers’ eating preferences will presumably make the company more valuable. The Privacy Policy makes clear that if the business is sold or merged: “your information may be disclosed or transferred to the target company, our new business partners or owners or their advisors”.

Standing to gain

Or Deliveroo’s financial backers may have called it wrong – it does happen – and the company may prove unable to turn a decent profit and disappear in ten years. If so, don’t feel too sorry for them. They have a lot of other paths to enrichment.

In addition to the companies’ founders and management, investors are made up of Silicon Valley venture capital firms and other tech financiers, with many of their investments in Deliveroo going through tax havens. The list below shows the biggest investors and what proportion of Deliveroo shares they own, based on the latest filings at Companies House. These were before the most recent investment by US fund giants Fidelity and T Rowe Price, which will have diluted the shareholdings listed below. To what extent will become clear when the company’s next ‘Confirmation Statement’ is published (keep an eye on this Companies House page if you’re interested).

Index Ventures – helds16% of Deliveroo shares as of 16 August 2017

US venture capital firm, putting its money into Deliveroo through two Jersey registered investment funds (essentially pots of money). Invests in 160 companies in 24 countries, including: Dropbox, Etsy, Sonos, SoundCloud, Squarespace, Lookout, Hortonworks, Pure Storage, Funding Circle, as well as Deliveroo rival Just Eat.

Their London office is in Mayfair, naturally.

They are represented by Martin Mignot on the Deliveroo board.

DST Global – 16%

Hong Kong-based firm founded by Yuri Milner, Russia’s “most influential tech investor” according to Wikipedia. It is one of the world’s most successful internet company backers after making huge sums from stakes in Alibaba and Facebook. It invests in Deliveroo through three different funds.

Greenoaks Capital– 13%

San Francisco-based venture capitalists specializing in tech investments. They invest in Deliveroo through three different funds, all of which appear to be registered in the Cayman Islands.

They are represented by Benjamin Peretz on the Deliveroo board.

William Shu – 12%

The boss, who founded the company with Greg Orlowski (now left). Ex-Wall Street banker (Morgan Stanley) and financial analyst (SAC Capital and ESO Capital).

Bridgepoint Capital – 10%

UK-based private equity firm. Also own lots of companies including: Zizzi, Pret a Manger, Leeds Bradford Airport and The Dining Group, as well as healthcare profiteers Care UK and Tunstall Healthcare.
Their London office is just off Oxford Street.

They are represented by Antoine Froger on the Deliveroo board.

Accel Partners – 10%
Another investment firm specializing in tech companies. They were one of the first investors in Facebook and also own stakes in Dropbox, GoFundMe, Groupon, GoCardless, Squarespace, Walmart.com, Wonga and a host of other companies.

They have a UK office in Mayfair.

They are represented by Luciana Lixandru on the Deliveroo board.

General Catalyst – 3%
US-based investor. Also backed Airbnb, among others.

They are represented by Adam Alexander Valkin on the Deliveroo Board.

Greg Orlowski- 3%

Founded company with Shu but since left. Responsible for setting up logistics and website according to his LinkedIn profile.

The rest of the shareholders are investment funds or individuals, all with minor stakes. You can find the full list in the RooFoods Ltd Confirmation Statement.

If you have information about a company that you’d like to share with Corporate Watch, email us at contact[at]corporatewatch.org or call 02074260005.

See our DIY guide for help on understanding company accounts.

1 The ‘gross profits’ in the accounts

2 The accounts show Deliveroo’s wage bill increased to £40.6m before social security and pension costs, from £8.7m the year before (not including couriers, who the company argues are self-employed). Staff numbers went up from 231 to 1,049

3 Through parent company Roofoods Ltd

The post Deliveroo: where’s the money? appeared first on Corporate Watch.

You can find Corporate Watch articles on Virgin in the right hand column of this page, or by clicking here.

There is lots of useful information on the Virgin Group website:

Click here for Virgin’s head office and basic contact details.

Click here to find out which business Virgin is currently involved in.

Click here to find out who the directors of the Virgin group are (to find out who the directors of each of the individual Virgin businesses are, you’ll need to go to the relevant website).

Virgin’s financial affairs are notoriously opaque, with Branson and family ultimately owning the Virgin group from the British Virgin Islands. The best window into the overall financial performance of the companies owned by Virgin is the Virgin UK Holdings Ltd accounts. Click here to download them from Companies House.

For the financial performance of each Virgin business, you’ll need to get the relevant company’s accounts from Companies House.

Note that not all Virgin-branded companies are owned by Branson and the Virgin group. Virgin Media is majority owned by US media giant Liberty Global, for example, which pays Virgin for use of the brand.

For a more critical perspective on Virgin and Branson, try the book Branson: Behind the Mask, by Tom Bower, or at least click here for a good review of it.

The post Virgin Company Profile appeared first on Corporate Watch.

Mags Dewhurst from the Independent Workers Union of Great Britain (IWGB) Couriers and Logistics branch tells Corporate Watch how they have won better pay from London’s biggest courier companies and discusses the future of the industry.

So far IWGB couriers from three different companies have organised and have won the London Living Wage. Why do you think the union has been successful?

A number of reasons but the first is solidarity. We’ve developed solidarity with each other as couriers through union membership, meetings and protests; with other workers, other workplaces and unions; with the general public via online petitions, the press and social media; and other supportive organisations (such as Reel News and Corporate Watch!) as well as political individuals, such as Sian Berry and Natalie Bennett from the Green Party. Everybody’s help and support has been really important because it contributes to a feeling of pressure from every direction – and each target company has to be really sweating to give a pay rise!

Campaigns often have peaks and troughs, which can be quite overwhelming, especially to inexperienced campaigners and protesters. When workers feel deflated or defeated, it’s particularly important to have outside support at that time to keep up the morale, and keep momentum moving forward, otherwise the fear of defeat can become contagious and spread through the group, killing off any resistance. That’s when outside support really matters.

The key tactic of attacking the supply chain and clients of the target business really has worked well too. We have subjected them to so much pressure that eventually they have had to take notice. It has only taken one or two of them to side with us before our target courier companies have fallen over and complied with our demands. In addition, we kept really ‘on message’ with the media, demanding the same thing (the London Living Wage plus costs), playing the companies off against each other in the market.

And we have become more efficient as an organisation, learning from our mistakes and experiences. When we started, our first campaign was against CitySprint and it took nine months to win. Our second target – eCourier – caved after four months, and our latest – Mach 1 – took only four weeks.

We’re not done with the courier industry – there are still many nasty companies operating by exploiting couriers. But now we’re expanding into food delivery as well and are taking on the likes of Deliveroo and Uber.

Fundamentally, if we are going to win against them, we’ll have to keep doing what we’re doing, but on a much, much bigger scale. London has about 200-300 bicycle couriers that work the traditional sector between 7am and 7pm. Food delivery is predominantly in operation from 11am-11pm, and has about 3,000-4,000 couriers working in London. It’s probably going to be a big and long fight. We’ll have to encourage people, build solidarity, social networks, and re-educate people about how to run effective campaigns if we are going to win at Deliveroo and Uber.

How did the branch start?

In December 2014, the pushbike fleet at London’s second biggest courier company, eCourier, went on strike for an hour or two in Lincoln’s Inn Fields, in protest over pay and conditions. Not all the couriers joined the strike but perhaps 50% did, causing immediate disruption and delays to work. At the same time, two of us from CitySprint met up to discuss if and how we could unionise. We joined up with one of the leaders of the eCourier strike, and another highly respected courier in London.

Together we met with the IWGB Union to ask if we could join and if they could help us campaign for change in our industry. The IWGB said yes, but we’d have to start our own branch because they only took cleaners, porters and security guards at the time. So we organised an open meeting for one month later, and tried to flier-drop London to inform as many couriers as we could.

The Couriers and Logistics branch was then formed by couriers across London from the biggest five courier companies, as well as many smaller ones, at a mass, open meeting in February 2015. At the open meeting, we put the case for action forward, saying we had nothing to lose, given how crap our situation was, and convinced people to join together with the plan being to build a campaign for a pay rise. In the first few meetings, it was decided that we’d go for CitySprint. We decided we wanted to stay self-employed, that we’d go for the London Living Wage, and that we’d start contacting clients to pressure them too.

What other struggles or campaigns have you learnt from?

In particular, the IWGB Union’s cleaners’ campaigns for the London Living Wage and the 3 Cosas Campaign at the University of London. Those were all really inspiring because they used solidarity to win too. Also, a recent important campaign was the BESNA dispute, which was conducted by self-employed building workers – primarily electricians. Couriers could relate to the self-employment status and see that others had fought and won – through relentless campaigning and sheer hard work.

Couriers in other cities around the world have unionised too, particularly in Dublin and Sydney, but people here don’t actually know that much about them!

You’ve won the Living Wage – which is great, obviously – but the people at the top of a big company like CitySprint are still earning far more than the couriers, without risking their lives weaving in and out of traffic every day. Do you think there’s scope to increase your demands beyond the Living Wage at some stage?

Yes. We are doing that a bit via the courts at the moment, claiming “worker” status, which is somewhere between employee and independent contractor. If we win, which we should do, we will gain a set of basic employment rights, which we’ve never had before, and which a lot of people take for granted. Things like the right to the minimum wage, paid annual leave and protection from various discrimination.

But, I am a firm believer in campaigning – and that it’s a much faster route to change than going through courts or politicians. Even if we’re not legally entitled to such things, we can and should campaign for them; after all, we aren’t entitled to the minimum wage but we still fought for, and won, the London Living Wage.

How do you see the delivery industry developing going forward?

Things will be app-based soon. No more XDA devices, which will mean it’ll be easier for us to work for more than one company at once.

Depending how much pressure we put on, how involved the government gets, and how big we grow in terms of membership, we could make some big changes in the way the industry works in the coming months and years. It feels like the government will end up getting more involved soon, probably over employment status more than industry regulation (which would be my preference) but I hope that we’ll get big enough to basically operate as a regulator of our own!

The post Three companies, three pay rises: talking tactics with a courier union appeared first on Corporate Watch.

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The Byron burger chain is facing a wave of protests and condemnation for helping the Home Office organize a series of immigration raids on its London restaurants that led to the arrest of 35 of its workers from Albania, Brazil, Nepal and Egypt last week.

And while their company is collaborating with the Home Office to deport people, Corporate Watch has found that the owners of Byron are siphoning millions of pounds offshore.

Since buying Byron in 2013, investment fund Hutton Collins has already made £14m through a complicated financial scheme that sees money routed through the Channel Islands Stock Exchange to companies in Luxembourg.

Mayfair-based investment fund Hutton, run by a group of financiers and former bankers, bought Byron in November 2013 for £100m. Paladin, a ‘boutique’ private equity group co-founded by Caffe Nero boss Gerry Ford, has also bought a minority stake in the company, as have Byron’s management team, including founder and chief executive Tom Byng.

Accounts filed at Companies House for the Byron group show that the new owners made the majority of their investment in the form of a £82.7m loan, at an interest rate of 10%.

On the face of it this makes no sense – why would the owners saddle their own company with so much debt, at such a high interest rate (Byron is paying just 3% on the loans it has from banks)? Hutton could have put this money into shares in Byron, and received dividends when the company made a profit. But dividends are paid after a company’s profits have been taxed, whereas interest payments are taken from profits before they are taxed, thus potentially reducing a company’s tax bill.

In the 19-month period from November 2013 to June 2015, when the latest accounts were made up to, interest of almost £14m was racked up on these “shareholder loans”. Instead of receiving the money straight away, the owners have chosen to add it back onto the original loan so that more and more interest can be charged every year, leaving them with a hefty reward whenever they choose to sell the business on.

The scheme is in its early stages and how much UK corporation tax the interest payments will help Byron avoid remains to be seen. But it is already helping the owners move their earnings from the burger chain into tax havens.

Hutton’s offices are on Pall Mall but the Byron group accounts show that the investment fund made the loans through a Luxembourg-registered company, HC Investissements VI Sarl, which is where their interest will be sent. To make things more convoluted, Paladin private equity owns its minority stake in the loan through its own Luxembourg-registered company, Paladin Holdings Sarl, plus one in the Isle of Man – Paladin Byron Limited Partnership. Eric Bellquist, a former Lehman Brothers banker and now a Hutton Collins partner, is also listed as a partner in the latter, while Graham Hutton, also a partner at Hutton Collins, “has an interest” in TH Lord Sarl, another Luxembourg company with a stake in the loan.

Records show that these loans have been made through the Channel Islands Stock Exchange, which, thanks to a legal loophole, means the interest can automatically be sent to the owners tax free (click here for an explanation of the ‘quoted eurobond exemption’, as the loophole is known).

Hutton Collins owns a number of other UK businesses including the wagamama restaurant chain, the Hunter clothing brand and Healthcare at Home, which receives the vast majority of its multi-million pound income from the NHS.

Byron’s accounts also show how lucrative the business has become for founder and chief executive Tom Byng.

The highest paid director – presumably Byng – made £266,000 in 2015, with an extra £19,000 of pension contributions on top. On top of this, he has a nearly 1% stake in the shareholder loans and as such will have earned around £72,000 from the interest on these in 2015.

According to Right to Remain, most of the workers deported were paid the minimum wage of £7.20 per hour.

The post Byron Burgers appeared first on Corporate Watch.

Demolition of a home in East Jerusalem, as depicted by a child of the Amro family. The children continue to suffer from anxiety, trauma, and bedwetting following the partial demolition of their home in 2015.

Sodastream, Hewlett Packard, and Barclays Bank have been among a number of key targets of Palestine solidarity activists in the last few years, not to mention G4S, Elbit Systems and EDO MBM. High street supermarkets Sainsbury’s and Waitrose and now even the Co-op Bank are also facing criticism for their business practices, regarded as undermining Palestinian human rights and being complicit in illegal Israeli occupation.

Such solidarity campaigns help Palestinian children in particular, as it is a cruel but true reality that they suffer disproportionately from the occupation. Over 550 children were killed in the 2014 bombing of Gaza alone, with child mortality sharply on the rise with the continuing siege. Settler violence towards children in the West Bank is also worsening: in 2015 arson attacks and tear gas inhalation resulted in very young babies dying,whilst simply attempting to get to school in Hebron has become a nightmare. The age of criminal responsibility for Palestinian children is also becoming ever lower, with hundreds subject to the violence and humiliation of Israeli detention each year. House demolitions and the ever present threat of them – from East Jerusalem to the Jordan Valley – continue to terrify, traumatise, destroy and degrade. The drawings by children of the Amro family in East Jerusalem, featured above, are evidently testament to such systematic child abuse – shocking yet common under occupation. Here is an account by their father, Nurredin Amro.

UK consumers can help to end the systematic denial of childhood to Palestinian children by supporting the call for boycott, divestment and sanctions against Israel, otherwise known as the BDS movement. Yet what about BDS supporters shopping for children in particular? Ethical Consumer has produced an extremely useful guide on how to shop ethically when buying products for babies and children. However, few guides have focused specifically on Palestine. Here are the main companies to avoid for those who want to support Palestine.

Pampers

Environmental and animal rights considerations aside, what nappy you buy can also have human rights implications. Pampers is a US company which sells a range of nappies, training pants and wipes for babies and toddlers. The business is owned by Proctor and Gamble, one of the largest clients of Israeli company Avgol Nonwoven Industries (P & G accounts for approximately 40% of their sales). Avgol Nonwoven Industries has a production factory located in Barkan, an industrial zone in an illegal West Bank settlement in the occupied territories. By purchasing from the company you are supporting the illegal settlement economy which further strengthens the occupation, undermining Palestinian rights. More information can be obtained from the Israeli research group Who Profits?.

Taf Toys

Taf Toys is an arm of Israeli company Taf Plastic Products Ltd and sells a range of baby and toddler products including soft toys, play mats, walkers and baby gyms. Parent company Taf Plastic Products Ltd is located in the city of Netanya in Northern Israel. Products in the UK are available from a number of retailers including John Lewis, Argos and tax avoiding Amazon UK. Supporters of the BDS movement should take heed.

Halilit

Israeli company Halilit has become a near-ubiquitous seller of musical instruments and educational toys for babies and toddlers in a large number of countries. Products are available in the UK from a number of retailers including JoJo Maman Bebe , Debenhams and Argos. The company is based in the Tel Aviv district of Or-Yehuda, which has a particularly bloody history – the neighbourhood was built on the Palestinian village of Saqiya which was forcibly cleared of Palestinians in the Palestinian nakba (catastrophe) of 1948. Campaigners have highlighted this company as clearly ripe for boycott .
To take action beyond simply boycotting the individual companies, we recommend contacting the retailers who sell their products and asking them to stop. You can also join your local Palestine solidarity group to take direct action collectively.

The post Palestinian solidarity for parents appeared first on Corporate Watch.

UPDATE 06/01/16: After mounting pressure from couriers, Citysprint have agreed to pay the equivalent of the London Living Wage. Click here for more details.

One of the UK’s biggest delivery companies is sending millions of pounds to its owners through tax havens, while refusing couriers’ demands for “decent” pay.

By analysing company accounts and other financial records, Corporate Watch has found CitySprint – which calls itself the leading same-day delivery service in the UK – has racked up £8.2m in interest on loans from the investment fund that bought the company in 2010. As the loans have been taken out through the Channel Islands Stock Exchange, a legal loophole means CitySprint’s tax bills will be slashed while the interest on the loans can be sent to owners tax free.

Investors in the Dunedin Buyout Fund include Sir Richard Sutton – one of the biggest landowners in the UK – an investment fund run by the EU, and the pension funds of British Airways staff and Yorkshire council workers.

CitySprint’s 2,500 couriers transport cash, legal documents, blood samples, and much else across the UK in vans, motorbikes and bicycles.

The last two months have seen a series of protests against the company by couriers in London who say they are exploited and underpaid. The couriers – who are all self-employed – have set up a branch of the Independent Workers of Great Britain (IWGB). They are campaigning for the company to pay them the equivalent of the London Living Wage plus reasonable expenses “so that people can earn a decent living for the hazardous work they undertake”. They have staged demonstrations at CitySprint’s head office and those of clients including Google, the Guardian and Goldman Sachs. CitySprint disputes the union’s claims.

CitySprint announced record figures in its latest financial results, with revenues increasing by 11% to a record £112.7m in 2013. According to its own measure, profits were up by 15%, to £12.3m.* CEO Partick Gallagher – who according to the company’s accounts earned £231,657 in 2013, a 55% increase on the £149,000 he earned the previous year – welcomed the “very strong operational performance”. Since being bought by the Dunedin private equity investment group five years ago, CitySprint has been expanding, buying up seventeen smaller rivals.

Accounts filed at Companies House show that when Dunedin took over CitySprint in 2010, the Edinburgh-based investment fund made the majority of its investment in the form of a £32.9m loan, made through the Channel Islands Stock Exchange. CitySprint has accrued £8.2m interest on the loan so far, at a rate of 8% – significantly higher than the rate of interest it is paying to other ‘third party’ lenders such as banks that it is borrowing from.

As well as ensuring CitySprint’s owners enjoy a healthy return, this scheme also sees the company’s UK corporation tax bills slashed. The interest is deducted from CitySprint’s profits before it is taxed (meaning the amount taxed is much lower). A legal loophole – called the ‘quoted Eurobond exemption’ – means that the interest will go to the owners tax free when it is paid out (see a full description of how it works here). This could have already saved CitySprint as much as £2m, with future savings increasing as more interest is racked up.

Corporate Watch has previously exposed a range of other companies exploiting this loophole – including energy giants, high street brands and healthcare firms taking NHS contracts.

But who are the investors benefiting from CitySprint’s scheme? Private equity firms like Dunedin invest other people’s money to buy companies, hoping to cut costs wherever possible, then sell them for a tidy profit at some point in the future – with the investment managers taking a cut of the proceeds. They pool investments into a particular fund – in this case called the Dunedin Buyout Fund II, which is the majority owner of CitySprint (with all the members of the CitySprint management team also owning shares themselves).

Documents available at Companies House and other financial sources show the money in the fund has been invested by a wide range of organisations. As well as a bevy of other investment funds, some registered in tax havens such as Luxembourg, Jersey and Delaware, are the British Airways pension fund for its employees, plus organisations ultimately owned by the EU, the French government, the pension funds of public sector workers in the East Riding of Yorkshire and Sir Richard Sutton, a major landowner with properties in Mayfair, estates in Berkshire and one of the 100 richest people in the UK, according to the Sunday Times’ rich list (see the full list below).

Corporate Watch put the above to CitySprint and Dunedin. Both said they were “fully compliant with UK tax legislation”.

A spokesperson from the IWGB Couriers and Logistics branch said: “instead of sending all this money to their owners, CitySprint should be using it to give couriers a decent rate of pay for the work they do. It is the leading trendsetter in courier exploitation and through its industry dominance, is suppressing wages across the whole sector. It’s time for CitySprint to set a new trend, and pay its workers and couriers more.”

Read more about the IWGB’s CitySprint campaign here.

* Using the EBITDA measure CitySprint uses in its 2013 financial results presentation. Profit after tax was £4.6m.

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