WEBVTT - Daybreak Weekend: U.S CPI, UK Security, China CPI 0:00:01.840 --> 0:00:04.120 This is Bloomberg day Break Weekend, our global look at 0:00:04.160 --> 0:00:06.200 the top stories in the coming week from our day 0:00:06.200 --> 0:00:08.479 Break anchors all around the world, and straight ahead on 0:00:08.520 --> 0:00:12.000 the program. After a dismal August jobs report, is a 0:00:12.000 --> 0:00:14.520 FED rate cut looking like a sure thing? I'm Tom 0:00:14.560 --> 0:00:15.520 Busby in New York. 0:00:15.680 --> 0:00:18.520 I'm Caroline Headkitt in London, where we're shining a spotlight 0:00:18.640 --> 0:00:21.239 on the UK's defense industry ambitions. 0:00:21.560 --> 0:00:24.480 I'm Charlie Pelop with a look at the Chinese economy 0:00:24.560 --> 0:00:28.800 ahead of next week's readings on consumer and producer prices. 0:00:29.160 --> 0:00:33.200 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:33.240 --> 0:00:36.920 eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, 0:00:37.440 --> 0:00:42.559 Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius 0:00:42.720 --> 0:00:46.240 XM one twenty one, and around the world on Bloomberg Radio, 0:00:46.320 --> 0:00:48.560 dot Com and the Bloomberg Business App. 0:00:52.720 --> 0:00:54.520 Good day to you. I'm Tom Busby, and we begin 0:00:54.560 --> 0:00:57.120 today's program with what a sharp cool down in the 0:00:57.200 --> 0:01:00.640 US labor market last month and some key US inflation 0:01:00.760 --> 0:01:03.640 data out this week will mean for FED policymakers and 0:01:03.640 --> 0:01:07.160 for more. We're joined by Stuart paul Us economists with 0:01:07.200 --> 0:01:11.120 Bloomberg Economics. Well, Stuart, thank you so much for joining us. Now, 0:01:11.200 --> 0:01:14.120 before we talk about the Fed's next move, I really 0:01:14.160 --> 0:01:16.039 want to dissect what we saw on Friday with that 0:01:16.120 --> 0:01:19.000 August jobs report. I mean, what did it mean to you? 0:01:20.800 --> 0:01:23.560 Well, the pace of hiring is just too slow to 0:01:23.600 --> 0:01:26.640 maintain a steady unemployment rate. We heard earlier in the 0:01:26.640 --> 0:01:32.280 week that Minneapolis Fed Branch President Neil Kashkari thinks that 0:01:32.360 --> 0:01:34.800 the break even pace of hiring it's about seventy five 0:01:34.880 --> 0:01:39.200 thousand workers. That's what the consensus was expecting for the month. Alas, 0:01:39.240 --> 0:01:43.080 we only saw about twenty two thousand additional jobs added 0:01:43.319 --> 0:01:46.200 during the month. If you really break it down, most 0:01:46.280 --> 0:01:49.360 of the hiring, most of the net hiring is in 0:01:49.720 --> 0:01:57.120 the lowest skill human facing services industries, things like retail, trade, leisure, 0:01:57.120 --> 0:02:00.760 and hospitality. While there is still higher in things like 0:02:00.920 --> 0:02:04.639 education and healthcare. The pace of hiring in that higher 0:02:04.680 --> 0:02:11.000 skill industry has slowed dramatically, and with that, with slowing 0:02:11.080 --> 0:02:15.120 in demand for workers, we've also seen essentially a slowing 0:02:15.160 --> 0:02:18.720 in income growth. By our estimates, income growth in the 0:02:18.720 --> 0:02:21.480 month of August right now is looking like it's going 0:02:21.560 --> 0:02:24.760 to register just a touch above zero point three percent. 0:02:25.760 --> 0:02:30.200 And when that's the case, the outlook for consumer spending 0:02:30.840 --> 0:02:33.560 starts materially softening. We had a pretty good July, it 0:02:33.560 --> 0:02:35.520 looks like August might be a little bit slower. 0:02:36.040 --> 0:02:39.880 And let's talk about that shocker from June, that revision 0:02:39.960 --> 0:02:43.400 showing a contraction thirteen thousand job losses. 0:02:44.800 --> 0:02:48.239 That's right. It seems like revisions have been one of 0:02:48.240 --> 0:02:52.000 the more interesting factors with each of these payroll releases. 0:02:52.040 --> 0:02:54.720 You'll remember in July it was also the revisions that 0:02:54.760 --> 0:02:59.840 were so shocking. Yeah, what's really what's really most relevant 0:03:00.040 --> 0:03:04.160 where the FED is that their understanding of the labor 0:03:04.200 --> 0:03:10.200 market is now updating, and as they get these revisions, 0:03:10.600 --> 0:03:15.840 the resilience of the labor market that they believe was 0:03:15.880 --> 0:03:21.240 so profound seems to be dissipating. What they thought was 0:03:21.240 --> 0:03:24.440 a strong labor market is actually being revealed upon revision 0:03:24.480 --> 0:03:27.440 to be a relatively weak labor market. We've seen all 0:03:27.480 --> 0:03:31.960 these alternative data sets pointing to cooling hiring, slowing labor demand. 0:03:32.320 --> 0:03:35.680 It seems like finally the official statistics are catching up 0:03:35.680 --> 0:03:35.960 to it. 0:03:36.560 --> 0:03:36.720 Now. 0:03:36.720 --> 0:03:40.600 Do you see any indication that the Trump crackdown on 0:03:40.680 --> 0:03:45.280 immigration and deportations may have played a role, especially in construction, 0:03:45.400 --> 0:03:47.880 which saw a pretty sizable decline in jobs. 0:03:48.960 --> 0:03:52.520 It's possible. It's really difficult to go from the more 0:03:52.680 --> 0:03:56.120 human element, things that we would capture in the household survey, 0:03:56.240 --> 0:03:59.560 things like the composition of the workforce, and then map 0:03:59.640 --> 0:04:02.480 that to pay roll. So, for example, yes, as you 0:04:02.560 --> 0:04:07.520 mentioned weak hiring and construction, but there was relatively strong 0:04:07.600 --> 0:04:11.800 hiring in leisure and hospitality, which one also might think 0:04:11.960 --> 0:04:18.120 has a relatively high representation of immigrant workers. So it's 0:04:18.200 --> 0:04:21.960 difficult to fully map the consequences of the inflation of 0:04:22.000 --> 0:04:27.000 the immigration crackdown. What is clearer, though, is that the 0:04:27.040 --> 0:04:30.360 break even pace of hiring needed to maintain a steady 0:04:30.400 --> 0:04:34.159 unemployment rate is now lower than previously believed. It was 0:04:34.240 --> 0:04:36.960 thought that the break even pace of hiring needed to 0:04:37.000 --> 0:04:40.599 maintain steady unemployment was a bit over one hundred thousand. 0:04:40.600 --> 0:04:43.080 Now it looks like it's you know, seventy five thousand 0:04:43.160 --> 0:04:47.159 workers per month or lower. And again we're now running 0:04:47.560 --> 0:04:50.360 just about one third that pace right now. And that's 0:04:50.360 --> 0:04:52.160 why we saw the uptick and the unemployment rate. 0:04:52.600 --> 0:04:56.560 Wow, and the unemployment rate though four point three percent historically, Yes, 0:04:56.600 --> 0:04:59.800 it went up, but historically not a something to get 0:05:00.200 --> 0:05:03.119 scared about. But I guess the question is what does 0:05:03.200 --> 0:05:07.040 all this mean for the FED? I mean, we're about 0:05:07.080 --> 0:05:10.400 ten days away from another meeting. We've seen the signals 0:05:10.440 --> 0:05:14.120 from Jackson hole from Chairman Powell. Is a twenty five 0:05:14.120 --> 0:05:16.520 basis point rate cut baked in at this point. 0:05:18.040 --> 0:05:21.000 I think a twenty five basis point rate cut is 0:05:21.560 --> 0:05:26.760 almost a certainty at this point. As you say, a 0:05:27.120 --> 0:05:31.160 four point three percent unemployment rate is not exactly high, 0:05:31.320 --> 0:05:34.880 and so it's difficult for the FED to rationalize taking 0:05:34.920 --> 0:05:39.119 the elevator down on rates and cutting rates by fifty 0:05:39.120 --> 0:05:41.960 basis points or more. That's going to be very difficult 0:05:41.960 --> 0:05:44.680 to rationalize with a four point three percent unemployment rate. 0:05:44.960 --> 0:05:48.279 But still, when the FED is expecting to end the 0:05:48.400 --> 0:05:52.880 year around four point three to four point four percent unemployment, 0:05:53.360 --> 0:05:57.719 each incremental uptick, including in this August payroll report, is 0:05:57.760 --> 0:05:59.760 going to be enough to get their attention, and for 0:05:59.800 --> 0:06:02.320 that reason, I think we will get that quarter point 0:06:02.360 --> 0:06:03.480 cut in September. 0:06:03.720 --> 0:06:06.640 Oh boy, Well, the August producer price index out Wednesday, 0:06:06.680 --> 0:06:09.760 the consumer price index for August on Thursday, and that 0:06:09.800 --> 0:06:12.839 FED decision on rates just about ten days away our 0:06:12.880 --> 0:06:17.120 thanks to Stuart Paul, Us, economist with Bloomberg Economics. We 0:06:17.160 --> 0:06:19.720 move next to tech giant Apple, which will hold its 0:06:19.760 --> 0:06:23.120 fall product launch this Tuesday, September ninth, where it's expected 0:06:23.120 --> 0:06:26.680 to introduce a new iPhone seventeen lineup, and it comes 0:06:26.720 --> 0:06:31.240 as the company explores using outside AI technology in its products. 0:06:31.600 --> 0:06:33.839 For more on this and all things Apple, were joined 0:06:33.839 --> 0:06:39.320 by Mark German, Bloomberg News Managing editor for Global Consumer Tech. Well, Mark, 0:06:39.360 --> 0:06:41.440 thanks so much for joining us. I want to start 0:06:41.480 --> 0:06:44.120 with all the excitement around this week's product launch, which 0:06:44.120 --> 0:06:47.480 will include an ultra thin version of the iPhone. So 0:06:47.600 --> 0:06:49.440 what do you expect to see this week? 0:06:50.120 --> 0:06:53.080 Yeah, thank you for having me. The iPhone redesign Era 0:06:53.720 --> 0:06:58.000 begins on Tuesday at Apple's next launch event. Right over 0:06:58.040 --> 0:07:01.000 the past half decade or so, the iPhone design really 0:07:01.040 --> 0:07:03.880 hasn't changed much. But over the next three years it's 0:07:03.880 --> 0:07:06.800 going to change significantly. And that starts Tuesday, and you're 0:07:06.839 --> 0:07:09.400 going to see that in two ways. One, they're releasing 0:07:09.440 --> 0:07:13.000 the iPhone seventeen Pro in seventeen Pro Max, and for 0:07:13.040 --> 0:07:14.920 the first time in a while, they're going to be 0:07:14.960 --> 0:07:18.560 redesigning the device. The back is going to look entirely new. 0:07:18.760 --> 0:07:21.080 It's going to have a new wireless charging area on 0:07:21.120 --> 0:07:22.960 the bottom half, and it's going to have a brand 0:07:22.960 --> 0:07:25.920 new camera area, a camera bar, so to speak, on 0:07:25.960 --> 0:07:29.400 the top part, which extends that camera region right now, 0:07:29.480 --> 0:07:32.640 right now, it's in the top left quadrant. Now it's 0:07:32.680 --> 0:07:35.400 going to really take up about the top third of 0:07:35.440 --> 0:07:38.080 the whole phone. And that's going to allow some new 0:07:38.120 --> 0:07:42.120 tricks related to the aperture and optical zoom in some 0:07:42.160 --> 0:07:45.040 such so big improvements to the camera on the seventeen 0:07:45.080 --> 0:07:47.960 Pro and seventeen Pro Max, and it's going to visually 0:07:48.400 --> 0:07:50.880 look different. The other phone is going to be what 0:07:50.920 --> 0:07:54.200 I'm calling the iPhone seventeen Air. This phone is going 0:07:54.240 --> 0:07:57.440 to be about two millimeters thinner than any iPhone sold 0:07:57.480 --> 0:08:00.160 to date. Now two millimeters might not sound a lot 0:08:00.400 --> 0:08:03.119 on paper or when I say it, but in your hand, 0:08:03.160 --> 0:08:06.000 you're going to notice a gigantic difference. And this is 0:08:06.040 --> 0:08:08.880 Apple taking the same strategy as the mac BLAGUEIR that 0:08:08.960 --> 0:08:12.960 it introduced almost twenty years ago. Something that's thinner, lighter, 0:08:13.000 --> 0:08:16.320 and more marketable, but has some drawbacks on key features 0:08:16.400 --> 0:08:20.720 like battery life and in some cases processing power, camera 0:08:20.840 --> 0:08:23.239 and overall performance, so you're going to get some trade offs, 0:08:23.360 --> 0:08:25.600 but it's going to be a really cool looking phone 0:08:25.880 --> 0:08:28.080 and it's probably going to sell far better than the 0:08:28.120 --> 0:08:31.280 prior fourth iPhone models before they had the Mini and 0:08:31.320 --> 0:08:34.320 the Plus phones of the regular variation. This is something 0:08:34.360 --> 0:08:37.079 sandwiched in the middle between the Base and the profone, 0:08:37.120 --> 0:08:38.920 so that's very exciting. 0:08:38.640 --> 0:08:41.080 And any other new devices you expect to see. 0:08:42.240 --> 0:08:44.960 I expect to see new versions of all the Apple 0:08:44.960 --> 0:08:48.360 Watch models, So a pretty significant update to the Apple 0:08:48.400 --> 0:08:51.600 Watch Ultra, theough Ultra three in order to better compete 0:08:51.640 --> 0:08:54.760 with Garmin. That high end sports watch market is something 0:08:54.840 --> 0:08:57.360 that Apple wants to make a big vent into. And 0:08:57.400 --> 0:08:59.240 then you're going to see a minor update to the 0:08:59.280 --> 0:09:01.840 Series eleven Watch last year was more of a significant 0:09:01.840 --> 0:09:05.120 engineering upgrade. And then you're also going to see upgrades 0:09:05.120 --> 0:09:08.360 to the Apple Watch se which is Apple's entry level watch. 0:09:08.400 --> 0:09:10.920 This is something they're trying to position for kids, a 0:09:11.080 --> 0:09:14.120 pre smartphone age. And then we're also likely to see 0:09:14.480 --> 0:09:16.280 upgrades to the AirPods. 0:09:16.760 --> 0:09:19.000 All right, a lot to look forward to. There was 0:09:19.040 --> 0:09:21.400 also some good news for Apple last week now a 0:09:21.440 --> 0:09:24.079 federal judge ruled that Apple can maintain its deal with 0:09:24.120 --> 0:09:28.000 Apple Bit making Google the default search engine on all 0:09:28.040 --> 0:09:31.800 its devices, and that means that's good news for shareholders certainly. 0:09:32.120 --> 0:09:34.040 What kind of money were talking about in that deal. 0:09:34.920 --> 0:09:38.079 Well, Apple is generating north of twenty billion dollars a 0:09:38.160 --> 0:09:41.319 year roughly from this deal. And basically what this is 0:09:41.320 --> 0:09:44.360 is when you make a Google search, Google makes money 0:09:44.440 --> 0:09:47.880 from the advertising or the search placement fees that companies 0:09:47.960 --> 0:09:51.240 pay to have their website result go higher in the 0:09:51.280 --> 0:09:54.880 search results. Right, if you do that on an Apple device, 0:09:54.920 --> 0:09:58.840 an iPhone, an iPad, a math, you name it, Apple 0:09:58.880 --> 0:10:01.040 get to Cut, it's a rev you share deals similar 0:10:01.040 --> 0:10:02.959 to the revenue share deals they have on the App Store. 0:10:03.160 --> 0:10:06.000 In this case it's a little bit more lucrative. Like 0:10:06.040 --> 0:10:08.160 I said, more than twenty billion a year is the 0:10:08.240 --> 0:10:08.920 value here. 0:10:09.280 --> 0:10:10.000 And there was a. 0:10:09.920 --> 0:10:14.480 Real scenario where Apple was going to lose out on 0:10:14.520 --> 0:10:17.480 that deal because the judge was going to prevent Google 0:10:17.480 --> 0:10:19.760 from having default search arrangements, not only with Apple, but 0:10:19.840 --> 0:10:22.839 any companies they had default search arrangements. So this is 0:10:23.000 --> 0:10:25.480 quite significant development not only for Apple and Google, but 0:10:25.559 --> 0:10:28.640 the whole tech industry, which now breathes a sigh of 0:10:28.679 --> 0:10:32.920 relief because the precedent has been set that the current 0:10:33.480 --> 0:10:35.440 government is not breaking up these companies. 0:10:35.840 --> 0:10:38.760 Wow, big, big, Well, I want to pivot to something else, 0:10:38.760 --> 0:10:42.960 the story that you broke Apple's Elvis in Vegas. AI comeback. 0:10:43.040 --> 0:10:45.880 That's what I want to call it. Overhauling. It's Sirie 0:10:46.000 --> 0:10:49.920 Voice Assistant and you know it's worked with Google and 0:10:50.640 --> 0:10:54.480 it's worked with Open Ai. Apple tell me about this 0:10:54.600 --> 0:10:57.680 AI powered web search tool for Siri that they're working 0:10:57.720 --> 0:11:00.360 on right now, who they're working with, and what it 0:11:00.440 --> 0:11:01.640 means to the consumer. 0:11:02.640 --> 0:11:05.120 March, Apple is going to finally overhaul Serrie. This was 0:11:05.120 --> 0:11:07.480 supposed to come out several months ago, but it was delayed. 0:11:08.160 --> 0:11:10.439 At the core of the new series, as I broke, 0:11:10.600 --> 0:11:13.600 is going to be an AI web search tool. So 0:11:13.640 --> 0:11:15.839 this is going to allow people in Siri and other 0:11:15.880 --> 0:11:19.600 parts of iOS and Apple's operating systems to get better 0:11:19.720 --> 0:11:22.080 data from the Internet. You know, Series good at doing 0:11:22.120 --> 0:11:24.640 things on your devices, but it really can't get information 0:11:24.720 --> 0:11:27.480 reliably from the open web, and so this is going 0:11:27.559 --> 0:11:30.240 to do that with what is known as World Knowledge Answers. 0:11:30.280 --> 0:11:33.640 That's the internal code name for this feature. Others call 0:11:33.679 --> 0:11:37.200 it an answer engine internally. So this is a pretty 0:11:37.240 --> 0:11:41.640 significant deal. This is Apple competing with perplexity and search 0:11:41.760 --> 0:11:44.760 on Chat GPT to a large extent rather than competing 0:11:44.760 --> 0:11:47.040 with Google. And in terms of who they're working with 0:11:47.080 --> 0:11:49.640 on this, I've been talking for months that Apple is 0:11:49.640 --> 0:11:53.440 seeking major AI partnerships. They've talked to Open Ai, They've 0:11:53.640 --> 0:11:57.640 went very deep in discussions and negotiations with Anthropic, but 0:11:57.800 --> 0:11:59.960 it sounds like they're going to land with Google. Google 0:12:00.200 --> 0:12:03.240 has created a custom model for Apple to help power Siri, 0:12:03.559 --> 0:12:06.640 to really make serie work more effectively, like a Gemini 0:12:06.679 --> 0:12:09.880 or Chat GPT, And right now all signs are pointing 0:12:09.920 --> 0:12:13.480 towards Apple seriously considering taking this agreement with Google. 0:12:13.760 --> 0:12:17.920 Well. Apple's awe dropping iPhone seventeen launch event is this Tuesday. 0:12:17.920 --> 0:12:20.520 Amid all that talk about AI and our thanks to 0:12:20.520 --> 0:12:24.600 Mark Erman, Bloomberg News Managing editor for Global Consumer Tech 0:12:25.120 --> 0:12:27.160 and coming up on Bloomberg day Break weekend to look 0:12:27.160 --> 0:12:29.920 ahead as the global defense industry is about to gather 0:12:29.960 --> 0:12:33.880 in London for the UK's flagship sector event. I'm Tom Busby, 0:12:34.040 --> 0:12:46.800 and this is Bloomberg. This is Bloomberg Day Break Weekend, 0:12:46.880 --> 0:12:49.240 our global look ahead at the top stories for investors 0:12:49.280 --> 0:12:51.800 in the coming week. I'm Tom Busby in New York 0:12:52.280 --> 0:12:54.320 up later in our program and look at some key 0:12:54.480 --> 0:12:58.720 economic data in China amid lingering questions about tariffs and housing. 0:12:58.960 --> 0:13:01.960 But first, the US defense companies have won some major 0:13:02.080 --> 0:13:06.080 contracts in recent days, including one to build warships for Norway. 0:13:06.480 --> 0:13:09.000 Now this comes as the global defense industry is about 0:13:09.040 --> 0:13:12.320 to gather in London for the UK's Flagship Sector event. 0:13:12.400 --> 0:13:16.079 But as pressure mounts on Britain's fiscal situation, will domestic 0:13:16.160 --> 0:13:19.800 government spending on security be a priority for more? Let's 0:13:19.840 --> 0:13:22.320 go to London and bring in Bloomberg daybreak. Euro banker 0:13:22.600 --> 0:13:23.840 Caroline Hepgar. 0:13:24.080 --> 0:13:28.160 Tom Bae Systems won a high profile ten billion pound 0:13:28.200 --> 0:13:32.040 deal to supply navy frigates to the Norwegians recently, in 0:13:32.080 --> 0:13:35.040 a sign that the UK may be reviving the shipbuilding 0:13:35.040 --> 0:13:39.040 industry at once dominated. And there's reason the world is 0:13:39.080 --> 0:13:43.840 a more uncertain and perhaps dangerous place despite an entrenched 0:13:43.840 --> 0:13:47.600 conflict in Ukraine. Russia's Vladimir Putin has brushed off European 0:13:47.640 --> 0:13:52.079 concerns about a Russian threat to the continent as hysteria. 0:13:52.640 --> 0:13:57.600 And consider China's massive choreographed military parade in the last 0:13:57.600 --> 0:14:01.160 few days that prompted US President Donald to dismiss the 0:14:01.240 --> 0:14:06.079 idea that China would ever quote use their military on us. 0:14:07.000 --> 0:14:09.480 So with that in mind, it seems grimly apt that 0:14:09.559 --> 0:14:13.199 the theme for this year's Defense and Security Equipment International 0:14:13.240 --> 0:14:17.800 Exhibition here in London is preparing the future force. European 0:14:17.840 --> 0:14:21.040 allies have promised to plow billions of euros into domestic 0:14:21.120 --> 0:14:25.280 defense manufacturing. How quickly that happens and what is bought 0:14:25.360 --> 0:14:29.600 is vital. Norway picked the UK as the supplier of 0:14:29.680 --> 0:14:33.480 frigates to help it deter Russian submarines in the High 0:14:33.520 --> 0:14:36.760 North in what is the biggest ever investment in the 0:14:36.800 --> 0:14:41.440 Nordic country's defense history. Here is Norway's Defense Minister tore 0:14:41.600 --> 0:14:44.200 O Sandvik discussing that decision. 0:14:44.560 --> 0:14:46.880 It was a very difficult choice and we had the 0:14:47.080 --> 0:14:51.680 four very good contenders, both the Germany, France, UK and 0:14:52.000 --> 0:14:55.960 the Americans, close allies to Norway all four, but it 0:14:56.160 --> 0:14:59.080 was a decision with a lot of factories. So we 0:14:59.160 --> 0:15:03.480 decided to go were with the Brits because in the 0:15:03.600 --> 0:15:05.840 end it was a lot of factors who decided it. 0:15:06.720 --> 0:15:10.600 So are you worried at all about Norway's navy needing 0:15:10.640 --> 0:15:14.640 the capabilities before twenty thirty which is when deliveries are 0:15:14.720 --> 0:15:15.280 due to start. 0:15:16.400 --> 0:15:19.480 No, we all already have frigates, but we'll want to 0:15:19.640 --> 0:15:22.760 exchansion with the new frigates. So this is completely in 0:15:22.760 --> 0:15:26.120 line with our plans in the long term defense plan. 0:15:26.400 --> 0:15:29.880 That was the Norwegian Defense Minister tore O Sandovic speaking 0:15:29.920 --> 0:15:33.560 that to Blomberg's Francine Laqua. So as the Norway deal 0:15:33.560 --> 0:15:36.760 a flash in the pan or the start of a revival, 0:15:37.160 --> 0:15:40.120 the government here sees defense as a sector ripe to 0:15:40.280 --> 0:15:45.160 drive economic growth. As for Britain's own defense, security experts 0:15:45.160 --> 0:15:49.360 have judge Britain currently incapable of defending itself against a 0:15:49.440 --> 0:15:54.440 ballistic missile attack given a combination of long term under investment, 0:15:54.840 --> 0:15:58.760 botch contracts and poor recruitment. So joining me now to 0:15:58.920 --> 0:16:01.880 discuss all of this, what's happening here in Britain and 0:16:01.920 --> 0:16:06.680 the global contexts Boomberg's Roslyn Matheson and Tony Halpin, who 0:16:06.760 --> 0:16:10.640 leads our team covering the Russian government and economy, Welcome 0:16:10.680 --> 0:16:15.200 to both of you. Thank you, Roz. How acute is 0:16:15.320 --> 0:16:19.120 the security threat in your view facing the UK? Perhaps 0:16:19.200 --> 0:16:20.320 we should start there. 0:16:21.040 --> 0:16:23.400 Well, you were just laying some of it out because 0:16:23.640 --> 0:16:26.240 like a lot of countries. The UK arguably took their 0:16:26.240 --> 0:16:28.360 foot of the gas for many years when it came 0:16:28.400 --> 0:16:31.600 to its own security and spending to keep up with 0:16:32.760 --> 0:16:37.200 security threats, and perhaps a sense of complacency because the UK, 0:16:37.320 --> 0:16:41.000 like others, falls under the NATO umbrella that somehow, you know, 0:16:41.080 --> 0:16:45.200 NATO would magically come to the rescue if needed. And 0:16:45.240 --> 0:16:48.200 there's been a realization across the board on that, particularly 0:16:48.240 --> 0:16:50.400 over the last year or two. I mean, there are 0:16:50.440 --> 0:16:53.720 two wars still going on. There's a war obviously in 0:16:53.760 --> 0:16:57.520 Gaza and the war in Ukraine, and other potential threats 0:16:57.600 --> 0:17:01.800 on the horizon Nonstate act is, particularly cyber attacks. So 0:17:01.840 --> 0:17:05.399 the threat has grown more complex as we go on, 0:17:05.680 --> 0:17:08.560 and really the renewed questionals of a nuclear threat, given 0:17:08.600 --> 0:17:12.959 all the international guard rails, the architecture around nuclear weapons 0:17:13.000 --> 0:17:16.479 seems to be falling apart those understandings about how to 0:17:16.520 --> 0:17:20.080 manage arsenals and behavior. I mean, is there an immediate 0:17:20.119 --> 0:17:24.199 threat to the UK from say Russia. Unlikely, But we 0:17:24.320 --> 0:17:29.120 are an increasingly multipolar, complex world and that's a lot 0:17:29.119 --> 0:17:32.000 for the UK, especially as you were noting, with limited 0:17:32.280 --> 0:17:33.640 air defenses of its own. 0:17:33.880 --> 0:17:37.480 Yeah, Tony, more dangerous world. Perhaps we should think about 0:17:37.560 --> 0:17:42.200 Vladimir Putin the war in Ukraine. Is it going to end? 0:17:42.320 --> 0:17:43.399 What's your view now? 0:17:44.840 --> 0:17:46.879 Well, eventually, of course, you know it will come to 0:17:46.920 --> 0:17:50.119 a conclusion. But I think there's a great deal of concern, 0:17:50.520 --> 0:17:53.440 particularly in Europe, that they don't see a near term 0:17:53.480 --> 0:17:55.760 horizon in which the war does come to an end. 0:17:56.000 --> 0:17:57.840 And even if it did, even if we got to 0:17:57.880 --> 0:18:01.960 a point where the active fighting stopped, that doesn't resolve 0:18:02.000 --> 0:18:05.760 the crisis because you have this enormous front line something 0:18:05.840 --> 0:18:08.680 like a thousand kilometers long in eastern Ukraine, which if 0:18:08.680 --> 0:18:11.640 there is a peace agreement, will require policing that will 0:18:11.640 --> 0:18:14.040 require troops on the ground from other countries to make 0:18:14.080 --> 0:18:18.560 sure that Putin doesn't in fact initiate another conflict. That's 0:18:18.600 --> 0:18:21.320 going to require commitments from Europe, which are very difficult 0:18:21.320 --> 0:18:23.560 at the moment to see the meeting over the long term, 0:18:23.600 --> 0:18:26.280 because it's large numbers of troops, it's large numbers of 0:18:26.280 --> 0:18:29.280 military commitments, and it's going to go on for years 0:18:29.400 --> 0:18:33.280 unless tensions abate somehow, And it's difficult to see how 0:18:33.320 --> 0:18:37.720 tensions do abate when Vladimir Putin's in the Kremlin and 0:18:38.080 --> 0:18:41.600 they basically have ripped up relations with Europe. So even 0:18:41.640 --> 0:18:44.640 if the fighting stops, which is a big question mark 0:18:44.680 --> 0:18:48.800 at this point, Once that happens, the crisis continues for 0:18:48.880 --> 0:18:50.120 years and potentially decades. 0:18:50.480 --> 0:18:51.200 Wow. 0:18:51.960 --> 0:18:55.240 In terms of the UK, to what extent is defense 0:18:55.240 --> 0:18:57.880 spending then for the British government of priority? I mean, 0:18:57.880 --> 0:18:59.920 we know that they've talked about it a great deal 0:19:00.160 --> 0:19:03.359 Defense Minister John Healey, the Prime Minister, the new NATA 0:19:03.480 --> 0:19:06.960 defense spending commitments. But it's a difficult time fiscally for 0:19:07.000 --> 0:19:08.920 Britain too well. 0:19:08.960 --> 0:19:11.439 It is min Kirs Starmer, the Prime Minister. Back at 0:19:11.480 --> 0:19:13.760 the time of the NATO summer he said the first 0:19:13.880 --> 0:19:16.240 duty for prime minister is to keep the country safe 0:19:16.280 --> 0:19:19.639 and that sits above all other duties. And so you 0:19:19.680 --> 0:19:22.880 know it is a priority for the government. We've got 0:19:22.880 --> 0:19:24.719 the recent news that the UK is going to buy 0:19:24.800 --> 0:19:27.440 at least a dozen new US made F thirty five 0:19:27.480 --> 0:19:30.119 fighter jets, for example. It is part of the NATO 0:19:30.200 --> 0:19:34.920 pledge to increase spending on defense as a proportion of GDP. 0:19:35.119 --> 0:19:36.800 It's going to have to commit to getting there. The 0:19:36.880 --> 0:19:39.360 question is like, at what point does it get there? 0:19:39.400 --> 0:19:41.560 Is it closer to twenty thirty five? 0:19:42.280 --> 0:19:43.760 But the but the big bart. 0:19:43.600 --> 0:19:46.320 As you were saying, is Chancellor Rachel Reeves has some 0:19:46.560 --> 0:19:50.199 very delicate fiscal waters to navigate, and she's got her 0:19:50.240 --> 0:19:53.480 budget in late November. There's a lot of chatter that 0:19:53.520 --> 0:19:56.239 she will need to raise taxes or cut spending. I mean, 0:19:56.280 --> 0:19:59.960 some estimates are up to what fifty one billion power 0:20:00.400 --> 0:20:04.160 to fill a hole in public finances. And so where 0:20:04.160 --> 0:20:06.080 do you find that money? How can you show that 0:20:06.080 --> 0:20:10.040 you're still spending money towards defense in those environments? And 0:20:10.080 --> 0:20:13.320 do you face potentially a backlash at home if you're 0:20:13.359 --> 0:20:16.440 cutting welfare in order to devot money into into defense spending. 0:20:16.960 --> 0:20:18.720 And yet the UK has been at the forefront of 0:20:18.760 --> 0:20:21.240 trying to support Ukraine, being at the heart of the 0:20:21.280 --> 0:20:26.600 so called Coalition of the willing Tony. President Putin doesn't 0:20:26.640 --> 0:20:30.480 obviously want NATO troops in Ukraine. I mean, how likely 0:20:30.640 --> 0:20:33.080 do you think that might be? 0:20:34.960 --> 0:20:36.639 Well, this is one of the big un answered questions 0:20:36.680 --> 0:20:39.399 I think the Russia says consistently. Putin says that he 0:20:39.440 --> 0:20:44.280 will not tolerate the presence of NATO countries' troops in Ukraine. 0:20:44.280 --> 0:20:46.560 They've said all on that they can't allow Ukraine into NATO, 0:20:46.640 --> 0:20:49.560 But they don't even want NATO troops present in Ukraine. 0:20:50.160 --> 0:20:52.880 Given that the Coalition of the Willing is basically comprised 0:20:52.880 --> 0:20:55.760 of countries that are in NATO, it's very difficult to 0:20:55.800 --> 0:20:59.320 see how square that circle. Ukraine, of course, is very 0:20:59.359 --> 0:21:02.920 concerned to sure that it has security guarantees that mean 0:21:03.000 --> 0:21:05.200 something and aren't just on paper, So they will want 0:21:05.240 --> 0:21:08.760 to know very concrete answers to very concrete questions. Who 0:21:08.880 --> 0:21:11.359 comes if the war starts again, what do they sayd 0:21:11.560 --> 0:21:14.080 when do they send it? How can we expect to 0:21:14.119 --> 0:21:18.320 defend ourselves in these different scenarios? And at the moment 0:21:19.000 --> 0:21:21.800 the Coalition of the Willing isn't really sketching out the 0:21:21.840 --> 0:21:25.600 answers to that question that would allow them then to say, okay, well, 0:21:25.640 --> 0:21:28.160 we feel fairly secure in the event that the war 0:21:28.200 --> 0:21:31.560 stops and Putin continues to present a threat to us. 0:21:32.440 --> 0:21:39.320 Meanwhile, the uses of technology within Ukraine are being rapidly 0:21:39.359 --> 0:21:43.119 integrated within the defense space across Europe and here in 0:21:43.160 --> 0:21:45.359 the UK. In the next few days we're highly likely 0:21:45.400 --> 0:21:48.439 to see a lot of that. In terms of the 0:21:48.480 --> 0:21:51.640 frigate deal for the UK and that ten billion pounds 0:21:51.640 --> 0:21:55.240 that I mentioned, the idea of reviving ship building in Britain. 0:21:55.240 --> 0:21:58.600 It does look like the Nordics are looking to the UK. 0:21:58.680 --> 0:22:01.159 And there was also big question mark about that wasn't there. 0:22:01.160 --> 0:22:05.320 It was about actually whether Britain this defense spending sort 0:22:05.359 --> 0:22:09.080 of gosh that we're expecting was going to come to Britain. 0:22:09.520 --> 0:22:11.720 And the UK did beat out other countries, you know, 0:22:11.760 --> 0:22:13.800 it was looking like France, Germany and the US. We're 0:22:13.840 --> 0:22:17.320 also competing for that. For the Norway frigate deal, and 0:22:17.359 --> 0:22:21.120 a big selling point for the UK was that interoperability 0:22:21.600 --> 0:22:24.479 of their vessels, right, which is they work well together, 0:22:24.640 --> 0:22:27.720 that's much more efficient, it reduces costs, and that's increasingly 0:22:27.760 --> 0:22:30.040 something that's going to be on the table with defense 0:22:30.119 --> 0:22:32.080