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DAILY BRIEFING

AI as a job creator?

Written by Li-Ann Chin, associate
Edited by David Gaffney, partner
26 October 2020

Good morning,

From the German payments group Wirecard, to Patisserie Valerie, the ubiquitous café chain, and the infamous 1MDB scandal from Malaysia which saw audit firm Deloitte reprimanded and fined 2.2 million ringgit (US$535,000), it feels, lately, that if you missed the last accounting scandal you can be sure another one will be along any minute.

To counter this trend, the accounting industry is reportedly turning to artificial intelligence (AI) to help identify fraud and prevent new scandals from further damaging the sector’s reputation. It was announced last week that the Institute of Chartered Accountants in England and Wales (ISAEW) has built a ten per cent stake in Engine B, a data platform designed to help audit firms pinpoint fraud and financial misstatements.

Founded in London last year, Engine B is currently working with accounting firms, Microsoft, Imperial College London and the University of Birmingham to create an open platform which will use AI to read and compare different data inputs, including contracts, invoices and bank accounts, to assess measures such as cashflow. While about 15% of audit work is currently being automated, Engine B believes that proportion could soon rise to 70%.

But where would all the auditors go? In the early 2010s, advances in robotics and AI, described ominously in countless papers and books, seemed to portend a wave of job destruction. Those fears have only grown since then, with a survey by cybersecurity company Kapersky finding that 60% of UK adults are worried that their jobs will be replaced by AI in the future.

According to Thiess Peterson, however, an economist at the Bertelsmann Foundation think-tank, the next five years will see digitalisation creating more jobs in industrialised countries than it destroys. The caveat, of course, being that the development of digital infrastructure is accompanied by corresponding investments in – and training for – the nation’s workforce.

Covid has already dictated that the skills and training landscape for adults is set to be one of the most crucial policy intervention spaces over the next few years. With the Get Help to Retrain programme newly scrapped and the National Retraining Scheme now integrated with the government’s new £2.5 billion National Skills Fund, many in England will be auditing the government’s investment of that money closely next year. 

News

Seven stowaways have been detained after the Special Boat Service stormed a Liberian registered tanker off the Isle of Wight last night. The special forces responded to a request for help from Hampshire police, after it was feared that the crew was no longer fully in charge of the vessel.

Italy has introduced its strongest virus restrictions since the end of its national lockdown in May and Spain will be imposing new measures, including a curfew, as Covid-19 cases surge in both countries. (£)

The UK government’s decision not to extend free school meals for children in England into the half-term holiday has been defended by cabinet minister, Brandon Lewis, amid mounting pressure for a U-turn. Praising footballer Marcus Rashford for his campaign, Lewis nevertheless insisted that help through the councils was “the right way to do it”. 

A Covid test that can provide a result in 12 minutes will be made available at high street pharmacy Boots. The nasal swab test, which will cost £120, will be available in more than 50 stores across the UK to anyone who is not showing symptoms. The test, and the device needed to process it, have been approved by authorities in Europe and the US. Meanwhile, it has been revealed that Gaby Appleton, a director of academic publishing company Elsevier, has only taken the role of director of product for NHS Test and Trace for six months, raising critical questions about the programme’s leadership and its rapid turnover of executives. 

Business and economy

According to a report published by University of Oxford academics, large, bespoke infrastructure projects such as the HS2 railway line should be avoided by the government when it looks to construction to boost the UK economy post-pandemic. Such projects are too slow, costly and risky to stimulate gross domestic product, the report contends.

Brexit negotiations between the UK and EU have been extended until Wednesday, in the hope thata compromise over the key stumbling blocks of fishing rights, state bailouts and level playing field guarantees can be reached. 

Facebook Inc. teams have planned for the possibility of trying to calm election-related conflict in the US by deploying internal tools designed for “at-risk countries”. Previously used in countries including Myanmar and Sri Lanka, emergency measures include slowing the spread of viral content and lowering the bar for suppressing potentially inflammatory posts. 

The Civil Aviation Authority (CAA) has rejected Heathrow’s demand to hike airline and passenger charges by £1.7 billion to cover costs of the pandemic, urging the airport instead to shore up emergency funding from its shareholders. The CAA has warned that without it, the airport may face a state takeover to save it from collapse.  

Columns of note

It’s been almost nine months since I last met my family in person. For some of my friends, that timespan stretches to more than a year, maybe more. With travelling  home for the festive season made infinitely harder by Covid-19 restrictions, Emma Brockes writes in The Guardian about how the pandemic has given a new edge to experience of homesickness.

If the first wave of coronavirus brought a wave of national unity, the second has seen a descent into local squabbles. In the Financial Times, Camilla Cavendish lambasts Boris Johnson for mishandling the northern lockdowns, arguing that there is a fatal disconnect between Whitehall’s policies and the reality for businesses around the country.

Cartoon source: Telegraph

Markets

The week ahead

Italy has introduced its harshest public health restrictions since the end of its first national lockdown in May as new Covid-19 cases hit a fresh daily high on Saturday.

Several US states also will head into the week grappling with a surge in coronavirus cases, as Donald Trump and Joe Biden continue their presidential election campaigns. The US Senate aims to confirm Amy Coney Barrett as Supreme Court judge by today.

The chief executives of Twitter, Alphabet and Facebook will appear before the US Senate on Wednesday to testify virtually in a hearing about section 230 of the Communications Decency Act.

European Central Bank (ECB) president Christine Lagarde and other policymakers are set to meet on Thursday, with analysts predicting that the ECB will keep its cards covered and  rates on hold. It is expected to publish its lending survey on Tuesday, which will reveal the health of the banking sector in the Eurozone. 

Similarly, the Bank of Japan will be meeting on Thursday, with analysts  confident that it will not be announcing any policy changes.

Microsoft will issue its third-quarter earnings on Tuesday while Sony, Pinterest, Ebay and Etsy will be following suit on Wednesday.

HSBC and Santander are due to release their earning updates on Tuesday, Deutsche Bank and Nomura on Wednesday and Credit Suisse, Lloyds and Standard Chartered reporting on Thursday. NatWest Group will be closing the week with its earnings on Friday. 

Food delivery group GrubHub will release its third-quarter results on Wednesday. Starbucks, Kraft Heinz and YUM! Brands are due to do so the day after. 

In other news, Canada’s Wheaton Precious Metals – one of the world’s largest companies involved in the buying and selling of gold and silver – is scheduled to list on the London Stock Exchange on Wednesday. 

What’s happening today?

AGMs
All Active
Asimilar Grp
Banco Santander
Marechale Cap.

UK economic announcements
(10:00) CBI Industrial Trends Surveys

Int. economic announcements
(08:00) IFO Expectations (GER)
(08:00) IFO Business Climate (GER)
(08:00) IFO Current Assessment (GER)
(14:00) New Homes Sales (US)

Source: Financial Times

did you know

Public opinion about AI improved in 1997, when IBM’s Deep Blue computer defeated grandmaster Garry Kasparov in the chess game. The match took place live. Of the six games held, three ended in a draw, the computer won two games and Kasparov won just one.

Parliamentary highlights

House of Commons

No business scheduled

House of Lords 

Introductions

Lord Hammond of Runnymede

Oral questions

Addressing social and economic inequalities in the economic recovery from the impact of the COVID-19 pandemic – The Lord Bishop of London

Supporting cultural and creative industries affected by the COVID-19 pandemic – Lord Colgrain

Impact of the COVID-19 catch-up premium on disadvantaged pupils – Lord Carrington

Increases, if any, in uptake of Pension Credit in each of the past 12 months – Lord Foulkes of Cumnock

Legislation

United Kingdom Internal Market Bill – committee stage (day 1) – Lord Callanan

Scottish Parliament 

No business scheduled.

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