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Speaker 1: Back to the UK now and the Chancellor Rachel Reeves

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Speaker 1: has been making her pitch to the financial services industry.

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Speaker 1: In her first Mansion House speech, it included a promise

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Speaker 1: to rethink regulation of the sector and efforts to boost investments.

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Speaker 1: Joining us now to discuss is Nigel Wilson, chair of

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Speaker 1: the Canary Warf Group, former CEO of Legal and General

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Speaker 1: of course and a regular visitor to these Bloombag studio.

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Speaker 1: So very nice to see you once again, Nigel. You've

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Speaker 1: also shared, of course the recent Capital Markets of Tomorrow

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Speaker 1: report looking at the challenges facing the city. So well

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Speaker 1: placed to review Rachel Reeves and everything we got from

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Speaker 1: Mansion House. How did you read her comments on rethinking regulation, Nigel,

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Speaker 1: because this is part of this is part of a

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Speaker 1: push to perhaps refocus some of the regulatory bodies we

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Speaker 1: have in the city around growth.

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Speaker 2: Yeah. I think the growth agenda came back. You know,

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Speaker 2: we had a sort of ideological diversion for the budget

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Speaker 2: and then we've gone back to the growth agenda, which

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Speaker 2: is a good thing. And I think the upbeat message

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Speaker 2: around growth has been central again is actually what we

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Speaker 2: should be spending up time on because you know, you know,

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Speaker 2: the economy is muddling through growth dynemic. Everybody's panicking about

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Speaker 2: how they handle the NIX issues and the various other

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Speaker 2: incremental taxes that have come through the budget. We've got

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Speaker 2: to get back to the bigger picture, which is how

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Speaker 2: we're going to grow. And the fact that they're going

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Speaker 2: to give the regulators the dual objective of delivering growth

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Speaker 2: I think's really positive.

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Speaker 1: And you think we'll get the balance right there?

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Speaker 3: Will we?

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Speaker 2: Because of I'm sure we won't get the balance right.

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Speaker 2: We're going to get the direction of travel right, yeah,

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Speaker 2: which I think is what we haven't had for twenty

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Speaker 2: five years. And whether that's the water industry or the

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Speaker 2: telecoms industry, along the financial services industry, we have not

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Speaker 2: got the growth agenda anywhere embedded in the regulations of

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Speaker 2: those of all those industries. And that has to be

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Speaker 2: part of the long term growth strategy that we have

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Speaker 2: as a country. We definitely don't have it right now.

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Speaker 3: Will the simple shifting of our addition to those mandates

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Speaker 3: of those regulators, they'll be enough to encourage more risk

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Speaker 3: taking and thus spur the investment that reads is helping

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Speaker 3: that a well?

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Speaker 2: No, I think the culture of the organizations needs to

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Speaker 2: change dramatically because sometimes the messages the top get diluted

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Speaker 2: when they come to implementation. And I know we used

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Speaker 2: to spend sometimes years trying to get a new asset

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Speaker 2: a class approved by the regulator for investing in the UK,

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Speaker 2: and often as a consequence of that, we ended up

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Speaker 2: investing outside the UK in an asset class which already

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Speaker 2: existed in America. And that's not a good outcome, and

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Speaker 2: that was because they didn't have a growth agender. They

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Speaker 2: were excessively risk averse, and as a consequence of that,

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Speaker 2: we took action which allowed us to deliver on a

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Speaker 2: global thing, the right outcome, but definitely not the right

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Speaker 2: outcome for the UK.

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Speaker 1: And that takes us on to the pension activity that

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Speaker 1: we've seen from Rachel Reeves and this idea that you

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Speaker 1: pull these pension assets together to make these mega funds,

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Speaker 1: and maybe that increases some of the investment that we

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Speaker 1: see from pensions into infrastructure projects in the UK, although

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Speaker 1: not necessarily in the UK. So Nigel tell us your

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Speaker 1: response to where we've got to.

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Speaker 2: On this, Yeah, but not necessarily in the UK, which

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Speaker 2: is because what we've seen is in LGPS for example,

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Speaker 2: Legal and General manage a huge amount of money for LGPS.

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Speaker 2: Thirty eight percent of their investments used to be in

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Speaker 2: UK equities. It's now about nine percent. So the first

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Speaker 2: wave of consolidation which we've seen in LGPS didn't result

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Speaker 2: in more investment in the UK, resulting in entirely the opposite,

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Speaker 2: which is a big decrease in UK equities. So you

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Speaker 2: give the necessary conditions, but it's not sufficient conditions.

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Speaker 1: So scale isn't everything.

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Speaker 2: What else Scale isn't and everything it's actually here. We

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Speaker 2: have to create the planning opportunities which allow us to

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Speaker 2: have these investments, but also the risk appetite to want

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Speaker 2: to do these things. You know, America leads the way

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Speaker 2: in lots of these asset classes, and they have some

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Speaker 2: amazing companies, you know, the Brookfields and Blackstones and Apollos

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Speaker 2: and Kkrs who've been developing these assets in private marketers. Indeed,

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Speaker 2: you know JP Morgan and the other banks have. We

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Speaker 2: haven't got that capability at the moment in the USE.

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Speaker 2: So if we're not careful the assets, people will invest

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Speaker 2: in those assets, but not necessarily in the UK in

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Speaker 2: those assets, which is what we saw over the previous

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Speaker 2: fifteen years in UK equities for the decline from almost

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Speaker 2: forty percent down to less than ten percent.

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Speaker 3: But isn't it always going to be the case that

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Speaker 3: you know, comparing yourselves to the US is is an

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Speaker 3: extremely difficult thing to make the case for. How do

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Speaker 3: you what encouragements do? I mean you're talking about the

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Speaker 3: local government pension schemes as the changes that rate res announced,

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Speaker 3: But do pension funds need a mandate? Doesn't need to

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Speaker 3: be very clear that they have to push x amount

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Speaker 3: of assy.

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Speaker 2: I'm flavor of soft compulsion, which is as that look like,

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Speaker 2: which is a bit like auto enrollment. You know, people

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Speaker 2: are encouraged to invest in things and if they don't

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Speaker 2: want to, they opt out. But we certainly should be

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Speaker 2: setting targets or frameworks which allow them to invest more

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Speaker 2: in the UK so that over a long period ten

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Speaker 2: twenty thirty years we see more of these moneys being

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Speaker 2: flawed into risk assets in the UK as are paused

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Speaker 2: to too much of the assets in cash and guilts

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Speaker 2: to be frank.

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Speaker 1: Why do you think they've stopped short of doing that?

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Speaker 1: Because this was a criticism of the last administration as well,

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Speaker 1: that they didn't mandate that the money had to stay

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Speaker 1: in the UK, and it might be because well, if

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Speaker 1: you want best execution for future pensioners, you need to

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Speaker 1: be able to invest abroad. But you could attach it

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Speaker 1: to text benefits and say okay, put it in the

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Speaker 1: UK and then you get these tax.

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Speaker 2: Breaks absolutely, and cash isis are probably the best example

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Speaker 2: of that, where we give everybody a tax brik for

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Speaker 2: investing in cash with the only country in the world

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Speaker 2: that does. Add that's a three hundred billion pound asset

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Speaker 2: class and imagine if we fiers that out over time

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Speaker 2: and got people to invest in other assets which are

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Speaker 2: of greater strategic value to the UK and deliver better

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Speaker 2: returns over the long term, that would be a good outcome.

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Speaker 3: I'm curious to know more about your view of this

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Speaker 3: idea of setting targets. What should what's the idea level

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Speaker 3: for a target for investment in the UK assets? What's

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Speaker 3: going to do enough to spur the growth that then

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Speaker 3: creates the business case behind us.

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Speaker 2: Well, I feel look at DC Pensions, which was kind

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Speaker 2: of where richual was talking talking about, and I think

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Speaker 2: much of you know it, it's quite a good It

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Speaker 2: was a good speech by Richual. I thought, and I've

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Speaker 2: now read it twice and listened to it last night

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Speaker 2: as well. The challenge in DC it's growing very quickly.

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Speaker 2: Most people invest in the default fund. It's the it's

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Speaker 2: the middle one on the first page, in the middle box,

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Speaker 2: and people tick that and they very rarely change from that.

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Speaker 2: So the default fund can be used as a vehicle

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Speaker 2: for nudging in the right direction. And I would say,

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Speaker 2: let's give UK infrastructure a five percent allocation within the

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Speaker 2: default fund. And that's an easy.

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Speaker 3: Need to be huge what it doesn't need to be

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Speaker 3: a huge It doesn't need.

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Speaker 2: To be huge, and it doesn't you know, you know,

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Speaker 2: everybody being very weird about it being non competitive and

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Speaker 2: all the rest of it. We've got a huge infrastructure deficit.

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Speaker 2: How we're be going to fill it is actually get

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Speaker 2: people to be nudged in the right direction, in the

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Speaker 2: same way that young people should be investing in young companies,

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Speaker 2: you know, their friends and setting up these new companies,

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Speaker 2: and maybe have a two percent allocation for that. Again

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Speaker 2: not massive allocations.

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Speaker 1: And why are those things not there already? Then, Nigel

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Speaker 1: just remind us, since long we've spent a long time

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Speaker 1: getting at this place.

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Speaker 2: I've failed miserably is one of the reasons they're not there.

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Speaker 2: I've tried very hard for fifteen years to get this

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Speaker 2: to happen in the in the UK, and there's always

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Speaker 2: been a reluctance to doing it. But now we can

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Speaker 2: see there's no growth, the tiny amount of growth, and

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Speaker 2: it's been.

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Speaker 1: About risk aversion. Has it that those things weren't there?

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Speaker 2: Well, it's sort of an ideological objection to actually some

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Speaker 2: soft compulsion, and that I think is the wrong approach

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Speaker 2: when there's such an urgent need in the UK for

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Speaker 2: this real, real money to make a difference to everybody's lives,

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Speaker 2: and everybody thinks it's a good idea, but you've got

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Speaker 2: to give a bigger nudge than we've been giving so far,

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Speaker 2: and we're not saying go wild and reckless and do

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Speaker 2: all things. That's why the growth objective is so important.

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Speaker 2: Then the regulator can approve these asset classes much quicker

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Speaker 2: and we can see much greater growth in these businesses

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Speaker 2: in the UK.

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Speaker 3: I want to kind of put to ask you, for

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Speaker 3: a want of better word about the vibes right because

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Speaker 3: I'm sensing you're quite positive about what you heard from

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Speaker 3: Rachel Reeves last night, good ideas, you know, moving us

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Speaker 3: in the right direction. That's contrary to the narrative that

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Speaker 3: we've had since the budget, particularly from business groups. Weren't

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Speaker 3: happy about employers' national insurance contributions going up as well.

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Speaker 3: Do these things cancel each other out?

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Speaker 2: I'm not sure they cancel them out From a business

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Speaker 2: point of view. I think people are still very grumpy

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Speaker 2: about the budget and that's going to mess up a

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Speaker 2: lot of business plans and a lot of change.

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Speaker 3: And are you seeing that, you know, people looking at

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Speaker 3: Canary War for example.

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Speaker 2: And not really looking at Canary Wolf. But I think

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Speaker 2: as I travel across the country and meet lots of people,

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Speaker 2: you know, I think that's definitely the case. The direction

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Speaker 2: of travel was good last night. And talking to the

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Speaker 2: Treasury as well, which I did, was they think the

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Speaker 2: speed of travel has been going to be real queer.

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Speaker 2: But but are we doing enough fast enough? I think

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Speaker 2: the answer to that is not. But the direction of

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Speaker 2: travel is better than definitely better than what we saw

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Speaker 2: in the budget.

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Speaker 1: And on the big picture questions, Nigel, let me ask you,

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Speaker 1: we're coming towards the end of this year. We know

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Speaker 1: that next year is going to be to some degree

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Speaker 1: of our own making, but here in the UK, but

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Speaker 1: to some degree dictated by others. And we have a

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Speaker 1: return to the White House in the United States that

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Speaker 1: will have a big impact on so many people's lives

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Speaker 1: and finance in many places. Do you think that the

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Speaker 1: growth plans in the UK are sort of trump proofed?

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Speaker 1: Are you watching with anxiety what might happen?

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Speaker 2: Yeah? I think everybody's got to watch you with a

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Speaker 2: bit of anxiety as to what might happens, because you know,

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Speaker 2: there's a lot of contrarian approaches to solving problems that

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Speaker 2: are going to happen, and there's some very addish appointments

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Speaker 2: that have been made already, which you guys have been

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Speaker 2: talking about. And yes, we'll see some compromise on tariffs,

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Speaker 2: but they're still tariffs, and we know that there's there's

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Speaker 2: all sorts of negative consequences as a part of that.

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Speaker 2: The whole defense and defense spending in the role of

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Speaker 2: NATO is going to have a big impact on Europe.

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Speaker 2: I hope personally that again, and kiss Sarmus said that,

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Speaker 2: and Rachel said that. Indeed, Governor Bank of England said this,

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Speaker 2: let's get together and be closer to Europe. You know,

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Speaker 2: Brexit was a mistake, but actually, let's move forward and

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Speaker 2: figure out how we can develop better partnerships with the

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Speaker 2: rest of Europe. And Trump may prove to be the

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Speaker 2: catalyst that makes that happen, and so that may be

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Speaker 2: the positive outcome of all of this, is that we'll

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Speaker 2: all be treated in a certain way and that actually,

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Speaker 2: as a consequence of that, we may all get together.

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Speaker 2: Because you know, the German economies is in a mess.

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Speaker 2: The French economy, I think, is in a mess. The

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Speaker 2: Italian economy has got no growth whatsoever. Some of the

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Speaker 2: smaller countries are doing reasonably well, but net net, it's

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Speaker 2: a pretty miserable show. And the Europe's going to muddle

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Speaker 2: through as well. Next year, the UK has going to

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Speaker 2: muddle through. We've got to work together in partnership and

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Speaker 2: figure out how we can grow together and how we

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Speaker 2: can invest so much more because we've got the capital.

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Speaker 2: It's all sitting around. We've had regulators been overly risk averse,

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Speaker 2: which has ended up with companies being overally risk averse.

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Speaker 2: Our politician's been risk averse, and the outcome of this

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Speaker 2: excessive risk aversion is low growth, and that's been a

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Speaker 2: terrible outcome for US as a society,