12/07/2016 BBC Business Live


12/07/2016

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This is Business Live from BBC News with Ben Thompson and Alice Baxter.

:00:00.:00:09.

"The lady's not for turning" - famous words from Margaret Thatcher

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but could they also apply to Britain's new leader Theresa May?

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With Brexit negotiations round the corner, is she the right

:00:17.:00:18.

Live from London, that's our top story on Tuesday 12th July.

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Theresa May is set to become the next Prime Minister

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of the United Kingdom, potentially cutting short months

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We'll take a look at what's next for Britain, following the country's

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An international court is due to issue its verdict

:00:55.:01:02.

What does this mean for the $5.3-trillion worth of trade

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to flow through these contested waters?

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We will find out. And this is what the markets look like, the first

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half an hour of trade under way in Europe. We will have the details for

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you. And we'll be talking to successful

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entrepreneur William Kendall about his latest venture,

:01:20.:01:22.

selling chocolate-maker Green Blacks to Cadbury,

:01:23.:01:24.

and what needs to be fixed Today we want to know how

:01:25.:01:26.

you would improve your office space It's all the rage among

:01:27.:01:34.

the big tech giants So let us know your office

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improvement thoughts. Seriously, people have bouncy

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castles in their office?! If you have one, let us know!

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It's been an eventful couple of weeks in UK politics

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but Theresa May has emerged as the next Prime Minister

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Yesterday, Andrea Leadsom, her main rival for the role,

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pulled out of the race to become leader of the Conservative Party.

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So what could May's leadership mean for the economy?

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Mrs May says she'll put worker representatives on executive boards

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in order to address the "unhealthy and growing gap" between

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She's also pledged to increase the power given to shareholders

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This comes after investors in several companies attempted

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Ultimately, these were shareholder protests that went ignored

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With me is Jessica Ground, of UK equities fund manager Schroders.

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We have the second woman to Dubai Number Ten one quarter of the

:03:05.:03:09.

century, an exciting time for the UK. She has got a big task in front

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of her, who will make up the Cabinet? The first priority, who

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will be the Chancellor? She has got about 100 posts to fill and this is

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her chance to return papers and set her agenda out. The interesting

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thing about yesterday is she was quite critical of the Treasury and,

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by default, George Osborne. Saying he had not done enough to solve

:03:33.:03:38.

productivity, which is such a key games for so many people and the

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growth of the country, and also that he perhaps had not done enough on

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infrastructure investing, so, following that, I would be quite

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surprised if George stayed in the hot seat in the Treasury, and the

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speculation going that Philip Hammond would prefer that. I think

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the question is, does he get the other big job he would like, which

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is in the Foreign Office with a focus on trade? How likely is it

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that she will include some of those prominent Brexiteers around the head

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table, Mr Johnson and Mr Gove particularly? I think Mr Gove

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probably more likely than Mr Johnson, who is probably seen as a

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live wire. She was a Remain campaigner and she will want to be

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pretty clear that, she has said that Brexit what happened, and so she is

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going to want to give Brexit good weight in the Cabinet, and I think

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people like Liam Fox, who supported her in this, they should see good

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position is coming to them. In terms of her economic strategy, she was

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pretty critical of some of Mr Osborne's strategies in their past,

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she has criticised his focus on two of our great regional cities, if you

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like, a suggestion she might want to develop more than just London and

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Manchester is what many people in third from those comments. She also

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pledged to tackle predatory takeover power was on the part of some

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corporations out there and also wanting to close the gap between

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executive pay and work paid. Is the city were read by these comments? I

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think much of what she has said, the city has been on a introductory

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already. If we just look at the issue of pay, we have seen big votes

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against CEO pay, certainly in the US where there is more disclosure on

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CEO pay relative to average workers' pay. So I think that momentum is

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already underway. I think the protection for industries, that has

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sort of been on the table since Kraft taking Deborah Cadbury, the

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feeling that promises given were not delivered, so I don't think those

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are surprising. I think there has been a feeling for some time that

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this issue of inequality needs to be looked at and, believe it or not,

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even in the city, for we, as investors, we want sustainable

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business models, companies treating employees well, we have been

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campaigning for the living wage and encouraging companies to adopt that.

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I think it is right that we look at, how do all stakeholders, the

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environment, customers, workers, benefit, and it cannot just be CEOs'

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pay and nothing for the rest of the country. She was on the Remain camp

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but reiterated again, Brexit is Brexit and let's crack on with it.

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Good to talk to you, Jessica. A big task ahead for Theresa May.

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Absolutely, and we will keep you across all of the developments

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there. US officials didn't prosecute HSBC

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for money laundering in 2012 because they were worried it

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could cause a "global That's the verdict of

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a report from US Congress. Four years ago, HSBC was accused

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of breaching US sanctions and allowing drug cartels to use

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its branches to launder money. The bank paid a $1.92 billion

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settlement but did not Ikea has announced that it's

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recalling 1.7 million chests of drawers in China over

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concerns they could pose a danger to children if not

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properly fixed to walls. The recall covers items in the Malm

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range that were manufactured The announcement's after the Swedish

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furniture company recalled 36 million dressers in North

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America. Coffee giant Starbucks is to raise

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wages for workers at its stores It comes after the company

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was criticised for cutting staff hours and raising prices

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to meet profit targets. In a letter to employees,

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Starbucks' boss Howard Schultz said the company was looking to strike

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a balance between profit Let's take you quickly to the

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Business Live page. We talked yesterday about the Farnborough

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airshow, which kicked off with a big deal. A Boeing ?3 billion deal

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yesterday, hard to top, as the live page points out. Our correspondent

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is at the airshow and says it is not raining yet, fingers crossed the

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weather stays good because it was particularly terrible...

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A torrential downpour! Such a shame. And this from David Jones, one of

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our regular guests, we have talked about the slumping value of the

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pound so much recently in the wake of the Brexit boat but things are

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tipping up a little bit, looking slightly better, and we will talk

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about that more in the markets later.

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Let's head to Asia, because after more than three

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years and many hearings, a ruling is expected in The Hague

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later on the hugely contentious issue of China's claims over

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The Philippines brought the case to court in 2013,

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and disputes China's territorial claims for about 90%

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Well, it's thought $5.3 trillion worth of trade passes

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through the disputed waters every year.

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So it's vital for China, but also for energy.

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The South China Sea is also thought to contain billions of barrels

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of crude oil and up to 900 trillion cubic feet of natural gas.

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And China has already invested $20 billion in finding out

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We can speak to Eufracia Taylor, Asia analyst at risk

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consultancy Verisk Maplecroft, in Singapore for us.

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Nice to see you. Just explain, we have tried to touch on the

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significance of the South China Sea, but give us your take on what is at

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stake and why it is so vitally important, and why we will be

:10:16.:10:20.

looking at the verdict from the Hague today? It is important

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particularly for merchandise trade between the regions, and really

:10:27.:10:32.

between Asia and the rest of the world. The South China Sea act as a

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gateway for Asian manufacturers, consumers, to getting products out

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and bringing products in, and, as you mentioned, probably one of the

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most contentious issues around the territorial dispute is in terms of

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energy. Huge amounts of crude oil and liquefied natural gas is

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channelled through the South China Sea each year and a huge proportion

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goes to China, and it is one of the key reasons that it is so eager to

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ensure it has control over those waters. It is also one of the

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reasons why Japan in particular, despite sitting on the shelves of

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the South China Sea, is also watching the issue so closely as it

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depends significantly on the South China Sea to bring through its own

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liquefied natural gas supplies and power its industry. We are seeing,

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as imagined, in terms of internal trade but also energy security, it

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is a huge issue. About 60% of the $5 trillion of trade that passes

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through the South China Sea ends up in China, but they have said that

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they are ignoring the outcome of today's's ruling, whatever it will

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be, in the Hague. What do you think the ruling will be, and what sort of

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impact can it have, given what China has set? At this moment it is

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incredibly difficult to determine what the ruling will be, primarily

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because there are 15 claims specifically that the court in the

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Hague will be ruling on, and the court has also reserved its direct

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consideration of some of the most contentious claims, such as the

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status of China's historical claims. One thing we can say for sure is

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that even though China, as you mentioned, will reject the award, it

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cannot ignore it, because regardless of whether the court rules against

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China's claims feathers in Beijing have been ruffled and it is now at

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the point where, even if the court at Staines from ruling on those most

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contentious measures, people have scrutinised China's claims deeply

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and there has been a rallying of support around the smaller players

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in the dispute, which, if nothing else, has caused some embarrassment

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for China. We have to leave there, but thank you.

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Let's have a quick look at the numbers for you. The arrows tell the

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story, a bitter Bob Riley, particularly in Asia. The McKay

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doing well on the back of that Nintendo game, Pokemon go, winning

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legions fans around the world will -- around the world.

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Later this morning Bank of England governor Mark Carney appears

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in front of MPs along with other members of

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the Financial Stability Committee to answer questions

:13:28.:13:35.

US stock-market investors sail into earning season this week,

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wind at their backs, provided by the all-time

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high on the S 500, but conditions may already be

:13:46.:13:48.

worsening after the record close on Monday, metals giant Alcoa put

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out the first major earnings release, and it was

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They made $135 million in the second quarter, a decline on last year,

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driven by falling aluminium prices and cutbacks.

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Later in the week, JP Morgan and Citigroup,

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along with others, will also release their latest accounts.

:14:09.:14:14.

Investors will hope this view of the health of corporate America

:14:15.:14:20.

shows more plain sailing ahead, though given the events

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in the global economy, they would do well to prepare

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Joining us is Cornelia Meyer, chief executive of Australian mining

:14:25.:14:30.

Good to see you this morning. Actually, I am Chief of resources at

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a business consultancy. Apologies. Let's talk about the global rally

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that we are seeing at the moment. What would you say are the main

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factors behind this, helping stocks rebound after the slumps we saw

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after the Brexit vote? The first thing that we saw was, when we had

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the jobs report that was better than anticipated last Friday, and on the

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back of that it rallied, and then it rallied even further, everybody was

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very unhappy with the uncertainty that we had in the UK, no

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leadership, the opposition and Government in disarray, and now

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finally we have leadership, a way forward, somebody who has stepped

:15:27.:15:30.

up, a decisive lead in the says, OK, I will create an action plan, we

:15:31.:15:38.

will move forward. I think people want certainty, people want to see

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everyone move forward. I don't think business likes the idea of Brexit

:15:43.:15:46.

but at least if you have Brexit, it is a fact now, let's get on, let's

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have a road map and start negotiations.

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Somebody who has been studying the ship is Mark Carney, he has had to

:15:55.:16:01.

step in the breach and reassure the market. He will give evidence to MPs

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ahead of a cut in interest rates on Thursday. How crucial with his

:16:05.:16:10.

evidence be? Is very crucial in terms of reassuring the markets, but

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they are reassured, because he was the steady pair of hands when nobody

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else was there. They really -- a bit like Rudy Giuliani after 9/11. The

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markets are addicted to low interest rates and constitute easing. If he

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says interest rates go down, the markets will love it. I think at

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some stage we will have to get up again with interest rates, because

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when the next crisis comes, we will have no leaders left. We will watch

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closely. You will be back to talk us through the papers later.

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The sweet taste of success, but what's the secret

:16:52.:16:54.

We'll meet the man behind chocolate brand Green Blacks.

:16:55.:17:04.

He will tell as his secret to success.

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You're with Business Live from BBC News.

:17:07.:17:08.

It's been more than two weeks since the UK went to the polls

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There are still plenty of unanswered questions about the impact

:17:12.:17:16.

UK farming has strong links with the EU, how could that change?

:17:17.:17:27.

Victoria Fritz is at the Great Yorkshire Show finding out.

:17:28.:17:32.

Welcome to the Great Yorkshire Show, we are expecting 130,000 people

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to come through these doors in the next three days,

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there are 12,000 animals of all different varieties competing

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This is a showcase of the best of British, but it is also a place

:17:44.:17:49.

for farmers to discuss the next big issue for agriculture.

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That is the vote from Britain to leave the EU, because the EU

:17:55.:17:58.

is the biggest market for British agricultural exports,

:17:59.:18:01.

about 63% of British exports went to the EU last year.

:18:02.:18:09.

The NFU has described the vote as a political car crash,

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For me, I believe there could be some good opportunities

:18:13.:18:18.

The direct support received from the EU on many of our

:18:19.:18:23.

At the end of the day the role for the NFU is to bring people

:18:24.:18:33.

together and get a good result for British agriculture.

:18:34.:18:36.

We have seen a lot of funding go into milk production in terms

:18:37.:18:40.

of grants to support a lot of the infrastructure

:18:41.:18:42.

and technology, are you not concerned that that disappears

:18:43.:18:46.

At the end of the day the Government is going to have to realise that

:18:47.:18:53.

food security is a bigger issue than it has ever been before,

:18:54.:18:56.

At the end of the day, we have got to support ourselves.

:18:57.:19:01.

We have a huge imbalance, so if we cannot turn that around,...

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We need help from the Government as well.

:19:10.:19:15.

About half of all farmers' incomes come from EU subsidies,

:19:16.:19:18.

so there is a lot of uncertainty about the income in the future.

:19:19.:19:23.

But a lot of opportunity and some optimism as well that the future

:19:24.:19:26.

A quick story from the BBC business page, Asos confident for the 2016

:19:27.:19:43.

sales. After a frantic couple weeks in UK

:19:44.:19:45.

politics, Theresa May is to become the next Prime Minster

:19:46.:19:51.

of the United Kingdom. She's vowed to reduce

:19:52.:19:53.

what she describes as "the growing More details on that as it develops,

:19:54.:20:08.

and what happens over the next week will be pretty crucial.

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In the wake of the financial crisis more and more of us have chosen

:20:11.:20:14.

to start our own business, rather than work for someone else.

:20:15.:20:16.

But what's the secret to success when starting your own firm?

:20:17.:20:19.

Well, our next guest knows a thing or two about doing just that.

:20:20.:20:22.

William Kendall's first business venture was in 1990

:20:23.:20:25.

with the New Covent Garden Soup Company.

:20:26.:20:28.

He turned a company with a $2.6 million turnover into one

:20:29.:20:34.

with nearly $260 million in less than ten years.

:20:35.:20:39.

Next came the chocolate firm Green Blacks.

:20:40.:20:42.

Founded in 1999, he helped grow the business until it

:20:43.:20:45.

attracted the attention of confectionary giant Cadbury's.

:20:46.:20:49.

His latest venture is Cawston Press, an independent soft-drinks company.

:20:50.:20:56.

Last year, it sold five million cans in 12 countries,

:20:57.:21:00.

All the more impressive in a sector that's facing falling sales.

:21:01.:21:13.

You are smiling at those numbers, you are clearly quite pleased,

:21:14.:21:22.

pretty impressive, in such a market. It is hard to know where to start,

:21:23.:21:26.

but let's begin at the beginning, what got you into doing this? You

:21:27.:21:32.

a business, turn it around and sell a business, turn it around and sell

:21:33.:21:38.

it off. I grew up on a farm, making things happen very quickly is what

:21:39.:21:42.

appeals, getting involved in small businesses, you can make a

:21:43.:21:46.

difference. I tried working for a big company, it did not work for me,

:21:47.:21:51.

it is too slow. Did you have a specific way that you work? Do you

:21:52.:21:59.

identify things that are short-term and long-term? Or do you have a

:22:00.:22:04.

different strategy? It is about teamwork. It is about finding good

:22:05.:22:10.

people who do the work with you. All I can do is gather people around me.

:22:11.:22:14.

On your own you are lost. Each business has been about having a

:22:15.:22:20.

trends. All of the businesses are in trends. All of the businesses are in

:22:21.:22:24.

areas that have interested me and my team-mates. Then you try and find a

:22:25.:22:30.

business that is small and struggling but is in the right space

:22:31.:22:33.

and then you have got a following wind, the market is moving in your

:22:34.:22:40.

direction, the figures are exciting, but it is hardly surprising that

:22:41.:22:43.

people want to drink soft drinks that contain less sugar and taste

:22:44.:22:44.

delicious. One thing that you have delicious. One thing that you have

:22:45.:22:49.

spoken about that I found interesting is regret overselling

:22:50.:22:55.

Covent Garden soup and green and blacks to early, you called it a

:22:56.:22:58.

British disease, selling something the moment it becomes successful.

:22:59.:23:03.

You going to hang onto your current brand? It was more of a general

:23:04.:23:06.

point, and each is this is different. Covent Garden had a

:23:07.:23:12.

venture capital shareholder, so we were under pressure to sell. Green

:23:13.:23:21.

Blacks, we had less pressure, but we still did. You often define success

:23:22.:23:26.

by how much you sell the business for. Sometimes selling it is the

:23:27.:23:34.

right thing to do for the business and for you, but think of the other

:23:35.:23:42.

options beforehand. When we talk about Cawston Press, as we said in

:23:43.:23:48.

the introduction, the industry is shrinking, because we are trying to

:23:49.:23:51.

get healthier drinks, reducing sugar, so what was the appeal? I was

:23:52.:23:55.

one of those people. You go to a one of those people. You go to a

:23:56.:23:58.

party, there is a delicious white wine being presented, you think, I

:23:59.:24:04.

am driving, or I don't want to drink to night, the alternative is warm

:24:05.:24:10.

elderflower cordial or a glass of water, they might as well give you a

:24:11.:24:14.

badge saying loser, so you drink wine even though you did not intend

:24:15.:24:22.

like me who don't particularly like like me who don't particularly like

:24:23.:24:23.

sugar, don't want to drink all the time, but we don't get the

:24:24.:24:27.

alternatives, so it was obvious to me that there must be more demand

:24:28.:24:29.

out there than was being satisfied out there than was being satisfied

:24:30.:24:32.

majors. When you talk about the big majors. When you talk about the big

:24:33.:24:37.

brands, how difficult is it being a niche brand and going up against the

:24:38.:24:44.

likes of Coca-Cola and Pepsi? It is a covered market, they have the

:24:45.:24:47.

economies of scale and marketing budget, so how difficult is it? It

:24:48.:24:55.

is difficult. In some ways it is easier than the food brands, because

:24:56.:24:57.

we are less dependent on the supermarkets. A lot more drinks sold

:24:58.:25:02.

outside supermarkets, so you have more places to sell, but the

:25:03.:25:04.

brands have got huge budgets and brands have got huge budgets and

:25:05.:25:10.

they tried to close you out. Some places are no go areas, unless you

:25:11.:25:14.

have got a big cheque-book. But there are plenty of places, there

:25:15.:25:18.

are lots of people who want to drinks that are not loaded

:25:19.:25:20.

sugar that taste good, and those are sugar that taste good, and those are

:25:21.:25:25.

the people weighed you can sell to, those are the niche shops and

:25:26.:25:29.

chains. He said one of the things you think you are good at is

:25:30.:25:34.

spotting long term trends, and you think one trend that we can look

:25:35.:25:38.

forward to is insects as food, is that the next big thing? I am

:25:39.:25:44.

involved in another business that is looking at fly farming, not

:25:45.:25:46.

necessarily for humans, but replacing protein. My daughter has

:25:47.:25:51.

done her dissertation on it, she says it is a long-term trend.

:25:52.:25:55.

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