13/04/2017 BBC Business Live


13/04/2017

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This is Business Live from BBC News with Aaron Heslehurst and Ben Bland.

:00:00.:00:00.

Can America's banking giants back their sky-high share prices

:00:07.:00:10.

Live from London, that's our top story on Thursday the 13th of April.

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JPMorgan, Wells Fargo and Citi kick off the earnings seasons where we'll

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get to learn the strength of any Trump bump.

:00:36.:00:46.

Also in the programme: "They're not currency manipulators" -

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the US President makes a big U-turn on his view of China's

:00:50.:00:52.

And as always we'll give you the latest lowdown on what's

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happening on the markets all around the world.

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And we'll be getting the Inside Track on the key

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The founder of UK high street stalwart Timpson's will be

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here to explain why he's expanding his key-cutting and shoe

:01:16.:01:17.

repair business overseas, and why Brexit was the right

:01:18.:01:20.

Today, as Burger King launches a new ad that hijacked

:01:21.:01:30.

Google's home assistant, we want to know: Do adverts

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need to be more creative to get your attention these days?

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We start on Wall Street, where it's a hugely

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Now, we know the share prices of banks have soared in the months

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following President Trump's election, led by America's biggest

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But in recent weeks, doubts have been creeping in,

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let me show you what we have put together.

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Today we get first quarter results from the biggest US bank,

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JPMorgan Chase, and later from its rival Citigroup.

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They're the first of a barrage of reports

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But will they be good enough to justify the Trump rally,

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or confirm those fears that it's a bubble waiting to burst?

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President Trump has famously promised to throw out the mass

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of banking regulation brought in by the Obama administration

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after the financial crisis - the Dodd-Frank Act of 2010.

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But he's been struggling to pass other legislation

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like healthcare reform, so this is all up in the air.

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Still the banks have had a boost from rising US interest rates,

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which have now hit 1% and are expected to hit 3%

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This means more profits, because it helps their lending margins.

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That's the difference between the interest rate they offer

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to savers and the rate they charge to borrowers.

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Professor Thorsten Beck is Professor of Banking and Finance

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Welcome to Business Live. The banks, big time of the year for them,

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revealing their profits. Do you think they have already priced in

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the anticipation of looser regulation, or do you think we are

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yet to see that affect them? I don't think we will see that in the

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reports coming out of the next couple of days. What the banks have

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been benefiting from his healthy credit growth over the last couple

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of years. The US financial market looks different from the European

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market. They have come out of the crisis much quicker than we did in

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Europe. And as Aaron just mentioned, this will drive the only rates. The

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higher share prices are more driven by the expectation of future

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deregulation. Do you think that this set of results is going to be the

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last one where they are really feeling the pressure of the interest

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rates that have been so low for so long that have hit their

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profit-making ability? Probably, yes. You might see an offsetting

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effect in the future of the growth slowing, but of course on the

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investment acting side, there are probably more deals to be had given

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the general deregulation trend that we see in the US and of course the

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animal spirits that have been released over the past couple of

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months, but there is also a high certainty along the way, so it is to

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be seen. Thorsten, can I ask you this. For the uninitiated out there,

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these numbers are backward looking. The markets are looking for what is

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in front. And something we don't touch on with the US banks much is

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the carload market. -- car loan market. It is very similar to the

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housing sub-prime market, and we know what happened to that. I would

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not be as concerned as the sub-prime mortgage market, but yes, it is

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often hidden from investors' eyes across the banking sector. I don't

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think it would be as bad as in 2006/7, but yes, care is to be

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taken. So is it the right time to be talking about deregulation, or if

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there is a simmering problem in the car loan mar market, isn't this the

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time when we need that regulation in place to stop that happening? If you

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tell me that you want to reduce the 1000 pages of Dodd Frank and the

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regulation that comes with it, that is one way, but it is more about the

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general regulatory approach that will see change over the next couple

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of ears potentially. I don't think we are looking at a reform of the

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Dodd Frank act any time soon, because it is not top of the

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legislative agenda, and that has kind of stalled over the last couple

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of weeks. I think what they will look at our two things, number one

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in the budget appropriation process, the regular treat framework might be

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starved of funds, such as the financial protection, the equivalent

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to the FCA, and second, there are three open positions at the Federal

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reserve board, two more potentially opening up next year, and so five

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positions out of seven to be filled by the Trump administration, and

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that can set the tone for a different type of regulatory

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approach. That is what we will have to keep our eye on. Professor

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Thorsten Beck, thank you for joining us.

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Let's take a look at some of the other stories making the news.

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United Airlines' chief executive has said he will not quit

:07:44.:07:45.

amid an explosive backlash to video of a screaming man being dragged off

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Oscar Munoz said he felt "shame and embarrassment",

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Let's take a look at some of the other stories making the news.

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and vowed it would never happen again to a seated passenger on one

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The embattled aviation boss said the passenger

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in question, David Dao, deserved "certainly an apology".

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A group of shareholders has written to electric car-maker Tesla

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questioning the independence of its board, warning it's too close

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They urged it to re-elect members annually and to add two

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new independent directors to the board.

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In a tweet Mr Musk said the investors "should buy

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The French supermarket group Carrefour has posted a strong rise

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of 6.2% meaning it hit almost $22.7 billion. Its Brazilian business was

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one of the main reasons why, with 38% growth in turnover, mitigating

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the impact of its poorly performing French business.

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US President Trump has said his administration will not

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The huge U-turn comes despite his campaign promise to do

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Rob Brandt is in Shanghai and joins us. Good to see you.

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It is another U-turn, but in general terms, this is good news for all of

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us? We don't want these countries having a trade battle? You talk to a

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whole range of people, I interviewed the CEO of Ford a few minutes ago,

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they also the same, nobody wants a trade war between the United States

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and China, the world's two biggest economies. It is a substantial

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U-turn for the president, he spent months on the campaign Trail saying

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that China was a currency manipulator and had been taking US

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jobs, but now he says they are not. The figures for the past few years,

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it has been appreciated in value and growing in strength against the US

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dollar. Maybe what we are seeing is part of this grand bargain that

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President Trump appears to be offering China, we saw that detailed

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in Florida, and at the heart of that is North Korea, trade deals a key

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part of that. Thank you for the update, Rob.

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Let's look at the markets kicking off around the world.

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expected to follow more of a cautious trading session as it has

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done in the past, and again, just important to note that the dollar

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has dipped off the back of President Trump saying that China is not a

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manipulator. central bank to keep

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interest rates low - because the dollar is

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getting too strong... OK - let's turn our

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attention now to Brazil - one of the world's biggest emerging

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economies - it's finally cut its main interest rate by 1%

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but it's still 11.25%. Here's Daniel Gallas

:11:12.:11:13.

in Sao Paulo with the details. We haven't seen interest rates to

:11:14.:11:18.

this fast in Brazil for almost eight years. Back then it was a completely

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different country, the B in Brics, one of the fastest-growing countries

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in the world. Now it is mired in corruption scandals and facing one

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of its worst recessions in history. So there is this drop in interest

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rates, does that mean Brazil is back on track and back to the good old

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days? The answer is probably not, at least not so fast. The interest

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rates drop is partly because Brazilians are unemployed and they

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have no purchasing power left, so prices are falling, and that means

:11:52.:11:54.

that interest rates can drop as well. The fundamentals of the

:11:55.:11:59.

Brazilian economy are in bad shape. Growth is supposed to be very modest

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this year, also the Government has high levels of debt. So economists

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are watching whether the country will keep cutting it interest rates

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in the next coming months. That could maybe signal that the country

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is back on track to a very slow recovery.

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Joining us is Lawrence Gosling who is editor in chief

:12:22.:12:23.

Plenty there to talk about. Let's talk about some of what Daniel was

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mentioning there and this cut in interest rates in Brazil. As he

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mentioned, the Brazilian economy is still heavily indebted, and if you

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are the central bank in any country, you have two weapons at your

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disposal, they can't pump money into the economy, so they will steadily

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use this interest rate weapon tool to try to revive the economy. Let's

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turn our attention closer to Europe. Everybody keep an eye on what is

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coming up with the elections. The French election around the corner.

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Turkey's election this weekend coming, an important one because

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there is still a state of emergency in Turkey and it is a big economy,

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so that is important. And then the following weekend, the first round

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of the French elections, it could be all over in wonder if one of the

:13:22.:13:26.

candidates gets 50% of the vote, not expected, it is very tight. So these

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other two next key elections. And especially the French election, does

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that affect European market at all? European equity markets have cooled

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off a little, and the sovereign bonds of France in particular have

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eased off a little bit as well. So investors are nervous, albeit most

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people don't expect Marine Le Pen to end up being elected after the

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second round. And the Turkey referendum rather than an election.

:13:57.:14:03.

That is the key thing about that. Thank you very much, you will be

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back to go through the papers with us shortly.

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The inside track on why one of the UK's biggest high-street chains

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thinks it has the key to success in China. You are watching Business

:14:17.:14:21.

Live on BBC News. Sainsbury's Argos are opening

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their 50th digital store today. It's part of plans to

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transform the retailer after Sainsbury's bought

:14:32.:14:32.

the Home Retail Group in 2016. They're also announcing plans

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to open ten mini Habitat stores in branches of Sainsbury's -

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and 90 stores will have Argos John Rogers is the CEO

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of Argos he joins us now. I'm sure some people will be

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delighted by this, but are you not potentially putting some people off

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who are not quite so, double, they love that traditional catalogue? I

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think it is about giving customers choice. Many of them do love the

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catalogue, but many of them like to be above the shop in-store in an

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easy and convenient way through the digital tablet, so it is about

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providing customers with choice, whether it is home delivery, picking

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up stuff in the supermarket or indeed going into one of our Argos

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high-street stores and giving customers that choice to grow sales,

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giving us a successful six-month sales and a winning market share.

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One other interesting is, when you look at your rivals, like Amazon,

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with big warehouses is out of town, if they don't have the same sort of

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business rate overheads that you inevitably do in stories in towns

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and city centres, where you concerned by the recent changes? As

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a business, with, say, Argos, we pay over half ?1 billion in business

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rate and we would ask the Government to look at reforming the system, and

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out of date tax clearly focused on property, and with those retailers,

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in in this digital world, it is becoming less relevant so I think we

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welcome some of the small changes made to the system and processes are

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the last 12 months or so but fundamentally we are asking for a

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major freehold. John, many thanks. John Rogers, Chief Executive of

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Argos. Don't forget you can find plenty on the Business Live page.

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Right now, bad news if you're planning to travel over the bank

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holiday weekend. Virgin's Isco sorry, no, forgive me, it is later

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in April. Not this weekend. It is later in the month. Just frighten

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half the country! LAUGHTER

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Is US burning season kicking off? It kicks off with the big banks over in

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America and they will tell us how much money have been making -- is US

:17:20.:17:27.

banking season kicking off? A quick look at how

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markets are faring... This is the start of the trading day

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in Europe, all down just a shade, very cautious. Now, I want to talk

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about this... Imagine taking over a family

:17:42.:17:43.

business and then more Timpson was founded

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in Manchester in 1865 as a shoe store and later expanded

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into manufacturing and repairs. In 1975 it had 430 stores

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and a new managing director, with John Timpson taking over

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the family business. Now the company has

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almost 1900 stores in the UK and Ireland,

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and one shop in Beijing. Here to give us the inside

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track is John Timpson, Welcome to Business Life. Successful

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business in the UK and Ireland. What tempted you about China? The

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Chinese! LAUGHTER

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-- welcome to Business Live. Looking around the world, they wanted a

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model to copy, they found us, and that is what is happening. Do you

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think it is the start of more? Not much point just having one. Yes, a

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silly question. But you have a lot of shoes over there. We have one,

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there will be more fairly soon. Obviously we have to learn how to do

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it, we have one or two of our people over there. A long way to go. I'm

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not getting excited yet, but it is a very interesting new direction for

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us. Can I ask you this? I know you were watching the interview with

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John as well from Argos. Their model was very similar... Asking if this

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is the future, you know, click collect, picking up in supermarkets,

:19:25.:19:28.

and you're opening up a lot of the Timpsons in supermarkets around the

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UK. Is that the future because it is with the footfall is? We are in

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pretty much every high street you want to be end, and we are opening

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lots of shops together with supermarkets, all the big format,

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particularly Tesco and Sainsbury's. Most of them are little pods in the

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car parks, near the entrance. You obviously are doing something right

:19:51.:19:54.

with your business, growing and so on. What is interesting is how you

:19:55.:20:01.

draw up your business plans, 15 years in advance? There is this

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little trick I do every three years as a way of stimulating... You know,

:20:05.:20:09.

we don't have forward planning meetings or anything like that, but

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I write a chairman's report for 15 years' time. How do you know what is

:20:15.:20:20.

coming up? Of course you don't! But it takes you away from today.

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Instead of writing a forward plan, most people for word -- people's/ is

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just from today, and they say the sales will go faster than costs so

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they make more money, so they can put that to bed and so on, but my

:20:36.:20:41.

forward plan, my annual report for 2032, which I have just written...

:20:42.:20:44.

LAUGHTER It is trying to guess what will

:20:45.:20:48.

happen. Actually, do you know what? The most interesting thing about it

:20:49.:20:53.

is the thing is that absolutely don't change. And the thing that

:20:54.:20:59.

matters most to me is the fact that in 2032 one of the bits of our

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culture we have to keep, and we will still be making sure we take great

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people and let them get on with it, what I call upside-down management,

:21:10.:21:12.

it'll still be how we run our business. Which is in your book?

:21:13.:21:21.

Absolutely. We have to wrap it up, but upside-down management... The

:21:22.:21:26.

book is cold Keys To Success and it is 50 different quirky things we do

:21:27.:21:33.

to make a difference, and the way to give great service in shops, part of

:21:34.:21:37.

the secret to our success, we allow the people who sell to our customers

:21:38.:21:40.

to do it how they want, and they do it as long as we pick great people.

:21:41.:21:49.

OK, thank you. Upside-down management. I wonder if we can apply

:21:50.:21:53.

that to presenting? Could do, I don't know!

:21:54.:21:58.

Now, are you happy to have your food delivered...

:21:59.:22:00.

That's the question being asked of take-out food

:22:01.:22:03.

It's the first full scale roll-out of technology that could mean

:22:04.:22:10.

the end of the road for scooter delivery riders.

:22:11.:22:13.

We think the best approach for this kind of system is one where,

:22:14.:22:40.

you know, there's constant human oversight of the robots.

:22:41.:22:44.

The architecture we've chosen is one where a person is capable

:22:45.:22:47.

of controlling one or two robots, and over time it would build

:22:48.:22:51.

into more and more autonomous operation so that there is one

:22:52.:22:59.

person then controlling five, and then ten and so on, so effectively

:23:00.:23:02.

multiplying the ability of a given person to do more work

:23:03.:23:04.

over the set of robots that they're overseeing.

:23:05.:23:53.

What other business stories has the media been

:23:54.:23:55.

Laurence Gosling is joining us again to discuss.

:23:56.:24:01.

Burger King, new TV at, designed to interact with your device, and

:24:02.:24:10.

Google don't seem to like it? No, because it was only running for

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three hours and they disallowed the software that allowed this app to

:24:15.:24:19.

pop up on your phone or Google bomb device. Saw the commercial on the TV

:24:20.:24:26.

use the trigger words to activate -- Google device. The yes, it would

:24:27.:24:32.

tell you where to get it, pay it back, so it is kind of stealth

:24:33.:24:35.

marketing and I am sure somebody thought it was a clever idea. I'm

:24:36.:24:40.

sure it got a bit of coverage. We asked whether people like the idea

:24:41.:24:44.

or if it was too invasive. The two best responses - advertising just

:24:45.:24:53.

needs to be targeted. Tom says simply for something I want to own

:24:54.:24:56.

or desire, and those things don't matter to me. Look at this picture.

:24:57.:25:05.

What is going on with Swiss chocolate and appLindt? They are

:25:06.:25:08.

suffering because we all are getting more healthy -- what is going on

:25:09.:25:17.

with Lindt? But the cost is going up because of the cocoa beans... Yes,

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clearly this with cannot draw their own Kauko. The other thing,

:25:22.:25:25.

interestingly enough... Why not? They are very good at Cowes for the

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milk, but... You know, this is a luxury item. It is expensive and

:25:33.:25:36.

that is how they position themselves. It is Easter now so we

:25:37.:25:41.

will all go and buy some chocolate and we will just buy the cheapest

:25:42.:25:44.

chocolate and consume it quickly. But what about the chocolate? It is

:25:45.:25:50.

higher quality because it is only manufactured to be on the shelves

:25:51.:25:54.

for short time so can eat it and it is not quite as unhealthy for you.

:25:55.:25:59.

Ah! OK, see you soon. Happy Easter.

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