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Speaker 1: Good morning.

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Speaker 2: It's Friday, the nineteenth of January here in London. This

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Speaker 2: is the Bloomberg dayba Q podcast. I'm Caroline Hepkea.

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Speaker 3: And I'm Stephen Carroll. Coming up today, the Chancellor makes

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Speaker 3: the case for overseas investment in the UK in an

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Speaker 3: increasingly unstable world.

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Speaker 2: The US Press is ahead with what it describes as

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Speaker 2: the least bad option in confronting the WHO fees as

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Speaker 2: more ships are targeted.

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Speaker 3: Plus, our Head of Economics and Government, Stephanie Flanders, joins

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Speaker 3: us to look back at the week that was in

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Speaker 3: Davos and what we learned from the gathering of business

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Speaker 3: and political leaders.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 3: The Chancellor, Jeremy Hunt, has told Bloomberg that Britain is

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Speaker 3: a safe harbor for investors in an increasingly unstable world.

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Speaker 3: Speaking on the sidelines of the World Economic Forum in Davos,

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Speaker 3: Hunt also hinted at tax cuts in the March budget

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Speaker 3: as a way to deliver growth. He says the UK

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Speaker 3: is in a good position to capitalize on geopolitical uncertainty elsewhere.

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Speaker 4: I think when investors look around the world at the

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Speaker 4: instability in other countries, the rise of populist far right

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Speaker 4: parties in many parts of Europe. They say that even

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Speaker 4: with elections, which is right we have because we're a democracy,

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Speaker 4: the UK is actually a very stable long term bet

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Speaker 4: and the UK has got stability and the rule of law,

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Speaker 4: and that's very attractive.

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Speaker 3: Jeremy hunts efferis to sell the UK. We're delivered, as

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Speaker 3: Google announced it would put a billion dollars into a

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Speaker 3: new data center near London. The Chancellor's claims of stability

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Speaker 3: come after a fractious time in British politics following the

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Speaker 3: UK's decision to leave the EU. Britain has had five

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Speaker 3: prime ministers and seven finance ministers in the past eighty years.

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Speaker 2: Major British banks are reportedly being summoned to meet the

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Speaker 2: Chancellor because of their low valuation. Sky News says that

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Speaker 2: the government is concerned the weakness at UK bankstocks is

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Speaker 2: holding back wider economic growth in the UK. Executives from

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Speaker 2: hi BC, Barkley's, Lloyd's, nat West and Santander are expected

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Speaker 2: to be at the meeting next Tuesday.

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Speaker 3: Hoothy militants and Yemen fired missiles at another American owned

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Speaker 3: commercial vessel in the Red Sea. The News comes as

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Speaker 3: President Joe Biden acknowledged that air strikes against Toothy militants

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Speaker 3: in Yemen won't deter the group from attacks that are

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Speaker 3: Royal commercial shipping. However, they also say they don't it

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Speaker 3: doesn't mean the military campaign will stop anytime soon. Bloomberg's

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Speaker 3: at Baxter has more.

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Speaker 5: The White House says it is the least bad option,

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Speaker 5: that it won't stop Hoothy attacks in the Red Sea,

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Speaker 5: but can cut down on Hoothy capabilities. Pentagon spokes from

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Speaker 5: when Sabrina Singh says the US is not at war.

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Speaker 5: This is limited destroy missiles that could be launched, and

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Speaker 5: that we're preparing to launch either towards US Navy ships

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Speaker 5: that are in the region, that are in that waterway

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Speaker 5: or other commercial vessels. The Hooths say the two are

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Speaker 5: indeed indirect conflict and will not stop the attacks at

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Speaker 5: Baxter Bloomberg Radio.

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Speaker 2: Israel's Prime minister has vowed to control security in Gaza

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Speaker 2: after the war, in a clear snub to the wishes

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Speaker 2: of its closest ally the United States. Speaking to journalists,

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Speaker 2: Benjamin Netneir, who said that Israel would accept a Gaza

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Speaker 2: civil authority running the territory, but indicated that he wouldn't

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Speaker 2: accept the Palestinian authority doing this.

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Speaker 6: In any future arrangement, settlement or no settlement. Israel needs

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Speaker 6: security control over all territory west of Jordan. This is

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Speaker 6: a necessary condition and it collies with the onlydea of sovereignty.

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Speaker 6: What can you do? I tell this truth to our

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Speaker 6: American friends, and I also stop the attempt to impose

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Speaker 6: a reality on us that would harm Israel's security. The

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Speaker 6: Prime Minister needs to be capable of saying no to

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Speaker 6: our friends, saying no when necessary, and saying yes when possible.

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Speaker 2: Netnia, whose comments come after the US state actually blink

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Speaker 2: and an other US officials said that lasting peace wouldn't

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Speaker 2: be possible without an eventual state full Palestinians. The Palestinian

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Speaker 2: Prime Minister Mahammud Shtaia has told Bloomberg that the Palestinian

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Speaker 2: authority has been working with the US officials on a

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Speaker 2: plan to govern Gaza after the conflict ends.

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Speaker 3: US regulators are planning to require banks to tap the

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Speaker 3: Fed's discount window at least once a year. More from

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Speaker 3: Bloomberg's Doug Kresner.

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Speaker 7: The proposed requirement aims to reduce the stigma of borrowing

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Speaker 7: from the window. In the past, it's been construed as

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Speaker 7: a sign of weakness. Over the past two decades, the

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Speaker 7: FED has worked to change that perception, but it's been

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Speaker 7: tough to shake. At the same time, regulators want banks

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Speaker 7: to use the window once a year to ensure banks

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Speaker 7: are ready for troubled times. Last year, during the regional

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Speaker 7: banking crisis, it was apparent that several lenders were not

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Speaker 7: even set up to quickly borrow from the discount window

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Speaker 7: even in a pinch. In New York, I'm Doug Prisoner

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Speaker 7: Bloomberg Radio.

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Speaker 2: The US Congress has passed a temporary bending bill to

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Speaker 2: avert a partial government shut down this weekend. The measure

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Speaker 2: would fund American agencies until March. Republican Congressman Bob Good

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Speaker 2: chairs the party's Freedom Caucus, who tried to block the bill.

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Speaker 8: We have the majority in one half of the legislative branch.

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Speaker 8: When will that begin to account for something? When will

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Speaker 8: that begin to matter for something? When you have the

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Speaker 8: majority in one branch or one house of one branch,

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Speaker 8: shouldn't you get half of what your policy priorities are.

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Speaker 2: Nearly half of House Republicans voted with Good against the measure,

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Speaker 2: whilst Democrats overwhelmingly supported it. The legislation will be sent

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Speaker 2: to Joe Biden, who plans to sign it, but urged

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Speaker 2: Congress to find a more long term solution to financing

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Speaker 2: the government.

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Speaker 3: JP Morgan Chase has raised CEO Jamie Diamond's pay by

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Speaker 3: four point three percent to thirty six million dollars in

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Speaker 3: twenty twenty three. The bumper pay packet came as the

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Speaker 3: bank recorded the largest profit in the history of American banking.

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Speaker 3: They lender wrecked in close to fifty billion dollars last

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Speaker 3: year as it benefited from fed Ray hikes and the

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Speaker 3: purchase of First Republic Bank. Diamond, who's already a billionaire,

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Speaker 3: has now been in the role for eighteen years and

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Speaker 3: as long equipped that he plans to stay in the

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Speaker 3: post for five more years, no matter when he's asked. Now,

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Speaker 3: in a moment, we'll bring you more from our interview

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Speaker 3: with the Chancellor Jeremy Hunt, and a look back at

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Speaker 3: the week in Davos. But first a piece of Bloomberg

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Speaker 3: intelligence research that caught my eye this morning. Given that

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Speaker 3: it is a Friday, and thus the day that you

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Speaker 3: can feel the wind blowing through the city, A little

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Speaker 3: more easily as it's that much less crowded. This is

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Speaker 3: a look at how byside traders are where they are

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Speaker 3: inflexible working on working from home. So this is a

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Speaker 3: piece of intelligence looking at the US, but I think

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Speaker 3: pretty interesting to mirror what we're seeing elsewhere as well,

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Speaker 3: that the three days in the office is now the

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Speaker 3: norm for forty percent of byside traders in the UK.

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Speaker 2: Well, that's quite surprised that that it's so many people

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Speaker 2: are working two days a week from.

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Speaker 3: Home exactly, And that was the most popular option of

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Speaker 3: the list of kind of one to five days or

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Speaker 3: fully remote. The one in five traders are in the

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Speaker 3: office full time. Those working though Asian trading hours, so

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Speaker 3: those be working overnight. In the US, they're much more

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Speaker 3: likely to have a fully remote option. And this is

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Speaker 3: actually a bit of a shift that the industry is

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Speaker 3: seeing is instead of banks perhaps employing people in financial

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Speaker 3: centers in age to be trading those markets, they're able

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Speaker 3: to use a lot more people who are working in

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Speaker 3: the US to trade those markets because they can offer

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Speaker 3: them the option of working fully remotely.

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Speaker 2: So that is but an overnight shift. Yeah, interesting, Okay,

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Speaker 2: I like that or the insider industry information on what

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Speaker 2: people are doing.

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Speaker 3: Let's bring you more now from our interview with the Chancellor.

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Speaker 3: Jeremy Hunt has been speaking to Bloomberg at the World

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Speaker 3: Economic Forum in Davos. He repeated his hope that he

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Speaker 3: can cut taxes in the budget on March sixth, and

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Speaker 3: that he believes the UK is now a stable long

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Speaker 3: term bet for investors. Jeremy Hunt has been speaking to

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Speaker 3: Bloomberg's Francine Laqua.

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Speaker 4: What I'm detecting here in Davos is a recognition that

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Speaker 4: the UK has's become one of the great technology centers

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Speaker 4: of the world. It's now the third largest tech economy

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Speaker 4: after the United States and China, double the size of

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Speaker 4: anywhere else in Europe. And of course companies like Google

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Speaker 4: are reflecting that in their investments, and this is a

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Speaker 4: billion dollars to improve their data processing. It means that

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Speaker 4: people who use Google facilities like Gmail will get a

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Speaker 4: faster service. Data is of the wiring of the Internet.

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Speaker 4: If you don't store it effectively, the Internet grinds to

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Speaker 4: a halt. So it's an example of the kind of

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Speaker 4: deals that I'm here talking about. The whole time as

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Speaker 4: people look at the UK and they say, this is

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Speaker 4: Europe's Silicon Valley and it's well on the way to

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Speaker 4: becoming the world's next big tech center.

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Speaker 9: But a chancewer is this because they see opportunities in

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Speaker 9: the UK, or because they look at the rest of

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Speaker 9: the world, they look at conflicts, they look at Europe

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Speaker 9: and they think it's a bit of a mess.

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Speaker 4: Well, I think it's a combination. The UK has got

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Speaker 4: stability and the rule of law, and that's very attractive

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Speaker 4: to international investors. But it's also got two things things

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Speaker 4: that virtually nowhere else has outside the United States. The

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Speaker 4: biggest financial services sector, so these small businesses that get

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Speaker 4: off the ground can get the backing they need to grow,

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Speaker 4: and that is very interesting to companies like Google and Microsoft.

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Speaker 4: But it's also got outside the United States the world's

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Speaker 4: most respected universities, four of the world's top twenty universities.

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Speaker 4: So the new ideas that are, for example, creating the

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Speaker 4: new medicines of the future, a lot of that is

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Speaker 4: happening in the UK and that makes it a very

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Speaker 4: exciting place to invest.

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Speaker 9: But answer at the same time, there's so many questions.

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Speaker 9: I mean, there was so much turbulence in the UK

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Speaker 9: economy because of politics. We're now a little bit more stable,

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Speaker 9: but we're looking at elections and your party is far behind.

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Speaker 9: What promises do you give to investors now, Well, I.

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Speaker 4: Think when investors look around the world at the instability

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Speaker 4: in other countries, the rise of populist far right parties

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Speaker 4: in many parts of Europe, they say that even with elections,

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Speaker 4: which is right we have because we're a democracy, the

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Speaker 4: UK is actually a very stable long term bet. And

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Speaker 4: what they're also seeing is something they haven't seen before,

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Speaker 4: which is that the technology sector is now so vibrant

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Speaker 4: in the UK that they can't really afford not to

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Speaker 4: be there.

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Speaker 9: Well, you will, you tell actually investors that will see

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Speaker 9: a corporation tax cut.

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Speaker 4: Well, they've already seen a huge corporation tax cut because

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Speaker 4: in the Autumn Statement I introduced full expensing of capital allowances,

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Speaker 4: which means for investors invest in capital they get a

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Speaker 4: twenty five percent discount off their corporation tax bill, which

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Speaker 4: is more attractive than any other major countries. So we

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Speaker 4: will continue to do everything we can to get the

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Speaker 4: tax burden down, and that is, you know, a choice

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Speaker 4: we have as a country, because other parties would increase

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Speaker 4: the tax burden they'd increase borrowing. We think the way

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Speaker 4: we grow the economy is by reducing taxes, making them

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Speaker 4: more competitive.

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Speaker 9: But will that happen in the next budget statement and

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Speaker 9: is that going to be the next the last financial

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Speaker 9: event before the election.

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Speaker 4: Well, fran it's early days for the budget. It's on

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Speaker 4: March sixth. I haven't seen the final figures from the

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Speaker 4: Office for Budget Responsibility, so I don't know the headroom

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Speaker 4: that I'm going to have to play with. But what

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Speaker 4: I can tell you is what I want to do

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Speaker 4: because I look around the world and I see that

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Speaker 4: North America, Asia, where generally countries have lower taxes than Europe,

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Speaker 4: they are growing faster. In Europe, where our taxes tend

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Speaker 4: to be higher, we're growing more slowly. So if I can,

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Speaker 4: I want to reduce the tax burden and make the

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Speaker 4: UK more competitive, more dynamic, more vibrant.

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Speaker 9: Will you deliver a nartum statement or will we have

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Speaker 9: an election before then?

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Speaker 4: Well, the timing of the election I wish I could

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Speaker 4: tell you, And it's not that I'm hiding, I just

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Speaker 4: don't know. This is a decision for the Prime Minister.

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Speaker 4: What I have to do as Chancellor is make sure

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Speaker 4: that I set the economy on the right track because

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Speaker 4: the main reason people vote conservative is because they trust

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Speaker 4: us with the economy, and they can look at Rishisunac's record,

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Speaker 4: my record. They can see we brought inflation down from

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Speaker 4: eleven point one percent to four percent so far, we've

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Speaker 4: avoided a recession, even though many people predicted we get one,

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Speaker 4: and they can see tremendous prospects for the future.

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Speaker 9: I mean, you're probably was not always stable, but when

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Speaker 9: you look at instability across the world, and this is conflicts,

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Speaker 9: this is concerns with the price of oil, and of

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Speaker 9: course what we're seeing in the middle eastern Ukraine. Do

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Speaker 9: you worry that it's going to be a hard, very

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Speaker 9: difficult economy this year.

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Speaker 4: Well, I think I worry about the world. Yes, I

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Speaker 4: don't think we've seen it this unstable for a very

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Speaker 4: long time. And the UK of course has a very

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Speaker 4: important role in protecting global stability, working alongside our allies

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Speaker 4: like the United States. And of course if you're responsible

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Speaker 4: for a country's economy, you have to keep a very

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Speaker 4: careful eye on what's happening in places like the Red Sea.

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Speaker 4: But what I would say is that the things that

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Speaker 4: will really help to do that. Bring down inflation, bring

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Speaker 4: down borrowing, keep public spending under the control, under control.

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Speaker 4: That will make the economy resilient for whatever shocks might

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Speaker 4: be around the corner.

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Speaker 9: Final question, You are behind in the polls, an election

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Speaker 9: is closed, twenty points behind. Can you really make that up?

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Speaker 4: I believe we can, because you know, politics has never

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Speaker 4: been more volatile. And in the end, when people see

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Speaker 4: an economy that has whethered, a pandemic, whethered, the cost

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Speaker 4: of cost of living crisis, the very many shocks and

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Speaker 4: challenges we've had, and when they see that, actually, our

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Speaker 4: potential is huge despite all those challenges, I think they'll

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Speaker 4: understand the value of the Conservative government.

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Speaker 3: That was the Chancellor Jeremy Hunt, speaking to Bloomberg's Francine

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Speaker 3: Lackway in Davos.

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Speaker 2: Now, the World Economic Forum wraps up pits meetings today

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Speaker 2: in DeVos. Blombot's head of Economics and Governments, Definitely Flanders,

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Speaker 2: has been in Switzerland all of this week and she

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Speaker 2: joins us now to discuss Definitely good morning, good morning,

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Speaker 2: And there seemed to be two competing narratives at DeVos.

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Speaker 2: On the one hand, you know, rising geopolitical tension what

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Speaker 2: the chance was talking about just there on the other hand,

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Speaker 2: and economy globally, perhaps it is surprisingly resilient.

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Speaker 1: Which one do you think one out? You know, it's funny, Karly.

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Speaker 1: I think when you people arrived, I think they thought

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Speaker 1: they were going to spend all week talking about geopolitics,

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Speaker 1: and there's obviously penny to discuss, and we've had we've

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Speaker 1: got all these elections coming down the track, so there's

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Speaker 1: kind of what people called here the return of the

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Speaker 1: political as well as the sort of hot wars in

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Speaker 1: Ukraine and lots of focus on the Middle East obviously,

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Speaker 1: But yeah, you couldn't sort of help feeling that despite

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Speaker 1: all of that, over the course of a few days, you know,

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Speaker 1: deals were being done and there was this sort of big,

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Speaker 1: creeping feeling of having dodged a bullet. You know that

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Speaker 1: if you look at what forecasts, any kind of consensus

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Speaker 1: forecasts and economic models would have predicted to be the

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Speaker 1: result of the kind of interest rate increases that we've

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Speaker 1: seen in most of the developed economies over the last

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Speaker 1: year a year and a half. You know, all of

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Speaker 1: the economies should have by now, they should have had

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Speaker 1: a recession. We certainly should have been looking down at

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Speaker 1: the barrel of the recession. UK, for example, sort of

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Speaker 1: if you just look at how far interest rates have

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Speaker 1: gone up, should have had a recession shrinking by three

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Speaker 1: and a half percent. Similar numbers for the Europe. So

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Speaker 1: we're sort of looking around. Although growth is not looking

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Speaker 1: great for this year, it looks if it's all costs,

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Speaker 1: so even're sort of roughly right for inflation. We've managed

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Speaker 1: to bring down what could have been a seventy style

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Speaker 1: inflation problem without an eighty star recession. And it was

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Speaker 1: that I think was in the end the feeling that

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Speaker 1: one out, even though you know, many of us might

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Speaker 1: think that was a little bit wishful thinking. And certainly

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Speaker 1: if you look at the stock market you might have

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Speaker 1: the US stock market, you might think that is a

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Speaker 1: little bit Goldilock scenario.

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Speaker 3: The central to the conversation about what happens next, of course,

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Speaker 3: is interest rate cots. We did hear from arak of

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Speaker 3: central bankers this week as well. Did they manage to

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Speaker 3: convey the message of the markets are if you're pardon

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Speaker 3: the pond way over the skis on Rapecot forecasts, Well, we.

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Speaker 1: Had, I mean Christine Laguard obviously spoke to Francine earlier

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Speaker 1: in the week and we did you know, we got

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Speaker 1: we got some news in the said, you know, and

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Speaker 1: she she was, I think, surprisingly happy to talk about

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Speaker 1: the likelihood of our interest rate cuts from the central

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Speaker 1: back in the summer. Others were sort of pushing back

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Speaker 1: a little bit. They certainly was not not wanting to

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Speaker 1: be pushed on on timings, which is predictable, we would

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Speaker 1: always have that. But yeah, I'm sure as they look

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Speaker 1: looking at particularly how the how the US stocks have

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Speaker 1: performed in the last few months, you know, have to

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Speaker 1: be a little bit nervous that that that something here

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Speaker 1: is going to is going to have to to break

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Speaker 1: in this in this very golden scenario, because you know,

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Speaker 1: either the if inflation ends up being higher than we

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Speaker 1: expect and turns out to be more of a problem,

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Speaker 1: well they may have to They have the scenario of

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Speaker 1: maybe having to backtrack, which they really don't want to

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Speaker 1: do after they start reducing weights. And you know, of course,

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Speaker 1: the other possibility is that we still have a lot

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Speaker 1: of the impact of our interistrates yet to come and

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Speaker 1: the economy weakends unexpectedly older. I think that the focus

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Speaker 1: on that is definitely less than it was.

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Speaker 2: Yeah, although, of course this year is the year of

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Speaker 2: elections in many parts of the world, and actually going

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Speaker 2: into this week, the World's Economic Forum was highlighting misinformation

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Speaker 2: and disinformation as being the biggest risk this year. From

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Speaker 2: the conversations that you've had, what actually were the risks

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Speaker 2: that people were most worried about?

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Speaker 1: Do you think? Yeah, it was more. I think that AI,

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Speaker 1: which I'm sure you would have heard lots about from

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Speaker 1: lots of people. There was definitely a shift on that

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Speaker 1: because in the past, and it's not something that we

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Speaker 1: haven't talked about here in DeVos, you know, the likes

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Speaker 1: of McKinsey and you know, a lot of academics have

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Speaker 1: often been here talking about the impact of machine learning

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Speaker 1: and digitalization and AI on the economy. But that was

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Speaker 1: kind of it. We kind of knew what AI was,

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Speaker 1: and the question was, you know, how are we going

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Speaker 1: to manage the risks and how is it going to

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Speaker 1: affect jobs and business models. There's all of that is

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Speaker 1: obviously now kind of accelerated because of just the sheer

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Speaker 1: pace of change in the last year. But also I

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Speaker 1: think the more that people here are talking to those

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Speaker 1: who are at the front line of this and these developments,

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Speaker 1: kind of realizing that even the experts don't quite understand

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Speaker 1: how these models have progressed as far as they have,

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Speaker 1: as quickly as they have. You know, you have the

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Speaker 1: likes of Bill Gates saying, you know that he didn't

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Speaker 1: really understand how CHATGBT worked as well as it did,

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Speaker 1: And I've heard that from a lot of people, and

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Speaker 1: of course it makes you slightly nervous. Fine, if the

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Speaker 1: lady people don't quite understand how the system works, that's

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Speaker 1: one thing. But it's the people at the heart of

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Speaker 1: this revolution don't really are rather kind of befuddled and

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Speaker 1: confused about why they're able to do the things they

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Speaker 1: can do. Then that makes you even more concerned about

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Speaker 1: the potential of you know, its effect on war, it's

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Speaker 1: effect on you know, the practice of warfare, and certainly

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Speaker 1: the practice of political conflict, because even the people closest

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Speaker 1: to it just don't understand its power.

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Speaker 3: Stephanie. Conversations in Davos are often criticized for being sort

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Speaker 3: of lofty and big picture, are not connected to the

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Speaker 3: reality people are experiencing. I wonder what your impression of

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Speaker 3: that was this year, given the particular economic moment that

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Speaker 3: we're in were people speaking in a way that was

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Speaker 3: grounded in the reality of what the economic situation is.

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Speaker 1: Wellok, I think it depends. I think I it's saying,

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Speaker 1: is it grounded the reality of what it's like to

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Speaker 1: be in the North of England still trying to deal

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Speaker 1: with a massive increase in the cost of living and

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Speaker 1: not necessarily finding that wages are keeping up? Clearly not

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Speaker 1: and I suspect, you know, it never has been in

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Speaker 1: relation to that. But I tell you one thing that

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Speaker 1: you know, for those who kind of spend their time

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Speaker 1: really worried about the world and worried about the you know,

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Speaker 1: the challenge of deglobalization and fragmentation and populism and all

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Speaker 1: these things, you know, there's an awful increasing number of

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Speaker 1: participants here and now from emerging market economies and parts

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Speaker 1: of the world that actually are feeling like they're doing

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Speaker 1: pretty well. You know, as we've talked about, and we've

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Speaker 1: done research in Blouembo economics, there are these connector economies

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Speaker 1: that are actually doing well out of fragmentation. India's doing

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Speaker 1: fantastically well every the last few years. The Indian participants

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Speaker 1: here have always been incredibly upbeat. But we also have Mexicans.

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Speaker 1: Even the Argentine president was here, and although you know,

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Speaker 1: he's a controversial figure, but actually a lot of people

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Speaker 1: were saying, you know, maybe Argentina was going to have

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Speaker 1: its moment as well as he does all these big reforms,

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Speaker 1: lots of people from the Gulf UAE doing deals, feeling,

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Speaker 1: you know, not contantly worried about whether or not Donald

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Speaker 1: Trump gets elected. So for me, it's not as if

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Speaker 1: it's not really talking to the man on the street

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Speaker 1: like in the US or Europe. But I think it

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Speaker 1: sort of reminded us that lots of the world are

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Speaker 1: not seeling quite so gloomy.

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Speaker 3: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 3: stories making news from London to Wall Street and beyond.

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Speaker 2: I'm Caroline Hepka.

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