25/11/2015 BBC Business Live

This is Business Live from the BBC with Sally Bundock and Ben Thompson.

With security and migration concerns topping the agenda for European

leaders, is it now time to end free movement within the region?

Live from London, that's our top story on Wednesday, 25th November.

The end of passport free movement within Europe?

As the threat of more terror attacks hangs over the regions capitals,

many are now asking if security should take precedence over trade?

The UK Government lays out how it will spend $6 trillion

As trade is underway across Europe, they're following Asian shares

lower amid international tension over the downing of a Russian

And making a comeback, we speak to the man with a plan for

And as Black Friday turns into much more than a one day retail

Since the mid-1990s Europeans have enjoyed the freedom to move

between EU countries without border controls or checks.

In fact, the freedom of movement, goods and services is one

of the founding principles of the EU's single, economic area.

But the terror attacks in Paris and the current migrant crisis has cast

The Schengen Agreement, as the model is formally known, abolished

border controls in 1995, allowing passport-free travel for 400

Germany, Austria, Denmark and other states have all

tightened border security in response to the influx of

And following the Paris terror attacks, France has put in place

checkpoints on major routes into Belgium with drivers and passengers

And that free movement within the EU boosts trade.

European states will now have to decide if it's possible to preserve

the benefits of the Schengen Agreement while maintaining

Koen De Leus, Senior Economist at KBC Bank joins us from Brussels.

Thank you for being on the programme. Ben outlining just how

important Schengen is and yet it is something that's been challenged at

the moment, isn't it, given what happened in Paris and the movement

of those terrorists that have been found to be involved in that event?

Yes. Yes, indeed. It is really very, a very endangering. The Schengen

Agreement allows people passport-free travel within the

European Union. That's important. If you ask politicians, they say it is

the most important thing of European integration. If you ask citizens,

they say as well, passport-free travel is the most important thing

about European integration up to this stage. To abolish it would be a

big error, I think. For European leaders who will be discussing this,

I would imagine that is the very last thing that they would want to

do, but is there something they can do to increase security without

hampering trade within the zone? Well, that is a big challenge. The

terrorist attacks, of course, they cost a lot of money, but when you

are going to abolish the passport-free travel then you know

that you're going to hurt business. When you have passport-free travel,

you know that businesses, that goods and people are trading freely and

very fast in between countries. And this is a big advantage of being

member to the Schengen zone. This is a big advantage compared to goods

and services that are imported from outside the Schengen zone and that's

why, for example, 63% of the total value of goods, traded by the

European countries is traded between them. So it is very important to

abolish this thing because then we lose the competitive advantage of

the Schengen zone that we have today. Is it possible to quantify

the advantage? The UK is not part of the Schengen and yet Europe is its

biggest trading partner and for British businesses it makes a lot of

money in trade between the UK and European countries? Yes, there was

some research done and research stipulates that when two countries

are part of the Schengen Agreement then they increase their by lateral

trade by approximately 0.1% annually. This is a huge advantage,

a huge advantage compared to when you're not part of the Schengen

zone. What do you think the likely outcome might be in terms of ways to

improve things? Well, I think safety is a very important issue, to

preserve this safety that this will cost money. This will cost money

because there will be more controls. There will be more border controls

and things like that and so if you ib stall the controls you know the

cost of the terrorist attack is multiplied by ten-fold for example.

If you look to the United States, after 9/11 the longer queues in the

airports cost approximately $10 billion a year. So safety first.

That's true, but we have to take into account that if you introduce

border controls and everything like that, OK, it comes at a cost. All

right. Thank you very much for joining us from KBC Bank.

A division of Deutsche Bank will pay more than $31 million to the

US Justice Department to avoid possible prosecution for helping

Deutsche Bank's Swiss unit offered a number of services

and permitted some practices that it knew could assist US taxpayers

in concealing assets and income from the tax authorities.

The price of iron ore, the key ingredient for making steel,

It closed Tuesday at $43 and 40 cents a tonne.

Iron ore prices have tumbled nearly 40% this year.

Some say it's got much further to fall, with too much supply

How about this for an accounting error?

China's Securities Association says the country's biggest brokerage,

Citic, overstated the size of its derivative business

Citic, which is state owned, said the error occurred due to a system

Probes have resulted in executives confessing to insider trading.

The Business Live page is concentrating on events in the UK.

George Osborne will be delivering his Spending Review for Government

departments later today. He has got a budget of ?742 billion

to spend, but the Chancellor has pointed out he wants to save ?20

billion this year. So the graph there looking at where the money is

currently spent, but the big headline will be where the big cuts

come in. Some departments, of course, already ring-fenced. So

there are some that are bracing themselves for cuts and we're told

that agreements have been made with some of those departments. We will

have more on that later on. But full details on the Business Live page.

In Japan they have made a decision to increase the minimum wage by 3%.

Will this boost the Japanese economy or will people just save the money?

Right now, the minimum wage in Japan is $6.36 an hour. A 3% increase

would take the minimum wage to $8.16 and the comparison right now is with

the high cost of living in Japan, this amount would buy a little more

than a bowl of noodles. But of course, the move is more a sign that

the Government is trying to boost consumer sentiment in Japan at a

time when the country has fallen back into a recession. Japan has

been in a recession twice since the Prime Minister came into power in

late 2012 and despite his economic policies, Japan's growth struggled

to gain momentum, but rising wages is one of the biggest steps forward.

Consumption accounts for 60% of the economy. So we're going to have to

wait and see if this is going to have a lasting impact.

Thank you very much. So Asian shares ended lower over

worries over events in Middle East after Turkey shot down a Russian

warplane. The Nikkei also ended

its five-day winning streak. US markets are also contending with

a short week due to the Thanksgiving holiday -

that's Tuesday's close for the DOW. The rebound in energy prices did

prevent US stocks In the UK today,

all eyes on Chancellor, Finance Minister, George Osborne, who will

deliver his Autumn Statement and Spending Review, laying out the

governments tax and spending plans. It's likely to be more politically

sensitive than economic, but recent events in Paris and beyond could

have prompted a rethink of the planned reductions in the Defence

and Home Office budgets - that could affect defence

and aerospace stocks including BAE Systems, as well as those related to

internet security and cyber-crime. Later today there's also a deluge

of US data with the durable goods numbers for October as well as the

latest inflation data as Michelle It is a packed Wednesday before the

thanksgiving holiday in the US. The day is loaded with economic data

including durable goods, housing and jobless claims. For many on Wall

Street durable goods orders will be the highlight. These are more

expensive items that last at least three years and require more

planning and more investment. Like manufacturing equipment, commercial

aircraft or even washing machines! Most economists are forecasting gain

of 1.5%. The number of Americans filing for unemployment benefit is

forecast to have slipped. The data though can sometimes be more

volatile towards the end of the year given the holidays. Sales of new US

homes, probably climbed in October, and on the earnings front, there is

no trading on Thursday and markets close early in the US on Friday.

Joining us is Nandini Ramakrishnan, Global Market Strategist at

Nice to see you. Good morning. So a lot going on. We've got a shorter

week in the United States because of course, of thanksgiving, but we have

got geopolitical concerns affecting trade in Asia today and on the minds

of Europeans, give us your thoughts? I think the geopolitical concerns we

have seen yesterday and in the past few weeks have been fairly contained

in terms of markets. You haven't seen massive sell-offs in terms of

panic, but as Asia opens before the other markets of the world, those

jitters played out a bit in the markets as we have seen. I have

touched on the Spending Review that we will get later today from the UK

chancellor, and it is interesting because we have seen many

departments facing budget cuts over the last few years and that's been

replicated elsewhere, particularly in Europe, but we could see a

reversal of that, especially after events in Paris, a big boost perhaps

to the defence budgets and that's good news for the stocks in defence?

Sure. It is ironic almost because a few weeks ago, we saw the shares in

the big UK defence manufacturers really fall due to profit warnings

etcetera. So having a bit of national budget swung more towards

that area might help the shares, but of course, that comes with cuts in

other areas. So it is not, you know, a win, win so to speak. Briefly, we

had the US growth figures out yesterday, didn't we? They were

really strong, surprisingly strong? Yes, a big revision upwards from

1.5% to 2.1% growth in the US. That's definitely still looking to

the past few months. It is for the third quarter. So not as much

forward looking, but once again, an indication to the US Federal Reserve

that the US economy is in good shape for a potential rate hike in

December. OK. You will be back shortly to talk

about all sorts of things including Plaque Friday. Something she is

familiar with. I can tell from her accent.

Lots of comments coming from inn about Black Friday of the it is more

than one day, in many cases it is a week. It goes on and on!

Keep your messages coming in. We are talking about pod casts with

the co-founder and Chief Executive of Europe's biggest podcast

platform, Acast. He claims it is changing the way we

listen to pre-recorded radio shows. So we will be asking him a little

later in the show. You're with Business Live from BBC News.

George Osborne is to set out the Government's tax and spending plans

for the next five years later today, and it's expected they'll include

billions of pounds in cuts, but also new money for house-building.

Simon Jack is following this from our Business Newsroom.

Let's look at the background this. This is what George Osborne wakes up

every morning thinking about. This is how much the Government has to

borrow every year to balance the books, and he wants to get that down

from its current ?80 billion to zero by the end of the Parliament, maybe

even a small surplus. But he has made his life difficult because he

has promised no rises in income tax or national insurance or VAT. Plus

he has ring fenced certain departments like health, education

and defence. He has got to bring down the spending, he tried to do it

with welfare and got rebuffed in the House of Lords which turned down his

proposals to limit subsidies for low paid work. He has some wiggle room,

this is the surplus predicted for the end of the Parliament, and he

could say, I would just make it zero, that gives him ?10 billion to

pay with. And because interest rates are so low, there is less money to

pay an interest. But overall, he has made a rod for his own back by ring

fencing and saying no rises in some of those basic taxes, a tough

conundrum is the one he has to face. Thank you, Simon. When that all

kicks in, the spending review and Chancellor Osborne begins to deliver

his plans, we will be across it. They BBC special begins at 11:30am

here on BBC news about the impact that that back and have not only on

spending, day-to-day plans, council budgets, and also reaction from the

City. Another business story to highlight, Thomas Cook is hailing

this year, 2015, as a year of real progress. It has had allsorts of

headaches of late, but the travel firm has reported a ?50 million

profit for the year to September, its first full-year profit 2010. So,

Thomas Cook back on track. The risk of terror attacks

and a migrant crisis are putting pressure on the Schengen Agreement,

which abolished the EU's internal borders, enabling passport-free

movement across most of the bloc. While it is good news for business,

that free movement of people and trade, it is not such good news for

trying to maintain borders, and we have talked about that a lot of

late. Pre-recorded radio programmes, or

podcasts as they are more commonly known, have been around for a while

but it's only recently that anyone has made a serious case for making

money from them on a large scale. Leading the charge is one

of Europe's biggest podcast Acast already hosts more than 50%

of all podcasts created in the UK The free-to-use platform is

attempting to cash in on the resurgence of the medium

by enhancing podcasts with videos, links and images while they play

on smartphones. Crucially, the firm's software also

allows targeted ads to be inserted Investors are certainly impressed

with the technology, and recently backed the firm with

half a billion dollars in funding. The man behind

the technology is Mans Ulvestam. As well as being

the chief executive, he is also the co-founder of the company and has

worked in the industry since 1996. Welcome to the programme. Let's just

pick up on that thought. They were retro, and we are only going back to

the 1990s, but people could download things to their iPods and listen

anywhere, but they fell out of favour, didn't they, because you

Tube videos took over. And you are building the resurgence? We are

certainly helping it. People used to do tech pod casts for other tech

people, and that is not a large audience. But in the last few years,

we are seeing a broader type of content coming out, so more people

can enjoy them. And with the advent of everyone having a smartphone and

they are accessible, it is easier to find and listen to interesting

content. I tend to gauge the relevance of something, if I'm using

it, I am, Leeds technophobe but I do have a smart device and I do listen

to podcasts on the train. It does seem a popular activity now, but the

question is how are you making that into something that makes money for

you as a company but also for your client? The old way of making money

from a pod cast would be if you had a large enough audience, then you

would get a sponsor, and you would have to talk about the sponsor. We

have introduced dynamic advertising so you can target of change

advertising. Now Christmas is coming, you can say Christmas is

coming, get your business shopping done early when Christmas is

actually coming, so that is the big invention that we bring, so we time

advertising. And you have changed how traditional pod cast works,

because it always used to be just the audio, some then you can listen

to, and it is about adding video, picture, other content. New

technology means you can do that, but that is also something you have

worked hard on to make sure you can stand out in what is a crowded

market. It is a proprietary technology from Acast, so it allows

us to enrich the pod, a link. You can have a video in the actual feed,

so that is something that will also popularise the format. And how has

the advertising industry caught up with you? There has been concern

about these podcasts without us as viewers realising that way -- we are

being sold things. That was one of the reasons we started Acast,

because the division between the commercial message and the editorial

message was unclear in the old way, so what we're doing is

revolutionising the podcast to make it clear to the listener that this

is someone saying it because they actually think so, or are they

getting paid. So we have a clear commercial break. We will have to

leave it there, but we really appreciate you coming in, Mans, and

we will watch that space, for sure. The start of the programme, we asked

you for your comment on Black Friday. Now it is a week-long event,

retailers trying to get you to shop all week so here are some new names

that people have sent in Banksgiving is one, Woeful Wednesday, help us

clear our unwanted stock week. A lot of comments about whether this is an

awful American imported whether we should do it. Matt says, meaningless

imported retail week. There is a lot of negativity! Five-day shopping

binge, I could go on. In a moment we'll take

a look through the Business Pages, but first,

as part of a new BBC series, we have been looking at 30 entrepreneurs

under the age of 30 in the world. Catherine Mahugu is the founder

of Soko, an e-commerce platform based in Kenya and San Francisco,

allowing local artisans to sell The team sees itself as a family

rather than just workmates. It is a place that fosters innovation. Soko

is a jolly fashion brand that connect global Artisans to the

international market, giving them access to financial opportunities.

My name is Catherine Mahugu, I am 27 years old and the co-founder of

Soko, a company wasting Kenya and San Francisco. -- based in San

Francisco and Kenya. You can find out more

about our 30 under 30 series Nen Dini is back in the studio,

where talking about a new name for Black Friday. Do you love it or hate

it? I love a good bargain, but at the core of the issue, we should

probably be eating pumpkin pie rather than lining up at the local

mole to get the best deals. I make this assumption because you are

American, is it something you participated in every year? Wasn't a

big event? I have participated in it a few times when you want a big

ticket item, like a big-screen TV, the discount is formidable, but it

eats into time as a family, and people don't want to go when they

want to spent times a family. But people are not buying more, just

buying it all on one day, and those retailers suffer in the real run-up

to Christmas or the holidays because people have already spent everything

they are going to spend on that day. Exactly, and trying to take

advantage of that frenzy, that idea that you are going to pick up a

bunch of different things you might not have needed, that is something

that brick and mortar retailers are really looking for, because as we

know, Internet sales are taking over that territory. Briefly, the

financial times looks at the UK's Premier league success barking US

private equity interest. Football stateside? I think it is interesting

to look at this corporate interest, these private equity firms bringing

expertise and monetising the sport a bit more, but in general, this means

a bigger global interest in the sport. And it is working the other

way, rather than importing Black Friday from the US, we are exporting

football to them. But I can already see the e-mails about the US taking

over football and making it into a big show.

Have you got that off your chest? Thank you for coming in. Thank you

for your company. We will see you at the same time, same place tomorrow.

Goodbye.