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Speaker 1: Good morning. It's Wednesday, the sixth of September here in London.

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Speaker 1: This is the Bloemberg Daybreak you at podcast. I'm Caroline Hedger.

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Speaker 2: And I'm Stephen Carroll. Coming up today, one of the

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Speaker 2: Bank of England's most recent rate setters tells us the

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Speaker 2: Central Bank is pretty much done hiking.

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Speaker 1: Shares plunge in Man United on reports that the club

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Speaker 1: is no longer for sale.

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Speaker 2: And we get details on how a jump in mortgage

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Speaker 2: cost is pushing out smaller landlords and clearing a path

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Speaker 2: for rich investors to build to rent.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: The former Bank of England rate setter Michael Saunders says

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Speaker 2: interest rates may already have peaked. He told Bloomberg Radio

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Speaker 2: there's an emerging weakness in the economy.

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Speaker 3: I think they're pretty much done at the moment. It

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Speaker 3: looks to me about fifty to fifty as to whether

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Speaker 3: they will hike again at the September meeting, and if

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Speaker 3: they do hike, it would be only twenty five basis

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Speaker 3: points either way. I don't think they'll be hiking beyond that.

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Speaker 3: So either we've already reached the peak or we have

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Speaker 3: another twenty five in September, and probably that is the peak.

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Speaker 2: Sondras was one of the most hawkish voices when he

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Speaker 2: was on the Monetary Policy Committee. You can hear that

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Speaker 2: full interview on the Bloomberg UK Politics podcast.

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Speaker 1: Brent crude has risen above ninety dollars a bow for

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Speaker 1: the first time this year. Is Saudi Arabia and Russia

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Speaker 1: announced that they will extend supply curbs to the end

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Speaker 1: of this year. Bloomberg's All reporter Julia Fanzaz says that

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Speaker 1: the surprise extension will tighten the market until the end

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Speaker 1: of twenty twenty three.

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Speaker 4: Traders are really surprised, not by necessarily the quantity, but

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Speaker 4: the fact that it has been extended until December. So

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Speaker 4: they expected that Saudi Arabia was going to extend their

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Speaker 4: production cuts one million barrels a day, but till December.

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Speaker 4: That's really going to tighten the market to the end

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Speaker 4: of twenty twenty three, and that's what really caught traders

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Speaker 4: by surprise and what sent markets soaring to above ninety

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Speaker 4: one dollars a barrel for Brent at one point.

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Speaker 1: That was Bloomberg All reported Julia Fanzarez. There Godman Sachs

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Speaker 1: says that the moves Biopech plus brought bullish risks to

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Speaker 1: its outlook for prices. So the bank's analysts outlined several scenarios,

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Speaker 1: including one that sees Brent extending gains to above one

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Speaker 1: hundred dollars a bow, although they suggest that this wasn't

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Speaker 1: a base case view.

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Speaker 2: ARMS initial public offering is already falling short of lofty expectations.

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Speaker 2: The Cambridge based company, which snubbed the London Stock Exchange

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Speaker 2: earlier this year for the US, is aiming for a

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Speaker 2: market value of close to fifty five billion dollars. That's

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Speaker 2: well below initial reports of a target of up to

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Speaker 2: seventy billion dollars. Our US Deals Managing editor Leanna Baker

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Speaker 2: breaks down the details.

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Speaker 5: The ROACHO is just starting. There could be great demand,

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Speaker 5: for all we know, for these shares, and we could

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Speaker 5: see them raise the range. That's definitely possible. That said,

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Speaker 5: SoftBank has kind of scaled back the amount that they

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Speaker 5: want to sell. Masayoshi Sone, the CEO and founder of SoftBank,

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Speaker 5: is very bullish on ARM. He doesn't want to get

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Speaker 5: rid of the whole thing. They're only selling ten percent

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Speaker 5: in the IPO, so that's one of the reasons why

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Speaker 5: the company is not looking to raise as much as

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Speaker 5: they had thought, and because they're not looking to raise

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Speaker 5: as much, the valuation is a little lower.

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Speaker 2: Bloomberg's Leanna Baker says ARM is also facing risks from

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Speaker 2: an economic slowdown in China, which accounted for a quarter

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Speaker 2: of its sales in the last fiscal year.

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Speaker 1: The UK government has recovered just a fraction of the

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Speaker 1: one point one billion pounds lost to fordsters, taking advantage

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Speaker 1: of its Coronavirus business support program more now from Bloomberg's

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Speaker 1: Un Potts.

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Speaker 6: Almost three and a half years on from the start

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Speaker 6: of the first COVID lockdown, the government has recovered just

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Speaker 6: two percent of fraudulently claimed payments. According to data from

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Speaker 6: Parliament's Public Accounts Committee, less than twenty one million pounds

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Speaker 6: has been recovered. Is estimated frauds has benefited to the

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Speaker 6: tune of one point one billion pounds. The government has

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Speaker 6: acknowledged some of the assistants programs rolled out during the pandemic,

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Speaker 6: We're done so at speed, and says there are some

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Speaker 6: legal obstacles to recovering funds. The Labour chair of the

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Speaker 6: Public Accounts Committee says it's simply not good enough to

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Speaker 6: give up on recovering money simply because it's difficult to

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Speaker 6: do so in London. I'm you in Pot's Bloomberg Day Baky.

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Speaker 2: The Manchester United shares have plunged following reports the club

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Speaker 2: is no longer for sale. The Mail on Sunday says

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Speaker 2: they may try to sell the business again in twenty

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Speaker 2: twenty five, when improved conditions could attract more bidders. Bloomberg's

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Speaker 2: Jess meant and breaks down the stock drop.

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Speaker 5: Manchester United down eighteen percent at the close.

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Speaker 4: So this is biggest drop percentage drop on record.

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Speaker 5: So that did come after a report that the Glazer

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Speaker 5: family is going to take the club off the market.

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Speaker 2: It means the football club's now valued at rough t

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Speaker 2: three point two billion dollars after around seven hundred million

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Speaker 2: dollars was wiped from its market cap. Shake Jassim, a

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Speaker 2: member of Qatar's royal family, and Ennius Had Jim Radcliffe

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Speaker 2: had both made offers to buy Manu from the Glazers.

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Speaker 2: Let's turn two another story, and the UK government has

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Speaker 2: announced it will unveil its autumn statement on the twenty

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Speaker 2: second of November. The Chancellor is under increasing pressure from

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Speaker 2: within his own party to use it as an opportunity

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Speaker 2: to cut taxes before the next election, but he says

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Speaker 2: his priority will remain bringing down inflation. With prices still

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Speaker 2: arising by six point eight percent and annually. Many of

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Speaker 2: those will agree where that santiments.

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Speaker 1: Well, of course, we discussed all of this with the

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Speaker 1: former Bank of England policymaker Michael Saunders on the UK

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Speaker 1: Politics podcast Now. He told me and Lizzie Burden that

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Speaker 1: the UK will need to settle in for persistent low

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Speaker 1: growth in living standards unless the government dramatically rethinks spending

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Speaker 1: and debt.

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Speaker 3: Well, I don't know what advice they're giving and whether

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Speaker 3: that advice is taken, but the UK over the last

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Speaker 3: ten twelve years has made economic policy errors which many

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Speaker 3: of the experts identified at the time as being errors.

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Speaker 3: A lot of people can be clever with hindsight. The

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Speaker 3: people you listen to most of those who can tell

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Speaker 3: you at the time when things wrong, because they've got

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Speaker 3: deep knowledge, well founded expertise. And one of those errors

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Speaker 3: was to have very low public investment during the twenty

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Speaker 3: tens at a time when the economy had plenty of

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Speaker 3: spare capacity and borrowing costs were low. Another one also

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Speaker 3: was to downplay the economic costs of Brexit, which many

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Speaker 3: experts warned will be substantial. I think the evidence that

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Speaker 3: we've seen since Brexit is consistent with that. So maybe

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Speaker 3: the experts know something after all, and having we should

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Speaker 3: try to learn the lessons from experts advice rather than

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Speaker 3: dismiss it.

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Speaker 1: There's an important moment really as we look to the

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Speaker 1: autumn of when the tightening the interest rate hiking cycle

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Speaker 1: is going to come to an end. What do you

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Speaker 1: expect to come from the Bank of England next? How

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Speaker 1: many more interest rate increases do you think the UK

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Speaker 1: economy can deal with.

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Speaker 3: I think they're pretty much done. I think it's at

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Speaker 3: the moment. It looks to me about fifty five as

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Speaker 3: to whether they will hike again at the September meeting,

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Speaker 3: and if they do hike, it would be only twenty

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Speaker 3: five basis points either way. I don't think they'll be

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Speaker 3: hiking beyond that. So either we've already reached the peak,

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Speaker 3: or we have another twenty five in September, and probably

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Speaker 3: that is the peak. So we've had during the course

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Speaker 3: of this year substantial evidence a second round effect through

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Speaker 3: wages and services inflation. But also there's a growing drag

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Speaker 3: on the economy from the substantial tightening of monetary policy,

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Speaker 3: not just here but overseas as well, and the business surveys,

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Speaker 3: notably the PMIS have turned down quite markedly in the

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Speaker 3: last few months. And I think the emerging weakness in

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Speaker 3: the economy, alongside signs that the lab market is beginning

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Speaker 3: to loose with unemployment rising, that should be enough to

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Speaker 3: allow the NPC to shift from a strategy of raising

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Speaker 3: rates at every meeting to then just keeping them high

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Speaker 3: for an extended period. And I thought the use of

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Speaker 3: the table mountain analogy by Hugh pill in his most

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Speaker 3: recent talk is quite telling. There. The idea of the

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Speaker 3: table mountain strategy is having climbed the mountain, raised interest

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Speaker 3: rates steadily, you then go along a perhaps quite lengthy

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Speaker 3: period in which you're at the top of the mountain,

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Speaker 3: but it's flat and otherwise interest rates stay high. I

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Speaker 3: would say probably until quite a long way into next year.

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Speaker 7: And at the next Bank of England decision in September

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Speaker 7: this month they're also expected to give us an update

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Speaker 7: on quantitaive tightening. I wonder whether the pace should actually

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Speaker 7: be increased in your view, when it's going like clockwork,

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Speaker 7: and if so, by how much.

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Speaker 3: I suspect they will increase the pace slightly. I think

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Speaker 3: that was signaled by a talk a month or two

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Speaker 3: ago by Deputy Governor Dave Ramsden in which he discussed

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Speaker 3: the first year of the QT program. As you said,

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Speaker 3: it's on the whole, it's gone pretty well. I think

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Speaker 3: they started off at a slightly cautious pace because when

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Speaker 3: QT was initiated around a year ago, there was an

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Speaker 3: element for a step into the unknown about it. No

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Speaker 3: central bank had been doing QT, and so I think

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Speaker 3: they started off slightly cautiously. I would expect them to

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Speaker 3: expand it from a total of eighty billion in the

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Speaker 3: first year to perhaps ninety or one hundred billion in

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Speaker 3: the coming year. I don't think that would cause us

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Speaker 3: significant market reaction. Market expectations have shifted up to that

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Speaker 3: kind of range following that speech by rape by Dave Ramsden.

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Speaker 1: So that was the former Bank of England policy baker

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Speaker 1: Michael Saunders, now a senior economic advisor at Oxford Economics,

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Speaker 1: speaking to me into Lizzie Burden on the UK Politics podcast.

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Speaker 1: So you can hear the full interview on Apple, Spotify

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Speaker 1: or wherever you listen. But I think what Saunders was

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Speaker 1: underlining is that if we want to get out of

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Speaker 1: persistently low growth, low living standards, there needs to be

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Speaker 1: a rethink from government, whatever government comes in or is

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Speaker 1: in power that basically prioritizes economic growth and not just

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Speaker 1: the standard government measures around sort of debt and spending,

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Speaker 1: the so called fiscal rules with you so far, there

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Speaker 1: needs to be a sort of big, big rethink. It

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Speaker 1: was a very very good interview.

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Speaker 2: Let's turn to another issue that's facing the government though,

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Speaker 2: in terms of a financial strain on UK landlords triggered

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Speaker 2: by pricing, mortgages and tougher regulation. It's prompting money to

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Speaker 2: sell up and leave the market altogether. But meanwhile, bigger,

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Speaker 2: richer players are building their stock of housing schemes don't

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Speaker 2: as build to rent. While relatively small, now two of

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Speaker 2: the UK's biggest real estate firms expect to build to

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Speaker 2: rent to one day make up over a third of

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Speaker 2: the private rental sector. A residential real estate porter, Damian

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Speaker 2: Shepherd is with us to talk through this now. Damien,

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Speaker 2: good morning to you. What is build to rent exactly

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Speaker 2: and where does the idea come from.

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Speaker 8: So build to rent. It essentially refers to any residential

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Speaker 8: building that's gone up which is specifically for the purpose

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Speaker 8: of being professionally managed and rented out to tenants. In

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Speaker 8: the UK, we've actually pinched the idea from the US,

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Speaker 8: where it's known as multifamily housing. It was born in

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Speaker 8: London about just over a decade ago, and just to

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Speaker 8: put those forecasts into perspective, Saddle was a night for

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Speaker 8: Anchor predicting that it could rise to about thirty percent

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Speaker 8: of the whole of the private rental sector. So we're

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Speaker 8: on fewer than one hundred thousand homes now. They reckon

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Speaker 8: that that can rise to one point six million eventually,

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Speaker 8: which can only be a good thing for UK rental

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Speaker 8: supply and these investors that run these buildings, they're typically

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Speaker 8: in the shape of private equity firms, pension funds and developers,

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Speaker 8: and there was two billion pounds worth of investment in

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Speaker 8: the first half of this year. It's been around for

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Speaker 8: just over a decade. But we're at a bit of

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Speaker 8: a moment now where with the strain that small landlords

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Speaker 8: are under, we're seeing a little bit of a change

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Speaker 8: in hands going on.

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Speaker 1: Absolutely because there is a current housing downturn going on.

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Speaker 1: So what role do you think bill to let has

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Speaker 1: to play in that?

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Speaker 8: Yeah, so small landlords, your sort of traditional often accidental landlords,

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Speaker 8: are under a huge strain at the moment. They're typically

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Speaker 8: on interest only mortgages that are feeding through interest rates

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Speaker 8: in a dramatic fashion for them. Many are selling up

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Speaker 8: and there's a huge shortage in rental properties in the UK.

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Speaker 8: As a rental myself, I'm looking for another place to

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Speaker 8: live at the moment and finding it extremely difficult. So

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Speaker 8: these investors are proposing to step in and plug that

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Speaker 8: gap where a lot of small landlords are leaving the sector,

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Speaker 8: and it can only be a good thing for supply.

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Speaker 8: But I suppose it really raises the fact that these

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Speaker 8: landlords are round a huge pressure and it's the people

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Speaker 8: with the money that are going to step in.

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Speaker 2: So how big what's the potential here for a build

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Speaker 2: to rent in the UK?

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Speaker 8: So JLL, one of the biggest real estate firms in

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Speaker 8: the UK, believe that in about a decade it could

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Speaker 8: rise from only one point five percent now, so we're

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Speaker 8: still very small at the moment. They think that that

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Speaker 8: could rise to ten percent in about a decade, so

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Speaker 8: this will move pretty quickly if we're going by these

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Speaker 8: real estate firms predictions, and the pandemic has actually accelerated

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Speaker 8: the potential for bill to rent. A lot of these

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Speaker 8: tower blocks are kitted out with all sorts of amenities

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Speaker 8: like meeting rooms, some with swimming pools and other areas

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Speaker 8: like that, and the tech is pretty good as well,

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Speaker 8: so there's certainly an acceleration since the pandemic in sort

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Speaker 8: of the attractions to these places.

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Speaker 1: Damian just briefly. Government's attitude then to build to rent.

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Speaker 8: Anecdotally, they like it. There's new regulation coming in in

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Speaker 8: the way of energy efficiency standards and the Renter's Reform Bill. Anecdotally,

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Speaker 8: these investors can probably deliver it better than small andlers

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Speaker 8: who are under a financial crunch.

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