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Speaker 1: This is Bloomberg Daybreak Europe for this Monday, the twelfth

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Speaker 1: of June in London.

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Speaker 2: Coming up today, Britain adrift.

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Speaker 3: The evidence grows that the UK has gone from charting

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Speaker 3: its own course to going off course.

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Speaker 2: We have a special report.

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Speaker 1: A warning from the Chairman of M and S, Archie Norman,

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Speaker 1: tells us Sunak's government desperately needs to rebuild the business ties.

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Speaker 1: Boris Johnson swept away.

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Speaker 3: One hundred and sixty seven years of independence comes to

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Speaker 3: an end. UBS finalizes its takeover of troubled rival Credit Sweee.

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Speaker 1: Plus political dramas worthy of Shakespeare. Boris Johnson quits Parliament

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Speaker 1: and the former Scottish First Minister, Nicholas Sturgeon is arrested.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Europe. The business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App

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Speaker 4: and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm Stephen Carroll and.

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Speaker 3: I'm Caroline Hetger. Here are the stories that we're following today.

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Speaker 3: Some of the world's biggest companies are highlighting the deteriorating

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Speaker 3: investment climate in the UK. An investigation by us here

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Speaker 3: on Daybreak Europe and the Bloomberg Newsroom has found that

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Speaker 3: business leaders believe the government has failed to meet the

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Speaker 3: twin challenges of Brexit and the foreign subsidies arms race.

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Speaker 3: Here's what the chairman of Marx and Spencer, Archie Norman,

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Speaker 3: told us.

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Speaker 5: Other countries are saying, No, we need laboratory as systems.

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Speaker 5: No we need more coders, No we we need more

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Speaker 5: data suntists. We seem to be agnostic. We don't know

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Speaker 5: what we need and that's not good enough. The footprint

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Speaker 5: of government is too big in the economy to say

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Speaker 5: we're just hands off.

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Speaker 3: And we'll be bringing you more of our interview with

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Speaker 3: Archie Norman, as well as a host of other conversations

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Speaker 3: with leading business voices later in the show.

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Speaker 1: The criticism from the business community comes on the same

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Speaker 1: day that the Bank of England policymaker Katherine Mann has

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Speaker 1: called on the government to move economic policy to a

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Speaker 1: more sustainable footing. In an essay for the Resolution Foundation,

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Speaker 1: the rate setter says fiscal and monetary policymakers need to

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Speaker 1: transition from a crisis policy phase to a longer term agenda.

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Speaker 1: Catherine Mann's word, they are a warning to both Prime

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Speaker 1: Minister Rishi Sunak and the opposition Labour leader kir Starmer

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Speaker 1: as each begins to set out their agenda and spending

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Speaker 1: plans for a general election expected next year.

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Speaker 3: The growing chorus of voices calling for a new approach

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Speaker 3: by government come just as the Prime Minister faces a

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Speaker 3: major political challenge from his predecessor. On Friday, Boris Johnson

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Speaker 3: resigned as an MP, with two of his allies also

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Speaker 3: stepping down from Parliament in a row over COVID nineteen

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Speaker 3: rule breaches. The resignations trigger three by elections that could

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Speaker 3: highlight softening support for the Conservative Party, but Johnson's former

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Speaker 3: communications director, Ghetto Harry claims that that wasn't what drove

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Speaker 3: the former Prime Minister's decision to stand down.

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Speaker 6: I don't think this is part of an elaborate plot

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Speaker 6: to sort of destabilize and topple Rishie Sunac. I think

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Speaker 6: there is an opportunity for him now to go off

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Speaker 6: and seize new opportunities.

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Speaker 3: Despite itet Harry's assertion, the by elections complicates Sunac's hopes

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Speaker 3: of further narrowing the gap in support with Labor. Recent

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Speaker 3: opinion polls have put the opposition party up by as

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Speaker 3: much as fourteen points against the Tories in Scotland.

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Speaker 1: Former First Minister Nicolas Sturgeon says she knows beyond doubt

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Speaker 1: that she's innocent of any wrongdoing. That's after she was

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Speaker 1: arrested as part of an investigation into the SMP's finances.

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Speaker 1: Sturgeon was questioned by police before being released without charge.

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Speaker 1: Professor of Politics at the University of Strathclyde, John Curtis

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Speaker 1: says it's fire from the SMP's only electoral issue.

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Speaker 7: I think in truth we've probably been anticipating that at

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Speaker 7: some point the police would also want to talk to

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Speaker 7: Nicholas Sturgion. Any conclusion we can draw from this so

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Speaker 7: far as the investigations concern is that the police have

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Speaker 7: everently decided it is still worth continuing.

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Speaker 1: Strathclyde Professor of Politics, John Curtis, speaking there. The SMP

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Speaker 1: is set to hold a special conference later this month

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Speaker 1: to consult party members on the way forward for its

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Speaker 1: independence campaign.

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Speaker 3: Now away from politics, Crispin ODI's main hedge fund will

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Speaker 3: now be run by his co manager, Freddie Neve. The

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Speaker 3: move follows a decision by Ode Asset Management to remove

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Speaker 3: its founder, who is facing fresh assault allegations. Crispin Odi

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Speaker 3: denies those allegations and declined to comment on the decision.

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Speaker 3: The Financial Times also reports that the Hedge Fund is

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Speaker 3: discussing restrictions on investor withdrawals from its EU funds as

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Speaker 3: part of emergency measures to contain the fallout.

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Speaker 1: UBS says it's completed its takeover of Credit Suisse. The

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Speaker 1: bank made the announcement in an open letter published in

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Speaker 1: the Swiss Enzz newspaper. It comes as The Financial Times

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Speaker 1: of reports that the UBS will impose restrictions on bankers

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Speaker 1: from Credit Suisse, including a ban on new clients from

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Speaker 1: high risk countries. The paper says a list of almost

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Speaker 1: two dozen red lines will apply to Credit sweet staff

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Speaker 1: under the merger.

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Speaker 3: And finally, Ukraine's President Vladimi Zelenski confirmed yesterday that the

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Speaker 3: long expected Ukrainian counter offensive has begun.

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Speaker 8: Counter Offensive and defensive actions are taking place in Ukraine.

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Speaker 8: On which stage I won't say in detail, and we

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Speaker 8: for sure will feel all of it. I wouldn't trust

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Speaker 8: those or other telegram channels and especially putin.

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Speaker 3: Hey's comments come as Ukrainian forces say that they have

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Speaker 3: retaken three villages in the southeast of the country. The

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Speaker 3: gains couldn't be independently verified, and Russia's defense ministry called

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Speaker 3: the situation fluid.

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Speaker 1: Okay, so those are our top stories on the program

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Speaker 1: this morning, Karlin, so much more on this theme of

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Speaker 1: is Britain adrift? But first I just wanted to mark

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Speaker 1: this news that we're having in regards to UBS's takeover

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Speaker 1: of Credit Sweee. The milestone moment has arrived. UBS has

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Speaker 1: taken over its former rival. This ends the lenders one

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Speaker 1: hundred and sixty seven year independent existence. This of course

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Speaker 1: capping two months of uncertainty for employees. After this Swiss

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Speaker 1: government brokered takeover nine billion Swiss francs guarantee against potential

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Speaker 1: losses on credit swiez asses. It's been a massive story

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Speaker 1: in the financial sector and today we're turning another page

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Speaker 1: in it.

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Speaker 3: Yeah. Absolutely, this is the expectation. We had that note

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Speaker 3: to employees from the Credit Suisse a CEO on Friday

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Speaker 3: that was expected to happen. So now the details are

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Speaker 3: actually out this Monday that UBS Credit Suisse takeover is complete.

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Speaker 1: Now yet more political uncertainty in the UK, and a

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Speaker 1: growing number of business leaders are left wondering if Britain

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Speaker 1: is a drift. The challenges the economic challenges for the

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Speaker 1: UK are clear, the damaging consequences of the pandemic, the

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Speaker 1: war in Ukraine and Brexit, but the UK is also

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Speaker 1: at a crossroads in need of what business leaders see

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Speaker 1: as a long term, ambitious planned from government that is deliverable. Caroline,

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Speaker 1: this is something that you've been looking into in some detail.

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Speaker 3: Yeah, absolutely, I think there was a moment in the

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Speaker 3: newsroom where we were thinking about this. Bloomberg is doing

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Speaker 3: a deep dive into the state of the British economy.

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Speaker 3: The past couple of months have seen this criticism from

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Speaker 3: a host of business leaders wondering concern that the business

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Speaker 3: and the policies that the government is pursuing and trying

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Speaker 3: to execute perhaps are not the right ones. Think James

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Speaker 3: Dyson think of the criticism from Stilantis Revolute, Microsoft's Brad Smith,

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Speaker 3: Rigie sou NAC's Five Pledges, which are largely economic, and

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Speaker 3: the Chancellor's Edinburgh reforms simply have not quelled the chorus. Indeed,

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Speaker 3: the government only looks increasingly bogged down now and precarious.

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Speaker 3: So I've been speaking to business leaders about this. Archie

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Speaker 3: Norman the chairman of Marks and Spencers since twenty seventeen.

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Speaker 3: A lifelong Conservative. We know former MP himself, former CEO

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Speaker 3: of ASDA. I met him at mns's headquarters in Paddington

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Speaker 3: and I spoke to him at length about this issue.

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Speaker 3: Where is the British economy right now? Is the UK adrift?

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Speaker 3: This is what he said.

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Speaker 5: I think there's a huge appetite for a new agenda,

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Speaker 5: for a sense of where are we trying to compete

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Speaker 5: in the world? What is our strategy post for exit

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Speaker 5: is no good just saying we left and we're going

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Speaker 5: to have some trade agreements. Is how are we now

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Speaker 5: going to compete in the world. We've created this dislocation,

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Speaker 5: We created friction fal trade. No rightly or wrongly, that's

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Speaker 5: what people voted to do. Now we need a plan

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Speaker 5: for how we compete and that used to be called

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Speaker 5: industrial strategy. Now this government, for whatever reason, has an

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Speaker 5: aversion to the expression industrial trait. It's what everybody else

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Speaker 5: calls it, so they can't bring themselves to say it.

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Speaker 5: But I don't care whether it's a growth strategy or competitiveness.

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Speaker 5: It's got to be a profound point of view as

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Speaker 5: to how Britain's going to compete.

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Speaker 3: So a profound point of view Archie Norman speaking to

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Speaker 3: me there, he also made a lot of other interesting

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Speaker 3: points on skills. The government is agnostic, it doesn't know

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Speaker 3: what it wants in terms of people's skills acquisition. That's

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Speaker 3: not good enough, he says. For the economy of the future.

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Speaker 3: He was scathing about recent policy blunders on a price

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Speaker 3: cap on essential foods. He called that hair brained. His

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Speaker 3: advice to Sunak if you want to be re elected,

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Speaker 3: you've got to be the future, not the past. We've

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Speaker 3: lost the plot. When it comes to getting firms to

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Speaker 3: list and headquarter themselves in London, that is a long

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Speaker 3: list for government.

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Speaker 1: Yeah, it certainly is British business. More broadly, though, Carolyn,

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Speaker 1: there's this battle ongoing for who represents and who works

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Speaker 1: with the government on addressing these concerns.

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Speaker 3: Well, that's it. It's about the relationship with business and

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Speaker 3: the interplay with business and government. The British Chambers of

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Speaker 3: Commers is trying to supersede the CBI as the biggest

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Speaker 3: business lobby. Martha Lane Fox, who is herself perhaps Brittain's

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Speaker 3: most successful techre entrepreneur, is the president of the BCC.

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Speaker 3: She's been traveling across the UK and again I spoke

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Speaker 3: to her at length and she says that there needs

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Speaker 3: to be policy across a breadth of sectors, a particular

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Speaker 3: focus on increasing trade, on getting the sales of UK

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Speaker 3: businesses abroad up. This is how she described the moment domestically.

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Speaker 9: There's also a sort of holding a collective breath, waiting

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Speaker 9: to see what happens over the next eighteen months with

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Speaker 9: political situation, not just here in the UK, but in

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Speaker 9: the US and more broadly, I guess across Europe, and

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Speaker 9: that's a confidence piece to a large degree. So I

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Speaker 9: think you have to be careful not to talk ourselves

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Speaker 9: into a position where we're saying that the UK is

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Speaker 9: all at cduse your words, you know, adrift. That's a

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Speaker 9: propriate language in some ways, but in other ways it

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Speaker 9: really isn't. I think the UK has a huge amount

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Speaker 9: to offer. We have a lot of extraordinary businesses and

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Speaker 9: amazing talent pool. We have to be careful, I think,

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Speaker 9: not to talk ourselves into a dark spot, because that's

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Speaker 9: not the UK that I think I recognize and that

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Speaker 9: I think we will want to build.

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Speaker 3: So, you know, business leaders and entrepreneurs like Martha lane

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Speaker 3: Fox are not pessimists, that they're always looking on the

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Speaker 3: bright side, emphasizing the advantages that the UK has, especially universities,

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Speaker 3: innovation entrepreneurs. But lane Fox does also talk about there

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Speaker 3: being a people crisis in the UK. People's crisis, the

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Speaker 3: difficulty of finding staff and retaining them. She talks about

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Speaker 3: needing a businesses needing to feel most importantly that they

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Speaker 3: can look ahead with certainty and there's not going to

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Speaker 3: be this constant rotation and chaos. Those are her words.

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Speaker 3: So this is reflected in the Big Take, the Deep

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Speaker 3: Dive imprint that we've got. It's on the front page

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Speaker 3: of the Bloomberg dot co dot UK websites, also on

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Speaker 3: the terminal this morning talking to a lot of businesses

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Speaker 3: about what they think about investibility within Britain.

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Speaker 1: And what we're hearing from the people that you've been

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Speaker 1: speaking to is that this is a pivotal moment for

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Speaker 1: the UK and one that needs policy solutions.

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Speaker 6: Yeah.

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Speaker 3: And Xavier Julie was also in London, so I had

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Speaker 3: a long conversation with him. He was the CEO of

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Speaker 3: the London Sock Exchange between two thousand and nine twenty seventeen,

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Speaker 3: he's now nonexecu UIR and Ashore Capital, another well known company.

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Speaker 3: Very frustrated that there isn't a more serious conversation in

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Speaker 3: the UK but also in Europe about how we fund businesses,

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Speaker 3: how we get them to grow. Very critical of the

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Speaker 3: fact that in the UK, in Europe we use debt,

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Speaker 3: we use bank lending, and in the US it's obviously

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Speaker 3: done far more through equity. He talks about today we're

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Speaker 3: at a point of needing radical reform.

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Speaker 2: Here's his arguments.

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Speaker 10: If you have equity markets there are one tenth the

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Speaker 10: size of US. The cost of raising equity here, particularly

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Speaker 10: for a high growth industry, cost is much higher here.

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Speaker 10: So the best, fastest growing, biggest value creators moved to

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Speaker 10: the United States, and then we end up with that

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Speaker 10: productivity deficit. Over time, you end up with a low growth,

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Speaker 10: low productivity, debt focus funding environment, and the best of

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Speaker 10: what you've invested in your universities, your entrepreneurs and others.

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Speaker 10: Migrates the US are leveraging that. But in the US

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Speaker 10: business runs, business investors make the choices as to who

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Speaker 10: are going to be the winners on the technology side.

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Speaker 10: In the UK and Europe. It is still today government

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Speaker 10: you know, these talks of sovereign funds and all sorts

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Speaker 10: of initiatives government driven. Eliminate the regulation that prevents the

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Speaker 10: long term holders of capital insurance companies and pension funds

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Speaker 10: from investing inequities and let investors make the choices. You'll

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Speaker 10: see what happens. We could grow our equity to be

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Speaker 10: on part of the United States. With these changes, we

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Speaker 10: could grow the liquidity of our equity markets in the

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Speaker 10: UK by tenfold.

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Speaker 3: So that was a Zevier rule speaking to me about

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Speaker 3: the kind of the difficulties that the UK and Europe

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Speaker 3: has in terms of how we fund high grade businesses.

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Speaker 3: I mean, he says very said, to be very clearly,

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Speaker 3: you can't scale up the industries of the future, particularly tech,

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Speaker 3: without far deeper equity markets. And he was very concerned

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Speaker 3: that there wasn't a lot of responsiveness to that idea.

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Speaker 1: Carolyn, from these conversations, what are you taking away is

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Speaker 1: Britain adrift?

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Speaker 3: Well, the economic issues for the UK have again been

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Speaker 3: superseded by these internal party politics of the Conservative Party.

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Speaker 3: So on the one hand, we understand the depths of

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Speaker 3: the economic issues in the UK. On the other hand,

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Speaker 3: the more positive and optimistic outlook might be this is

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Speaker 3: a moment right for big ideas, well thought out long

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Speaker 3: term industrial strategy, accountability. It's what Archie Norman was sort

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Speaker 3: of saying. The footprint of government is too big in

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Speaker 3: the economy to say we're just hands off. We've got

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Speaker 3: to get on with it in post Brexit Britain and

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Speaker 3: actually deliver for the growth economy of the future.

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Speaker 1: Okay, Carolyn, so much more coming from your conversations throughout

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Speaker 1: the program this morning. You can find that Big Take

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Speaker 1: report the Bloomberg website and I Big Take it for

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Speaker 1: using the terminal, or you'll see plenty more. Two on

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Speaker 1: social media, Caroline, you can find our c hepger on

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Speaker 1: Twitter as well, or of course by looking up Bloomberg Radio.

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Speaker 1: But of course this has bigger implications than just in

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Speaker 1: the business world.

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Speaker 6: Two.

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Speaker 1: Growing the economy one of Ritchie Sinac's five key priorities.

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Speaker 1: Does the Prime Minister, though risk being distracted by more

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Speaker 1: Tory infighting follow the resignation of Boris Johnson and two

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Speaker 1: of his key allies. Well, our UK correspondent Lizzie Burden

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Speaker 1: is with us for more on this. Lizzie let's start

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Speaker 1: on I suppose what is the government's current plan in

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Speaker 1: this area, What is the government's plan for growth?

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Speaker 11: Well, the government would argue that it's number one priorities

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Speaker 11: having inflation by the end of the year. That would

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Speaker 11: create stability as a platform for growth. And you've just

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Speaker 11: seen SUNAC in the US to shore up ties there

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Speaker 11: specifically to boost growth. For example, it's pumping a billion

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Speaker 11: pounds into the semiconductor industry. But that pales in comparison

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Speaker 11: to what the US are doing through the Inflation Reduction

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Speaker 11: Act and what the EU's doing in response, and it

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Speaker 11: leaves the UK heavily reliant on its allies to fill

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Speaker 11: in the gaps in the rest of the supply chain.

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Speaker 11: You heard there in Caroline's brilliant reporting. Business leaders are

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Speaker 11: queuing up to put forward the notion that Britain's closed

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Speaker 11: for business, that the government isn't doing enough to compensate

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Speaker 11: for the economic damage of Brexit. You had as well

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Speaker 11: last week almost one thousand tech companies, including Alphabet and Apple,

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Speaker 11: warning that the UK's falling behind in sectors like AI,

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Speaker 11: like semiconductors. So on the UK Politics podcast this week,

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Speaker 11: we're going to be speaking to Oliver Dowd and the

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Speaker 11: Deputy Prime Minister at Founders Forum in front of a

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Speaker 11: room of tech bosses and founders about this very question.

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Speaker 2: Is Britain adrift? What is the plan for growth?

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Speaker 11: So do tune into that on Friday's episode on Bloomberg

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Speaker 11: Radio at twelve pm.

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Speaker 3: Okay, great stuff. The reporting also comes though, as the

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Speaker 3: Bank of England's Catherine Mann has called for long term

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Speaker 3: strategy for the economy.

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Speaker 2: What's she been saying?

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Speaker 11: Well, she's the hawk of them and a try policy committee,

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Speaker 11: as you know, And this essay for the Resolution Foundation

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Speaker 11: really argues that the focus of the government needs to

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Speaker 11: be on the long term, especially on sustainability, rather than

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Speaker 11: on fire fighting because of course we've had the successive

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Speaker 11: shocks of Brexit, the pandemic Ukraine. But I have to

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Speaker 11: say frankly, even for Labor which has promised a more

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Speaker 11: activist state in response to Bidenomics, secure Anomics.

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Speaker 2: Is what the Shadow Chancellor Rachel Reeves calls it.

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Speaker 11: That's centered around investing twenty eight billion pounds a year

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Speaker 11: on the green energy transition. Labour's had to scale that

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Speaker 11: plan back and now the plan is to ramp up

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Speaker 11: spending rather than hit that twenty eight billion pound target

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Speaker 11: in the first year of a labor government. Labour says

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Speaker 11: it's because of persistent inflation, meaning higher rates since that

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Speaker 11: plan was announced, and it's necessary, they say, to cut

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Speaker 11: back a bit to maintain fiscal responsibility. So you've got

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Speaker 11: both parties battling it out to be the party of Business,

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Speaker 11: to be ambitious on growth within a very.

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Speaker 2: Politically and fiscally constrained environment.

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Speaker 1: Okay, Lizzie, this is all happening at a time when,

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Speaker 1: of course we've been also watching what's been happening inside

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Speaker 1: the Conservative Party. What's the risk that these events surrounding

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Speaker 1: Boris Johnson and the resignation of two of his allies

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Speaker 1: as well, will take away from the government's focus of

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Speaker 1: the economy.

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Speaker 11: Yes, so much happened over the weekend, didn't it.

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Speaker 6: Well.

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Speaker 11: The announcement of Boris Johnson's resignation and the timing of

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Speaker 11: that announcement does look designed to inflict the maximum damage

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Speaker 11: on the Prime Minister. Of course, Johnson blames Sunac for

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Speaker 11: his downfall, and Johnson even said he's exiting politics for now,

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Speaker 11: so hinting again that he hopes for a comeback as

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Speaker 11: his allies have been. It reminds me of when he

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Speaker 11: said Asta la visa baby when he left as Prime Minister,

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Speaker 11: suggesting that like the terminator, he's going to be back.

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Speaker 11: And of course the comparison to Donald Trump is well done.

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Speaker 11: You know, Johnson resigned even on the same day that

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Speaker 11: Trump was indicted on federal charges. But the key difference

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Speaker 11: says Johnson's isolated within the party, but scandal only seems

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Speaker 11: to boost Donald Trump.

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Speaker 2: Among the Republicans.

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Speaker 11: The bigger picture, as you point out, is whether or

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Speaker 11: not Johnson's comeback is realistic. It's a distraction from the

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Speaker 11: diligent government that sunac's trying to present. It's also an

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Speaker 11: immediate challenge for SUNAC in the sense that Johnson's resignation,

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Speaker 11: along with those of his two allies, Nigel Adams and

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Speaker 11: Noddine Doris, triggers by elections. That is going to be

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Speaker 11: embarrassing if SUNAC loses. The opposition Labor parties already calling

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Speaker 11: for a general election. Some polls show that they'd win

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Speaker 11: a landslide if there were an election. And over the

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Speaker 11: weekend you also saw Nikola Sturgeon, the former First Minister

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Speaker 11: of Scotland, arrested.

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Speaker 2: She was released after several hours.

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Speaker 11: But it adds to this sense that her party's imploding

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Speaker 11: that would benefit labor, and so Sunak's going to be

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Speaker 11: watching very closely what happens north of the border.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the

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