Speaker 1: Good morning. It's Wednesday, the thirteenth of September here in London.
Speaker 1: This is the Bloomberg Day Bacurate podcast. I'm Caroline Hepka.
Speaker 2: And I'm Tom McKenzie. Coming up today, the UK economy
Speaker 2: reverses recent gains, shrinking at the quickest pace in seven months.
Speaker 1: Bp CEO Bernard Looney quits over failing to fully disclose
Speaker 1: past relationships with colleagues.
Speaker 2: Plus, Apple unveils its latest iPhone and hikes top end
Speaker 2: prices everywhere except the UK.
Speaker 1: Let's start with a round up of our top stories.
Speaker 2: The UK economy has shrunk at the quickest pace in
Speaker 2: seven months, as dull weather held back spending and strikes
Speaker 2: hit the public sector, unwinding the strength of the previous month.
Speaker 2: GDP fell by zero point five percent half a percent
Speaker 2: in July after a zero point five percent gain the
Speaker 2: month before. Are UK Chris One and Lizzie Burdens says
Speaker 2: the reversal will give the Bank of England pause for
Speaker 2: thought ahead of next week's rate decision.
Speaker 3: This day to suggests that there is a bit more
Speaker 3: weakness in the economy, perhaps than was thought. We're going
Speaker 3: to get more inflation data from the Eve of the decision.
Speaker 3: That's expected to show that the headline rate actually increases
Speaker 3: because of contributions from petrol and diesel prices, So you
Speaker 3: might see another hike yet, but maybe we get to
Speaker 3: that peak sooner than perhaps thought.
Speaker 2: Lizzie Burden also says that the latest estimate may well
Speaker 2: be revised later this month based on recent changes the
Speaker 2: way the data is calculated.
Speaker 1: Now, Apple has launched a range of upgraded iPhones, also
Speaker 1: raise the price of its top end handset by almost
Speaker 1: ten percent in the US. But as Bloomberg's chief correspondent
Speaker 1: Mark German points out, there's one place where prices won't
Speaker 1: be rising.
Speaker 4: The UK is unique today for a very key reason.
Speaker 4: There was actually no price increase in the UK. In fact,
Speaker 4: the new iPhones are cheaper in the UK than they
Speaker 4: were previously, coming down by about one hundred pounds, which
Speaker 4: response to about one hundred and twenty eight dollars US,
Speaker 4: So if you're in the UK, you might be getting
Speaker 4: a better deal than you did last year.
Speaker 1: Mark German says that the new iPhone models, which include
Speaker 1: a USB C connector, represent the first significant iPhone overhaul
Speaker 1: since the five G phones came out three years ago.
Speaker 1: Apple CEO Tim Cook will be hoping that the updates
Speaker 1: will pull the company out of a sales slump and
Speaker 1: fears of a consumer backlash in China.
Speaker 2: That's another major corporate story. BP's CEO, Bernard Looney has
Speaker 2: resigned over failing to fully disclose past relationships with colleagues.
Speaker 2: Ludy's exit leaves the Island gas giant looking for a
Speaker 2: new CEO as the company pushes ahead with a costly
Speaker 2: transition to low carbon energy. Bloomberg's Managing editor for Energy
Speaker 2: and Commodity Simon Casey says the decision is part of
Speaker 2: a wider trend at corporations.
Speaker 5: The CEO big corporate of failing to be honest with
Speaker 5: the board. Fundamentally, That's what this is hardly about. It's
Speaker 5: got a lot tougher in recent years, its boards to
Speaker 5: feel much more empowered to fort fedules of the whole,
Speaker 5: even the CEO to account.
Speaker 2: Simon Casey says that while BP hasn't named a long
Speaker 2: term successor, it typically depicts its CEOs from among the
Speaker 2: ranks of its own top executives.
Speaker 1: Storms and flooding in eastern Libya are thought to have
Speaker 1: claimed more than twoy three hundred lives, with thousands more
Speaker 1: people missing. A search for survivors is underway after a
Speaker 1: Mediterranean storm hit the city of Dierna, with dams collapsing,
Speaker 1: triggering flooding. High water levels, but also tumultuous politics are
Speaker 1: hindering rescue efforts. Rami El Shahabi, who is from the
Speaker 1: World Health Organization in Libya, says it's a disaster zone.
Speaker 6: The situation is more disasters than we expected, and the
Speaker 6: numbers that keep builing up, so those who have not
Speaker 6: been reported as found are considered very likely to be
Speaker 6: dead or under the rubbles of those Bill think that
Speaker 6: collapsed after the flood.
Speaker 1: Meanwhile, rescue teams have recovered over two thousand bodies in
Speaker 1: eastern Libya. Today, officials fear that the death told they
Speaker 1: could exceed five thousand.
Speaker 2: Okay, Double Line Capital CEO Jeffrey Gunlack well he's fine
Speaker 2: back at retired bond king Bill Gross, saying he hopes
Speaker 2: he feels better about himself. The ongoing feud in the
Speaker 2: world of finance returned after Gross criticized Gunlac saying he
Speaker 2: wasn't anywhere near being crowned a bond king.
Speaker 7: To be a bond king or a Quinn. You need
Speaker 7: a kingdom, You need a kingdom. Okay. BNKO had two
Speaker 7: trillion dollars. Okay, double line's got like fifty five billion.
Speaker 7: That's no kingdom. That's like Latvia for her Estonia. Then
Speaker 7: look at his record for the last five six seven years,
Speaker 7: had a sixtieth percentile smack of a bond king. That doesn't.
Speaker 2: Poor old Latvia gross there. In a live recording Applom
Speaker 2: Hot Lots Podcasts, in response, gone Like says quote, it
Speaker 2: is sad for somebody that's been out of the business
Speaker 2: for so long ten years and is still trying to
Speaker 2: exercise the demons. But I hope he's doing fine.
Speaker 1: This caught my attention though the policies around families have
Speaker 1: come to the four in the UK, but also specifically
Speaker 1: around birds. This issue is one that is significant for
Speaker 1: the UK. You know, worries around demographics, not just in
Speaker 1: the UK, Germany, Italy, Japan also but David Miles, who's
Speaker 1: the Chief forecaster at the UK's Office for Budget Responsibilities,
Speaker 1: are well known economists in the UK. He actually says
Speaker 1: that lower birth rates are set to help household living standards,
Speaker 1: that long term they might not be quite so bad
Speaker 1: as we think he's done some new analysis.
Speaker 2: Well, he points as well to the fact that if
Speaker 2: you have an increase in population, you have to match
Speaker 2: that with the build out of infrastructure, and the UK
Speaker 2: has clearly failed to do that. Many other countries have
Speaker 2: as well. But then he points as a slightly different
Speaker 2: case or or case of example of shrinking ooperlation in
Speaker 2: Japan that has actually managed to continue to increase per
Speaker 2: capita GDP even as that population has of course famously shrunk,
Speaker 2: and they've struggled with that declining population. So it's a
Speaker 2: kind of counterintuitive. Look. I remember we spoke to Grace
Speaker 2: Peter's JP Morgan just a week ago or so, and
Speaker 2: she said one of the key reasons she was negative
Speaker 2: on the UK was because of the population constraints, particularly
Speaker 2: post Brexit.
Speaker 1: Yeah, and that seemed to me more of a migration
Speaker 1: argument than one of birds.
Speaker 7: Yeah.
Speaker 1: The other thing that I pull out of what David
Speaker 1: Marles was saying is that the reason that sort of
Speaker 1: on a household, on a more individual basis, that it
Speaker 1: might be helpful for people's finances is simply the cost
Speaker 1: of having children, you know, the cost of raising kids,
Speaker 1: of childcare, is so astronomic in the UK that actually
Speaker 1: households might kind of reconsider it on that basis effectively. Look,
Speaker 1: I think it's a really interesting bit of analysis, you know,
Speaker 1: demographics being destiny, that older economics catchphrase.
Speaker 2: Really interesting and really important to us when you think
Speaker 2: about the productivity challenges of many countries as well. And
Speaker 2: we're going to focus on the.
Speaker 1: UK now absolutely well. Speaking of the UK economic picture,
Speaker 1: So we had the latest monthly GDP figures out this
Speaker 1: morning disappointing the UK economy shrank at the fastest pace
Speaker 1: in seven months in July and zero point five percent.
Speaker 1: It comes though after the ONS reviewed UK growth post
Speaker 1: pandemic and actually upgraded economic output significantly for Britain. Johnny
Speaker 1: is now to discuss this and much more. I'm delighted
Speaker 1: to say, is the UK's Checkers Secretary to the Treasury,
Speaker 1: Gareth Davies. Good morning, lovely to have you back on
Speaker 1: Bloomberg Radio. That it's a pleasure, great reaction to the
Speaker 1: UK GDP figures. Then the monthly data was much worse
Speaker 1: than expected, rapid Bank of England rate rises of biting
Speaker 1: plus the bad weather and strikes your view.
Speaker 8: So I think you know, the data out today has
Speaker 8: been explained by the owns, has been as a result
Speaker 8: of two one off factors. One is the wet weather
Speaker 8: in that particular month that's hurt retail sales by about
Speaker 8: one point two percent, which is down, and also construction,
Speaker 8: So that is one factor, and as you allude to,
Speaker 8: the other factor is industrial action, particularly in the healthcare sector,
Speaker 8: and we've seen a drag on growth as a result
Speaker 8: of health sector output. So I think it's important to
Speaker 8: one identify what has caused today's figures, but two put
Speaker 8: it in the context of the overall picture, which is
Speaker 8: that the end of Q two growth was up unexpectedly
Speaker 8: by some estimates. But also the IMF as you alluded to,
Speaker 8: as well as upgraded significantly their growth forecast for the UK.
Speaker 8: The Bank of England have said that we're going to
Speaker 8: avoid a recession, and the Ons revise their previous analysis
Speaker 8: to say that we were one of the fastest growing
Speaker 8: economies out of the pandemic. So it is important to
Speaker 8: put this data out today in the context of the
Speaker 8: overall picture.
Speaker 2: Yeah, context is obviously important and the forecasts are accurate,
Speaker 2: but Gareth, what is your level what is your level
Speaker 2: of confidence? That we are not in the foothills of
Speaker 2: a recession right now here in the UK.
Speaker 8: Well, I remember not so long ago a lot of
Speaker 8: the forecasters were saying that we'd be in a recession
Speaker 8: by now, and that hasn't happened. As I say, I
Speaker 8: think the IMF, the Banking and the OBR have all
Speaker 8: upgraded their forecasts for growth. For the Treasury, for the government,
Speaker 8: what we are doing is, you know, seeking to ensure
Speaker 8: that we stimulate growth through our active policies. So whether
Speaker 8: it's workforce participation, as you saw at the budget with
Speaker 8: the chartcare reforms.
Speaker 2: Still two point six million people who have healthcare issues
Speaker 2: who have not returned two point six million people, Gareth,
Speaker 2: and that's linked to the NHS and the failures in NHS.
Speaker 2: You have to fix the NHS to get some of
Speaker 2: those people back at two point six million people.
Speaker 8: So what I was going to say is we are
Speaker 8: taking decisive action to incre grease workforce participation but also
Speaker 8: trying to unblock some of the issues for those who
Speaker 8: want to work to be able to work. So we're
Speaker 8: piloting various schemes, for example, to help the disabled, them
Speaker 8: those with long term health issues by providing extra support
Speaker 8: to them to get them into the workforce because we
Speaker 8: recognize that we want to you know, there's more work
Speaker 8: to do to get people back into the workforce. We
Speaker 8: clearly have post pandemic pandemic situation in the NHS where
Speaker 8: we need to clear the backlog of appointments. The industrial
Speaker 8: action is not helping that, and we've been very clear.
Speaker 8: You know, the industrial action has caused I think nearly
Speaker 8: nine hundred thousand appointments to be canceled and so we
Speaker 8: are very clear about that. That is not something that
Speaker 8: we agree with and is clearly having an impact. But overall, overall,
Speaker 8: I think the employment record is strong. Unemployment is still
Speaker 8: lower than most of our international competitors, and payroll employment
Speaker 8: is still at record high. So again, contacts is important.
Speaker 1: Yeah, I mean, but that's part of the problem for
Speaker 1: the UK, isn't it. It's that that is fueling inflation.
Speaker 1: The Bank of England, though, expects Britain to stagnate basically
Speaker 1: for much of the next two years. So maybe you know,
Speaker 1: we aren't in recession, but we're certainly bumping along the
Speaker 1: bottom and that is the fundamental issue for Britain. It's
Speaker 1: actually raising long term economic growth. It's not much to
Speaker 1: celebrate if the next two years are going to be
Speaker 1: stagnant and living standards are under continued enormous pressure.
Speaker 8: Well, the thing that we've got to do is, as
Speaker 8: I've said many times before, the top priority. The thing
Speaker 8: we've got to do is cut inflation. We got to
Speaker 8: get inflation down because that acts as a drag on growth,
Speaker 8: and Prime Minister the Chancellor I have been very clear
Speaker 8: that is our number one priority. We've got to make
Speaker 8: sure that what we do in the treasury fiscal policy
Speaker 8: is aligned with monetary policy, that we support the Independent
Speaker 8: Bank of England to tame inflation and get it down.
Speaker 1: Do you have to start cutting though? Is the triple
Speaker 1: lock on UK pensions going? I mean it looks like
Speaker 1: William Hague has basically taken the heat from the Prime
Speaker 1: Minister by calling for the pensions guarantee to be ditched
Speaker 1: the ifs that we were speaking to and yesterday saying
Speaker 1: that it's going to cost an extra two billion pounds
Speaker 1: more than budgeted two billion. That's not insignificant given how
Speaker 1: little headroom the Treasury has. Is the pension's triple lock
Speaker 1: just toast?
Speaker 8: Well, we're committed to the Triple Lock. Since we introduced it,
Speaker 8: I think two hundred thousand pensioners have been brought out
Speaker 8: of absolute poverty. About twelve and a half million people
Speaker 8: in this United Kingdom rely on it and use it
Speaker 8: as a foundation for their retirement. What we want to
Speaker 8: do is ensure that we provide security and dignity in
Speaker 8: retirement while also ensuring that the system that we put
Speaker 8: in place is fair and sustainable. And we're very clear
Speaker 8: that we're committed to the Triple Lock.