31/07/2017 BBC Business Live


31/07/2017

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

:00:07.:00:09.

HSBC splashes the cash on a share buyback as profits soar.

:00:10.:00:16.

Live from London, that's our top story on Monday 31st July.

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It looks like a towering success across the business but with Brexit

:00:40.:00:54.

on the horizon and change at the top of HSBC can it

:00:55.:00:57.

Apple is criticised for helping China censor the internet after it

:00:58.:01:02.

It says it was just sticking to the rules.

:01:03.:01:05.

We will be live in Shanghai. And we'll be talking to the winners and

:01:06.:01:13.

losers. And who would you trust with your bank account. We will need one

:01:14.:01:19.

London digital bank that promises a new way of managing your money. We

:01:20.:01:23.

ask what would be the one thing you change about the bank you use,

:01:24.:01:29.

cheaper loans, better interest rates, faster service?

:01:30.:01:34.

Good to have you with us. Banking is dominating the programme today, get

:01:35.:01:48.

in touch with your thoughts. We are talking about Europe's biggest bank,

:01:49.:01:50.

HSBC. One of the world's biggest banks,

:01:51.:01:52.

HSBC, has reported its latest set of earnings and if

:01:53.:01:55.

you're a shareholder you are going to be very pleased

:01:56.:01:57.

with what they have to say today. The bank made a pre-tax

:01:58.:02:15.

profit of $5.28 billion in the second quarter of the year -

:02:16.:02:25.

that's more than the $4.6 HSBC announced a share

:02:26.:02:30.

buyback of up to $2 billion as it looks to make the most

:02:31.:02:41.

of its huge cash pile. The move will effectively restrict

:02:42.:02:44.

the supply of shares in the market and should lead

:02:45.:02:46.

to the company's value rising. In the last 12 months

:02:47.:02:49.

the bank has had a good run with its stock price almost doubling

:02:50.:02:52.

in value as you can see here. Peter Hahn is a Professor of Banking

:02:53.:02:55.

at The London Institute So many things to discuss when it

:02:56.:03:01.

comes to things like HSBC. The results are better-than-expected,

:03:02.:03:02.

beating pretty modest expectations. Yes, most banks have delivered a

:03:03.:03:06.

message that they could beat so the banks have generally all exceeded

:03:07.:03:13.

expectations, that is good news. We said managing expectations, didn't

:03:14.:03:17.

they set the bar pretty low? I think they set it pretty low. There's some

:03:18.:03:25.

good news in HSBC 's results. Its business mix is hitting more

:03:26.:03:29.

across-the-board. It was more concentrated on one business before

:03:30.:03:32.

so some of their weaker businesses have come back. The results also

:03:33.:03:36.

show a greater dependence. They were stating that they were going more

:03:37.:03:41.

towards Asia. Asia is more of the real money for Aegis PC. A lot of

:03:42.:03:47.

change underway for the banks, we know it has been cutting costs, it

:03:48.:03:52.

also has to split the retail and the investment is required by changes in

:03:53.:03:56.

regulation. That has cost it quite a lot of money to put into place. Yes,

:03:57.:04:04.

in the UK, in the statement they put out, they spent ?400 million, and

:04:05.:04:10.

they had millions of people involved, when you mention splitting

:04:11.:04:14.

their retail from their corporate business, it's a UK phenomena. I

:04:15.:04:22.

think it is still an integrated bank and other places but the UK has

:04:23.:04:24.

decided to take this route to separate. It solves some issues yet

:04:25.:04:32.

probably creates more than it solves! Also management changes will

:04:33.:04:35.

figure in this over the coming years. We've got some confirmed,

:04:36.:04:44.

some not confirmed. Talk us through it. A new chairman is coming in,

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Douglas Flint was the finance director before, and new chairman

:04:52.:04:59.

has been named, his experience, significant in Asia, he was in Asian

:05:00.:05:05.

insurance and for a short time had been finance director for HSBC. That

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is telling about the focus of the bank. The Seoul government is

:05:15.:05:18.

retiring so we'll see a change of chairman and CEO. The real question

:05:19.:05:24.

for HSBC as they tried to determine the next CEO, Wilkie focus more

:05:25.:05:33.

internally -- will he focus more internally or with the focus on

:05:34.:05:40.

Asia, try to develop new business? If we look at many bank statements,

:05:41.:05:46.

HSBC is not different from many. There's a lot of revenue growth in

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this business, it is about control. Something we will be talking about

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in future, I am sure, thank you, Peter. HSBC shares in London, one of

:05:57.:06:05.

the leading winners on the FTSE this morning. Let's look at some other

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stories making the news. The Chancellor, Philip Hammond,

:06:12.:06:15.

suggested that the UK will not cut taxes and regulation after Brexit to

:06:16.:06:21.

try to undercut European rivals. His interview with a French newspaper

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contradicts what he said with a German newspaper earlier this year.

:06:26.:06:30.

Shopper in the largest economy in the Eurozone, Germany, helped it to

:06:31.:06:35.

see the biggest increase in retail sales last year, month by month

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those retail sales rose by 1.1% all adding to the positive momentum

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that's leading to a robust end to the second quarter of the year.

:06:44.:06:47.

Official data from the Chinese government suggests

:06:48.:06:53.

that the country's manufacturing sector, still the backbone

:06:54.:06:57.

It is still growing though, propped up by a government-led

:06:58.:07:01.

infrastructure push that's keeping construction humming

:07:02.:07:02.

and propping up the world's second-largest economy.

:07:03.:07:08.

Let's stay in China because Apple has been criticised after removing

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some software from its app store in China that allows users to get

:07:16.:07:19.

around tough restrictions on Internet access. The change comes

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after the Chinese government announced a crackdown on what it

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calls Virtual Private networks. What is a Virtual Private network,

:07:26.:07:47.

it punches a tunnel from your iPod or your phone and allows you to see

:07:48.:07:50.

what happens on the web. It is crucial in China because the

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regulatory environment is so tough with so many filters and bands put

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in place by the government on what you can see so if you want to look

:08:00.:08:07.

at Gmail or Facebook you need a VPN. The government announced tougher

:08:08.:08:11.

restrictions will come in next year so VPN providers will need licenses.

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Apple which sells most VPN Dexter in China has moved quickly to remove

:08:18.:08:23.

the VPN apps that don't have a license ready. Tim Cook, the CEO of

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Apple, says he wants to continue to grow and invest in China. Apple gets

:08:29.:08:36.

50 billion US dollars from China so China is very important to it.

:08:37.:08:41.

Speaking to the rules it seems even more important. Interesting to see

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how these relationships develop. Thank you, Robin.

:08:48.:08:51.

A quick look at how markets are faring.

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This is the Dow Jones on Friday. In general we have teams which we will

:08:58.:09:04.

discuss in detail in a moment, if we look at the European markets, we

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have commodities in general edging up, mining stocks are doing well and

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so our energy stocks and that will boost the FTSE 100. A lot of those

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are listed in London. Also among the winners HSBC. Rolls-Royce is the

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biggest loser on the FTSE 100 today, coming up with their results

:09:26.:09:28.

tomorrow. Let's keep an eye on them. We'll talk about their results

:09:29.:09:32.

tomorrow. Heineken saw their sales rising in the first half by almost

:09:33.:09:36.

6% so a lot of earnings coming through, we'll try to keep you up

:09:37.:09:39.

with all of that, now looking ahead to

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Wall Street with Michelle. Stocks are trading near record highs, will

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the corporate earnings this week help to keep prices aloft? We are

:09:58.:09:59.

more than halfway through reporting season, good results so far,

:10:00.:10:01.

companies listed on track to increase earnings by more than 10%.

:10:02.:10:03.

There's also some positive economic data last week pointing to faster

:10:04.:10:06.

growth in the second quarter. Which names should we look forward to

:10:07.:10:10.

keeping the momentum going this week? Perhaps the biggest is Apple,

:10:11.:10:15.

which reports on Tuesday. The tech giant is expected to turn in a rise

:10:16.:10:19.

in revenue for the third quarter thanks to stronger sales of its

:10:20.:10:23.

iPhone seven and seven plus smartphone. Apple often releases its

:10:24.:10:28.

latest iPhone in September but this year there has been speculation that

:10:29.:10:34.

it might be until October. So investors will be looking for more

:10:35.:10:36.

guidance from the company on this issue. Tesla, Pfizer and Craft of

:10:37.:10:42.

the other companies do to turn in report cards this week.

:10:43.:10:52.

Joining us is Lawrence Gosling, editor-in-chief of Investment Week.

:10:53.:10:58.

I'm interested in the parent company of Snapchat,. Senior executives said

:10:59.:11:07.

they would not sell any shares in the company floated on the US market

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but now they can. How much stock do they sell if any. We had a rise in

:11:11.:11:16.

the snap price when it floated and now it's drifting back down. Looking

:11:17.:11:20.

like one of those classics were everyone asks, how do they make

:11:21.:11:25.

money. This is when we seek a look at its true value, who is selling it

:11:26.:11:29.

and who is buying, who is investing. It's kind of an artificial period.

:11:30.:11:35.

When executives sell its a good indicator of how much they believe

:11:36.:11:40.

in the future, so normally people like to take some money off the

:11:41.:11:43.

table to pay their mortgages or school fees, I suspect we will not

:11:44.:11:47.

see as much as we might if the price was higher. The oil price is heading

:11:48.:11:53.

up the game, various issues on the market. Sanctions against Russia

:11:54.:12:00.

announced by the US. And political unrest in Venezuela. Valenzuela has

:12:01.:12:04.

the most oil in the world, more than Saudi Arabia. -- Venezuela. We

:12:05.:12:09.

talked about Chinese growth figures, they are probably slightly better

:12:10.:12:13.

than people thought, and the spending on infrastructure shows

:12:14.:12:18.

more demand for oil. This is about supply and demand, demand is

:12:19.:12:22.

slightly higher and supply slightly tighter. Opec keeping a close eye

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because they are figuring out how to get used to the new normal. Trying

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to keep an almost artificial price of $50 on the price of a barrel of

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oil, it could go lower if all the supply came into the market. We love

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giving them fancy names to make them more exciting, Thursday is Super

:12:43.:12:48.

Thursday! It's a big Bank of England meeting. I'm not sure why it is

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super, it is a quiet Thursday in August! The focus will be on whether

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there will be an interest rate rise. Three economists out of 80 expected

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a rise. Probably not that super by the time we get to lunchtime! Damp

:13:04.:13:10.

is good Thursday! What is the one thing you would change about your

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bank if you could. I went temporarily overdrawn through paying

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some direct debits, I would like them to tell me that, because the

:13:20.:13:23.

end of the month cash flow issue we get, get paid on one day and direct

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debits go out a couple of days before, your banks know when your

:13:28.:13:30.

money is coming in so if they could signal it and give you a couple of

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days grace without charging the full's interest I would be very

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happy. Good suggestion. Good to see you, Lawrence.

:13:41.:13:43.

But would you trust Apple, Google and Facebook

:13:44.:13:57.

Or do you rely on the age-old institutions?

:13:58.:13:59.

You're with Business Live from BBC News.

:14:00.:14:10.

In the UK, the Financial Conduct Authority has said

:14:11.:14:22.

unauthorised overdrafts may be regulated.

:14:23.:14:24.

It said charges for the overdraft were complex

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and hard for customers to understand.

:14:27.:14:27.

Theo Leggett is in our business newsroom

:14:28.:14:34.

Theo, talk is through this. They might ban unauthorised overdrafts,

:14:35.:14:42.

these can be very costly. In fact according to the FSA they can be

:14:43.:14:45.

more costly than payday loans which are already regulated because they

:14:46.:14:48.

were proving to be too expensive. Today they have said about

:14:49.:14:53.

unauthorised overdrafts, "Based on the evidence we have to date, we

:14:54.:14:57.

believe there is a case to consider the fundamental form of an arranged

:14:58.:15:01.

overdrafts and whether they should have a place in any modern banking

:15:02.:15:05.

market. We have significant doubts about whether any and arranged

:15:06.:15:09.

overdrafts in their current form can continue in a well functioning

:15:10.:15:13.

market." That leaves two options which can be consulted on,

:15:14.:15:16.

potentially banning them or tightening the rules considerably.

:15:17.:15:23.

What did they say of payday loans? Remember they've been capped for the

:15:24.:15:27.

last two is because they were generating headlines about sky-high

:15:28.:15:32.

interest rates trapping people in a vicious cycle of payday borrowing

:15:33.:15:35.

we'll had to borrow one month to make it to the end of the month and

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there was a lot of interest charges loaded onto next month you had to

:15:40.:15:43.

borrow more and so on. Well, nowadays, they are capped so that

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the total in terms of fees and interest charges you can end up

:15:48.:15:51.

paying is equal to the value of the loan so you never pay more than the

:15:52.:15:55.

value of the original loan plus that again. They say that this cap is

:15:56.:16:02.

working. The FSA says the 760,000 borrowers are saving a total of ?150

:16:03.:16:07.

million a year. Firms are less likely to lend to customers who

:16:08.:16:10.

can't afford to repay. They will keep the cap in place until 2020 and

:16:11.:16:16.

review it again. Thank you, Theo. More about that on our Business Live

:16:17.:16:20.

page. Sales are down at Trinity Mirror. It

:16:21.:16:32.

is a familiar tale. Pre-tax profits were down 11%. It is advertising

:16:33.:16:40.

that's the problem for the print organisations.

:16:41.:16:48.

You're watching Business Live. Our top story:

:16:49.:16:54.

Shares in HSBC are up significantly in London on the news, it has seen a

:16:55.:17:01.

big rise in profits in the second quarter and it has announced a about

:17:02.:17:07.

billion share buy back. HSBC is boosting the FTSE 100. A

:17:08.:17:12.

similar picture across Europe. Interesting times ahead. We were

:17:13.:17:16.

discussing with Lawrence earlier about potential discussions of

:17:17.:17:19.

interest rate rises and whether we will get one in the UK on Thursday.

:17:20.:17:23.

The chances are it's not going to happen again.

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Let's discuss the bank account you have got or the bank account you use

:17:35.:17:37.

to do your money matters. When is the last time

:17:38.:17:39.

you changed your bank account? Chances are you're still with

:17:40.:17:41.

the same one you've had for years. And chances are it's one

:17:42.:17:44.

of the big old institutions. So, the lack of competition

:17:45.:17:46.

amongst banks has forced the government in

:17:47.:17:53.

the UK into action. In 2015, UK authorities

:17:54.:17:54.

launched an investigation It found that the four biggest banks

:17:55.:17:56.

dominated the market with over It means few of us bother

:17:57.:18:00.

to switch to a rival bank. A new breed of so-called challenger

:18:01.:18:09.

banks have emerged as a result of the investigation,

:18:10.:18:12.

many of these don't have high-street branches,

:18:13.:18:14.

but use call centres Earlier this year it

:18:15.:18:17.

received its full banking license meaning that it can now offer

:18:18.:18:23.

conventional current accounts. Tom Blomfield is the Chief

:18:24.:18:25.

Executive of Monzo Bank. Good morning Tom. Good morning. So

:18:26.:18:35.

much to talk about when it comes to the changes in banking. It's

:18:36.:18:38.

something we talked about before, but that idea of just shaking up the

:18:39.:18:45.

entire market. We're reliant on the big old institutions that have

:18:46.:18:47.

headquarters in the city and branches on the high street and

:18:48.:18:51.

you're doing it differently? We are an app only smartphone bank. We

:18:52.:18:56.

offer current accounts via an iPhone app or an android app. It strikes me

:18:57.:19:00.

that you have got to be tech savvy to do that? It started out really

:19:01.:19:07.

very focussed. 31-year-old males in Shoreditch. It has broadened out...

:19:08.:19:16.

You're describing Ben. I don't live in Shoreditch. Most tend to be 20

:19:17.:19:23.

and 40. We talk about the shape up in banking and there is some big

:19:24.:19:27.

changes on the way. It is called open banking, it is part of the EU

:19:28.:19:30.

directive that would allow the information that we have at our

:19:31.:19:33.

banks to be freed up. So, actually, there may come a day and we said

:19:34.:19:36.

this earlier, that the likes of Apple or Facebook or Google could

:19:37.:19:41.

create an app that encompasses all our bank accounts so we don't have

:19:42.:19:44.

to go into each individual one and that could be a big shift? That's

:19:45.:19:48.

right. So in January of next year, this piece of regulation called PSD

:19:49.:19:57.

2, it requires any bank offering a payment account to open up the data.

:19:58.:20:02.

It is a message that says look, this data in your bank accounts could be

:20:03.:20:06.

very, very valuable, but the banks are sitting on it and not doing

:20:07.:20:11.

anything. It forces them to make that data available to their

:20:12.:20:15.

customers. If you were a customer of HSBC or Barclays and you want to

:20:16.:20:19.

take that data and share it with a third party, you will be able to do

:20:20.:20:24.

so from January of next year. There is the need out there, the desire

:20:25.:20:29.

for change. But given what happened in 2008, and you know the collapse

:20:30.:20:35.

of Lehman Brothers and the run on the bank at Northern Rock, the fear

:20:36.:20:40.

factor kicked in and suddenly you like the old-fashioned bank that's

:20:41.:20:42.

been there for hundreds of years because you believe it will get

:20:43.:20:45.

bailed out by governments if things go wrong and your savings will be

:20:46.:20:51.

OK. But Monzo Bank maybe not? Well, the changes that were introduced as

:20:52.:20:54.

a result of those two big to fail banks RBS and Lloyds, which cost the

:20:55.:20:59.

taxpayer tens of billions of pounds in bail outs. The Government

:21:00.:21:03.

responded by saying actually we want more banks with more competition so

:21:04.:21:07.

if one or two fail, that's OK. That's a sign of a well functioning

:21:08.:21:11.

market and the way we will protect consumers is the Financial Services

:21:12.:21:16.

Compensation Scheme. So your deposits are guaranteed up to

:21:17.:21:20.

?85,000. That's the hassle though. It is easier if you're bailed out by

:21:21.:21:24.

the Government and your savings is not touched? I'm not sure as an

:21:25.:21:30.

economy we can afford another ?47 billion bail out. I'm not suggesting

:21:31.:21:35.

we go that way. We talked a lot about the UK and clearly with Europe

:21:36.:21:41.

PDS 2 will change how we bank. What plans elsewhere? Is this being

:21:42.:21:46.

repeated around the world or is it a European issue? It is very much

:21:47.:21:50.

European for now. The FSA and the Bank of England are leading the

:21:51.:21:53.

world, I think, in terms of pushing innovation and regulation to try and

:21:54.:21:58.

drive competition and ultimately improvout comes for customers, so we

:21:59.:22:01.

are at the fore front, but other countries will follow. Tom, it is

:22:02.:22:04.

really nice to see you. Thank you for coming in. Best of luck. Keep us

:22:05.:22:16.

posted. Ask Here is a tip from one of the

:22:17.:22:20.

Chief Executives that we have been grilling.

:22:21.:22:23.

Sukhinder Singh is the head of the Whisky Exchange,

:22:24.:22:25.

one of the UK's largest online retailers of spirits and wines.

:22:26.:22:28.

There can be nothing better than taking your

:22:29.:22:31.

hobby or your interest and turning it into a business.

:22:32.:22:45.

My brother and myself we grew up in the business

:22:46.:22:49.

just surrounded by these interesting coloured bottles

:22:50.:22:51.

and spirits and I guess it caught our imagination.

:22:52.:23:05.

When your business is your passion, there is nothing more satisfying

:23:06.:23:07.

than coming into work every day and living and breathing

:23:08.:23:10.

Your staff can see, you know, the passion and the interest in you.

:23:11.:23:16.

You still need an element of business acumen and a

:23:17.:23:18.

You can't let your heart take over your mind.

:23:19.:23:23.

I mean a business at the end of the day is there to make

:23:24.:23:26.

money to, pay the bills, to pay for the staff.

:23:27.:23:29.

We asked you what's the one thing you want to change about your bank?

:23:30.:23:48.

One viewer said lower credit card interest rates. Adam, "Maintenance

:23:49.:23:54.

of internet banking and early closing hours." These are the things

:23:55.:23:59.

that annoy Adam. I have to agree the closing hours, the opening hours, I

:24:00.:24:07.

guess that's a high street bank. Harry, I agree you, as a teenager,

:24:08.:24:13.

watching teens, language to aid financial literacy. I don't know why

:24:14.:24:17.

we don't teach more financial literacy in schools.

:24:18.:24:20.

So the Financial Times, what's going on? MUFG is Japan's biggest bank and

:24:21.:24:39.

it has decided to move its investment banking business, but set

:24:40.:24:43.

up a new base in Amsterdam, it is part of the idea of City

:24:44.:24:47.

institutions relocating out of the city of the London on to the

:24:48.:24:49.

Continent in preparation for Britain leaving the European Union. What's

:24:50.:24:54.

the competition? So Frankfurt, Paris, Amsterdam? The big winner has

:24:55.:24:59.

been Frankfurt and Dublin. They have gone to Frankfurt and Dublin.

:25:00.:25:03.

Luxembourg has done well for fund managers and Lloyds of London

:25:04.:25:07.

surprised people by going to Brussels. Who is going to Berlin?

:25:08.:25:10.

There is one going to Berlin, ush' right. The picture is of dispassion.

:25:11.:25:16.

It is not that Frankfurt is suddenly overtaking the City of London or

:25:17.:25:19.

Paris, some banks are going to Paris. Different companies are

:25:20.:25:23.

choosing different locations, the idea that we were going to have a

:25:24.:25:27.

new financial centre of Europe growing up to replace London doesn't

:25:28.:25:31.

look to be true. How worried is the City of London? We don't know. It is

:25:32.:25:36.

all around all this stuff, we don't know what the final trading

:25:37.:25:39.

relationship between the UK and the EU will be. Once we know that,

:25:40.:25:43.

that's when we will know how worried we have to be. Happy Monday. Enjoy.

:25:44.:25:47.

We're back tomorrow. Are you back tomorrow? Yes. I'm back tomorrow.

:25:48.:25:50.

Tune in. Bye-bye. Good morning.

:25:51.:26:13.

It's the last day of July, but for some summer is temporarily on hold.

:26:14.:26:20.

An unsettled week ahead summed up as sunshine and showers. Warm in

:26:21.:26:21.

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