23/12/2015 BBC Business Live


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


As 2015 draws to a close, we'll look back on the business year


Welcome to a special edition of Business Live: The Review


China's slowdown has dominated headlines this year,


and the impact has been felt far and wide, but what happens next?


Also in the programme: We've been on Fed Watch for a rate rise.


As America's Central Bank raises the cost of borrowing,


will other Central Banks now do the same?


It's been a record-breaking year for big money mergers.


Pfizer is on track to break a new record as it battles


to close its $108 billion deal with Allergan.


2015 was the year of the Internet of Things so what will 2016 bring?


We'll be joined by celebrated investor, Eileen Burbidge


who is telling us whereis putting her money next year.


They are the BBC exclusive interviews and breaking stories that


We'll contemplate the big moments of the business year


and what the key players said to the BBC with our business


Welcome to this special edition of Business Live.


As a difficult economic year draws to a close,


will 2016 bring more cheer for the global economy?


Well, 12 months ago, the tremors of the financial crisis


might have been finally beginning to fade.


But instead, another challenge came into sharp focus.


And it began with warnings from the IMF and World Bank.


The Chinese economy was slowing, they said, and with it,


the boom in emerging markets and commodity prices.


The effects would be felt around the world.


The heady days of double digit growth were at an end,


replaced instead with more modest expansion of around 7%.


The global economy would slow to around 2.9%, down


One trigger of the slowdown was a fall in consumer


That came partly after a government crackdown on corruption which made


many wealthy Chinese avoid lavish displays of spending.


As a result, sales of luxury brands fell sharply,


everything from Prada to Porsche, Fendi to Ferrari.


After a decade of building tower blocks, airports and bridges


at record speed, China's construction sector also ground


That led to a massive fall in demand for global commodities sparking


Companies everywhere have suffered - steel makers in the UK closed,


copper mines in Chile shut down and iron ore producers in Australia


The Baltic Dry Index which monitors trade levels is currently


So as 2015, the year of the Chinese slowdown,


draws to a close, we turn our attention to the year ahead.


Has the world adjusted to a new normal - the era


Charles Goodhart is a professor at London School of Economics


Lovely to have you on the programme. Give us your thoughts on this year


for China. Of course, it had its plenam as well, where we were trying


to read between the line when the president and others in the


Government were talking about their five year plan. Well, last year and


next year, are a fascinating period because China is changing its


business model. It is moving away from being a manufacturing


industrial super power to being much more of a service economy which


happens when you get richer and incidentally, consumption of


luxuries did slow down sharply in China last year, but the consumption


overall did not, consumption is growing rapidly, but its consumption


of services and it is consumption by the ordinary people, not consumption


by the rich, that is keeping China growing and it is growing steadily.


So from your point of view, is this transition, the great transition


from an economy led by manufacturing made in China by massive


infrastructure spend to a consumer-led economy. Is that


transition going to plan and is it going well? Oh, it is a very


difficult transition, but I think it is going to plan and it is going


pretty much as well as you might hope for. One of the reasons why


there was such a concern about China in the summer was because they


handled the stock market boom and bust really rather badly and that


was not just a problem in itself, but it threw doubt about whether the


leadership actually was capable of making this massive transition away


from manufacturing towards more services. Whether he could handle it


safely and well. But that, there has been a recovery, I think, of


confidence in the Chinese leadership and they don't do everything well.


The one child policy was maintained for far too long. But I think


they're back on track. We talk often about how all of these events are


interconnected around the world we see the impact of China. Is there


anything to mitt grate that influence on the world economy. We


have seen what China has done to world commodity prices and


especially to oil. Is there anything which could mitigate those risks?


For many countries there is a great benefit, the reduction in commodity


prices and oil prices is a huge benefit and particularly to Europe


and the eurozone is going to do better than people expected in 2016


partly because input prices have been going down so very sharply and


the developed economies are benefiting and there is a switch.


From 2008 to about 102014, the emerging economies did very well and


the developed economies did not now. Now it is a around and the develop


economies will do well in 2016 and EM will not.


Thank you very much. In other news: It's been


a record-breaking year They don't come bigger than Pfizer's


take-over of Allergan It was the biggest ever health care


transaction and second biggest In technology, Dell bought EMC


for a whopping $67 billion. And drinks giants AB InBev snapped


up SABMiller this year, And there was no shortage


of stockmarket action. A flurry of flotations kept


global markets moving. In November, Japan Post


listed its shares, raising $12 billion and claiming the the title


of the largest market Japan Post offers mail


delivery but also loans, And big business often means big


scandal, and this year Volkswagen admitted to cheating


emissions tests in the US, after it emerged the car giant had


used a piece of software Chief executive Martin Winterkorn


stepped down and VW recalled 11 The scandal could cost the German


car giant around $30 billion in costs, compensation


and falling sales. Sales in Europe and the US have also


fallen by up to a fifth and shares in the company are now trading


near four year lows. For more on the year in Business,


there's much more on the website with our correspondents around


the world weighing up the biggest Jonty Bloom is assessing


whether Greece really Our Economics correspondent,


Andrew Walker, is looking at who stands to gain


from the slide in oil prices. 2015 has also been


the year of Fed watching. Month in, month out, the BBC -


the financial press and financial markets worldwide were hanging


on every word from its new chief Janet Yellen for any clues


as to when the US central bank For our US correspondent


Michelle Fleury, this meant many days on the steps of the Federal


Reserve building in Washington. Janet Yellen used her first day


of testimony to provide greater clarity on the timing


of the first interest rate hike. Most investors here on Wall Street


still think such a move is likely Dropping the word patient


from the statement released after every meeting does not mean


a rate hike is imminent, according to Janet Yellen,


but she and her colleagues are trying to prepare the financial


markets for the day when finally, monetary policy starts


to return to normal. The intense spotlight


on Janet Yellen and the other Federal Open Market Committee


members shows just how dependent the markets have become


on the Central Bank. It's an addiction the Fed hopes


to break when it begins The US Federal Reserve wrapped up


a two-day meeting in Washington on Thursday with the announcement


that interest rates would remain unchanged, leaving many people


asking Janet Yellen what would it After seven years of near zero,


Janet Yellen, the chairwoman of the Federal Reserve has finally


announced a rate rise of 0.25%. Now, for a long time,


the financial markets have been obsessing over the timing


of the first rate hike. Now they have another


question to ponder. What will be the size


and the frequency of Michelle Fleury, BBC News


in Washington, DC outside Joining us now is Gillian Tett,


US managing editor for the Financial I imagine you have had quite a year


as well. Talking about not so much about waiting for God, but waiting


for the Fed. We have been waiting all year and when it finally


happened, frankly it was an anticlimax. The markets reacted


smoothly and everything went to plan and we were wondering what are we


going to write about in the FT? It was breaking the cycle of record low


rates that had been at that level for so long. It was actually a big


watershed in terms of history. Not so much in terms of raising traits


because the Fed has done that many times in recent decades, but because


never before in history have had a Central Bank kept rates so low for


so long on such an extraordinary scale. The Fed's balance sheet has


quadrupled in the last few years. Extraordinary what's going on. The


big question is how do you get out of that? It is not just the rate


rise, but it was all that went before, the so-called quantitative


easing that we are familiar with now, but from your point of view,


what impact has this had? Well, the good news is thus far there hasn't


been a big market reaction. The FedEx cuted this pretty well. They


are hoping that Janet Yellen will be like the pilot of a plane coming


into land and going forward, the rate rise will be so gradual and


gentle that you will come down from this high altitude of super


extraordinary monetary policy experiments and the passengers, ie,


the markets won't even notice it will be so gentle, but to my mind


there are three things to watch right now. Firstly, what's going to


happen to those big bubbles that have been blown as a result of the


Central Bank poly in the risky markets? What's going to happen to


investor portfolios? Most investors are positioned presuming that rates


will stay low forever? The third issue which is geeky and nerdy, deep


inside the bowels of the financial system, there have been strange


things going on recently because the rates have been so low. How is that


going to unwind? Gillian, when will the next move be? Markets are


betting on April 2016? Markets think there will be two rises. The Fed


have predicted four next year. In 2016 venlgt my bet is around March,


but the big question is, are the market right or is the Fed right?


That affects how investors price their portfolios. We will all be


watching. Thank you. Ben. Well, what a year it was


on the financial markets. The best performing stock market


in the world was China's Shenzhen. Despite the big falls in August,


it's still up by 68% at the close At the other end of the scale,


Tthe prize for worst performing Well, the exchange is dominated


by commodity companies that have And speaking of that slump


in commodity prices, oil was the worst performing


commodity of the year. And that's been enough to drag


down European markets, particularly the FTSE 100 in London,


that's heavily weighted with oil Still to come: They were


the newsmakers of the year and they were speaking to the BBC


when they made headlines. Our Business Editor,


Kamal Ahmed will take us through some of his exclusive


conversations from 2015. You're with Business


Live on BBC News. In the UK, if we are not


obsessing about the weather, we are tracking and trying


to predict the direction Yes, there was one clear message


from the National Association "If you have the money,


buy your home now." Victoria Fritz went to the most


expensive street in If you want to buy average property


on Victoria Road in west London, It has just been named the most


expensive street in the UK. You need upwards of ?8 million


normally to buy one of these homes. Here to explain why,


Grainne Gilmour from Knight Frank The Chancellor has introduced a raft


of measures aimed at tackling One of the things he has done


is really tried to boost That is what we struggle


with in the UK, not enough housing Another factor he introduced


in December last year was a change For buyers buying under ?1.1


million, it is cheaper to buy a property now but it is more


expensive for homes over that ?1 million mark in London


and around the UK. What we have seen in London


particularly, prime locations in London suffered a bit


of a slowdown in activity which hits the tax receipts from stamp duty


but we see the market starting Speaking of property taxes,


we're not done with the changes. Yes, in the Autumn Statement,


the Chancellor announced he wanted to introduce an additional 3% stamp


duty for buy-to-let investors We have a consultation coming out


in January so we will have So a little more detail


to come but at the moment, what is your best bet


for what will happen to prices over We are seeing the same level


of growth across this year as we have seen last


year, 4% or just under. We allow for out performance in key


commuter towns and regional cities House prices will be


underpinned by economic growth. We have seen wages rise in the last


couple of years and also consumer confidence has bounced back over


the last year or so. Also, house prices are being


underpinned in many areas by the lack of supply,


and under-supply is something that affects most of


the UK housing market. We will leave it there


but interesting that Grainne notices what is going on with


economic growth. When the IMF was here


at the beginning of the month, they said UK house prices pose


a real risk to the economic You're watching a special


edition of Business Live, as we take a look at


the business year that was. And with the help of some experts,


we're assessing what lies And let's turn our attention


to the world of technology. This was the year of the so-called


Internet of Things. From tech giants like Facebook


to tech minnows like Jawbone, it's been a hot topic of debate


and investment this year. According to Forbes,


the top 100 Internet of Things start-ups received venture capital


funding of nearly $6.5 billion So as that tech area matures,


what will 2016 bring? For our next guest, Eileen Burbidge,


cyber security and FinTech are both She's a partner at venture capital


fund Passion Capital and serves on the advisory board


for Tech City UK. She's previously worked


for Apple, Skype and Yahoo. Before we look at the year ahead,


talk us through 2015 for you. Like you said, I think it was a lot of


discussion around the Internet of Things. The funny thing about those


of us who are looking at the sector is that it is quite nebulous and


very vague. The way we translated that was wearable devices like


Jawbone and fitness trackers, or how people were going to try to consume


more data or produce more data in their daily lives. Really, what has


started to happen was you started to see more of that coming through


bigger devices, vehicles, cars, homes, and then you started to see


things like the on demand or sharing economy, so things like Uber,


Airbnb, home food delivery and cleaners and how people dealt with


large Internet of Things because of what it enabled. That was the


biggest trends in the UK and globally. At the start of the year,


we were all a bit sceptical about your home heating system or getting


your fridge wired up to the Internet but now it is increasingly common


and people think the benefits of it. I suppose alongside the security and


the personal information risks, the benefits of interconnectivity are so


important. The theme of all of this, whether it is cars, homes, holiday


rentals or devices, is the convenience and the ability to be


able to have the power or the control over what you want for your


own environment. If we look at what will happen in the next year, what


are people going to be doing intelligently and creatively with


the data being collected? How are you protecting people's privity and


their data? What are you doing to personalise services? How that


translates to other sectors and not just personal convenience. That is


becoming increasingly important because technology is everywhere, so


pervasive, whether it is in your home life, career or future plans.


It seems to be involved in every aspect of our lives and yet we are


all as individuals quite concerned about where the data is going and


what is being done with it. That in turn has led to a lot of problems. I


completely agree but I would also see massive opportunities. A lot of


it relates to how people and consumers, users are being affected


by technology. Now we are going to see technology becoming not quite so


pervasive and disruptive of other business sectors. -- it will be. You


will see it creep into business sectors and in security concern not


just for personal data about enterprise data and some of the


other stories you have been talking about of this past year. Cyber


security as a sector I think will continue to flourish and be an area


of sensitivity, and disruption to the financial services sector, not


just in payment unremitting this but in making services, how it relates


to property insurance and rigging else. It is a long list! Thank you


for joining us. This year was also


one of digital video. Our online offering exploded,


with videos streaming across Facebook and the website


and being viewed by millions Now, we've had a whole host


of newsmakers on the programme this The big names, the top bosses


and the exclusive interviews. And when it comes to


getting the inside track, our business editor,


Kamal Ahmed is the man for the job. Whether it's covering the falling


oil price or cracking We'll speak to him in a moment,


but first, in the year that's been dominated by the falling


price of oil, here's Kamal's interview


with the boss of BP back in January and his assessment on where oil


prices could end the year. This is a significant change


in the industry that will have wide-ranging effects on geopolitics


and the energy industry itself. I think we have got to plan on this


being down, we don't know at exactly what level but certainly, a year,


probably two or maybe three years. So Bob Dudley, there, speaking at


the beginning of a year which was dominated by the oil prices. In a


way, he set the tone for the year. He said there that he felt this low


prize would remain in place for two or three years. I'm going to try to


catch up with him again at the World Economic Forum in January and asking


the same question. I would not be surprised if he said the low oil


price might extend out further. On the supply side, two big pressures


on the price downward, the US starting to export oil, probably


during 2016 and secondly, Iran will be starting to export oil as


sanctions are lifted. Two important points to contribute to the down


pressure. Also a big year when it comes to stepping up efforts against


hacking. A number of firms in the headlines. Absolutely, cyber attacks


have been one of the issues of the year, political ones, allegations


against China and Iran, for example on in that area. But also for


corporate, big attacks around the world. One of the biggest was in the


UK, TalkTalk, the telecommunications firm. I spoke to Dido Harding, the


chief executive of the company and asked her whether all of the data


that had been accessed was encrypted. The awful truth is I


don't know. Shouldn't you know that as chief executive, you should know


as chief executive should know, surely if the details are restricted


so even if they are stolen, they may not be used? I would love to be able


to give you that complete an unequivocal assurance but it would


be wrong of me to give that today when the amount of data that the


criminals have been able to access is a large. Dido Harding, there, the


Chief Executive of TalkTalk and another interesting conversation you


had was with Christine Lagarde, the head of the IMF. Let's hear what she


had to say about the UK and EU's relationship. I personally hope that


the British economy is within the European Union but that is a


personal option and a personal choice. We are generally come at the


IMF, for whatever opens up trade, facilitate exchanges. Christine


Lagarde, there. It could be an instrumental year as far as the EU


referendum is concerned. We know it will happen before the end of 2017


but it could be in 2016. It looks probable that the British


governorate will go for it in 2016. The IMF itself will play a big role.


They will bring out a big report in the spring over the economic


effects, both for Britain and the rest of the European Union on this


most important matter. It will be a huge theme, not just for Europe but


the world looking at Europe as well. Thank you for joining us.


Thanks for your company in this special edition of Business Live.


So that was how 2015 looked in the business world.


Hello. It looks like a pretty decent day forgetting out and about. Still


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