12/05/2017 BBC Business Live


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12/05/2017

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This is Business Live from BBC News with Tanya Beckett and Rachel Horne.

:00:09.:00:11.

Zooming exports and crumbling classrooms.

:00:12.:00:12.

The paradox of Germany's lopsided economy.

:00:13.:00:14.

Live from London, that's our top story

:00:15.:00:16.

Growth accelerates in Europe's biggest economy but is Germany

:00:17.:00:39.

Has Donald Trump opened the door to trade with China?

:00:40.:00:48.

Beijing gives the green light to certain US exports.

:00:49.:00:51.

We'll cross live to Asia for the latest reaction.

:00:52.:00:59.

It is a flat start on the markets for Europe. Oil prices remaining

:01:00.:01:03.

relatively firm of course. We'll hear from the young tech

:01:04.:01:06.

entrepreneur behind the UK's It's been a long week for Barclays'

:01:07.:01:10.

CEO Jes Staley and it ends with him fooled into replying

:01:11.:01:15.

to an email he thought was sent by the bank's Chairman

:01:16.:01:17.

but was actually from a prankster. We'll tell you what he wrote later,

:01:18.:01:20.

but first we want to know have you ever sent an email

:01:21.:01:23.

to the wrong person? We start in Europe's

:01:24.:01:26.

economic powerhouse, because in the last half hour

:01:27.:01:44.

Germany has released GDP figures for the first

:01:45.:01:48.

three months of the year, and they show an economy

:01:49.:01:52.

that's accelerating. It grew 0.6% on the

:01:53.:01:55.

previous quarter. That translates to an

:01:56.:02:04.

annual rate of 1.7%. It's being fuelled by global demand

:02:05.:02:06.

for the country's exports, But it's not all cause

:02:07.:02:08.

for celebration. Last year Germany clocked

:02:09.:02:11.

up its biggest ever trade surplus, that's how much more it

:02:12.:02:20.

exports than it imports. At $275 billion, Germany has one

:02:21.:02:24.

of the biggest trade It's a source of tension

:02:25.:02:26.

with its neighbours and allies. Look at how much more Germany sells

:02:27.:02:33.

to these top economies The US in particular has accused

:02:34.:02:35.

Germany of exploiting an undervalued euro to get an unfair

:02:36.:02:48.

trade advantage. An over-reliance on exports

:02:49.:02:51.

isn't the only problem. The European Commission says

:02:52.:02:56.

Germany is just too frugal. It is saving too much,

:02:57.:02:58.

and investing too little. It wants to see some of that cash

:02:59.:03:00.

invested in the region's Paul Kavanagh, Director

:03:01.:03:03.

of Patronus Partners, is with me. Growth of 0.6% for the first three

:03:04.:03:18.

month we were expecting, sounds not bad, so why is there so much

:03:19.:03:24.

criticism of Germany? It is to do with the imbalances within the

:03:25.:03:29.

economy. Germany taxes its popular very highly, around 40% of GDP is

:03:30.:03:35.

made up of taxes. As we approach the elections in September there is a

:03:36.:03:39.

lot of pressure on trying to release some of these taxes that are being

:03:40.:03:43.

imposed, to bring more euros back and to allow people to spend, and if

:03:44.:03:47.

they spend, will be spend on things they need to import? To rebalance

:03:48.:03:54.

this import export argument creating tensions particularly with the US.

:03:55.:03:58.

There is also the issue over the euro. Explain that. Germany has a

:03:59.:04:04.

very strong economy not only domestically but it is the strongest

:04:05.:04:09.

in terms of exports. Normally if you were alone as a country with that

:04:10.:04:15.

sort of thing you would have a very strong currency but they are

:04:16.:04:19.

benefiting from the weak economy of France and Spain and others and so

:04:20.:04:24.

they have had a very good year on the export front. The difficulty is,

:04:25.:04:30.

my issue with looking at a trade surplus, is it is a gross figure, it

:04:31.:04:35.

does not look at margins, profits, you could be selling something that

:04:36.:04:39.

had a very small margin, Germany is not, but it is a pretty crude way of

:04:40.:04:44.

assessing whether there is an imbalance. Absolutely. What happens

:04:45.:04:50.

around the world, this relationship between economies and currencies is

:04:51.:04:55.

becoming more tense and impacts on China and Japan and particularly the

:04:56.:04:59.

US at the moment because the manifesto from Donald Trump has been

:05:00.:05:03.

about protecting the US. It's feeling is that the US has been

:05:04.:05:08.

subsidising the world with a strong dollar and weaker currencies against

:05:09.:05:12.

the weaker yen and euro and when you look at the trade surplus numbers

:05:13.:05:16.

and the strong balance sheet of Germany at the moment, which is not

:05:17.:05:21.

being used to create new investment in schools, construction, and giving

:05:22.:05:25.

more money back to the popular to buy consumable goods, there is a

:05:26.:05:29.

feeling there is imbalance and you are benefiting from the weak

:05:30.:05:30.

currency. Thank you. Let's take a look at some of

:05:31.:05:34.

the other stories making the news. Shares in Macy's have plunged

:05:35.:05:38.

after the US department store owner Rivals Kohls and JC Penney

:05:39.:05:42.

were also down sharply, amid fears about the health

:05:43.:05:51.

of the traditional US retail sector. The rise in online shopping has seen

:05:52.:05:55.

US department stores shed more than 32,000 jobs in the past year,

:05:56.:05:58.

according to US The South Korean government has

:05:59.:06:01.

ordered carmakers Hyundai and Kia Motors to recall

:06:02.:06:08.

about 240,000 cars, after a tip off The ex-Hyundai employee raised

:06:09.:06:10.

concern about defects which affected It is the first time the country's

:06:11.:06:15.

government has issued Kia is an affiliate of Hyundai,

:06:16.:06:19.

and officials are asking the country's prosecutor to look

:06:20.:06:24.

for any evidence of a cover To Asia now, and since US

:06:25.:06:27.

President Donald Trump and Chinese President Xi Jinping met

:06:28.:06:40.

in Florida last month, the two countries have been

:06:41.:06:43.

in talks to try and reduce Well, it looks like those talks are

:06:44.:06:45.

beginning to yield results. Our reporter is in Singapore

:06:46.:06:52.

and can tell us more. They have unveiled a 10.8 package,

:06:53.:07:02.

quite a meaty deal. China is resuming imports of US beef after 13

:07:03.:07:06.

years and in return the US is allowing Chinese cooked chicken back

:07:07.:07:11.

into their market. Other points of this deal include the entry of

:07:12.:07:16.

Chinese banks into the US and for China they are opening the market to

:07:17.:07:21.

US natural gas and financial services firms and credit rating

:07:22.:07:25.

services. The US commerce secretary says that this deal should actually

:07:26.:07:29.

reduce china's trade surplus with America by the end of the year. On

:07:30.:07:36.

the campaign trail President Trump did a lot of sabre rattling when it

:07:37.:07:44.

did to China. He has not did what he threatened. After the meeting with

:07:45.:07:50.

the president in Florida it seemed like the situation is you scratch my

:07:51.:07:55.

back and I will scratch yours. Thank you. Interesting mix of politics and

:07:56.:08:01.

economics there. There is not a secular driving force

:08:02.:08:18.

in the markets at the moment. -- particular. We know the US central

:08:19.:08:25.

bank says it is ready to hike interest rates. The UK central bank

:08:26.:08:30.

takes a different view about the UK economy which is predicted to grow

:08:31.:08:33.

faster than the German economy this year. This is what is happening in

:08:34.:08:39.

Europe so far. In percentage terms not much movement. This is France,

:08:40.:08:50.

Merck on redefining the relationship between France and Germany. We have

:08:51.:08:55.

the details on what has been going on in Wall Street. Two bits of

:08:56.:09:01.

economic news, the consumer price index and retail sales. Economists

:09:02.:09:06.

estimate that the CBI will increase by 0.2% in April after a fall of

:09:07.:09:15.

0.3% in March. It seems it may be the same story for sales, the

:09:16.:09:19.

expectation is they will be up by 0.6% after falling by 0.2% in March.

:09:20.:09:27.

Speaking of retail sales JCPenney will be reporting earnings. The

:09:28.:09:31.

company is looking to cut costs as sales continue to slide. They said

:09:32.:09:37.

back in February they would close 130-140 underperforming stores over

:09:38.:09:42.

the next few months and they will offer voluntary retirement for about

:09:43.:09:43.

6000 employees. Joining us is Nandini Ramakrishnan,

:09:44.:09:50.

Global Market Strategist at JP Yesterday we had the Bank of England

:09:51.:09:59.

giving their inflation report and their inflation forecast has

:10:00.:10:02.

increased but no sign of an interest rate move. Yes, a combination of

:10:03.:10:08.

higher inflation expected and lower growth, which is making the Bank of

:10:09.:10:13.

England remain on hold. A lot of commentary about the strength of the

:10:14.:10:16.

UK consumer, a little bit of weakness coming from that consumer

:10:17.:10:20.

but other parts of the economy such as exports and potential investment

:10:21.:10:26.

from abroad should balance that. Things get complicated, the impact

:10:27.:10:30.

of the Brexit vote and the potential for inflation to rise and growth to

:10:31.:10:35.

stagnate at the same time, soft data comes in handy. Yes. This is

:10:36.:10:43.

happening globally. Survey data coming out quite strong that we want

:10:44.:10:47.

to see the GDP numbers, some of which we have been seeing coming out

:10:48.:10:52.

quite strong, but we want to see the hard data come out strong as well to

:10:53.:10:56.

support it which is what the Bank of England and lots of central banks

:10:57.:11:01.

around the world are hoping for. Looking at the markets we have had

:11:02.:11:07.

strong US earnings, resolution to the French presidential elections,

:11:08.:11:11.

we are in the middle of the European earnings season, how are the markets

:11:12.:11:15.

feeling? There's a bit of a positive breath after the French elections

:11:16.:11:20.

and we had strong US jobs data last week. Nothing too big on the horizon

:11:21.:11:25.

today or the early parts of next week that should shock the markets.

:11:26.:11:30.

We will see as the data comes out. You will be back in a few minutes to

:11:31.:11:35.

talk through the papers and to let us know if you have ever emailed the

:11:36.:11:39.

wrong person. Let us know if you have done that. I have done that. It

:11:40.:11:42.

was not nice! We'll hear from the young tech

:11:43.:11:46.

entrepreneur behind the UK's You're with Business

:11:47.:11:49.

Live from BBC News. Businesses in all parts of the UK,

:11:50.:11:59.

particularly rural areas, are experiencing full or partial

:12:00.:12:05.

not-spots in their mobile coverage according to the British

:12:06.:12:12.

Chambers of Commerce. The survey shows that 70%

:12:13.:12:14.

of firms experience mobile non-spots, areas of no mobile

:12:15.:12:17.

coverage by any operator, or partial not-spots,

:12:18.:12:21.

where there is some coverage but not from all networks,

:12:22.:12:23.

in their local area. This is a survey put out by the

:12:24.:12:34.

British Chambers of Commerce who have interviewed 1400 companies

:12:35.:12:39.

around the country, many of them small businesses. Mobile phone and

:12:40.:12:43.

internet access is but a clean important for small businesses

:12:44.:12:47.

because often able running them are on the move that they have to keep

:12:48.:12:54.

in touch with clients. 70% of these businesses report that they are

:12:55.:12:58.

experiencing either not spots where they cannot get any 4G coverage or

:12:59.:13:03.

partial not sports were one mobile provider might have coverage but

:13:04.:13:08.

others do not, and it is particularly acute in rural areas.

:13:09.:13:14.

It is a fairly small survey that echoes the national report last year

:13:15.:13:17.

on preparation for five G coverage where it said that 4G, Britain was

:13:18.:13:25.

56th in the world for 4G coverage, simply not good enough. The British

:13:26.:13:28.

Chambers of Commerce are trying to turn this into an election issue.

:13:29.:13:34.

What do they want to be done? What can you do? Surely operators will

:13:35.:13:40.

already have done what they can do. One of the things the British

:13:41.:13:44.

Chambers of Commerce is calling for is easing of planning laws to allow

:13:45.:13:48.

for taller masts because if you are in a rural area that might improve

:13:49.:13:53.

your coverage. The other point is that Ofcom it says must do more to

:13:54.:13:58.

hold providers to account for the service advertised to customers, in

:13:59.:14:03.

other words making sure that if it is advertised people get it.

:14:04.:14:07.

Customers not getting a good service at all. Some rely on 3G but 60% are

:14:08.:14:13.

only getting two G, which is not internet. Not good enough. Have you

:14:14.:14:27.

watched paper pig? ?47 million of extra costs, shares down 2%.

:14:28.:14:38.

Just because you're a tech startup doesn't mean

:14:39.:14:42.

Instead, London-based virtual reality firm, Improbable,

:14:43.:14:45.

has has raised $500 million in a landmark deal

:14:46.:14:47.

Japan's Softbank is backing Improbable in a funding

:14:48.:14:50.

round that values the business at more than $1 billion.

:14:51.:14:52.

Well let's get more on this with Rory Cellan-Jones.

:14:53.:15:03.

We should start with what Improbable dolls. And Improbable story. Founded

:15:04.:15:11.

to Maggie years ago by two Cambridge University computer science

:15:12.:15:24.

graduates. -- founded by two Cambridge University computer

:15:25.:15:28.

science graduates two years ago. The gaming businesses don't make much

:15:29.:15:34.

money. This is an early-stage company. It hasn't got a lot of

:15:35.:15:40.

revenue. It has a huge vision. I've been speaking to one of the

:15:41.:15:47.

co-founders, and I was asking why gaming was quite important. Where

:15:48.:15:52.

they are going somewhere very exciting. It is when people stop

:15:53.:15:56.

seeing games as a distraction and start seeing them as a source of

:15:57.:16:00.

meaningful experience. The generation coming up, when they go

:16:01.:16:03.

into the experience, which we are hopefully able to power, the

:16:04.:16:06.

relationship with that medium will be different. Especially when it

:16:07.:16:11.

comes to time spent and engagement with it. Seeing the technology, the

:16:12.:16:16.

powers, that enables us to build a massive scale in the real world.

:16:17.:16:24.

Those problems tend to converge with the technological path we are on.

:16:25.:16:30.

From SoftBank's perspective, that whole spectrum of problems... How

:16:31.:16:35.

significant is this that the UK Tech centre? This makes Improbable one of

:16:36.:16:40.

the first unicorns. A unicorn is a company valued at more than $1

:16:41.:16:43.

billion before it comes to the market. Let's stress what a huge bet

:16:44.:16:49.

this is by SoftBank. SoftBank has a lot of money. It is spreading it

:16:50.:16:55.

around the world. It bought the chip designer last year from the UK at a

:16:56.:16:59.

huge premium. It is a bet. It shows that in the UK there is a lot of

:17:00.:17:04.

great tech coming out. Particularly from universities. From the

:17:05.:17:08.

artificial intelligence field, virtual reality field, and the

:17:09.:17:11.

interesting thing about this is this company is staying independent. It

:17:12.:17:15.

is not being bought. It is a minority stake. They have said they

:17:16.:17:20.

want to stay British. That is a relief. Because we see so many

:17:21.:17:24.

companies build to a certain size in the UK and then go. I am thinking

:17:25.:17:34.

about Deepmind. Yes, they were unknown, it was bought by Google a

:17:35.:17:37.

number of years ago for the same amount of money, roughly, as what is

:17:38.:17:43.

being paid for a stake in Improbable. Difference there, Google

:17:44.:17:48.

bought control of Deepmind, which has turned out to be fantastic, in

:17:49.:17:53.

terms of reputation and a leader in artificial intelligence. Whereas

:17:54.:17:55.

SoftBank just have a stake in this company. Snap gave their

:17:56.:18:00.

first-quarter figures this week. Did not get a great result in the

:18:01.:18:05.

markets, did they? They increased users, but 2 million fewer than

:18:06.:18:08.

expected. They are not making a profit. The market share dropped by

:18:09.:18:14.

more than 20%. Interesting parallels with Improbable. A huge bet being

:18:15.:18:18.

placed on Improbable but at a much earlier stage. Equally, enormous bet

:18:19.:18:26.

being made by investors on Snap, that that will be a communications

:18:27.:18:30.

platform of the future. It is growing rapidly. The key thing is it

:18:31.:18:36.

isn't growing as rapidly as investors bet. And it needs to grow

:18:37.:18:40.

at a rate to justify that huge valuation. Question is, will this

:18:41.:18:47.

follow the trajectory of Facebook, confound it... Or can Facebook

:18:48.:18:53.

follow the trajectory of Snap? Exactly. On Twitter, which is

:18:54.:19:00.

disappointingly struggling. The problem is, it isn't Facebook, and

:19:01.:19:04.

it is being attacked by Facebook. Every time it comes up with an

:19:05.:19:08.

innovation, Facebook, which is bigger and more powerful, imitate

:19:09.:19:11.

it. That will weigh on their shares for a long time. The smaller social

:19:12.:19:21.

media companies... The users is 166 million for snap chat, for Facebook

:19:22.:19:28.

it is about 2 million. Do we assume they have to have the same number of

:19:29.:19:32.

subscribers in order to be viable? No, that is where I think investors

:19:33.:19:37.

are making a potential mistake. These companies can survive pretty

:19:38.:19:41.

well and be useful. Twitter is a useful platform for its users. For

:19:42.:19:45.

users like Donald Trump. Snap chat is loved by the young audience. But

:19:46.:19:49.

that doesn't mean it will grow forever and is going to be quite the

:19:50.:19:54.

moneyspinner investors bet it will be. Thank you so much for coming in.

:19:55.:20:01.

Do you Snap? When I'm on this programme with rabbit ears, the

:20:02.:20:05.

whole lot yet. I want to see that. You will see it later. The fact that

:20:06.:20:11.

she knows what it is is pretty good. As for reality, why do you want more

:20:12.:20:14.

of it? That is why we have rabbit ears.

:20:15.:20:20.

Let's move on. OK, we are also looking at Iran

:20:21.:20:23.

which holds its presidential election next week.

:20:24.:20:26.

It will be closely watched by hundreds of companies worldwide

:20:27.:20:29.

The current president, Hassan Rouhani, has opened up Iran

:20:30.:20:32.

to foreign investment and has attracted some of the

:20:33.:20:35.

But conservative challengers have said they would reverse his policy.

:20:36.:20:38.

Later today the candidates hold the last in a series

:20:39.:20:40.

of presidential debates, which will focus on business

:20:41.:20:42.

Two years ago jubilation on the streets of Tehran. World powers

:20:43.:20:59.

promised to lift sanctions on Iran after President Rouhani's government

:21:00.:21:05.

promised to scale back its nuclear programme. Its economy, which was

:21:06.:21:10.

close to collapse, is now growing at over 7% per year. Mr Rouhani says

:21:11.:21:17.

foreign trade and investment are vital for future growth. They have

:21:18.:21:24.

struck deals with Total and Shell. It has ordered new aircraft from

:21:25.:21:28.

Airbus and Boeing. Renault and Peugeot are back in around again to

:21:29.:21:37.

make cars. But Mr Rouhani's main conservative challenger says the

:21:38.:21:39.

failing. One in eight Iranians is failing. One in eight Iranians is

:21:40.:21:43.

unemployed. The wealth gap is widening. He wants to give Iranians

:21:44.:21:47.

firms the lead in rebuilding the economy. And rather than dealing

:21:48.:21:52.

with the West, he wants more trade links with countries like China,

:21:53.:21:58.

Russia. He also promises to create millions of new jobs for young

:21:59.:22:01.

Iranians, but he has not yet said how.

:22:02.:22:09.

Nandini Ramakrishnan, Global Market Strategist at JP

:22:10.:22:11.

Morgan Asset Management is joining us again to discuss.

:22:12.:22:15.

The chief executive of Barclays Bank was sent an e-mail, which he

:22:16.:22:19.

believed was from the chairman, after that, he replied to it. He

:22:20.:22:29.

replied to a prankster. He said you have a sense of what is right, a

:22:30.:22:32.

sense of theatre, you mix humour with grit, thank you, my respect for

:22:33.:22:39.

your guile, one day I want to see an ad lib guitar solo in the ilk of

:22:40.:22:43.

Eric Clapton. Cringe. But he sent it to somebody

:22:44.:22:49.

who was not in fact the chairman. So it is awkward.

:22:50.:22:53.

Have you ever done it? Not to him. I have sent text messages to

:22:54.:22:58.

somebody I was with, and then maybe intended to send it to somebody

:22:59.:23:05.

else, but sent it to them instead. Fortunately not offensive. The worst

:23:06.:23:09.

thing I have done is I have picked up the phone to make a phone call,

:23:10.:23:14.

and the phone rang at exactly the same time, and I happened to talk

:23:15.:23:18.

quite badly about that person.

:23:19.:23:22.

What did they say? There were very good about it. --

:23:23.:23:28.

they were very good about it. How about you? Sometimes AutoCorrect

:23:29.:23:36.

has allowed me to reply to the wrong person. What a way to end the week.

:23:37.:23:40.

A difficult week. He just wants the week and to start, I imagine.

:23:41.:23:45.

The background as the controversy over the whistle-blower. He

:23:46.:23:47.

reversed out of that because it reversed out of that because it

:23:48.:23:49.

appears he was trying to, maybe you should explain it better, control

:23:50.:23:55.

what the whistle-blower's interaction was with the bank.

:23:56.:23:59.

That's right, isn't it? Yes. Let's talk about...

:24:00.:24:05.

The City of London. In the context of Brexit. There is a lot of debate

:24:06.:24:07.

wane. Two arguments. One, certain wane. Two arguments. One, certain

:24:08.:24:15.

deals cannot be done in the UK if it isn't part of the Eurozone. Another

:24:16.:24:19.

argument is that it has a critical mass, so therefore that size is a

:24:20.:24:22.

market and a market works best when you have all of it going on in the

:24:23.:24:27.

same place. What is your prediction for the first couple of years? It'll

:24:28.:24:30.

be interesting. London is infrastructure. The city, Canary

:24:31.:24:36.

Wharf, built to handle that kind of volume of services and financial

:24:37.:24:39.

services London provides. It has the benefit of being in the middle of

:24:40.:24:44.

the time zone geographically. But you have these issues where if you

:24:45.:24:48.

are settling trades, having collateral movements through certain

:24:49.:24:49.

institutions, and it is based on institutions, and it is based on

:24:50.:24:52.

euros, it must be in the EU for certain aspects of that. That is the

:24:53.:24:57.

real challenge. All businesses move to other European cities? That is a

:24:58.:25:01.

big argument. But also there is a fear from Europeans in general that

:25:02.:25:02.

a lot of businesses go to New York a lot of businesses go to New York

:25:03.:25:06.

or other big financial sectors outside of this region. It would be

:25:07.:25:10.

based on the negotiations which come through with Theresa May and Brexit.

:25:11.:25:16.

We have this image from the article from the New York Times, talking

:25:17.:25:19.

about how nearly one fifth of the wild's banking transactions go

:25:20.:25:21.

through the UK, mostly through London. They have another

:25:22.:25:26.

interesting thing, saying the biggest cross-border banking

:25:27.:25:28.

sectors, why New York is largely centred on the American markets,

:25:29.:25:32.

London is more focused on the world, and we have $4.6 trillion moving

:25:33.:25:39.

through London. It is staggering. It is a huge part of the UK economy.

:25:40.:25:44.

Markets, not just investors, but global citizens will be watching.

:25:45.:25:47.

Thank you very much for your time. Have a lovely weekend.

:25:48.:25:50.