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REMIT IMPLEMENTING ACTS: CAN TECHNOLOGY HELP ENERGY MARKETS PARTICIPANTS COMPLY?

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By Rainer Landgraf, Product Manager for Allegro Development, EMEA

The Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) Implementing Acts came into force on January 7th laying down the final guidelines for reporting wholesale energy product transactions in the EU as required by the EU.

It is now mandatory for market participants to provide data concerning wholesale energy market transactions (including order history for standard trades) to ACER, the European Agency for the Cooperation of Energy Regulators which in turn makes the information available to National Regulatory Authorities (NRAs) in the EU for more specific enforcement.

REMIT requires ACER to monitor trading activity in wholesale energy products for the purpose of exposing and preventing both market manipulation and insider trading.

To allow for such control, ACER launched the REMIT Portal on January 8th. The Portal provides certain key documents as required by REMIT and also brings together all information and applications that market participants need to know as part of the REMIT data reporting requirements. It also allows interested parties to formally self-register as Registered Reporting Mechanisms (RRMs).

Overlapping regulatory regimes

The Implementing Acts appear to overlap with other compliance regimes and, on top of that, energy market participants have only three months to register with their national regulatory authorities. This has caused a minor panic amongst traders but are they worrying unnecessarily?

The document defines REMIT’s reporting requirements for energy contracts and derivatives, defining market abuse and prohibitions and applying identical rules to all reporting.

To complicate things however, some contracts subject to REMIT also need to be reported under EMIR and MIFID II. ACER has therefore stipulated that information which has already been reported under MIFID II or EMIR shall be considered to meet any co-existing requirement to report under REMIT.

The allowance does not work in reverse however. If information is reported under REMIT, it may still need to be reported to the appropriate authority under MIFID II and EMIR.

Available solutions

The changing regulatory landscape continues to perplex rule-makers and market participants alike. Uncertainty in the timing and details of these cross-border regulations are causing wholesale energy traders much anxiety over their next steps toward compliance. There is no doubt that REMIT will require a lot of time and effort both in terms of reporting and of increased scrutiny.

There are however alternatives in terms of what companies can do to meet the new requirements. Managing the process manually is not one of them. There are electronic reporting and data storage requirements involved in REMIT (and other regulatory regimes) that will quickly overwhelm any approach based on spreadsheets, both economically and technically.

Outsourcing is an option but comes with its own risks and costs. There is the added overhead of an ongoing contract to manage and how active you are in the energy trading arena will determine your breakpoints financially.

With so much complexity and overlap to manage, automating as much of the reporting function as possible makes business sense.

Automating regulatory processes requires a basic energy trading and risk management (ETRM) system.A good ETRM should be able not only to efficiently execute trades but also to guarantee trade compliance, enhance market intelligence and improve decision-making.

There are several systems out there that can offer basic ETRM functionality but there are a few factors to be considered. Do these systems integrate with your overall enterprise system? Can they be installed quickly and easily, without disruption to your day-to-day operations? Do they incorporate the core features you need to increase revenue, reduce cost, manage risk and comply with mandates?

A good Energy Trading and Risk Management System can generate returns unmatched by nearly any other technology investment for your business, but only if it also enables you to:

  • Enhance market intelligence and your control
  • Improve decision-making
  • Uncover opportunities
  • Identify best options
  • Efficiently execute trades
  • Effectively manage physical logistics
  • Help enforce company policies
  • And ensure trade compliance

If you have to bolt together various separate systems to achieve these combined capabilities, you are probably not looking at the right solution. The fact is, a robust ETRM capability can be achieved without massive customisation, if you have a vendor capable of offering a rich, field-tested solution out-of-the-box; one that provides a flexible, component-based architecture that allows you to scale your solution to fit your needs, now and as your situation evolves.

A shape-shifting software is also a solution for a fluid regulatory environment. There are software vendors with long tenures in the business of risk managing large energy purchases. In light of the new rules, you will want to choose a solution that allows you to upgrade and manage your regulatory compliance process quickly.

It is also essential to consider factors such as the ability to install software on a captive system and maintain it internally, or to buy a software-as-a-service (SaaS) contract and maintain it virtually in the cloud.

Direct connectivity to trade repositories should also be a keyfeature, including all necessary regulatory identifiers and formats. The system should be able to streamline your threshold monitoring and facilitate your risk mitigation obligations, including periodic portfolio reconciliations under the newly implemented rules.

What next?

Like any other regulatory regime, REMIT presents a remarkable challenge. The Implementing Acts have already come into force but there is still plenty of time to familiarise yourself with the rules and to understand the implications they have for your company so that you can plan accordingly. To run an efficient reporting programme and therefore eliminate the threat of fines and create the conditions for transparency, the best approach is to invest in an automated solution that can guarantee your compliance and at the same time prevent any exposure to business risk.

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UK shopper numbers rise for sixth straight week as Britons tire of lockdown

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UK shopper numbers rise for sixth straight week as Britons tire of lockdown 1

LONDON (Reuters) – The number of people heading out to shops across Britain climbed 11% last week from a week earlier, in a sixth week of gains despite a national lockdown, market researcher Springboard said on Monday.

Shopper numbers, or footfall, in the week to Feb. 27 climbed 15.9% in high streets, 6% in shopping centres and 5.9% in retail parks, it said.

Diane Wehrle, Springboard’s insights director, said the data suggested evidence of “lockdown fatigue” amongst consumers.

“Perhaps prompted by the announcement of the government’s roadmap to reopening at the beginning of the week, but then supported by drier warmer weather in the second half of the week, footfall in UK retail destinations rose once again last week from the week before,” she said.

“Not only was this the sixth consecutive week that footfall has increased, but its magnitude was greater than in any previous week and nearly twice that in the week before.”

The gap in footfall in retail destinations from 2020 narrowed to down 56.5%, from down 62.1% a week earlier.

England entered a third national lockdown on Jan. 4 to contain a surge in COVID-19 cases that threatened to overwhelm parts of the health system.

The rules in England mean schools are closed to most pupils, people should work from home if possible, and all hospitality and non-essential shops are closed. Scotland, Wales and Northern Ireland imposed similar measures.

Essential shops allowed to stay open include food outlets and home improvement retailers.

Last week, Prime Minister Boris Johnson announced a roadmap out of lockdown that will see non-essential shops in England open again on April 12.

(Reporting by James Davey; Editing by Alistair Smout and Bernadette Baum)

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The cost of Brexit to an eCommerce business: How can the effects be minimised?

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Supplier Relationships is Top Concern for UK Finance Leaders as Brexit Deadline Looms

After four years of uncertainty for businesses, the UK has finally left the EU, bringing many changes to rules and legislations into force. Almost every individual component of ecommerce businesses will be affected, with everything from shipping costs to trading fees subject to changes.

Despite a long warning period, Government data[1] has revealed that almost two thirds (61%) of businesses had made no preparations to leave the EU by June 2020, and whilst the Covid-19 pandemic had certainly added further economic stress onto businesses during this time, the delaying of preparations has made the process even more difficult. Here, warehousing and logistics platform Trident Worldwide discuss the effects of Brexit on ecommerce businesses and how they can be minimised.

Consider your ecommerce business’ shipping and sourcing locations

For online businesses that are trading outside of the UK, Brexit will now change every element within the business and will determine the complexity of each step of trading, from sourcing materials to postage.

It is vital to consider the location of where materials are being sourced, manufactured, stored, and even where customer bases are situated to keep additional costs at a minimum. For new customs regulations, all ecommerce businesses with need to apply for a UK and EU EORI number to be able to sell into the UK. Only a few weeks into the new legislations and the effects of this change are already showing, and with the UK currently positioned as the world’s third largest online retail market and the top market in Europe[2], this issue is only going to be magnified further.

Leila Aaboud from international law firm Berkeley Rowe explains how ecommerce businesses can overcome changes due to Brexit: “After years of positive growth, it is unfortunate that European e-commerce businesses are facing numerous challenges at the start of 2021 such as delivery speed and technical issues due to Brexit. Businesses actively involved in the international supply chain should now consider applying for an Authorised Economic Operator (AEO) certification to counter the trade delays inflicted by Brexit. Entering the AEO scheme is highly beneficial to businesses in that it will enable them to trade efficiently through simplified customs procedures and fast-tracked shipments. “Additionally, businesses with an AEO certification will gain a ‘trusted trader’ status which is an increasing demand amongst international clients.

“In line with government guidelines and to avoid increased costs and delays when trading across international borders, businesses need to apply for an Economic Operators Registration and Identification (EORI) number. Previously, EORI numbers were only required when exporting goods to non-EU countries however, since January 1st, businesses exporting goods from Great Britain to the EU will need an EORI number starting with ‘GB’. This number is used to uniquely identify the exporter in customs procedures and documentation.

“To avoid any potential losses, e-commerce businesses should prioritise being cost-effective throughout Brexit and should continue lining up their costs during the introduction of new Brexit tariffs.”

Understand new tax regulations and their effects

For goods shipped into the U.K., several changes have taken place that affect VAT, liability, and tax obligations to name just a few key components. To stay profitable, it is key for online retailers to pick the countries that they choose to work with carefully and consider each additional cost throughout the logistics process.

Arjun Thaker, CEO at Trident Worldwide says, “The Brexit deal agreed on Christmas Eve explains that under the new terms, anyone sending parcels from the EU to the UK needs to fill in forms including proof of origin and the reason for sending the package. Retailers selling to the UK are also now required to pay customs duties and fill out declaration forms, as well as register for VAT in the UK.”

Review your supply chain

The three main issues for ecommerce businesses caused by Brexit are delivery times, new tariffs on goods and the drop in value of the pound sterling, all of which affect the supply chain cost and efficiency.

Review your business logistics and supply chain and consider more efficient ways of sourcing and shipping goods that may minimise delays and import duties on goods coming from the EU. If possible, consider bulk-sourcing goods locally; this may cost more initially, but you may save money on importation tax in the long run, making the logistics of your business more seamless.

Arjun Thaker, CEO at Trident Worldwide, said: “Considering the logistics of your business throughout Brexit can be confusing for many businesses as new rules and regulations come into play. It is key for ecommerce retailers to plan, manage and market with effective end-to-end logistics handled professionally to help make the transition easier.”

Be cost-effective

A July 2020 survey conducted by delivery management company Whistl[3] outlined that consumers in Europe feel strongly that Brexit will lead to less choice of UK goods to purchase online. However, UK respondents were more evenly split, with 23% believing that there will be more choice post-Brexit, with an equal 23% believing there would be less. This clearly highlights the uncertainty surrounding ecommerce retail across Europe in a post-Brexit world, yet some retailers are already altering prices to align with this newly acquired outlook.

Amazon UK[4] has taken the decision to add a 20% price increase to items sold by non-UK sellers, with overseas sellers now finding themselves in an increasingly difficult position in which they are unable to compete with domestic sellers. Sellers on Amazon UK are also seeing increased importing fee deposits, with a huge 60-day waiting period for refunds, effecting the trust between ecommerce businesses, and selling platforms.

Arjun at Trident Worldwide explains: According to government calculations published last summer, it was suggested the UK businesses would have to submit 215 more customs forms a year after Brexit, from EORI numbers for every order, to Rules of Origin and Customs Declaration, as the requirements for information are huge.

The present drama’s and delays are thought to be caused by extra paperwork and additional customs and border checks. We can already see the parcel carriers and logistics providers struggling and the retailers adding additional pricing for international deliveries, so far, several companies have been hit by the disruption almost three weeks into the new arrangements.

So, who is going to pay these additional costs? Ultimately, it is us the consumer who will have to pay the additional costs added to the price of delivery and the price of goods.”

The ecommerce industry has undoubtedly been changed, with many businesses having to adapt quickly to the new regulations brought into place. By remaining reactive and critical of each aspect of the business, online retailers are more likely to thrive and grow.

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UK factory output grows at slowest since May, consumer lending slides

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UK factory output grows at slowest since May, consumer lending slides 2

By David Milliken and William Schomberg

LONDON (Reuters) – British manufacturers reported their slowest output growth since May last month, hit by Brexit and COVID-19-related delays, and consumers cut back heavily on borrowing in January as they returned to lockdown.

Britain’s economy is set to shrink sharply in early 2021 though manufacturers are upbeat about prospects later in the year, when they expect lockdown restrictions to end.

The speed of the recovery for households will also be critical. Bank of England data showed consumer borrowing in January suffered its biggest annual decline since records began in 1994, sliding 8.9%.

Britain entered a third national lockdown in January, closing schools, non-essential shops, restaurants and most other businesses open to the public, though people can still travel to work if needed.

Finance minister Rishi Sunak has announced an extra 5 billion pounds ($7.0 billion) of support for services firms and plans to offer more aid in an annual budget on Wednesday.

“All eyes are now on Wednesday’s budget to see if the chancellor has any surprises up his sleeve that will give the (manufacturing) industry’s businesses a boost for the latter part of the year,” said Simon Jonsson, a partner at accountants KPMG.

The BoE expects the economy to shrink 4% in the first three months of 2021 – a sharper decline than during any quarter of the 2008-09 financial crisis though much less than the 20% drop last spring.

The weak consumer borrowing suggests a slump in spending on non-essentials. Official retail sales data showed overall purchases fell by 8.2% in January.

Some of the weak borrowing also reflects repayment of loans by better-off households.

The BoE expects pent-up household savings to be unleashed when lockdowns end, but the scale of any bounce is uncertain.

Manufacturing has fared better than consumer-facing sectors. Nonetheless, February’s IHS Markit/CIPS Purchasing Managers’ Index (PMI)’s key output component showed growth slipped further after a sharp drop in January.

“Continued COVID-19 related disruption, now exacerbated by manufacturers’ cautious navigation of the new UK-EU trading arrangement, has created a scenario in which logistical and supply-side challenges are limiting the rate of economic recovery,” said James Brougham, an economist at industry body Make UK.

The broader manufacturing PMI touched a two-month high of 55.1, slightly higher than suggested by a preliminary reading.

However, much of the rise reflects longer delivery times and higher costs – which historically were linked with increased activity but more recently have represented a constraint.

Confidence for the year ahead was its highest in more than six years. This is despite new post-Brexit customs rules which took effect in January and increased the cost and complexity of trade with the European Union, especially for smaller firms.

Materials costs rose at the fastest rate in four years and delivery times lengthened sharply too.

($1 = 0.7164 pounds)

(Reporting by David Milliken and William Schomberg; Editing by Hugh Lawson)

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