Speaker 1: This is Bloomberg Daybreak Europe for this Monday, the twelfth
Speaker 1: of June in London.
Speaker 2: Coming up today, Britain adrift.
Speaker 3: The evidence grows that the UK has gone from charting
Speaker 3: its own course to going off course.
Speaker 2: We have a special report.
Speaker 1: A warning from the Chairman of M and S, Archie Norman,
Speaker 1: tells us Sunak's government desperately needs to rebuild the business ties.
Speaker 1: Boris Johnson swept away.
Speaker 3: One hundred and sixty seven years of independence comes to
Speaker 3: an end. UBS finalizes its takeover of troubled rival Credit Sweee.
Speaker 1: Plus political dramas worthy of Shakespeare. Boris Johnson quits Parliament
Speaker 1: and the former Scottish First Minister, Nicholas Sturgeon is arrested.
Speaker 4: That's all straight ahead on Bloomberg Daybreak Europe. The business
Speaker 4: news you need to start your day in just one
Speaker 4: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App
Speaker 4: and everywhere you get your podcasts.
Speaker 1: Good morning, I'm Stephen Carroll and.
Speaker 3: I'm Caroline Hetger. Here are the stories that we're following today.
Speaker 3: Some of the world's biggest companies are highlighting the deteriorating
Speaker 3: investment climate in the UK. An investigation by us here
Speaker 3: on Daybreak Europe and the Bloomberg Newsroom has found that
Speaker 3: business leaders believe the government has failed to meet the
Speaker 3: twin challenges of Brexit and the foreign subsidies arms race.
Speaker 3: Here's what the chairman of Marx and Spencer, Archie Norman,
Speaker 3: told us.
Speaker 5: Other countries are saying, No, we need laboratory as systems.
Speaker 5: No we need more coders, No we we need more
Speaker 5: data suntists. We seem to be agnostic. We don't know
Speaker 5: what we need and that's not good enough. The footprint
Speaker 5: of government is too big in the economy to say
Speaker 5: we're just hands off.
Speaker 3: And we'll be bringing you more of our interview with
Speaker 3: Archie Norman, as well as a host of other conversations
Speaker 3: with leading business voices later in the show.
Speaker 1: The criticism from the business community comes on the same
Speaker 1: day that the Bank of England policymaker Katherine Mann has
Speaker 1: called on the government to move economic policy to a
Speaker 1: more sustainable footing. In an essay for the Resolution Foundation,
Speaker 1: the rate setter says fiscal and monetary policymakers need to
Speaker 1: transition from a crisis policy phase to a longer term agenda.
Speaker 1: Catherine Mann's word, they are a warning to both Prime
Speaker 1: Minister Rishi Sunak and the opposition Labour leader kir Starmer
Speaker 1: as each begins to set out their agenda and spending
Speaker 1: plans for a general election expected next year.
Speaker 3: The growing chorus of voices calling for a new approach
Speaker 3: by government come just as the Prime Minister faces a
Speaker 3: major political challenge from his predecessor. On Friday, Boris Johnson
Speaker 3: resigned as an MP, with two of his allies also
Speaker 3: stepping down from Parliament in a row over COVID nineteen
Speaker 3: rule breaches. The resignations trigger three by elections that could
Speaker 3: highlight softening support for the Conservative Party, but Johnson's former
Speaker 3: communications director, Ghetto Harry claims that that wasn't what drove
Speaker 3: the former Prime Minister's decision to stand down.
Speaker 6: I don't think this is part of an elaborate plot
Speaker 6: to sort of destabilize and topple Rishie Sunac. I think
Speaker 6: there is an opportunity for him now to go off
Speaker 6: and seize new opportunities.
Speaker 3: Despite itet Harry's assertion, the by elections complicates Sunac's hopes
Speaker 3: of further narrowing the gap in support with Labor. Recent
Speaker 3: opinion polls have put the opposition party up by as
Speaker 3: much as fourteen points against the Tories in Scotland.
Speaker 1: Former First Minister Nicolas Sturgeon says she knows beyond doubt
Speaker 1: that she's innocent of any wrongdoing. That's after she was
Speaker 1: arrested as part of an investigation into the SMP's finances.
Speaker 1: Sturgeon was questioned by police before being released without charge.
Speaker 1: Professor of Politics at the University of Strathclyde, John Curtis
Speaker 1: says it's fire from the SMP's only electoral issue.
Speaker 7: I think in truth we've probably been anticipating that at
Speaker 7: some point the police would also want to talk to
Speaker 7: Nicholas Sturgion. Any conclusion we can draw from this so
Speaker 7: far as the investigations concern is that the police have
Speaker 7: everently decided it is still worth continuing.
Speaker 1: Strathclyde Professor of Politics, John Curtis, speaking there. The SMP
Speaker 1: is set to hold a special conference later this month
Speaker 1: to consult party members on the way forward for its
Speaker 1: independence campaign.
Speaker 3: Now away from politics, Crispin ODI's main hedge fund will
Speaker 3: now be run by his co manager, Freddie Neve. The
Speaker 3: move follows a decision by Ode Asset Management to remove
Speaker 3: its founder, who is facing fresh assault allegations. Crispin Odi
Speaker 3: denies those allegations and declined to comment on the decision.
Speaker 3: The Financial Times also reports that the Hedge Fund is
Speaker 3: discussing restrictions on investor withdrawals from its EU funds as
Speaker 3: part of emergency measures to contain the fallout.
Speaker 1: UBS says it's completed its takeover of Credit Suisse. The
Speaker 1: bank made the announcement in an open letter published in
Speaker 1: the Swiss Enzz newspaper. It comes as The Financial Times
Speaker 1: of reports that the UBS will impose restrictions on bankers
Speaker 1: from Credit Suisse, including a ban on new clients from
Speaker 1: high risk countries. The paper says a list of almost
Speaker 1: two dozen red lines will apply to Credit sweet staff
Speaker 1: under the merger.
Speaker 3: And finally, Ukraine's President Vladimi Zelenski confirmed yesterday that the
Speaker 3: long expected Ukrainian counter offensive has begun.
Speaker 8: Counter Offensive and defensive actions are taking place in Ukraine.
Speaker 8: On which stage I won't say in detail, and we
Speaker 8: for sure will feel all of it. I wouldn't trust
Speaker 8: those or other telegram channels and especially putin.
Speaker 3: Hey's comments come as Ukrainian forces say that they have
Speaker 3: retaken three villages in the southeast of the country. The
Speaker 3: gains couldn't be independently verified, and Russia's defense ministry called
Speaker 3: the situation fluid.
Speaker 1: Okay, so those are our top stories on the program
Speaker 1: this morning, Karlin, so much more on this theme of
Speaker 1: is Britain adrift? But first I just wanted to mark
Speaker 1: this news that we're having in regards to UBS's takeover
Speaker 1: of Credit Sweee. The milestone moment has arrived. UBS has
Speaker 1: taken over its former rival. This ends the lenders one
Speaker 1: hundred and sixty seven year independent existence. This of course
Speaker 1: capping two months of uncertainty for employees. After this Swiss
Speaker 1: government brokered takeover nine billion Swiss francs guarantee against potential
Speaker 1: losses on credit swiez asses. It's been a massive story
Speaker 1: in the financial sector and today we're turning another page
Speaker 1: in it.
Speaker 3: Yeah. Absolutely, this is the expectation. We had that note
Speaker 3: to employees from the Credit Suisse a CEO on Friday
Speaker 3: that was expected to happen. So now the details are
Speaker 3: actually out this Monday that UBS Credit Suisse takeover is complete.
Speaker 1: Now yet more political uncertainty in the UK, and a
Speaker 1: growing number of business leaders are left wondering if Britain
Speaker 1: is a drift. The challenges the economic challenges for the
Speaker 1: UK are clear, the damaging consequences of the pandemic, the
Speaker 1: war in Ukraine and Brexit, but the UK is also
Speaker 1: at a crossroads in need of what business leaders see
Speaker 1: as a long term, ambitious planned from government that is deliverable. Caroline,
Speaker 1: this is something that you've been looking into in some detail.
Speaker 3: Yeah, absolutely, I think there was a moment in the
Speaker 3: newsroom where we were thinking about this. Bloomberg is doing
Speaker 3: a deep dive into the state of the British economy.
Speaker 3: The past couple of months have seen this criticism from
Speaker 3: a host of business leaders wondering concern that the business
Speaker 3: and the policies that the government is pursuing and trying
Speaker 3: to execute perhaps are not the right ones. Think James
Speaker 3: Dyson think of the criticism from Stilantis Revolute, Microsoft's Brad Smith,
Speaker 3: Rigie sou NAC's Five Pledges, which are largely economic, and
Speaker 3: the Chancellor's Edinburgh reforms simply have not quelled the chorus. Indeed,
Speaker 3: the government only looks increasingly bogged down now and precarious.
Speaker 3: So I've been speaking to business leaders about this. Archie
Speaker 3: Norman the chairman of Marks and Spencers since twenty seventeen.
Speaker 3: A lifelong Conservative. We know former MP himself, former CEO
Speaker 3: of ASDA. I met him at mns's headquarters in Paddington
Speaker 3: and I spoke to him at length about this issue.
Speaker 3: Where is the British economy right now? Is the UK adrift?
Speaker 3: This is what he said.
Speaker 5: I think there's a huge appetite for a new agenda,
Speaker 5: for a sense of where are we trying to compete
Speaker 5: in the world? What is our strategy post for exit
Speaker 5: is no good just saying we left and we're going
Speaker 5: to have some trade agreements. Is how are we now
Speaker 5: going to compete in the world. We've created this dislocation,
Speaker 5: We created friction fal trade. No rightly or wrongly, that's
Speaker 5: what people voted to do. Now we need a plan
Speaker 5: for how we compete and that used to be called
Speaker 5: industrial strategy. Now this government, for whatever reason, has an
Speaker 5: aversion to the expression industrial trait. It's what everybody else
Speaker 5: calls it, so they can't bring themselves to say it.
Speaker 5: But I don't care whether it's a growth strategy or competitiveness.
Speaker 5: It's got to be a profound point of view as
Speaker 5: to how Britain's going to compete.
Speaker 3: So a profound point of view Archie Norman speaking to
Speaker 3: me there, he also made a lot of other interesting
Speaker 3: points on skills. The government is agnostic, it doesn't know
Speaker 3: what it wants in terms of people's skills acquisition. That's
Speaker 3: not good enough, he says. For the economy of the future.
Speaker 3: He was scathing about recent policy blunders on a price
Speaker 3: cap on essential foods. He called that hair brained. His
Speaker 3: advice to Sunak if you want to be re elected,
Speaker 3: you've got to be the future, not the past. We've
Speaker 3: lost the plot. When it comes to getting firms to
Speaker 3: list and headquarter themselves in London, that is a long
Speaker 3: list for government.
Speaker 1: Yeah, it certainly is British business. More broadly, though, Carolyn,
Speaker 1: there's this battle ongoing for who represents and who works
Speaker 1: with the government on addressing these concerns.
Speaker 3: Well, that's it. It's about the relationship with business and
Speaker 3: the interplay with business and government. The British Chambers of
Speaker 3: Commers is trying to supersede the CBI as the biggest
Speaker 3: business lobby. Martha Lane Fox, who is herself perhaps Brittain's
Speaker 3: most successful techre entrepreneur, is the president of the BCC.
Speaker 3: She's been traveling across the UK and again I spoke
Speaker 3: to her at length and she says that there needs
Speaker 3: to be policy across a breadth of sectors, a particular
Speaker 3: focus on increasing trade, on getting the sales of UK
Speaker 3: businesses abroad up. This is how she described the moment domestically.
Speaker 9: There's also a sort of holding a collective breath, waiting
Speaker 9: to see what happens over the next eighteen months with
Speaker 9: political situation, not just here in the UK, but in
Speaker 9: the US and more broadly, I guess across Europe, and
Speaker 9: that's a confidence piece to a large degree. So I
Speaker 9: think you have to be careful not to talk ourselves
Speaker 9: into a position where we're saying that the UK is
Speaker 9: all at cduse your words, you know, adrift. That's a
Speaker 9: propriate language in some ways, but in other ways it
Speaker 9: really isn't. I think the UK has a huge amount
Speaker 9: to offer. We have a lot of extraordinary businesses and
Speaker 9: amazing talent pool. We have to be careful, I think,
Speaker 9: not to talk ourselves into a dark spot, because that's
Speaker 9: not the UK that I think I recognize and that
Speaker 9: I think we will want to build.
Speaker 3: So, you know, business leaders and entrepreneurs like Martha lane
Speaker 3: Fox are not pessimists, that they're always looking on the
Speaker 3: bright side, emphasizing the advantages that the UK has, especially universities,
Speaker 3: innovation entrepreneurs. But lane Fox does also talk about there
Speaker 3: being a people crisis in the UK. People's crisis, the
Speaker 3: difficulty of finding staff and retaining them. She talks about
Speaker 3: needing a businesses needing to feel most importantly that they
Speaker 3: can look ahead with certainty and there's not going to
Speaker 3: be this constant rotation and chaos. Those are her words.
Speaker 3: So this is reflected in the Big Take, the Deep
Speaker 3: Dive imprint that we've got. It's on the front page
Speaker 3: of the Bloomberg dot co dot UK websites, also on
Speaker 3: the terminal this morning talking to a lot of businesses
Speaker 3: about what they think about investibility within Britain.
Speaker 1: And what we're hearing from the people that you've been
Speaker 1: speaking to is that this is a pivotal moment for
Speaker 1: the UK and one that needs policy solutions.
Speaker 6: Yeah.
Speaker 3: And Xavier Julie was also in London, so I had
Speaker 3: a long conversation with him. He was the CEO of
Speaker 3: the London Sock Exchange between two thousand and nine twenty seventeen,
Speaker 3: he's now nonexecu UIR and Ashore Capital, another well known company.
Speaker 3: Very frustrated that there isn't a more serious conversation in
Speaker 3: the UK but also in Europe about how we fund businesses,
Speaker 3: how we get them to grow. Very critical of the
Speaker 3: fact that in the UK, in Europe we use debt,
Speaker 3: we use bank lending, and in the US it's obviously
Speaker 3: done far more through equity. He talks about today we're
Speaker 3: at a point of needing radical reform.
Speaker 2: Here's his arguments.
Speaker 10: If you have equity markets there are one tenth the
Speaker 10: size of US. The cost of raising equity here, particularly
Speaker 10: for a high growth industry, cost is much higher here.
Speaker 10: So the best, fastest growing, biggest value creators moved to
Speaker 10: the United States, and then we end up with that
Speaker 10: productivity deficit. Over time, you end up with a low growth,
Speaker 10: low productivity, debt focus funding environment, and the best of
Speaker 10: what you've invested in your universities, your entrepreneurs and others.
Speaker 10: Migrates the US are leveraging that. But in the US
Speaker 10: business runs, business investors make the choices as to who
Speaker 10: are going to be the winners on the technology side.
Speaker 10: In the UK and Europe. It is still today government
Speaker 10: you know, these talks of sovereign funds and all sorts
Speaker 10: of initiatives government driven. Eliminate the regulation that prevents the
Speaker 10: long term holders of capital insurance companies and pension funds
Speaker 10: from investing inequities and let investors make the choices. You'll
Speaker 10: see what happens. We could grow our equity to be
Speaker 10: on part of the United States. With these changes, we
Speaker 10: could grow the liquidity of our equity markets in the
Speaker 10: UK by tenfold.
Speaker 3: So that was a Zevier rule speaking to me about
Speaker 3: the kind of the difficulties that the UK and Europe
Speaker 3: has in terms of how we fund high grade businesses.
Speaker 3: I mean, he says very said, to be very clearly,
Speaker 3: you can't scale up the industries of the future, particularly tech,
Speaker 3: without far deeper equity markets. And he was very concerned
Speaker 3: that there wasn't a lot of responsiveness to that idea.
Speaker 1: Carolyn, from these conversations, what are you taking away is
Speaker 1: Britain adrift?
Speaker 3: Well, the economic issues for the UK have again been
Speaker 3: superseded by these internal party politics of the Conservative Party.
Speaker 3: So on the one hand, we understand the depths of
Speaker 3: the economic issues in the UK. On the other hand,
Speaker 3: the more positive and optimistic outlook might be this is
Speaker 3: a moment right for big ideas, well thought out long
Speaker 3: term industrial strategy, accountability. It's what Archie Norman was sort
Speaker 3: of saying. The footprint of government is too big in
Speaker 3: the economy to say we're just hands off. We've got
Speaker 3: to get on with it in post Brexit Britain and
Speaker 3: actually deliver for the growth economy of the future.
Speaker 1: Okay, Carolyn, so much more coming from your conversations throughout
Speaker 1: the program this morning. You can find that Big Take
Speaker 1: report the Bloomberg website and I Big Take it for
Speaker 1: using the terminal, or you'll see plenty more. Two on
Speaker 1: social media, Caroline, you can find our c hepger on
Speaker 1: Twitter as well, or of course by looking up Bloomberg Radio.
Speaker 1: But of course this has bigger implications than just in
Speaker 1: the business world.
Speaker 6: Two.
Speaker 1: Growing the economy one of Ritchie Sinac's five key priorities.
Speaker 1: Does the Prime Minister, though risk being distracted by more
Speaker 1: Tory infighting follow the resignation of Boris Johnson and two
Speaker 1: of his key allies. Well, our UK correspondent Lizzie Burden
Speaker 1: is with us for more on this. Lizzie let's start
Speaker 1: on I suppose what is the government's current plan in
Speaker 1: this area, What is the government's plan for growth?
Speaker 11: Well, the government would argue that it's number one priorities
Speaker 11: having inflation by the end of the year. That would
Speaker 11: create stability as a platform for growth. And you've just
Speaker 11: seen SUNAC in the US to shore up ties there
Speaker 11: specifically to boost growth. For example, it's pumping a billion
Speaker 11: pounds into the semiconductor industry. But that pales in comparison
Speaker 11: to what the US are doing through the Inflation Reduction
Speaker 11: Act and what the EU's doing in response, and it
Speaker 11: leaves the UK heavily reliant on its allies to fill
Speaker 11: in the gaps in the rest of the supply chain.
Speaker 11: You heard there in Caroline's brilliant reporting. Business leaders are
Speaker 11: queuing up to put forward the notion that Britain's closed
Speaker 11: for business, that the government isn't doing enough to compensate
Speaker 11: for the economic damage of Brexit. You had as well
Speaker 11: last week almost one thousand tech companies, including Alphabet and Apple,
Speaker 11: warning that the UK's falling behind in sectors like AI,
Speaker 11: like semiconductors. So on the UK Politics podcast this week,
Speaker 11: we're going to be speaking to Oliver Dowd and the
Speaker 11: Deputy Prime Minister at Founders Forum in front of a
Speaker 11: room of tech bosses and founders about this very question.
Speaker 2: Is Britain adrift? What is the plan for growth?
Speaker 11: So do tune into that on Friday's episode on Bloomberg
Speaker 11: Radio at twelve pm.
Speaker 3: Okay, great stuff. The reporting also comes though, as the
Speaker 3: Bank of England's Catherine Mann has called for long term
Speaker 3: strategy for the economy.
Speaker 2: What's she been saying?
Speaker 11: Well, she's the hawk of them and a try policy committee,
Speaker 11: as you know, And this essay for the Resolution Foundation
Speaker 11: really argues that the focus of the government needs to
Speaker 11: be on the long term, especially on sustainability, rather than
Speaker 11: on fire fighting because of course we've had the successive
Speaker 11: shocks of Brexit, the pandemic Ukraine. But I have to
Speaker 11: say frankly, even for Labor which has promised a more
Speaker 11: activist state in response to Bidenomics, secure Anomics.
Speaker 2: Is what the Shadow Chancellor Rachel Reeves calls it.
Speaker 11: That's centered around investing twenty eight billion pounds a year
Speaker 11: on the green energy transition. Labour's had to scale that
Speaker 11: plan back and now the plan is to ramp up
Speaker 11: spending rather than hit that twenty eight billion pound target
Speaker 11: in the first year of a labor government. Labour says
Speaker 11: it's because of persistent inflation, meaning higher rates since that
Speaker 11: plan was announced, and it's necessary, they say, to cut
Speaker 11: back a bit to maintain fiscal responsibility. So you've got
Speaker 11: both parties battling it out to be the party of Business,
Speaker 11: to be ambitious on growth within a very.
Speaker 2: Politically and fiscally constrained environment.
Speaker 1: Okay, Lizzie, this is all happening at a time when,
Speaker 1: of course we've been also watching what's been happening inside
Speaker 1: the Conservative Party. What's the risk that these events surrounding
Speaker 1: Boris Johnson and the resignation of two of his allies
Speaker 1: as well, will take away from the government's focus of
Speaker 1: the economy.
Speaker 11: Yes, so much happened over the weekend, didn't it.
Speaker 6: Well.
Speaker 11: The announcement of Boris Johnson's resignation and the timing of
Speaker 11: that announcement does look designed to inflict the maximum damage
Speaker 11: on the Prime Minister. Of course, Johnson blames Sunac for
Speaker 11: his downfall, and Johnson even said he's exiting politics for now,
Speaker 11: so hinting again that he hopes for a comeback as
Speaker 11: his allies have been. It reminds me of when he
Speaker 11: said Asta la visa baby when he left as Prime Minister,
Speaker 11: suggesting that like the terminator, he's going to be back.
Speaker 11: And of course the comparison to Donald Trump is well done.
Speaker 11: You know, Johnson resigned even on the same day that
Speaker 11: Trump was indicted on federal charges. But the key difference
Speaker 11: says Johnson's isolated within the party, but scandal only seems
Speaker 11: to boost Donald Trump.
Speaker 2: Among the Republicans.
Speaker 11: The bigger picture, as you point out, is whether or
Speaker 11: not Johnson's comeback is realistic. It's a distraction from the
Speaker 11: diligent government that sunac's trying to present. It's also an
Speaker 11: immediate challenge for SUNAC in the sense that Johnson's resignation,
Speaker 11: along with those of his two allies, Nigel Adams and
Speaker 11: Noddine Doris, triggers by elections. That is going to be
Speaker 11: embarrassing if SUNAC loses. The opposition Labor parties already calling
Speaker 11: for a general election. Some polls show that they'd win
Speaker 11: a landslide if there were an election. And over the
Speaker 11: weekend you also saw Nikola Sturgeon, the former First Minister
Speaker 11: of Scotland, arrested.
Speaker 2: She was released after several hours.
Speaker 11: But it adds to this sense that her party's imploding
Speaker 11: that would benefit labor, and so Sunak's going to be
Speaker 11: watching very closely what happens north of the border.
Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the
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