WEBVTT - Daybreak Weekend: Archegos, UK Election, China Eco Data 0:00:02.800 --> 0:00:05.160 This is Bloomberg day Break Weekend, our global look at 0:00:05.160 --> 0:00:07.440 the top stories in the coming week from our Daybreak 0:00:07.440 --> 0:00:10.080 anchors all around the world, and straight ahead on the program. 0:00:10.119 --> 0:00:14.080 Another earning season begins this Friday. Some of Wall Street's 0:00:14.120 --> 0:00:18.799 biggest banks reporting, plus the Archagos jury scheduled to begin 0:00:18.880 --> 0:00:21.439 deliberations this week, and we'll get you up to speed. 0:00:22.120 --> 0:00:23.759 I'm Tom Busby in New York. 0:00:23.840 --> 0:00:26.400 I'm Caroline Hedge in London, where we're delving into the 0:00:26.440 --> 0:00:30.240 key issues facing the UK's newly minted governments. 0:00:30.360 --> 0:00:32.960 I'm got Prisner looking at the level of worry over 0:00:33.000 --> 0:00:35.879 the economy among policymakers in China. 0:00:35.960 --> 0:00:39.960 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:40.000 --> 0:00:43.800 Eleve Them three own New York Bloomberg ninety nine to one, Washington, DC, 0:00:44.120 --> 0:00:47.560 Bloomberg one O six one, Boston Bloomberg nine sixty, San 0:00:47.600 --> 0:00:52.199 Francisco DAB Digital Radio, London, Sirius XM one nineteen and 0:00:52.280 --> 0:00:55.200 around the world on Bloomberg Radio dot com and via 0:00:55.240 --> 0:00:56.560 the Bloomberg Business App. 0:01:01.000 --> 0:01:03.880 Good day to you. I'm Tom Busby. Earning season kicks 0:01:03.880 --> 0:01:06.479 off this week. Some of Wall Street's biggest banks will 0:01:06.520 --> 0:01:09.679 be reporting and for a preview, we welcome in Bloomberg 0:01:09.760 --> 0:01:15.520 Intelligence senior banking analyst Alison Williams. Well, Allison, let's just say, 0:01:15.680 --> 0:01:19.200 what are you expecting to see from these big banks 0:01:19.200 --> 0:01:23.160 that start this Friday, JP Morgan, Chase City Group, Wells Fargo. 0:01:23.440 --> 0:01:26.440 A couple of things that we'll be focusing on. First, 0:01:26.800 --> 0:01:31.720 net interest income. This has been an area of pressure 0:01:31.720 --> 0:01:34.120 in recent quarters, but we have seen signs that those 0:01:34.200 --> 0:01:37.440 pressures are abating. And what we're going to be specifically 0:01:37.440 --> 0:01:41.040 focusing on for the banks are what are the deposit 0:01:41.120 --> 0:01:47.600 trends in terms of seeing some of that some stabilization 0:01:48.240 --> 0:01:52.200 on that front. Secondly, are there any changes to the 0:01:52.240 --> 0:01:55.920 outlook based on what we have seen in terms of 0:01:56.040 --> 0:02:00.840 expectations for interest rate cuts and so over the past 0:02:00.840 --> 0:02:03.320 few months, things have been a little bit more stable 0:02:03.840 --> 0:02:06.080 than the bigger changes that we sought to start this year. 0:02:06.120 --> 0:02:08.720 But keep in mind that when we heard from the 0:02:08.720 --> 0:02:11.640 banks in April, most banks were a little bit hesitant 0:02:12.080 --> 0:02:16.920 to make changes to their forecasts based on the movement, 0:02:17.080 --> 0:02:20.560 and so specifically we'll be listening for Wells Fargo to 0:02:20.600 --> 0:02:25.200 see if there's any changes to their outlook. JP Morgan 0:02:25.360 --> 0:02:29.079 has already increased its outlook on the net interest income front. 0:02:29.639 --> 0:02:31.200 That was some of the news that we got at 0:02:31.320 --> 0:02:34.600 Investor Day. We also heard from them that their expenses 0:02:34.840 --> 0:02:36.680 are going to be higher, but some of that is 0:02:36.760 --> 0:02:40.680 because they are pulling forward some investments because they have 0:02:40.880 --> 0:02:44.600 a sizeable gain to work with. And then for Bank 0:02:44.639 --> 0:02:49.280 of America, the bank has been expecting that this quarter 0:02:49.320 --> 0:02:51.400 will be the trough and their net interest income, so 0:02:51.440 --> 0:02:55.079 we'll look for confirmation on that. City group expecting to 0:02:55.120 --> 0:02:58.480 see some weakness, but there are some offsets on the feeline. 0:02:58.120 --> 0:03:01.320 Now besides net interest income. Of a particular note to you, 0:03:01.560 --> 0:03:03.520 trading and fees. 0:03:03.520 --> 0:03:08.480 Trading and fees trading really continues to be resilient, and 0:03:09.320 --> 0:03:13.480 we have said that we expect that this revenue item 0:03:13.680 --> 0:03:16.440 keeps within the historically higher range, and that is what 0:03:16.480 --> 0:03:20.000 we've seen for the past few quarters. We've seen some 0:03:20.080 --> 0:03:22.440 differences in the drivers, but we do expect that that 0:03:23.280 --> 0:03:27.800 continues this quarter and the quarters ahead. Within fixed income, 0:03:27.919 --> 0:03:30.480 it's really the credit trading business that we expect to 0:03:30.520 --> 0:03:35.640 be the outperformer. We've seen good activity in mortgage backed 0:03:35.880 --> 0:03:39.640 securities as well as asset BAC securities. We've also seen 0:03:39.720 --> 0:03:46.560 currency trading showing some positive trends, as well as our 0:03:46.600 --> 0:03:51.440 expectations that equities trading should also be helped by some 0:03:51.520 --> 0:03:54.160 of the very strong stock price movement that we've had. 0:03:54.840 --> 0:03:57.920 We think the prime brokerage business will continue to support 0:03:57.920 --> 0:04:00.760 the bank, So when we look at trading, we're expecting 0:04:00.920 --> 0:04:04.080 that revenue relatively resilient compared to the prior year. We 0:04:04.120 --> 0:04:08.440 do think that we'll see some seasonal decline, which we 0:04:08.480 --> 0:04:11.200 typically do see in the second quarter, but the FEAT 0:04:11.240 --> 0:04:15.200 side is really where investors are focusing on. Trading is 0:04:15.240 --> 0:04:17.200 a much bigger piece of the revenue pool, but the 0:04:17.240 --> 0:04:21.440 FEA side is a focus because we have had such 0:04:21.760 --> 0:04:25.200 lower levels following the boom that we had in twenty 0:04:25.240 --> 0:04:28.400 twenty one, we saw a big decline the following year, 0:04:28.440 --> 0:04:32.280 and then last year really the big rebound that many 0:04:32.279 --> 0:04:36.560 had hoped for failed to materialize. What we've seen in 0:04:36.600 --> 0:04:40.320 the first half is really strong debt issue, and so 0:04:40.360 --> 0:04:42.560 that's where I think we're going to continue to see 0:04:43.200 --> 0:04:46.120 some of the biggest strength in the second quarter. On 0:04:46.200 --> 0:04:50.120 the equity underwriting side of things, we are seeing some 0:04:50.200 --> 0:04:55.719 positive activity within the US and European region, so we 0:04:55.720 --> 0:04:58.240 think that's helpful, but there's still a lot of room 0:04:58.320 --> 0:05:03.520 to run in terms of of overall issued and especially IPOs. 0:05:03.560 --> 0:05:06.159 So we're going to be listening to hear what the 0:05:06.200 --> 0:05:09.360 banks have to say with regard to pipelines and if 0:05:09.400 --> 0:05:12.680 some of the very strong equity prices can help to 0:05:12.720 --> 0:05:16.240 give a little bit lift on that front. Finally, m 0:05:16.320 --> 0:05:21.560 and A, again, this isn't a business that was relatively 0:05:22.360 --> 0:05:28.920 depressed last year and really looking to get some improvement. 0:05:30.240 --> 0:05:33.200 We think that really after the election is when we 0:05:33.240 --> 0:05:36.080 can start to see things pick up a little bit. 0:05:36.120 --> 0:05:36.240 There. 0:05:36.279 --> 0:05:39.600 It's really about the uncertainty, and we think that following 0:05:39.600 --> 0:05:43.440 the election, one way or another, there will be at 0:05:43.560 --> 0:05:46.600 least a little bit more certainty to help CEOs in 0:05:46.640 --> 0:05:47.480 their decision making. 0:05:47.800 --> 0:05:51.160 Well Our thanks to Bloomberg Intelligence channalyist Alison Williams, and 0:05:51.200 --> 0:05:53.599 we stay on Wall Street now, but shift gears to 0:05:53.720 --> 0:05:57.120 the court room. Jurors expected to begin deliberating in the 0:05:57.120 --> 0:06:00.600 federal fraud and market manipulation trial of Our our Kago's 0:06:00.600 --> 0:06:03.479 Capital management founder Bill Wong. And to bring us up 0:06:03.520 --> 0:06:07.239 to speed, I'm joined by Bloomberg Legal reporter Chris Dulmich 0:06:08.120 --> 0:06:11.720 Chris Somemer, calling this Wall Streets trial of the decade. 0:06:12.440 --> 0:06:16.839 Why what is Bill Wang and one time CFO Patrick Halligan? 0:06:17.240 --> 0:06:18.640 What are they being charged with? 0:06:19.960 --> 0:06:22.800 Yeah, and it's a fascinating case. The trial has been 0:06:22.800 --> 0:06:27.120 going on for nearly two months. It started in mid May. 0:06:28.320 --> 0:06:31.360 The two men are charged with kind of separate things. 0:06:31.720 --> 0:06:35.320 Archie Ghost flew up in March twenty twenty one when 0:06:35.360 --> 0:06:39.800 it's biggest position, Viacom, issued a secondary offering and kind 0:06:39.839 --> 0:06:44.760 of set off a domino effects that led the firm's 0:06:45.040 --> 0:06:48.279 counterparties to start issuing margin calls and eventually led to 0:06:48.320 --> 0:06:51.800 its collapse basically a week later or within the same week, 0:06:51.839 --> 0:06:55.360 I should say. Wang and Halligan, the firm's former CFO, 0:06:55.839 --> 0:07:00.560 are charged with a racketeering conspiracy for allegedly lying to 0:07:00.680 --> 0:07:04.160 the banks, to the firm's banks and counterparties about the 0:07:04.200 --> 0:07:08.960 size of its positions, what investments had held, and how 0:07:09.040 --> 0:07:12.640 much credit it had at other banks, which the government 0:07:12.680 --> 0:07:15.520 alleges led to the kind of collapse of the firm 0:07:15.560 --> 0:07:19.880 in the end. Huang is also charged separately with working 0:07:19.920 --> 0:07:25.200 with the firm's former head trader, William Tamida, to artificially 0:07:25.200 --> 0:07:28.360 increase the price of the stocks and its portfolio in 0:07:28.480 --> 0:07:30.560 order to keep it you know, get its grow its 0:07:30.600 --> 0:07:35.840 assets and continue making money. So it's it's a fascinating case. 0:07:35.880 --> 0:07:38.040 Like I said, it's been going on for nearly two months, 0:07:38.080 --> 0:07:41.040 and the two size will give closing arguments on Monday, 0:07:41.040 --> 0:07:43.320 and the jury could get the cases dudents Tuesday. 0:07:43.640 --> 0:07:46.400 So the question for the jury were the actions of 0:07:46.440 --> 0:07:50.840 our kgos just careless, reckless or something much worse? 0:07:52.320 --> 0:07:56.640 Yeah, the real question is whether they were material to 0:07:56.760 --> 0:08:00.600 the bank's decisions whether to extend credit to them. Really 0:08:00.920 --> 0:08:04.120 is the main question there, and what that means is essentially, 0:08:04.600 --> 0:08:09.920 would a reasonable investor or reasonable counter party have taken 0:08:10.480 --> 0:08:15.200 the alleged misstatements that they made to them into account 0:08:15.200 --> 0:08:17.840 when making the decision whether or not to extend credit. 0:08:18.800 --> 0:08:21.600 And the jury will have to decide that question. That's 0:08:21.640 --> 0:08:25.600 a very important question in most of the counts here. 0:08:25.680 --> 0:08:32.439 So it is it's going to be an interesting deliberation. 0:08:33.200 --> 0:08:37.000 We will obviously have no idea how long it will last, 0:08:37.000 --> 0:08:38.920 but the judge will give its instructions to the jury 0:08:38.920 --> 0:08:41.480 on Tuesday morning and they'll get the case shortly after that. 0:08:42.040 --> 0:08:43.679 Well, there's a lot for the jury to get their 0:08:43.760 --> 0:08:47.880 arms around. A thirty six billion dollar family fortune wiped 0:08:47.920 --> 0:08:50.640 out in three days and banks on the hook for 0:08:50.640 --> 0:08:53.760 about ten billion in losses. I mean, what was the 0:08:53.800 --> 0:08:56.040 bank's due diligence? How was that for? 0:08:56.559 --> 0:08:56.599 What? 0:08:56.800 --> 0:08:59.400 I mean, did he look like a safe bet for 0:08:59.480 --> 0:09:03.760 them or or did they just getled. 0:09:03.640 --> 0:09:06.040 That's been well, it's it's a mixed back because they 0:09:06.040 --> 0:09:09.000 are about there are about a dozen different counterparties reading 0:09:09.000 --> 0:09:12.520 from you know, giant investment banks like Goldman, Sachs and 0:09:12.600 --> 0:09:15.240 Credit Sweets, which eventually collapsed in kind of the wake 0:09:15.280 --> 0:09:19.240 of this this blow up. Some did more due diligence 0:09:19.240 --> 0:09:21.400 than others, but a lot of them have kind of 0:09:21.440 --> 0:09:24.240 looked anxious to do business with them. They had become 0:09:24.280 --> 0:09:28.640 a massive kind of player in the family office world, 0:09:28.960 --> 0:09:33.240 and and a lot of times they were maybe taking 0:09:33.280 --> 0:09:35.200 them at base value, like for a long time. This 0:09:35.320 --> 0:09:38.840 is a pretty profitable firm for a long time. Bill 0:09:38.960 --> 0:09:43.000 Wong's you know, thesis and kind of investment strategy was 0:09:43.120 --> 0:09:47.600 by and hold. He had his defenses that he honestly 0:09:47.640 --> 0:09:50.040 believed in these companies that he invested in, and he 0:09:50.120 --> 0:09:53.520 was making investment decisions based on fundamentals, and that he 0:09:53.640 --> 0:09:57.240 wasn't really trying to manipulate the market. But what's clear 0:09:57.320 --> 0:10:02.240 from the trial and the testimony is that starting around 0:10:02.240 --> 0:10:06.360 the time of the pandemic, he increasingly directed his traders 0:10:06.360 --> 0:10:12.320 to trade an increasing amounts both before market and near 0:10:12.440 --> 0:10:17.160 the close to you know, and there's a lot more 0:10:17.200 --> 0:10:20.880 activity than they had ever done before. So it's it's 0:10:21.040 --> 0:10:24.720 really going to be a big question for the jury 0:10:24.800 --> 0:10:28.240 as to what happened here, as to whether or not 0:10:28.280 --> 0:10:33.000 they're actually responsible for, you know, leading these banks into 0:10:33.040 --> 0:10:35.120 these decisions to extend credits. 0:10:35.640 --> 0:10:38.240 And this all began, as you said, with swaps on 0:10:38.440 --> 0:10:41.880 Viacom CBS. Then he got into some Chinese tech companies. 0:10:42.280 --> 0:10:44.920 Did they look like just mundane investments? Did they look 0:10:45.040 --> 0:10:47.480 like big risks at the time. I know, twenty twenty 0:10:47.520 --> 0:10:50.600 hindsight is perfect, but you know, going back to twenty 0:10:50.640 --> 0:10:51.319 twenty one. 0:10:52.200 --> 0:10:55.880 Certainly some of them could be considered risky bets he had. 0:10:56.040 --> 0:10:58.680 You know, the banks consistently asked him whether he had 0:10:58.760 --> 0:11:03.520 hedges in place in you know, pretty liquid companies like 0:11:03.600 --> 0:11:07.760 you know, Google, Facebook and big stocks like that, and 0:11:07.840 --> 0:11:09.800 they wanted to be reassured that he had and he 0:11:09.880 --> 0:11:12.320 did have some edges in place, but ultimately those were 0:11:12.320 --> 0:11:15.480 not really that did not really help him in the 0:11:15.559 --> 0:11:19.640 end because of liquid they they called it, and this 0:11:19.800 --> 0:11:24.720 was a big question in the trial that Archie Ghosts 0:11:24.720 --> 0:11:28.439 claimed that this was a liquidity problem, not a solvency problem. 0:11:28.640 --> 0:11:31.480 The government, of course says they were insolvent. They no 0:11:31.559 --> 0:11:35.160 longer were able to function as a going concern. So 0:11:36.240 --> 0:11:39.200 whether or not it was actually a problem of just 0:11:39.280 --> 0:11:42.120 being able to get the money to pay the margin 0:11:42.200 --> 0:11:46.520 calls and that they weren't able to in the end 0:11:46.640 --> 0:11:49.040 because of this domino effect, or whether or not it 0:11:49.080 --> 0:11:52.360 was because of manipulation and the statements they made to 0:11:52.400 --> 0:11:55.199 the banks. Of course, the defense says in a lot 0:11:55.240 --> 0:11:57.080 of ways, these were not my statements at all, that 0:11:57.200 --> 0:11:59.319 he believed a lot of the things they were saying 0:11:59.320 --> 0:12:00.600 that they were true. 0:12:00.800 --> 0:12:01.040 Wow. 0:12:01.120 --> 0:12:05.520 Well, Closing arguments expected this week in Bill Wong's federal trial, 0:12:05.559 --> 0:12:08.400 Wall Street Trial of the Decade. Our thanks to Chris 0:12:08.440 --> 0:12:11.880 dolmech legal reporter for Bloomberg News, and coming up on 0:12:11.880 --> 0:12:14.160 Bloomberg Day Break weekend, we head across the Pond to 0:12:14.160 --> 0:12:16.560 look at what the results of this past week's UK 0:12:16.760 --> 0:12:21.200 parliamentary election could mean for that country's and Europe's economy. 0:12:21.440 --> 0:12:35.760 I'm Tom Busby and this is Bloomberg. This is Bloomberg 0:12:35.800 --> 0:12:38.120 day Break weekend, our global look ahead at the top 0:12:38.120 --> 0:12:41.000 stories for investors in the coming week. I'm Tom Busby 0:12:41.040 --> 0:12:43.880 in New York. Up later in our program more trade 0:12:43.920 --> 0:12:47.520 and inflation data from the world's second largest economy. But first, 0:12:48.000 --> 0:12:50.880 what will last week's election results in the UK mean 0:12:51.000 --> 0:12:53.840 for that country's economy. For more, we head to London 0:12:54.320 --> 0:12:57.599 and Caroline Hepker, the host of Bloomberg Daybreak Europe. 0:12:57.800 --> 0:12:58.079 Tom. 0:12:58.240 --> 0:13:02.920 After a brief and different dificult election campaign, including many 0:13:02.960 --> 0:13:07.040 hard fought battles over the economy, immigration, and public services, 0:13:07.040 --> 0:13:10.559 to name a few, the British electorate has finally made 0:13:10.640 --> 0:13:14.400 its choice. Whilst the snap summer poll may have come 0:13:14.440 --> 0:13:17.320 as a surprise to many, even those well versed in 0:13:17.360 --> 0:13:21.880 the ways of Westminster, the dismal inheritance awaiting the next 0:13:21.960 --> 0:13:25.280 government will be news to no one. Britain's problems have 0:13:25.320 --> 0:13:29.200 been piling up since the twenty sixteen Brexit referendum, which 0:13:29.280 --> 0:13:33.760 triggered years of Tory political infighting. Add to that a 0:13:33.800 --> 0:13:38.480 global pandemic alongside current geopolitical unrest, and some would argue 0:13:38.559 --> 0:13:43.240 you're left with the perfect recipe for political disaster. Former 0:13:43.280 --> 0:13:46.920 Conservative Government minister Sam Jimar has been speaking to Bloomberg, 0:13:47.200 --> 0:13:51.400 telling us that the next government's navigation of relations with 0:13:51.480 --> 0:13:54.359 the European Bloc will now be critical. 0:13:54.800 --> 0:13:57.080 Foreign investment is a big thing. Is this going to 0:13:57.080 --> 0:14:00.319 be a government that is domestically focused or is going 0:14:00.360 --> 0:14:03.280 to really get out there, almost go on a road 0:14:03.320 --> 0:14:06.280 show and to try and attract for an investment. I 0:14:06.320 --> 0:14:10.479 think here the public is leading opinion rather than the politicians, 0:14:10.480 --> 0:14:12.200 and I think most of the public today, if you 0:14:12.240 --> 0:14:16.439 pull them, we'll say that Brexit has been a mistake, 0:14:17.120 --> 0:14:19.480 to put it bluntly, but I think the direction of 0:14:19.520 --> 0:14:23.880 travel from here is an easy enough relations Where we've 0:14:23.880 --> 0:14:27.120 been is that anything that is from the EU has 0:14:27.160 --> 0:14:30.560 to be treated with deep skepticism and therefore not getting 0:14:30.600 --> 0:14:33.360 involved with So that's one aspect of it. You're quite 0:14:33.400 --> 0:14:36.280 rightly pointed out. I resigned from government in twenty eighteen. 0:14:36.400 --> 0:14:38.920 I read the tea leaves that the Conservative Party was 0:14:38.960 --> 0:14:42.480 embarked on a journey that would not be constructive for 0:14:42.560 --> 0:14:45.680 the country. In fact, it's being destructive for our economy. 0:14:46.040 --> 0:14:49.840 And my personal hope is that we get back on 0:14:49.880 --> 0:14:52.640 an even keel that's not to re litigate the referendum, 0:14:53.080 --> 0:14:56.480 but to actually remove some of the sanctions we've effectively 0:14:56.480 --> 0:14:58.040 imposed on ourselves as a country. 0:14:58.120 --> 0:15:01.800 That was Sam Timo speaking to bloom Radio. Right now, 0:15:01.840 --> 0:15:05.840 the UK is also facing a fiscal strait jacket. This 0:15:06.000 --> 0:15:09.840 is the product of years of crisis spending spurred by 0:15:09.880 --> 0:15:13.200 the COVID pandemic and a need to help families to 0:15:13.280 --> 0:15:15.680 cope with the cost of a living shock after Russia's 0:15:15.680 --> 0:15:20.920 invasion of Ukraine. Today's government is presented with crumbling public 0:15:21.000 --> 0:15:25.160 services that desperately need money, taxes at a postwar high, 0:15:25.200 --> 0:15:28.720 and national debt at levels last scene in the early 0:15:28.880 --> 0:15:34.120 nineteen sixties, which costs sixty billion pounds per year just 0:15:34.160 --> 0:15:37.240 in order to service. As far as the list of 0:15:37.360 --> 0:15:40.600 priorities goes, it's hard to imagine a world in which 0:15:40.800 --> 0:15:44.480 minimizing the country's economic bleeding isn't high on the agenda. 0:15:45.000 --> 0:15:48.000 On the campaign trail, growth was a real buzzword, as 0:15:48.040 --> 0:15:51.880 parties promised that the economy could expand its way out 0:15:51.920 --> 0:15:55.680 of the spending bind. Business leaders will also be key 0:15:55.680 --> 0:15:58.920 in achieving that, but they will likely have their own 0:15:58.920 --> 0:16:02.480 set of demands or the new residents of Number ten. 0:16:03.040 --> 0:16:06.640 Key bosses tell Bloomberg that they're looking for upgraded infrastructure, 0:16:06.920 --> 0:16:09.720 a focus on the skills gap, and a commitment to 0:16:09.800 --> 0:16:14.000 the climate, coupled with a strong preference for lower business rates. 0:16:14.240 --> 0:16:19.040 Their requests won't come cheap. Can Britain's next cabinet keep up? 0:16:19.920 --> 0:16:23.280 Also personal it will be the housing crisis. Bloomberg analysis 0:16:23.280 --> 0:16:25.280 shows that the next government will need to build the 0:16:25.320 --> 0:16:28.960 equivalent of another city the size of London to make 0:16:29.080 --> 0:16:34.320 up for five decades of below target construction. The shortfall 0:16:34.520 --> 0:16:38.280 is driving Britain's worst housing crisis since World War II. 0:16:38.600 --> 0:16:43.120 Alleviating its effects will no doubt be of immediate concern, 0:16:43.560 --> 0:16:46.000 But is it possible to make up the difference? For 0:16:46.040 --> 0:16:50.280 almost five decades, developers and local authorities have failed to 0:16:50.320 --> 0:16:53.160 bring new homes onto the market at the pace of 0:16:53.200 --> 0:16:56.960 other wealthy nations in Europe, or even at the rate 0:16:57.040 --> 0:17:01.280 that Britain managed during the nineteen sixties. So plenty for 0:17:01.360 --> 0:17:04.280 this next administration to be getting on with. Where do 0:17:04.359 --> 0:17:08.560 they start? The new government's proverbial inbox is something that 0:17:08.600 --> 0:17:11.520 my colleague Tom McKenzie and I have been discussing with 0:17:11.800 --> 0:17:16.720 Bloomberg's senior economics reporter Philip Aldrick our City editor Katherine 0:17:16.760 --> 0:17:19.760 Griffiths and our housing reporter Jack Sitters. 0:17:20.520 --> 0:17:22.920 It's the combination of the one hundred percent of GDP 0:17:23.240 --> 0:17:27.160 debt level with high interest rates that has caused real 0:17:27.400 --> 0:17:30.000 constraints on public spending and what the government can do. 0:17:31.520 --> 0:17:34.320 The increase in the debt servicing costs has gone up 0:17:34.440 --> 0:17:37.560 by sixty billion pounds a year since before the pandemic. 0:17:37.800 --> 0:17:40.200 That sixty billion pounds is equivalent to the size of 0:17:40.200 --> 0:17:42.239 the defense budget, and you're not getting anything for that. 0:17:42.640 --> 0:17:45.320 So you have to take money out of services to 0:17:45.400 --> 0:17:48.560 pay for this debt servicing, or you've got to raise 0:17:48.560 --> 0:17:50.760 taxes to do this, or you could borrow more and 0:17:50.800 --> 0:17:52.720 send the debt spiraling further. These are the kind of 0:17:52.920 --> 0:17:54.960 horrific decisions that have to be that are having to 0:17:55.040 --> 0:17:57.280 be made, and that's why we've seen the tax burden 0:17:57.359 --> 0:17:59.520 just drift up to sort of the highest level since 0:17:59.560 --> 0:18:03.160 World War II, because you know, there are these ongoing 0:18:03.200 --> 0:18:06.280 public spending costs which have got no effect on the 0:18:06.680 --> 0:18:09.480 quality of public services. Just just paying our creditors doesn't 0:18:09.480 --> 0:18:12.760 help pay for nurses. So that's been this kind of 0:18:12.800 --> 0:18:13.480 core problem. 0:18:13.840 --> 0:18:14.159 Catherine. 0:18:14.200 --> 0:18:16.239 Let's bring you in at this point in terms of 0:18:16.240 --> 0:18:19.160 how the city of London is adjusting to the new government. 0:18:19.200 --> 0:18:21.119 We saw a course a number of politicians fighting for 0:18:21.160 --> 0:18:24.600 the affections of the city and businesses over the last 0:18:24.600 --> 0:18:26.240 six weeks or so. What is going to be at 0:18:26.280 --> 0:18:27.240 the top of their wish list? 0:18:28.200 --> 0:18:30.119 Well, I suppose, on the one hand, if they had 0:18:30.119 --> 0:18:32.760 a kind of ideal wish list, it would be a 0:18:32.880 --> 0:18:36.400 very very sort of tax free scenario or low taxes. 0:18:36.440 --> 0:18:38.840 So when it's banks, they don't want to have the 0:18:39.160 --> 0:18:41.359 surcharge on their profits, they don't want to have the 0:18:41.480 --> 0:18:44.600 levy on their balance sheets. But I think they are realistic. 0:18:44.720 --> 0:18:47.359 So what they're really looking for, given the constraints that 0:18:47.400 --> 0:18:50.920 feels just outlined, is they want sort of clarity. They 0:18:50.920 --> 0:18:54.520 want consistency, they want a closer relationship with Europe, and 0:18:54.560 --> 0:18:56.480 they want the UK overall to be a kind of 0:18:56.560 --> 0:18:59.280 place where they can attract the best talent. So they 0:18:59.280 --> 0:19:02.040 want all those other things to work well, public services too, 0:19:02.080 --> 0:19:03.840 so they can get people to come and work here. 0:19:04.240 --> 0:19:06.880 Attracting the best talent, though it means somewhere to live. 0:19:07.640 --> 0:19:12.520 In the planning system, the housing landscape has been incredibly difficult. 0:19:13.000 --> 0:19:16.760 Jack considers this is your beat, isn't it? How difficult 0:19:16.760 --> 0:19:19.000 it is going to be to solve the housing problem. 0:19:19.280 --> 0:19:21.080 The fact that you've even got me on for this discussion, 0:19:21.119 --> 0:19:24.320 I guess, is telling of just how much housing has 0:19:24.520 --> 0:19:27.879 risen up the agenda. The reality is today that you 0:19:27.920 --> 0:19:29.879 know a huge proportion of the housing output in this 0:19:29.880 --> 0:19:33.760 country is delivered by a very small number of private developers. 0:19:34.600 --> 0:19:37.639 They're not charities, they're focused on margin, and you know, 0:19:37.680 --> 0:19:41.359 you've had a period of suddenly increasing interest rates, so 0:19:41.359 --> 0:19:43.399 a lot of these housebuilders were very nervous about what 0:19:43.440 --> 0:19:45.639 demand would look like, so they've slowed down the amount 0:19:45.640 --> 0:19:49.000 they've been building. Inevitably, that's going to slow down, you know, 0:19:49.720 --> 0:19:51.879 the overall supply, and you just don't have the money 0:19:51.920 --> 0:19:54.520 there for the public sector to be building in significant 0:19:54.560 --> 0:19:56.240 volume as it did. You know back if you go 0:19:56.240 --> 0:19:57.880 back to the fifties and sixties, which is the last 0:19:57.880 --> 0:19:59.879 time Britain was really building, you know what, we might 0:20:00.359 --> 0:20:03.400 enough homes. The incoming government has got a huge challenge 0:20:03.440 --> 0:20:05.480 to try and stimulate that supply, and it just it 0:20:05.520 --> 0:20:06.439 won't happen quickly. 0:20:07.600 --> 0:20:09.680 On the question, Phil, we'll bring you back in at 0:20:09.680 --> 0:20:12.360 this point. Fiscal rules big feature of course of the campaign, 0:20:12.359 --> 0:20:15.200 and how how a new government will stick to them 0:20:15.760 --> 0:20:17.879 as they as they look to fund services like education 0:20:17.960 --> 0:20:20.320 and NHS do they do, they still need to stick 0:20:20.359 --> 0:20:23.080 to those to those fiscal rules is their rigal room. 0:20:23.400 --> 0:20:26.439 Because of course, loosening the fiscal purse to spend on 0:20:26.480 --> 0:20:28.159 things like tax cuts, it's very different to loosening the 0:20:28.200 --> 0:20:30.520 fiscal purse to spend on things like capex. 0:20:30.760 --> 0:20:33.920 In March, the OvR forecast that Jeremy Hunt had about 0:20:33.920 --> 0:20:37.440 eight point nine billion to spend you know, headroom under 0:20:37.560 --> 0:20:40.159 under under the fiscal rules. So there is going to 0:20:40.160 --> 0:20:43.520 be real constraints on what they can do caused by 0:20:43.920 --> 0:20:46.439 you know this this you need to show, you know, 0:20:46.520 --> 0:20:48.800 fiscal sort of prudence. 0:20:49.040 --> 0:20:53.680 Yeah, Catherine. In terms of then how that how that 0:20:53.760 --> 0:20:57.119 flows into what happens with the UK? How does Britain 0:20:57.200 --> 0:21:00.960 target foreign investment? I mean a few days before the election, 0:21:01.040 --> 0:21:04.440 I remember speaking to the country head a BNP Pariba, Menuelburi, 0:21:04.520 --> 0:21:08.320 and she was saying, you need stability, that is for 0:21:08.400 --> 0:21:12.639 more than just six months. How is Britain going to 0:21:12.680 --> 0:21:14.200 bring foreign investment in? 0:21:15.119 --> 0:21:17.919 So I think the government will start from quite a 0:21:17.920 --> 0:21:21.040 good place, which is that the UK seems quite a 0:21:21.080 --> 0:21:23.880 stable place compared to many other parts of the world, 0:21:23.920 --> 0:21:27.400 not LEAs style continental neighbors. So it's a good starting point. 0:21:27.760 --> 0:21:29.879 But I think there are a few things that foreign 0:21:29.880 --> 0:21:32.760 investors want for a start. They do want stability. They 0:21:32.800 --> 0:21:36.280 didn't like the idea of the HS two extension project 0:21:36.359 --> 0:21:39.200 being going so far down that path and then dropped 0:21:39.440 --> 0:21:42.199 by Richie Sunak, So they don't want to feel that 0:21:42.280 --> 0:21:46.320 kind of domestic politics. Trump's sort of long term planning, 0:21:46.720 --> 0:21:48.920 and they want to have kind of clear sight of 0:21:49.160 --> 0:21:52.840 what the government will do, whether it's green investment, whether 0:21:52.880 --> 0:21:55.639 it's housing or other infrastructure, because they definitely want to 0:21:55.680 --> 0:21:56.280 invest in the. 0:21:56.320 --> 0:22:00.240 UK Okay that on that challenge and then domestically, and 0:22:00.680 --> 0:22:02.840 part of the challenge around building those new homes and 0:22:03.280 --> 0:22:06.879 reaching those targets has been what nimbiism who's been has 0:22:06.960 --> 0:22:10.399 been blamed, so so local populations pushing back on developments. 0:22:10.920 --> 0:22:13.800 When I speak to people about this, those who welcome 0:22:14.040 --> 0:22:16.080 the development of buildings also say what they need to 0:22:16.240 --> 0:22:19.760 also incorporate things like additional hospitals and schools that come 0:22:19.800 --> 0:22:24.120 under pressure. How is the incoming government thinking about addressing 0:22:24.320 --> 0:22:26.679 that part of it? Are they going to rip up 0:22:26.720 --> 0:22:30.080 the regulations to just get that house building going even 0:22:30.160 --> 0:22:33.400 come what may, even if some of those issues are sidelined, 0:22:33.600 --> 0:22:35.119 or are they looking to address that as part of 0:22:35.119 --> 0:22:35.440 the mix. 0:22:35.800 --> 0:22:38.639 Yeah, so I think it's really interesting. And you know, 0:22:38.960 --> 0:22:42.520 in the time that I've spent covering this area, I've 0:22:42.560 --> 0:22:46.160 never never before heard a political party, even though slightly 0:22:46.200 --> 0:22:49.040