27/01/2017 BBC Business Live


27/01/2017

A look at the global business stories.


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This is Business Live from BBC News

:00:00.:00:00.

with Aaron Heslehurst and Rachel Horne.

:00:00.:00:10.

Trading with Trump, Britain's Prime Minister becomes

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the first foreign leader to meet the new US President,

:00:13.:00:15.

but can she strike a bargain with the world's biggest economy?

:00:16.:00:17.

Live from London, that's our top story on Friday the 26th of January.

:00:18.:00:22.

Live from London, that's our top story on Friday the 27th of January.

:00:23.:00:33.

As Britian leaves the European Union, we'll ask which side

:00:34.:00:37.

of the special relationship has more to gain from a boost

:00:38.:00:41.

And when is a $5.3 billion profit in three months just not enough?

:00:42.:00:49.

We'll tell you why investors are not happy with Google and also find out

:00:50.:00:54.

if its parent company Alphabet's other bets will pay off?

:00:55.:01:03.

And the markets still loving President Trumps pro-growth

:01:04.:01:08.

drive of tax cuts, big spending and deregulation.

:01:09.:01:10.

And as the head of BT Europe resigns over an accounting scandal,

:01:11.:01:12.

we'll be getting the inside track from our business editor,

:01:13.:01:15.

Simon Jack, on that and all the rest of the stories he's been

:01:16.:01:18.

After ten years of almost constant growth, the sales of soft sugary

:01:19.:01:24.

drinks in Australian supermarkets has fallen by more than $60 million.

:01:25.:01:29.

We want to know - are you more aware of sugar,

:01:30.:01:31.

We start in the US, where, as you have been hearing,

:01:32.:01:53.

UK Prime Minister Theresa May will become the first world leader

:01:54.:01:56.

to meet President Trump when they hold talks later today.

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Mrs May has called on the President to renew the special relationship

:02:04.:02:06.

She is keen to show Britain can prosper outside the European Union,

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so lining up a post-Brexit trade deal is high on her agenda.

:02:16.:02:18.

But is it really a priority for the US?

:02:19.:02:26.

In terms of individual countries, the United States is the UK's

:02:27.:02:30.

Britain sold goods and services worth

:02:31.:02:37.

Taken together, though, the European Union is by far

:02:38.:02:43.

Britain's top export market, worth $280 billion, 44%

:02:44.:02:46.

Any drop in those exports as a result of Brexit could see

:02:47.:02:55.

Britain is far less important to the US than the US is to Britain.

:02:56.:03:06.

America sold $65 billion of goods and services here in 2015,

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half the amount that went the other way.

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And to put that in the context of the vast US economy,

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that is little more than 4% of total US exports - and less

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So putting aside the warm words, will this really be a priority

:03:24.:03:33.

Dr Brian Klass, fellow in comparative politics

:03:34.:03:39.

at London School of Economics is with me.

:03:40.:03:44.

Thank you for coming in. Let's go to the figures we were talking about.

:03:45.:03:51.

It looks like the UK on paper is far more dependent on the US than the

:03:52.:03:55.

other way around. Why is Donald Trump making such positive noises?

:03:56.:04:00.

For both politicians this is about an early political whim for people

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trying to transform their countries and trading relationships with the

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world. I think Trump needs to say he has dealt with a global power and

:04:07.:04:11.

come away with a deal. He makes himself out to be a deal-maker and

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wants to show results. It's much more important for Theresa May who

:04:16.:04:18.

wants to show there will be a soft landing from Brexit and this US

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trade deal is one way this can be achieved. In the UK its headline

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news, but how aware are people in the United States of this meeting

:04:27.:04:30.

happening? I don't think they are aware at all. It's in the New York

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Times and Washington post. It's not on the New York Times right now. Is

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the 35th story on the Washington post. It's not headline news for

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Americans, who are much more concerned with things like the

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Mexican War. Trump was not chanting about trade deals with the UK. A

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little bit of a problem that I believe the UK faces. All well and

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good that the Prime Minister and President will be talking. But they

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are not the ones who really do the negotiating. It's the teams behind

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them. Apparently the UK lacks trade negotiators where America has some

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of the best in the world who will wipe the floor, so I hear. That's

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right, the UK hasn't negotiated trade deals independently for a long

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time and they only developed a new office last summer. They are getting

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up to speed to the US has done for a long time. Combine that with the

:05:28.:05:34.

leveraged the US saw the ball is in the US's court. Both politicians

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looking for an early win. What sort of headlines tomorrow will give that

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impact? I think they will commit to working on a trade deal and try to

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have one in place, a framework, to be in fermented as soon as the UK

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leaves the EU. Those are the headlines. What's not clear is

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whether they can battle the deregulation concerns that make the

:05:57.:06:00.

trade deal difficult to hash out and whether it will be a good deal for

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Britain in the end. Thank you for joining us, really interesting.

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When is $5.3 billion profit in three months just not enough?

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The parent company of the internet giant saw its shares fall

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in after-hours trade after its quarterly results

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As Dave Lee reports from San Francisco,

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there are concerns about a slowdown in the growth of online

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advertising and just how future-proof the company may be.

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The final three months of 2016 were important for Google -

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it launched a new smartphone range, the Pixel, and went big

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with its voice activated assistant, Google Home.

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The company didn't break out the numbers for those new devices,

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so it's hard to know exactly how they have performed, but Google's

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chief executive, Sundar Pichai, said he was "comfortable"

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with the direction things were going with the new products.

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Alphabet's revenues, which are up 22% on this time last year,

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still rely heavily on earning money through Google's advertising.

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As even more of us turn to mobile computer in,

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people are clicking - or rather tapping -

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on Google ads more than they used to, but advertisers are paying less

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Aside from Google, Alphabet has what it calls its other bets -

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things like superfast broadband, smart thermostats

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The revenues of these other bets has doubled compared

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to this time last year, but overall in the past three months

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those bets collectively lost the company $1.1 billion.

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Toshiba has said it will split off its operation that makes memory

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chips for smartphones and computers and will sell a stake

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The Japanese company needs to raise funds after revealing a heavy

:07:52.:07:57.

one-off loss at its US nuclear power business.

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Toshiba will unveil the size of the writedown next month,

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but some estimate it could be around $6 billion.

:08:03.:08:06.

Swiss banking giant UBS beat expectations in the last three

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months of 2016 to post a pre-tax profit of $847 million.

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It said that rising interest rates and stocks boosted the US wealth

:08:18.:08:20.

management and securities units, whilst the bank also put less money

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UBS is among the few European banks still facing a US probe into sales

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The bank has $3.2 billion in reserve for legal matters.

:08:29.:09:00.

Always good to see you. Happy Friday. Ali Bacher doing it again.

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Didn't they recently buy something in the states?

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They are making a big push in the States, but the country we are

:09:15.:09:19.

talking about today, the affiliate is called Ant Financial. They are

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buying Moneygram. Ant is China's biggest online payments company, and

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it's one third owed by the boss of Eilidh Barbour. It's an interesting

:09:42.:09:45.

deal. The business of international payments is a really tough one. It

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looks quite counterintuitive given that the world is deep globalising.

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Ultimately, this is what Ant financial get through this purchase

:09:58.:10:02.

of Moneygram, a big brand name and network in America as well as

:10:03.:10:04.

immediate expansion of the global remittances business. How do you say

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happy New Year in China? ... Right back at you. Chinese New Year

:10:16.:10:17.

tomorrow. The Dow on Wall Street continued

:10:18.:10:19.

extending those gains after breaking And that rebound continues rippling

:10:20.:10:29.

around the world markets. The third straight rise

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for Japan's Nikkei, banks and exporters

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leading the charge today. Europe is expected to follow

:10:37.:10:42.

that optimistic wave, because despite President Trump's

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words toward trade protectionism, investors are betting the new US

:10:50.:10:54.

President will embark on a pro-growth drive of tax cuts,

:10:55.:11:00.

big spending and deregulation. So let's find out what'll be making

:11:01.:11:02.

the headlines in the US today. The end of the week has finally

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come, and what a week it was! But before we look to the weekend,

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there are still a few bits Now, investors here will be focused

:11:17.:11:20.

on the fourth-quarter GDP estimate, Now, the US economy grew by 3.5%

:11:21.:11:25.

in the previous quarter. Now, economists are not

:11:26.:11:30.

expecting anything that high, but they will be closely

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watching this metric. Also happening on Friday,

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durable goods orders. Now, that is really looked

:11:38.:11:41.

as a proxy for how businesses Now, after seeing a drop

:11:42.:11:44.

in the month of November, analysts are expecting to see

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an increase for the And finally, in earnings news,

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American Airlines will be reporting. Now, it is the number-one airline

:11:52.:11:56.

by passenger traffic, but that may not be reflected

:11:57.:12:00.

in their earnings. Cheap airfares and higher wage

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costs have really hurt Joining us is Jane Foley, Senior

:12:03.:12:04.

Currency Strategist at Rabobank Thank you for coming in. Let's start

:12:05.:12:22.

with currencies. Sterling is on a much firmer footing this week. It

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is. It's off the highest levels of the week but if you go back to the

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beginning of last week, it's much stronger. A lot of this is to do

:12:30.:12:34.

with UK politics. Theresa May's speech last week, what the market

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liked was the idea that the government in the UK has a plan, and

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not only that it has a plan on Brexit, but Theresa May has been

:12:44.:12:47.

busy filling up her agenda. She has a busy to do list. She's talking

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about trade with the US. That will garner positive headlines for both.

:12:53.:12:56.

That will give sterling a bit more a boost? It'll be in the press.

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Sterling coming off its highest levels, so what the market often

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does is price in, wait for the news and see if it matches expectations.

:13:07.:13:10.

Theresa May has talked about industrial policy this week and says

:13:11.:13:14.

she's lining up talks with China about trade there. She's trying to

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firm up this belief that the UK does have a strong outlook post Brexit.

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But Brexit talks haven't yet begun. So we still have a volatile ride for

:13:25.:13:30.

sterling for the rest of the year. Going to the US dollar, which has

:13:31.:13:35.

had a ride recently. We are getting US GDP growth numbers out today.

:13:36.:13:39.

It's a funny old game because President Trump doesn't want a

:13:40.:13:44.

strong dollar. Others do, though, in the US. The US Treasury, is in

:13:45.:13:50.

charge of dollar policy, not the central bank. For years the US

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Treasury has been saying they've had a strong dollar policy but we

:13:54.:13:57.

haven't heard much about it recently, because if you have slow

:13:58.:14:00.

growth and inflation, you don't want a strong currency. They kept quiet

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about it. The Treasury Secretary said yes they wanted a stronger

:14:08.:14:10.

dollar but he has backed down again. Donald Trump wants to export more,

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import less, and if you want to export more, you want a weak dollar.

:14:15.:14:18.

So products are cheaper for us around the world? Precisely. You're

:14:19.:14:23.

coming back to take us through the papers. We will see you shortly.

:14:24.:14:27.

Still to come, we'll get the inside track on the big

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business stories of the week from our business editor, Simon Jack.

:14:30.:14:45.

Tesco has agreed to buy UK's biggest food wholesaler, Booker Group,

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The companies said the deal would create

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The joint announcement also said the deal would bring

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benefits for "consumers, independent retailers,

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caterers, small businesses, suppliers, and colleagues,

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as well as delivering significant value to shareholders".

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Our business correspondent, Theo Leggett,

:14:59.:15:00.

This is really a boost for consumers? Isn't this just Tesco,

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which is a whopper as it is, just getting bigger? Certainly, there may

:15:24.:15:28.

be concerns that Tesco is gaining an even bigger slice of the UK food

:15:29.:15:31.

market than it already controls, and some analysts are saying that

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competition regulators may want to look into it carefully. Tesco says,

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we're not buying any more big stores, so there is no reason for

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competition regulators to get involved, but that is a discussion

:15:44.:15:49.

for the future. Tesco says it is looking to broaden its business, so

:15:50.:15:53.

the supermarket business itself, which is its core business, is very

:15:54.:15:57.

competitive, dominated by a small number of large players, very hard

:15:58.:16:04.

to gain market share, hard to grow your business and expand revenues or

:16:05.:16:07.

cut costs in that way. So it is taking on a different part of the

:16:08.:16:12.

food business, making itself bigger in that way, expanding what it has

:16:13.:16:17.

to offer. It says it is particularly interested in what it calls the out

:16:18.:16:22.

of home offering, so people who go to supermarkets, prepare at home,

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that is traditional business for them. But restaurants, catering,

:16:26.:16:31.

convenience stores, that is another part of what it is looking at here.

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Tesco says this is not about refining its supermarket business

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and making that cheaper, it is about expanding its business and

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increasing its offer into new areas. OK, great stuff, enjoy your MG! On

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the weekend, I meant! It is the Chinese New Year, it is

:16:49.:16:59.

going to be the year of the Rooster, give me your Friday fact. President

:17:00.:17:07.

Trump and the Chinese leader were all born in the year of the Rooster.

:17:08.:17:12.

Were you? No idea! Let's look into it!

:17:13.:17:19.

Welcome back for our international viewers, you are watching Business

:17:20.:17:21.

Live! Britain's Prime Minister

:17:22.:17:23.

says she's delighted that new American President

:17:24.:17:24.

Donald Trump's has made a trade deal between

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their countries a top priority. Theresa May is set to discuss it

:17:26.:17:28.

when she becomes the first foreign They are going to do that in the

:17:29.:17:42.

Oval Office in a few hours' time. Let's have a look at how the markets

:17:43.:17:45.

are getting on, just up ever so slightly in London, a bit of

:17:46.:17:51.

profit-taking on the DAX and the CAC 40.

:17:52.:17:54.

on some of the big business stories of the past few days.

:17:55.:17:59.

is the growing accounting scandal at BT's Italian operation.

:18:00.:18:04.

It's now being reported by Reuters that

:18:05.:18:08.

BT's head of continental Europe, Corrado Sciolla,

:18:09.:18:10.

is to leave the company as a result of the crisis.

:18:11.:18:13.

Simon, you broke this story earlier in the week, it is your baby!

:18:14.:18:23.

Well, no, the boss of BT Europe, I was told, was leaving several days

:18:24.:18:30.

ago, he has taken a long time to write his resignation letter, he is

:18:31.:18:34.

leaving today! This scandal broke at the end of last year, back in

:18:35.:18:40.

October, they said, we have a ?140 million poll in their Italian

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division, but it turns out to be much worse than they previously

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thought, more than ?500 million, a whopping black hole for a business

:18:50.:18:54.

which is a tiny part of BT's total revenues. So something has gone

:18:55.:18:58.

seriously wrong. What has happened is that employees and customers have

:18:59.:19:05.

been colluding to pad out invoices, hitting profits targets. It was

:19:06.:19:11.

missed by the external auditors, PwC, and I am told that BT is

:19:12.:19:15.

reviewing whether it even wants to have a subsidiary in Italy anymore.

:19:16.:19:19.

A couple of interesting things, it is the one country where when you do

:19:20.:19:24.

a forensic investigation like this, personal e-mails of employees do not

:19:25.:19:30.

have to be handed over. And the authorities' approach to this is

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generally to find against the company, the company did wrong, not

:19:35.:19:38.

the individuals. So if you put that together, you have the potential for

:19:39.:19:45.

scandals like this to happen. BT, a big worldwide company, it is facing

:19:46.:19:48.

challenges and a number of fronts, it has a whopping pension deficit,

:19:49.:19:55.

it has got a stagnation in its core revenue, some of its biggest

:19:56.:19:57.

customers are not spending money, and that is worrying for the wider

:19:58.:20:02.

economy. When a company as big as BT sees customers holding off, some

:20:03.:20:06.

people say it is to do with Brexit, then they have a problem, and

:20:07.:20:09.

Moody's downgraded them the other night, saying that things look

:20:10.:20:13.

pretty rough for the company. I know we will keep across that. The US, we

:20:14.:20:21.

get growth numbers, and there is... 1:30 UK time, 2.2% is the consensus,

:20:22.:20:26.

which is not brilliant but not bad. They have been adding jobs pretty

:20:27.:20:31.

well. Better than Europe! But not quite as good as the UK, actually.

:20:32.:20:36.

The interesting about this, we have this term animal spirits knocking

:20:37.:20:42.

around, basically the Trump traders that he has been talking about, he

:20:43.:20:47.

has a couple of big plans, cutting corporate and individual taxes, and

:20:48.:20:50.

the other is spending big on infrastructure, including a wall.

:20:51.:20:57.

That does two things, people think it will stimulate growth, because,

:20:58.:21:01.

briefly, if you cut corporate taxes, they get to keep more money, spend

:21:02.:21:05.

more of it, shares are worth more, so you have seen that trade. So a

:21:06.:21:09.

strengthening of the dollar, the Dow Jones going through 20,000. People

:21:10.:21:14.

are just wondering now, where do we go from here? As you say, some of

:21:15.:21:19.

these protectionist talk about trade makes people think, is ego to throw

:21:20.:21:22.

sand in the engine of the global economy? -- is he going to. Could it

:21:23.:21:27.

reverberate around the world? It would be a damp and on global

:21:28.:21:32.

growth. It is till the world's biggest economy. It will be

:21:33.:21:37.

interesting to see how the dollar reacts to this number. We have to

:21:38.:21:41.

wrap it up, but interesting out Trump is trying to talk down the

:21:42.:21:45.

dollar in some ways, he once a weaker dollar. Correct. Have a great

:21:46.:21:47.

weekend, Simon Jack. US car giant Ford has

:21:48.:21:49.

made its second-best annual pre-tax profit to date of $10.4

:21:50.:21:52.

billion according to its But what effect could President

:21:53.:21:55.

Trump have on the auto industry? They have revealed they are

:21:56.:22:09.

cancelling a planned new plant in Mexico, it has cost $200 million.

:22:10.:22:18.

Earlier I sat down and spoke to Jim Farley, their boss for Europe, the

:22:19.:22:23.

Middle East and Africa, and he explained why free trade was very

:22:24.:22:24.

important to them. Our industry is based

:22:25.:22:26.

on free trade, you know, a good example is here in Europe -

:22:27.:22:28.

we build all of our engines in the UK, we export them to Europe,

:22:29.:22:31.

put them in cars, We are the number-one brand

:22:32.:22:34.

here in the UK, so you know, this model of free trade

:22:35.:22:39.

is the basis for our business. But that could change, couldn't it?

:22:40.:22:47.

President Trump is talking about 20%, your cars, whatever party make

:22:48.:22:50.

in Mexico to bring to the States, you may have to pay 20% on those. It

:22:51.:22:56.

is early days, we don't really know, so we will see, but it seems like a

:22:57.:23:00.

lot of his policies are friendly to business. He is talking about trade,

:23:01.:23:06.

currency manipulation, talking about data driven regulations. We will see

:23:07.:23:07.

what happens. Really wait and see, everyone is

:23:08.:23:14.

saying wait and see, Jane is back, are we going to start with my neck

:23:15.:23:19.

of the woods? We are, do you buy sugary drinks? Not that we are

:23:20.:23:28.

allowed to, but I love a Diet Coke once in a while! Other drinks are

:23:29.:23:33.

out there! But that has got no sugar in it. Anyway, consumer backlash

:23:34.:23:42.

being reported here in the Sydney Morning Herald, Australian

:23:43.:23:45.

supermarket is seeing a huge fall in the sales of sugary drinks. 2.2%

:23:46.:23:53.

down year on year, and they are talking about $80 million in lost

:23:54.:23:57.

sales, a fifth of their revenues, because of these sales not going

:23:58.:24:00.

through. And of course what they are talking about is the studies done on

:24:01.:24:05.

obesity, particularly sugar. So there is the possibility of a tax on

:24:06.:24:10.

that, and we have heard of this in other developed countries, but one

:24:11.:24:13.

thing about this is that there is a lot of lobbying from some of these

:24:14.:24:18.

big companies, and of course now we also have companies coming up with

:24:19.:24:22.

natural sugar alternatives too. So the industry is quite complex, but I

:24:23.:24:26.

think there is a movement by some of these big manufacturers, instead of

:24:27.:24:31.

selling sugary drinks, to get hold of branded waters. Is it that the

:24:32.:24:36.

money has gone out of the market, or is it being spent on alternatives?

:24:37.:24:40.

It is switching, all of the big drinks companies, over the last ten

:24:41.:24:44.

years or so, have been rushing to buy up those smaller branded water

:24:45.:24:48.

companies, and generally they are owned by bigger companies.

:24:49.:24:52.

Certainly, if you go back 20 years, we all know that the amount of water

:24:53.:24:56.

is sold in a supermarket has grown considerably. A huge market. That

:24:57.:25:06.

coconut water, 1 billion just in the UK! I hated! We saw that luxury

:25:07.:25:11.

goods do very well in China, then Beijing had a corporate crackdown

:25:12.:25:16.

and things, luxury sales dropped in China, but they are coming back. If

:25:17.:25:21.

you go back to 2015, you will remember the terrible stock market

:25:22.:25:24.

crash, it caused a lot of consumers to backtrack. Last year, really

:25:25.:25:30.

since February onwards, a lot of confidence in the outlook for China,

:25:31.:25:35.

although we are very cautious. That has brought some consumers back, and

:25:36.:25:46.

now they are doing things in duty is to encourage spending. Jane Foley,

:25:47.:25:52.

thanks very much for coming in. That is Business Live, bye!

:25:53.:26:05.

It's a cold and frosty start for central and eastern parts

:26:06.:26:10.

of the UK with patches of freezing fog and in East Anglia

:26:11.:26:13.

and the south-east of England there is the risk of some icy

:26:14.:26:15.

patches on untreated surfaces from this area of cloud

:26:16.:26:18.