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Speaker 1: This is the Bloomberg Daybreak Europe podcast, available every morning

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Speaker 1: on Apple, Spotify or wherever you listen. It's Monday, the

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Speaker 1: nineteenth of February in London. I'm Stephen Carroll. Coming up today.

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Speaker 1: The Bank of England's former chief economist tells us the

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Speaker 1: BOE risks deepening the UK's recession, The EU prepares to

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Speaker 1: hit Apple with a five hundred million euro fine after

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Speaker 1: a streaming route with Spotify, And why good design is

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Speaker 1: Good Business. Thomas Heatherwick shares his thoughts on building in Britain.

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

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Speaker 1: The former chief economist to the Bank of England, Andy Haldane,

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Speaker 1: says he sees a risk of a deeper recession in

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Speaker 1: the UK if the central bank doesn't cut rates soon.

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Speaker 1: He's told Bloomberg Radio that last week's economic data shows

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Speaker 1: the balance between bringing down inflation and saving the economy

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Speaker 1: has shifted.

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Speaker 2: The risks for me now firmly skewed towards the economy

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Speaker 2: and towards the downside. And that's why I think, think,

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Speaker 2: you know, for me, this is the time that the

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Speaker 2: bank should be considering very seriously with drawing some of

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Speaker 2: the tightening that it put in place over the course

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Speaker 2: of the last eighteen months to cushion those risks of

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Speaker 2: the economy at a time where inflation now is falling

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Speaker 2: at a feral click. You know, I think now is

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Speaker 2: the time to be speaking a little bit more firmly

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Speaker 2: about the need for cutting sooner rather than later.

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Speaker 1: Andy Haldane says the best case for the UK economy

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Speaker 1: is anemic growth this year, whereas a worst case would

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Speaker 1: see consumer and business spending slumping due to a lack

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Speaker 1: of confidence. Apple is set to face a five hundred

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Speaker 1: million euro fine over allegations it's suppressed music streaming rivals,

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Speaker 1: including Spotify. The EU Watchdog found the tech giant fell

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Speaker 1: foul of competition rules preventing music services from telling users

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Speaker 1: about cheaper alternatives outside of its app store. In response,

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Speaker 1: Apple said the app store helped Spotify become the top

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Speaker 1: music streaming service across Europe. The investigation was originally sparked

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Speaker 1: by a complaint from Spotify nearly four years ago. Britain's

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Speaker 1: professional and financial services are now the most vulnerable sectors

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Speaker 1: to international competition. A Resolution Foundation report found the UK's

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Speaker 1: highest paid workers are reliant on exports to keep their jobs.

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Speaker 1: Bloombergs James Wilcock has more we.

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Speaker 3: Used to hearing negative headlines about factories closing up and

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Speaker 3: moving abroad, but the Resolution Foundation says it's not industrial

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Speaker 3: jobs we need to be worrying about its consultants and bankers.

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Speaker 3: The think tank says Britain's one hundred and thirty billion

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Speaker 3: pound financial sector has changed in the last two decades.

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Speaker 3: It's now more reliant on making money abroad than any

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Speaker 3: other sector, even manufacturing. That makes the UK more vulnerable

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Speaker 3: to global slumps in demand and trade. That comes as

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Speaker 3: a parliamentary report slams the government for having a lack

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Speaker 3: of clarity on what the benefits are for any post

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Speaker 3: Brexit trade plans in London. James Wilcock, Bloomberg, Radia.

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Speaker 1: The French government has downgraded its economic growth forecast for

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Speaker 1: this year and announced ten billion euros in public spending cuts.

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Speaker 1: Finance Minister Bruno Leomeire now says he expects GDP to

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Speaker 1: expand by just one percent this year, down on the

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Speaker 1: previous forecast of one point four percent. The weak or

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Speaker 1: outlook led Limouv to announce that reduction in spending across

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Speaker 1: government departments to keep its budget deficit in line with

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Speaker 1: a target of four point four percent of GDP this year,

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Speaker 1: but the minister reiterated a commitment not to raise taxes

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Speaker 1: to ease budgetary pressures. European leaders are publicly pushing the

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Speaker 1: US to provide aid to Ukraine, while they privately wargame

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Speaker 1: and end to America's role as a global defender. America's

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Speaker 1: missing sixty billion dollars in military funding to Ukraine was

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Speaker 1: the key concern of defense ministers gathering at the Munich

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Speaker 1: Security Conference. President Biden condemned Congress for taking a two

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Speaker 1: week recess without passing the aid bill.

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Speaker 4: What it's about time they step up, don't you think

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Speaker 4: instead of going.

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Speaker 5: On a two week vacation two weeks, they're walking away

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Speaker 5: two weeks.

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Speaker 1: What are they thinking?

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Speaker 5: It's just reinforcing all the concern and almost, i won't

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Speaker 5: say panic, but real concern about the United States being

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Speaker 5: a reliable ally.

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Speaker 1: Officials who spoke to Bloomberg backed up the US President's warning.

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Speaker 1: They fear Russia might consider an attack on a NATO ally,

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Speaker 1: especially if Donald Trump were to win the presidency, and

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Speaker 1: Goldman Sachs says it expects the SMP five hundred to

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Speaker 1: rise to five thou two hundred points by the end

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Speaker 1: of the year. US right cut expectations have already helped

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Speaker 1: drive the index to a record high of more than

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Speaker 1: five thousand. Goldman Sachs Chief Asia Pacific strategist Timothy mo

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Speaker 1: explains the thinking behind the call.

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Speaker 4: The phrase US exceptionalism has rung true for a decade now,

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Speaker 4: and the SMB has delivered just extraordinarily good returns. Everyone's aware.

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Speaker 4: I'm sure that they're more narrowly based and led by

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Speaker 4: the so called Magnificent seven and so forth. Are you

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Speaker 4: a strategist? David Costin just raised our SMP five hundred

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Speaker 4: target for this year to fifty two hundred, several percentage

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Speaker 4: points above where we currently stand, and that's a function

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Speaker 4: purely of earnings delivery. So the fourth quarter earnings have

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Speaker 4: been better than expected. That's led us to increase our

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Speaker 4: earnings growth to eight percent this year and six percent

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Speaker 4: for next year, up from five percent for both years,

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Speaker 4: which is our previous estimate.

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Speaker 1: Timothy Moe also says that well Goldman believes there is

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Speaker 1: room for upside on the SMP five hundred, other markets

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Speaker 1: such as Japan offer more headroom for equity growth. Well,

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Speaker 1: in a moment, we'll bring you more of our interview

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Speaker 1: with the former Bank of England chief economist Andy hal

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Speaker 1: Dane and his warning on the risks of the bank

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Speaker 1: not acting soon. Plus we'll bring you a conversation with

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Speaker 1: the building designer Thomas Heatherwick. He's known for Vessel in

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Speaker 1: New York, Cold Drops the Yard in London, and he

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Speaker 1: tells us he'd like to be involved in building more

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Speaker 1: social housing in the UK. But first, another story that

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Speaker 1: caught our eye this morning, our opinion economist Javier blast

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Speaker 1: has been right about a looming crisis or a meltdown

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Speaker 1: that's coming to chocolate. Now he's reporting from the Ivory Coast,

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Speaker 1: the world's biggest coco producer, on how the fact that

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Speaker 1: cocoa growing never became large scale, combined with decades of

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Speaker 1: under investment or catching up with growing demand, it's push

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Speaker 1: prices on commodity markets to an old time high. That's

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Speaker 1: despite the fact that at the end of twenty twenty three,

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Speaker 1: coco was one of only four major commodities that still

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Speaker 1: traded below their price peaks set in the nineteen seventies.

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Speaker 1: The previous commodities boom well now we've seen it hit

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Speaker 1: record highs Haavier says that there are supply issues that

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Speaker 1: have created this crisis. He's been writing about why West

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Speaker 1: African farmers in particular aren't benefiting from these higher prices,

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Speaker 1: and he says it's something that's likely to get worse

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Speaker 1: with what he calculates as the largest shortfall and at

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Speaker 1: least sixty five years on the way in the market.

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Speaker 1: So I read this morning definitely worth your time, the

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Speaker 1: Truth behind the Coming meltdown and Chocolate from our opinion

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Speaker 1: columnist Javier blass Well. Let's turn and to our interview

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Speaker 1: now at the former chief economist of the Bank of England,

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Speaker 1: Andy hal Dane. He says the bank should have already

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Speaker 1: cut rates and should do so soon or risk a

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Speaker 1: deeper recession. How Dane's been speaking to myself and Lizzie Burden.

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Speaker 2: Inflation I touch below expectations, the economy I touch week

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Speaker 2: than expectations. I think the balance of risks between those

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Speaker 2: two things has changed quite a lot over the last

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Speaker 2: six months, with the risks for me now firmly skewed

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Speaker 2: towards the economy and towards the downside. And that's why

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Speaker 2: I think you know, for me, this is the time

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Speaker 2: that the bank should be considering very seriously withdrawing some

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Speaker 2: of the tightening that it put in place over the

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Speaker 2: course of the last eighteen months to cushion those risks

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Speaker 2: of the economy at a time where inflation now is

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Speaker 2: falling at a feral click. You know, when I think,

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Speaker 2: set to it target by perhaps Easter time, and then

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Speaker 2: remain around target. So for me, I think now is

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Speaker 2: the time to be speaking a little bit more firmly

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Speaker 2: about the need for cutting sooner rather than later.

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Speaker 6: Well, we're already in a technical recession. Are you worried

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Speaker 6: that this could get even deeper if the Bank of

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Speaker 6: England doesn't turn to cutting rates sooner.

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Speaker 2: I think that's where the balance of risks lies. Yes,

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Speaker 2: I mean that it's true at the date of this

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Speaker 2: year so far, such as it is, is a bit

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Speaker 2: brighter than the taal end of last year, that the

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Speaker 2: jumping off point last year of this year looks to

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Speaker 2: be a more positive one. Surveys of businesses, surveys of consumers,

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Speaker 2: surveys of housing all pointing to a somewhat firmer start

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Speaker 2: to the year. But I still think we're looking at

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Speaker 2: a year at best of anemic growth, with the risks

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Speaker 2: to that outlook still skewed pretty firmly on the downside.

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Speaker 2: So for me, the case for putting in place some

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Speaker 2: upfront early insurance on the montary policy side is strong

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Speaker 2: and strengthening, and I'm fearful we'll leave that insurance a

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Speaker 2: little too late in the year.

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Speaker 1: So for you, is signaling and easing enough for now

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Speaker 1: or does it need to be a rate cut in March?

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Speaker 2: Well, I think the press of signaling has begun, not

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Speaker 2: very full throated signaling just yet, and I think more

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Speaker 2: perhaps could have been done on that front. Of course,

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Speaker 2: words only take you so far ultimately to really shift

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Speaker 2: people's expectations out there. I don't just mean in financial markets,

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Speaker 2: I mean also on the high street among households, of

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Speaker 2: cheaper mortgage borrowing costs coming. The best way of signaling

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Speaker 2: that to the wider world, to the real economy, if

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Speaker 2: you like, to households and businesses, is by doing it

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Speaker 2: rather than talking about doing it, and that I think

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Speaker 2: should be taking a bit more seriously than has been

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Speaker 2: the case, not just by the bank but by central

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Speaker 2: banks globally.

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Speaker 6: Is there a risk that both on the way into

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Speaker 6: this inflation crist and on the way out of it,

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Speaker 6: the Bank of England's forgotten that there's this lag in

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Speaker 6: monetary transmission, in other words, that people need to refinance

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Speaker 6: their mortgages before the impact of interest rates filters through

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Speaker 6: to the economy.

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Speaker 2: Well, I hope not. I mean the bank shouldn't have

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Speaker 2: forgotten about the long and variable lags at a company monetary

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Speaker 2: policy lags that have probably become slightly longer and slightly

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Speaker 2: more variable over the past decade, probably as we move

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Speaker 2: towards more fixed rate mortgages in the UK. I mean,

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Speaker 2: we know very well, don't we that you know, perhaps

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Speaker 2: one and a half million households this year will face

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Speaker 2: a significant stepping up in their mortgage bills, perhaps around

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Speaker 2: on average a couple of thousand pounds. That's sure to

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Speaker 2: squeeze the real incomes of households that are already well

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Speaker 2: below water relative to where they were a couple of

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Speaker 2: years ago. Households feel poorer, and the reason they feel

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Speaker 2: poorer is because they are poorer, and that will make

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Speaker 2: a bad situation worse. The other relevant factor that I'd

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Speaker 2: say is that surprisingly about last year was not how

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Speaker 2: weak spending by households was, but how strong it was

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Speaker 2: given the extent of the squeeze on real incomes. It

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Speaker 2: was surprising how robust and resilient house old spending was,

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Speaker 2: and the reason that was possible. What reconciles the arithmetic

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Speaker 2: here is the fact that house olds here and the

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Speaker 2: US and the EU area ran down the savings that

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Speaker 2: had been involuntarily accumulating during COVID. Now, as best we

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Speaker 2: can tell, that savings pool is now a puddle. It

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Speaker 2: is reduced materially, and therefore, you know, house solds this

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Speaker 2: year can't return to the well of savings to support

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Speaker 2: their spendings. When that fatter mortgage bill lands on people's

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Speaker 2: doorsteps over the course of this year, it's much more

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Speaker 2: likely we need to cut spending to make ends meet.

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Speaker 2: And that's why for me, the balance of risks is

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Speaker 2: to the downside. And that's why those long and variable

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Speaker 2: lags call for the bank acting sooner rather than later.

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Speaker 1: What's the risk if the bank doesn't do that? If

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Speaker 1: outlined stagnation as being the best case scenario, what's the

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Speaker 1: worst case scenario?

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Speaker 2: I think the worst case would be one in which,

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Speaker 2: you know, we get to maybe the middle of the year,

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Speaker 2: inflation is back to a round target. It's stopped being

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Speaker 2: spoken about in the media, in financial markets, in the

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Speaker 2: pubs and on the high streets, which I think happens

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Speaker 2: when inflation gets to around two or three percent. But

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Speaker 2: we find the economy has hit a further soft spot,

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Speaker 2: that spending is tailing down, that confidence is tailing away,

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Speaker 2: that companies are hunkering down ahead of an election and

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Speaker 2: they're spending, and we find ourselves you're facing up to

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Speaker 2: inflation at target, but the economy water and that's bad

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Speaker 2: news obviously for jobs and the economy. It's also pretty

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Speaker 2: bad news for central bank's credibility. Though It's one thing

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Speaker 2: to have missed inflation on the way up, which happened,

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Speaker 2: it's quite another to then have crushed the economy on

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Speaker 2: the way down. I mean that double blow to credibility

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Speaker 2: is one. If I were a central bank in my

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Speaker 2: old job, I will be looking to avoid and for me,

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Speaker 2: that's what speaks the insurance policy.

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Speaker 1: Now that's Andy Haldane, former Chief Economist at the Bank

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Speaker 1: of England now CEO of the Royal Society of Arts,

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Speaker 1: speaking to Lizzie Burden and I you can hear the

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Speaker 1: full interview with Andy Haldane on today's Bloomberg UK Politics podcast.

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Speaker 1: We've been talking to him as well about fiscal policy

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Speaker 1: here in the UK and his views on that issue

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Speaker 1: as well. But an extract of that key interview this

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Speaker 1: morning with Andy Haldane, Well, let's turn next to something else.

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Speaker 1: Thomas Heatherwick is one of the best known names in

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Speaker 1: modern building design. He's behind Cole drops Yard, London Vessel

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Speaker 1: and Little Island in New York, as well as the

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Speaker 1: cauldron for the Olympic Flame the twenty twelve London Games.

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Speaker 1: He's been speaking to us on Bloomberg Radio about the

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Speaker 1: need for more homes to be built in the UK.

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Speaker 1: He says any plans should bring together a range of

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Speaker 1: people from creative professions. Heatherwick also says he'd like to

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Speaker 1: be involved in designing new social housing.

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Speaker 7: One thing that the UK has been famous for historically

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Speaker 7: is creativity and the confidence to be eccentric, idiosyncratic, make

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Speaker 7: a decision that others wouldn't do, and that humor that's

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Speaker 7: here in Britain as well. And I think that we

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Speaker 7: have times where we maybe hold back, but I think

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Speaker 7: we could be in a time where British forms of creativity,

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Speaker 7: you know, across the whole of the UK can really

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Speaker 7: manifest because we don't have to build more office buildings.

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Speaker 7: We do need thousands of more homes and so home

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Speaker 7: really is our challenge at the moment. How much can

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Speaker 7: we reappropriate the office buildings that aren't needed, and how

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Speaker 7: can we make not the same mistakes that were made

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Speaker 7: after the Second World War the sixties we built some

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Speaker 7: absolutely terrible places and no one can deny that. And

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Speaker 7: we're about I hope to build a lot of housing.

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Speaker 7: And it doesn't need to be crazy shapes, It doesn't

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Speaker 7: need to sort of be ironic and doing silly things.

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Speaker 7: But we do need to find a language which we

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Speaker 7: struggle with in the design world and in architecture at

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Speaker 7: the moment, of how to do small things, affordable ways

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Speaker 7: to bring detail and richness and humanness and love into details.

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Speaker 7: It doesn't need to cost much more, really doesn't. It's

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Speaker 7: just about the care.

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Speaker 1: Because it's such a big political issue as well, and

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Speaker 1: we are in an election here here in the UK

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Speaker 1: and both Labor and the Conservatives seem to that the

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Speaker 1: UK needs to build more housing in a traditional style,

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Speaker 1: be that sort of a neo Georgian pound Bree or

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Speaker 1: something similar. Is that a good solution for housing? What

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Speaker 1: would your sort of advice be trying to address the

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Speaker 1: housing crisis.

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Speaker 7: Every new government says they're going to build thousands and

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Speaker 7: thousands of housing units and then don't. So if we

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Speaker 7: have a new government coming in, they are going to

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Speaker 7: need to really find a way through all those barriers

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Speaker 7: about land ownership and planning to really make it happen.

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Speaker 7: And there are examples like Poundbury which were driven by

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Speaker 7: criticism of the sixties housing and the sixties buildings that

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Speaker 7: got built, some of which which were amazing, but a

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Speaker 7: very large proportion of which were insensitive to how humans are,

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Speaker 7: how we live, and how we behave. And Poundbury really

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Speaker 7: was the King's initiative to find some of the human

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Speaker 7: codes really that existed from history and show that they

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Speaker 7: could work in today's day and age. Now, I think

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Speaker 7: that there are some amazing, very true lessons to be

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Speaker 7: learned there. But personally I don't believe you have to

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Speaker 7: copy old fashioned buildings. But I think the values of

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Speaker 7: the engagingness and diversity and interestingness can exist in new buildings.

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Speaker 7: And we've just lost our touch, We've lost how to

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Speaker 7: do it. There's a mindset in the construction industry that

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Speaker 7: clean lines are always good, and that subtlety is good,

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Speaker 7: and that less is more and form follows function and

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Speaker 7: ornament is a crime. And we've learned this is not true.

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Speaker 7: It's not true. People love dirty lines and we like

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Speaker 7: places full of fascination and buildings need to tell stories. Again,

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Speaker 7: do you want to be part of that?

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Speaker 1: Would you like to be part of that?

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Speaker 7: I'd I'd love to. I've worked on housing, but not

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Speaker 7: on so housing, and I would absolutely love to and

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Speaker 7: I'd throw myself into it. And I believe that we

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Speaker 7: need to bring together a coalition of many creative industries

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Speaker 7: to collaborate together. It isn't just a case of one

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Speaker 7: profession can lead it and nail it. You know, buildings

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Speaker 7: used to be collaborations before, of crass people, artists, designers

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Speaker 7: all working together. And I think that we could bring

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Speaker 7: in stories back into buildings. But it needn't cost much

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Speaker 7: because it needs it's only really at the street door

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Speaker 7: distance that you can really feel when something has got

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Speaker 7: care and attention and love.

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Speaker 1: So what would a Thomas Hawthwick's social hazing project look like?

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Speaker 7: It would be probably quite simple blocks, but with fascination

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Speaker 7: built in to the doors, the windows, the paving, the landscape,

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Speaker 7: I think we could quite cost effectively build that in

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Speaker 7: without making expensive shapes.

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Speaker 1: Like social housing in Vienna.

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Speaker 7: Friederich hundreds of US's houses are not trying to be

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Speaker 7: clean lines. In fact, he wrote a manifesto called the

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Speaker 7: Mold Manifesto, which was really about the ability to have

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Speaker 7: many people's creativity instead of just one. And so if

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Speaker 7: I had the chance to work on a large social

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Speaker 7: housing project, I would want to work with the local people,

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Speaker 7: bring their creativity and have the creativity of children involved too.

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Speaker 7: We've had a sort of desert of sterile buildings, and

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Speaker 7: I don't believe one profession needs to have the sole monopoly,

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Speaker 7: but that it can be a collaboration. So my dream

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Speaker 7: would be for me to be executive architect and work

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Speaker 7: with some local people to help make their ideas come

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Speaker 7: forward and help amplify local distinctiveness. You know, it's such

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Speaker 7: a shame when everywhere looks the same as everywhere else.

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Speaker 7: And the danger in building lots of housing all in

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Speaker 7: one go is that we'll do a version of the

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Speaker 7: problem we had back in the sixties, where it felt

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Speaker 7: mass produced. We need to mass produce, but there are

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Speaker 7: ways to build at scale still having systems of idiosyncrasy.

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Speaker 7: And the headplanner from Singapore, who we've got to know

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Speaker 7: and who we've been doing some work with. One thing

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Speaker 7: she said that was so powerful is she said new

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Speaker 7: buildings don't tell stories anymore. So this is not about

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Speaker 7: whether things look old fashioned or curvy or square. It's

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Speaker 7: just we need buildings to have the culture of our

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Speaker 7: humanness in them. What we've learned is you strip buildings

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Speaker 7: of that culture, you are stripping them of their humanity,

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Speaker 7: and it's no wonder they then don't work. And it's

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Speaker 7: not enough to put a sculpture in front. I think

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Speaker 7: they say turd in the plaza. You know, we don't

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Speaker 7: need the odd random sculpture in the street. That's great,

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Speaker 7: that can happen as well, But what we actually really

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Speaker 7: need is some personality and the confidence to put some

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Speaker 7: quirks and humanness into the fabric of the buildings themselves.

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Speaker 7: Then they are givers and not just take us. It's

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Speaker 7: not just about who's inside. They are the backdrop to

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Speaker 7: our lives that are essential for bringing society together. And

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Speaker 7: we need that more than ever, this is Bloomberg Daybreak Europe.

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