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Klarna, the buy now, pay later (BNPL) finance giant, is setting up a new British holding company as it clears the path to a stock market flotation that could value it at more than $15bn (£12.1bn).

Sky News has learnt that the Stockholm-based consumer credit provider has informed investors it has kicked off preparatory work ahead of a listing expected to be launched as soon as the first half of next year.

City sources said this weekend that Klarna, which employs about 5,000 people and boasts 150 million customers globally, would be ready to float within months if market conditions were accommodating.

Its founder and chief executive Sebastian Siemiatkowski said in August that three key conditions – becoming established in the US, having a sustainable business model and significant growth potential – for an initial public offering (IPO) had been met.

Third-quarter results to be released on Monday are expected to show continued progress towards annual profitability, according to insiders.

The administrative decision has been taken to reflect the UK’s standing from a legal, regulatory and capital markets perspective, they added.

The incorporation of the new holding company does not, however, mean that Klarna will necessarily decide to float in London.

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Many bankers and investors expect it to choose New York to list instead, in what would be perceived as another blow to the City’s prestige following the US listing of ARM Holdings, the chip designer.

In a statement issued to Sky News this weekend, a Klarna spokesman said: “We have initiated a process for a legal entity restructuring to set up a UK holding company as an important early step on a journey towards an eventual IPO.

“This is an administrative change that has been in the works for over 12 months and does not affect anyone’s roles, nor Klarna’s Swedish operations.

“Klarna Holding will continue to be the regulated financial holding company under the direct supervision of the SFSA [Swedish financial regulator] and we will continue to hold a Swedish banking licence.

“This entity would be registered in the UK.”

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Klarna boasts 150 million customers globally

Klarna was forced to slash its valuation to $6.7bn (£5.4bn) in a funding round last year, having once been valued at $46bn (£37.2bn) and drawn backing from investors such as SoftBank’s Vision Fund, Sequoia Capital and Mubadala, the Abu Dhabi sovereign wealth fund.

Bankers believe that based on a comparison with New York-listed peer Affirm Holdings, Klarna should attract an IPO valuation of between $15bn and $20bn (£16.1bn).

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The establishment of the British holding company, which requires shareholder approval, is expected to take place shortly.

Klarna’s corporate reorganisation comes as the UK government veers away from a crackdown on the BNPL sector.

Sky News revealed in July that ministers were planning to shelve new legislation to regulate providers such as Klarna, with future rules instead incorporated into a reformed Consumer Credit Act.

Consumer group fury

Consumer campaign groups responded with fury to the decision, which has yet to be announced by the government.

One industry source said they understood that ministers were preparing to hold talks with BNPL providers about agreeing a series of voluntary measures prior to any legislative changes being introduced.

This week, the Financial Conduct Authority said it had secured contract changes for BNPL customers after an explosion in the use of such products.

Research published by the City watchdog showed that 27% of adults – roughly 14m people – had used BNPL at least once in the second half of 2023.

‘Proportionate’ regulation

Klarna has previously declared itself in favour of “proportionate” regulation of the sector.

Earlier this year, it said it was “concerned with the suggestion to copy and paste Consumer Credit Act rules on credit agreements, which are outdated and don’t protect or inform consumers”.

“Quite the opposite, they leave consumers confused and, ironically, push them towards expensive and higher-risk forms of credit.

“With BNPL regulation the government has a golden opportunity to be bold and create new rules to give consumers the right information at the right time so they can make informed decisions.”

In May, Klarna launched what it described as Britain’s first “credit opt-out” product to give consumers greater control of their finances.

It said the idea had been suggested by Andrew Griffith, the City minister, during a meeting with Mr Siemiatkowski.

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M&S tech chief leaves months after cyber attack cost it £300m

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M&S tech chief leaves months after cyber attack cost it £300m

The Marks & Spencer (M&S) executive responsible for its technology function is leaving the retailer months after a devastating cyber attack which disrupted its systems at a cost of hundreds of millions of pounds.

Sky News has learnt that Rachel Higham, M&S‘s chief digital and technology officer, is leaving the company.

A former WPP and BT Group executive, Ms Higham was hired by M&S early last year.

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Her departure was announced in an internal memo circulated on Thursday.

In it, the company said she was “stepping back from her role”.

“Rachel has been a steady hand and calm head at an extraordinary time for the business, and we wish her well for the future”.

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July: Four arrested over cyber attacks

The April cyber attack on M&S, which was conducted by a group called Scattered Spider, brought its online operations to a halt, underlining the growing threat posed by such incidents.

Its click-and-collect service is now back up and running, and the retailer expects part of its costs to be covered by insurance.

M&S said early last month that it was not looking to replace Ms Higham following an enquiry from Sky News.

It was unclear who would succeed her in the role or whether she would be eligible for a payoff.

An M&S spokeswoman confirmed on Thursday that the memo was genuine but refused to comment further.

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Supermarket spreadable matches Lurpak in taste test | Sign up to Money newsletter

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Supermarket spreadable matches Lurpak in taste test | Sign up to Money newsletter

Sky News has launched a free Money newsletter – bringing the kind of content you enjoy in the Money blog directly to your inbox.

Each Friday, subscribers get exclusive money-saving tips and features from the team behind the award-winning Money blog, which is read by millions of Britons every month.

Sign up today, and this week you’ll find the following in the newsletter:

  • The free £2,000 that 800,000 parents aren’t claiming
  • Our Verdict: Our blind tasters put spreadable butter to the test – and a cheaper supermarket version comes joint top with a big name
  • And we outline the best deals available in five key areas for your household budget

So join our growing Money community – and thanks to the thousands of you who already have.

What to expect each week

The newsletter is your essential personal finance companion, with digestible information to help you make smarter decisions on your savings, mortgages, holiday money and much more.

As a subscriber, you get additional exclusive content that goes beyond the blog.

At a time when the global economy faces so much uncertainty, we have analysis from our trusted economics teams on the big stories that affect the cash in your pocket.

You also get first looks at popular features such as Money Problem, Cheap Eats, What It’s Really Like To Be A and our weekend Long Read.

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John Lewis blames budget tax hikes for deeper loss

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John Lewis blames budget tax hikes for deeper loss

The John Lewis Partnership (JLP) has blamed budget tax hikes for a deeper half-year loss.

The UK’s largest employee-owned business, which owns John Lewis department stores and Waitrose supermarkets, reported a headline loss before tax and exceptional items of £34m for the six months to 26 July.

That compared to a £5m loss in the same period last year. The higher figure was reached despite a 4% rise in group sales to £6.2bn.

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“This result was significantly impacted by costs not present in the equivalent prior period”, the partnership explained, “including £29m of costs for the new Extended Producer Responsibility (EPR) packaging levy (where we took the full annual cost in our first half results), alongside higher National Insurance Contributions (NICs)”.

JLP said the loss figure also reflected additional investment in its systems and growth-led teams.

On a bottom line basis, the losses stood at £88m – up from £30m – as some exceptional costs associated with the group’s turnaround and some non-cash impairments were included.

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JLP insisted it was on track to grow profitability in the core second half of its financial year, despite a “challenging” macroeconomic environment, as both operations were outperforming in their respective markets.

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August: ‘We’ve got to get the balance right on tax’

The company cited benefits from its investment, which hit £191m over the six months, have been prioritised over partner bonuses during several years of recovery for the group that have seen underperforming department stores closed and jobs lost.

Jason Tarry, the former Tesco executive who has chaired the partnership for a year, said the outlook was positive despite consumer confidence remaining subdued.

“Our clear focus on accelerating investment in our customers and our brands is working: more customers are shopping with us, driving sales, and helping Waitrose and John Lewis outperform their markets”, he said.

“We achieved our highest recorded levels of positive customer satisfaction, a testament to the great service of our partners.

“The investments we are making, combined with our plans for peak trading, provide a strong foundation for the remainder of the year.

“While we are reporting a loss in the first half, we’re well positioned to deliver full-year profit growth, which we’ll continue to invest in our customers and partners.”

Market analysts have cautioned that the sales figures are likely to have been flattered by the disruption to trading at rival M&S, which suffered a cyber attack in April.

But Robyn Duffy, consumer markets senior analyst at RSM UK, said of the sales uplift: “Waitrose’s performance has been a key driver, benefiting from a renewed focus on its food proposition, including a greater emphasis on lower prices and a more effective adoption of technology to improve the customer experience.

“Meanwhile, the John Lewis retail arm is successfully drawing in customers through a combination of revitalised physical stores, a focus on meaningful brand partnerships, and the reintroduction of its Never Knowingly Undersold price matching strategy.”

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