25/11/2015 BBC Business Live


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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.




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