08/09/2017 BBC Business Live


08/09/2017

A look at the global business stories.


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This is Business Live from BBC News with Rachel Horne

:00:00.:00:00.

Insuring against nature - as Hurricane Irma

:00:00.:00:10.

continues to batter the Caribbean the insurance industry braces

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for one of its most expensive years on record.

:00:13.:00:15.

Live from London, that's our top story on Friday

:00:16.:00:17.

With Irma on course to overtake Katrina as America's

:00:18.:00:36.

costliest hurricane, we'll look at the spiralling cost

:00:37.:00:39.

Also in the programme, the public relations disaster that

:00:40.:00:45.

Bell Pottinger's Asia unit says it will separate from its British

:00:46.:00:50.

parent after its South Africa controversy.

:00:51.:00:59.

The European markets have opened, not a huge amount of movement so

:01:00.:01:05.

far. Many investors holding their breath to see the economic impact of

:01:06.:01:07.

the hurricane season. We'll be getting inside track on

:01:08.:01:15.

Saudi Arabia's plans to sell off oil operations. Plus, after an estimated

:01:16.:01:21.

143 million customers were affected by the massive Equifax incident, we

:01:22.:01:32.

want to know how often you change your password.

:01:33.:01:38.

Hurricane Irma is continuing its path of destruction

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The International Red Cross says that more than 1.2 million people

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have already been affected by one of the strong storms ever recorded.

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And many more are expected to suffer as it continues

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heading towards the US - it's predicted to reach

:02:00.:02:02.

Aside from the human cost of the disaster, experts warn

:02:03.:02:09.

it could also be one of the most expensive.

:02:10.:02:12.

Much depends on its exact path when it reaches

:02:13.:02:14.

densely populated Miami - but estimates range from $70

:02:15.:02:16.

There's no official figure yet for Hurricane Harvey,

:02:17.:02:24.

which caused severe flooding and displaced more than a million

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But some, including the Governor of Texas, are estimating costs

:02:28.:02:36.

If that figure is accurate, it would put Harvey ahead

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of Hurricane Katrina in 2005 - officially the costliest

:02:40.:02:41.

Katrina did damage of nearly ?160 billion.

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Until this year nothing had come close to Katrina -

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although Hurricane Sandy in 2012 caused more than $68

:02:53.:02:55.

But it's clear the economic damage from extreme weather is on the rise.

:02:56.:03:01.

Since 1980 the US has experienced 212 major weather disasters

:03:02.:03:03.

And the Chief Executive of Hiscox insurance, Bronek Masojada,

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told me this year was on course to be one of the most

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In terms of Irma, we expect it to be a far bigger

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Most people buy insurance against wind damage.

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So the economic cost, the insurance costs, could be

:03:29.:03:31.

anything between $50 billion and $150 billion, so a much

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bigger proportion of the total economic cost.

:03:35.:03:39.

David Marrock is the Chief Executive of Charles Taylor Insurance Services

:03:40.:03:42.

- among other things they help the industry process claims.

:03:43.:03:50.

In the immediate aftermath, it's going to be emergency shelter and

:03:51.:03:55.

food that people will need. How quickly can insurance companies give

:03:56.:04:00.

them emergency funding so that they can survive? I think a lot of the

:04:01.:04:02.

initial emergency funding will actually come through FEMA, the

:04:03.:04:09.

government agencies. The insurance agencies will have to go out and

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assess the claims, assess if they are covered and then they will stop

:04:14.:04:16.

providing funding. You say assess if they are covered, with flooding it

:04:17.:04:22.

is a grey area. Lots of people don't take out specific flooding

:04:23.:04:24.

insurance, even though the flooding may have been caused by a hurricane,

:04:25.:04:29.

which they are insured against? Essentially, if you look at Texas,

:04:30.:04:33.

for example, the estimate is only 20% of household is actually have

:04:34.:04:38.

coverage for flood in place. That compares to, if you go back to

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Katrina, over half of people had flood damage cover in place. If the

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damage is caused by flood, the reality is that the insurers will

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say that is under your flood insurance. If you don't have flood

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insurance, those individuals will be looking at FEMA for emergency

:04:57.:04:59.

assistance and it will take quite some time. Part of what Charles

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Taylor Davis do is loss adjusting, getting onto the ground, assess the

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damage and what claim people can make. How quickly are you on the

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ground after incidents like this? We have offices in Houston and Florida.

:05:14.:05:21.

We have people on the ground, right now, ready to assess claims. I think

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the reality is that there are still a lot of areas that are

:05:25.:05:28.

inaccessible. We deal quite heavily on the commercial end of the world.

:05:29.:05:33.

In that space, people are still getting back to their offices and

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workplaces to assess what damage there is, and to start making those

:05:37.:05:40.

claims. We seem to have have an increasing number of extreme weather

:05:41.:05:43.

events. Just today we had an earthquake in Mexico. How does the

:05:44.:05:48.

insurance industry factor these in, in projections going forward,

:05:49.:05:54.

working out how much to charge customers? Well, it is clearly one

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of the more difficult assessments to make because it is essentially a low

:05:59.:06:03.

probability event. When it happens, the costs are enormous. It's always

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a tough call, exactly how to rate that. They use models to help that

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assessment and they will have made a view about how many hurricanes, what

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sort of frequency and with what sort of cost. I think what we are seeing

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this year is that it will be above what people were expecting, to have

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two hurricanes of this scale and nature in such close proximity, it

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would be unexpected, if you like. Briefly, do you think it means

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insurance premiums will go up? I think there is definitely the

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potential for that. When insurers get surprised, that is typically the

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reaction. The caveat to that is that, at the moment, the market is

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awash with capital. There is always the potential that money will flow

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back in two, if you like, put capital back into those insurers and

:06:57.:07:03.

rates will end up staying the same. Wait and see? Overall, we would

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expect rates to go up. Thank you for talking to us.

:07:07.:07:07.

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

:07:08.:07:10.

The credit rating giant Equifax says its computer systems have

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It means more than 140 million customers across the United States

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may have had data compromised which includes addresses

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The company said its main credit rating databases weren't affected.

:07:19.:07:26.

The world's biggest internet retailer Amazon has announced plans

:07:27.:07:28.

to build a second headquarters in North America.

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It's sparked fierce competition from cities including Toronto,

:07:32.:07:34.

Texas and Chicago who are all keen to attract the $5 billion investment

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The new centre will support at least 50,000 jobs.

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Chinese imports grew slower than expected in August,

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hit by weak global demand, but a jump in imports

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It's been a terrible week for the British public relations

:07:54.:08:06.

It was kicked out of its industry body after being accused of stirring

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up racial hatred in South Africa and now as it nears

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collapse it's Asian unit is planning to go it alone.

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It's based in Singapore and Monica Miller is there for us.

:08:16.:08:22.

What have you discovered? Yes, the Asian firm's unit wasted little time

:08:23.:08:28.

to rebrand itself and get some distance from the London based

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parent. It plans to relaunch its business with a new ownership

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structure. It will operate under a new name, Clerical Communications.

:08:38.:08:41.

It comes after Bell Pottinger was expelled from the industry trade

:08:42.:08:45.

body after being accused of stirring up racial tensions in South Africa.

:08:46.:08:49.

Big-name companies like HSBC have already cut ties with the British

:08:50.:08:53.

public relations firm since the scandal broke. Here in Asia it

:08:54.:09:01.

story. Revenues have been growing at a steady pace in recent years. They

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have established offices in Hong Kong, Asia, me and

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it says the operations are solvent and it is business as usual.

:09:09.:09:14.

Stocks in Asia mixed - the Nikkei has been kept

:09:15.:09:17.

The Japanese stock market is stuffed full of exporters so a strong yen

:09:18.:09:21.

makes their items more expensive for foreign buyers -

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that pushes down the value of the companies and by extension,

:09:24.:09:26.

You can see the numbers, down 0.63%. The dollar is holding onto current

:09:27.:09:48.

price, investors holding their breath for the aftermath of

:09:49.:09:55.

Hurricane Irma. No huge movements in Europe. Familiar issues at play, a

:09:56.:10:00.

strong euro, a weaker pound. The strength of the Euro consolidated by

:10:01.:10:03.

the ECB meeting where they revised growth forecasts high and indicated

:10:04.:10:06.

they had started to talk about papering. No firm details yet. Let's

:10:07.:10:11.

go to somebody with details, Samira Hussein is on Wall Street.

:10:12.:10:14.

US supermarket operator Kroger will be reporting earnings on Friday

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and it's expected to show an increase to profits

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That's because of investments in categories like milk and eggs.

:10:20.:10:22.

The supermarket wars are really heating up in America,

:10:23.:10:24.

as many big US retailers are putting more deficits of groceries.

:10:25.:10:26.

Walmart has been investing heavily in its groceries division, including

:10:27.:10:29.

And of course, the big tie-up between Amazon

:10:30.:10:36.

Also happening on Friday, we'll get numbers for sales at US wholesalers.

:10:37.:10:43.

That likely went up by 0.4% in the month of July.

:10:44.:10:47.

That's after a 0.7% increase back in June.

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releasing the latest consumer credit numbers.

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Now, the availability of credit supports purchasing big-ticket items

:11:07.:11:08.

like cars and appliances, which is all part of the highly

:11:09.:11:11.

important consumer spending for the United States.

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Joining us is Mike Amey, Managing Director and

:11:14.:11:15.

Hello. Let's talk about insurers. What has happened to their share

:11:16.:11:27.

prices, given the hurricane ripping through the Caribbean? So far, so

:11:28.:11:30.

good. The insurance sector as a whole, if you look at the main

:11:31.:11:34.

insurance indices, they are down 2% of 3% over the last couple of days,

:11:35.:11:38.

about 10% on the peek at the beginning of August. That year to

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date, flat or slightly up. There are some that have done worse than that,

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but, generally speaking, as you were saying earlier, the market has taken

:11:47.:11:51.

it relatively well. They had a very, very good years before this. They've

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got a lot of capital? Yes, that is what the markets are focused on. You

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have the hit two innings this year, but it is not an event that is

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putting serious pressure on the insurance industry. Let's talk about

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the ECB, the big meeting that happened yesterday. What headlines

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came out of it? The ECB is still spending money. It is one of the few

:12:14.:12:16.

central banks trying to put more money into the economy. The European

:12:17.:12:21.

economy is doing quite well as a result. It will grow stronger than

:12:22.:12:24.

the UK for the next couple of years. There is a question mark as to when

:12:25.:12:28.

they are going to stop doing that. That is the focus. What Mario Draghi

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said to us yesterday, the President of the central bank, is that he is

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thinking about it, but not yet. He did mention the timing going

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forward? At the moment they are still spending money, most

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expectations are that they will slow down the cash spend next year. It is

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how quickly he is going to admit his own to do that. That is one of the

:12:49.:12:52.

focuses for yesterday. He said, I'm thinking about it, rather than it is

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a done deal and I'm going to do it starting next month. Still an issue

:12:57.:13:01.

with inflation? The UK is one of the few places with inflation above

:13:02.:13:05.

target. The US has inflation below target. The Europeans, the forecast

:13:06.:13:08.

for 2019 is still only 1.5% inflation. This is the challenge

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that we have, trying to get growth up, wages up. If you get wages up,

:13:15.:13:17.

hopefully we'll get inflation as well. Many thanks, you will be

:13:18.:13:21.

coming back later to talk through some of the stories making the

:13:22.:13:23.

papers. Our business editor Simon Jack

:13:24.:13:23.

will be here to talk about migration after Brexit and the latest

:13:24.:13:28.

on Saudi Arabia's plans to sell Lots of MPs are concerned about

:13:29.:13:30.

that. You're with Business

:13:31.:13:38.

Live from BBC News. There could be some very good news

:13:39.:13:43.

for those looking for jobs, at least that's according

:13:44.:13:46.

to the latest Recruitment and The REC has found that demand

:13:47.:13:48.

for staff has increased at the fastest rate since April

:13:49.:13:54.

2015, resulting in an And with candidate availability

:13:55.:13:57.

continuing to decline, pay rates are being pushed

:13:58.:14:02.

higher than ever. Tom Hadley, REC's Director

:14:03.:14:05.

of Policy and Professional Welcome to the programme. Can you

:14:06.:14:19.

give us an outline, what sort of jobs are we talking about? It cuts

:14:20.:14:23.

across, and what is interesting is the whole Brexit debate, in some

:14:24.:14:27.

ways, is creating some new jobs. There's a big demand for managerial,

:14:28.:14:30.

leadership roles to help companies navigate these uncertain waters.

:14:31.:14:35.

Also things like risk managers, legal staff, HR staff. There is huge

:14:36.:14:40.

demand there. Also big demand in sectors like the blue collar

:14:41.:14:43.

sectors, hospitality being one, logistics, construction. It cuts

:14:44.:14:53.

across most sectors of the economy. We talked about a lack of

:14:54.:14:55.

availability of candidates. Why are we seeing this? Anything to do with

:14:56.:14:58.

Brexit? To some extent, the demand for engineering and IT has been

:14:59.:15:01.

strong for many years, that predates Brexit, although it is getting

:15:02.:15:06.

harder. Some sectors like blue-collar, hospitality, there is

:15:07.:15:08.

no doubt it is getting tougher. Month on month, professionals are

:15:09.:15:11.

telling us we are making more placements, demand for staff is

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increasing, how are we going to fill that supply? Our members are working

:15:16.:15:19.

very hard to meet the demand. The challenge ahead is if the hammer

:15:20.:15:22.

does come down on immigration policy, how are we going to be able

:15:23.:15:26.

to meet that demand from employers? That is one of our messages to

:15:27.:15:30.

government. We need a progressive immigration policy to meet the

:15:31.:15:34.

demand for staff. Very briefly, how are the pay rates being pushed high?

:15:35.:15:38.

We keep hearing that pay is not matching inflation and wage growth

:15:39.:15:41.

is slowing. Is it lack of available candidates? Yes, we track starting

:15:42.:15:47.

salaries. Because it is hard to find of candidates to fill the roles,

:15:48.:15:51.

employers are having to put more cash in to attract people to

:15:52.:15:53.

companies. It's not just cash, a lot of companies are looking differently

:15:54.:16:01.

at how they hire, can we get people with less experience and build them

:16:02.:16:04.

up, can we have a printer ships? This is happening while we need to

:16:05.:16:07.

impress the need for progressive immigration policies in the short

:16:08.:16:08.

term. Becky. We will be talking about immigration

:16:09.:16:19.

a little later with Simon Jack, our business editor. You are watching

:16:20.:16:35.

Business Live. Our top story is about Hurricane Irma and the impact

:16:36.:16:38.

it is having on the insurance market.

:16:39.:16:38.

A quick look at how markets are faring...

:16:39.:16:43.

Europe has been open for about 45 minutes. A lot of investors waiting

:16:44.:16:57.

to see what impact the hurricane is going to have on the markets.

:16:58.:16:59.

And now let's get the inside track on this week's big economics stories

:17:00.:17:02.

with the BBC's business editor Simon Jack.

:17:03.:17:08.

What is concentrating minds in the city is the flotation of part of the

:17:09.:17:13.

Saudi Arabian oil industry. There are MPs who are not very happy with

:17:14.:17:21.

the way this deal has progressed. All the financial centres in the

:17:22.:17:25.

world love premium listings - the bring jobs, fee revenue, prestige.

:17:26.:17:29.

This is the place you come to raise money. New York, Hong Kong, London,

:17:30.:17:35.

or would like this because it would be a super premium listing. It will

:17:36.:17:42.

be worth double the amount of Apple, around $2 trillion, to give some

:17:43.:17:46.

perspective. The prestige question is interesting. Because it is 95%

:17:47.:17:54.

owned by the Saudi Arabian Government, its revenue generation

:17:55.:17:57.

machine, you would only have 5% available for the public to buy, and

:17:58.:18:02.

our concerns that smaller shareholders' interests wouldn't be

:18:03.:18:05.

look after. There are strict rules about that. Recently, Theresa May

:18:06.:18:11.

and the head of the London stock exchange went to Riyadh to talk to

:18:12.:18:15.

them, obviously to say, why don't you come to London? Hey presto, a

:18:16.:18:19.

little later, the financial watchdog said it was considering consulting

:18:20.:18:25.

on loosening the rules. They didn't mention Saudi Arabia or Aramco, but

:18:26.:18:30.

everyone knew what they meant. There were loosening the rules to make it

:18:31.:18:36.

easier for Aramco to list here. The question is, should you do that and

:18:37.:18:39.

weaken the standards to get them here, and others are saying, get

:18:40.:18:48.

real. That is one of the big reasons why the FTSE are going after it. But

:18:49.:18:53.

what other stock exchanges are in the race? New York and London are

:18:54.:18:57.

probably the leading candidates. You are right when you talk about

:18:58.:19:01.

Brexit, because there are those who think that after Brexit, some

:19:02.:19:04.

operations will move out of London and it may lose its prestige. Are we

:19:05.:19:11.

seeing this loosening as getting this premium bitter business as a

:19:12.:19:16.

counterweight to some loss of influencing global markets? Some

:19:17.:19:18.

people would say we don't need to that. On Brexit, there was this

:19:19.:19:23.

leaked immigration report. You have been looking into this, and it has

:19:24.:19:27.

sent a bit of a chill through the business community, hasn't it?

:19:28.:19:33.

Basically, some sectors are very reliant on large numbers of EU

:19:34.:19:39.

migrants, such as the hospitality industry. Their trade body said that

:19:40.:19:47.

clamping down on low skilled work in particular would be catastrophic.

:19:48.:19:53.

That was the word they used. Construction is well. Businesses

:19:54.:19:56.

have had the luxury of having almost limitless supplies of labour from

:19:57.:20:00.

the EU. Some people think that has pushed down working conditions and

:20:01.:20:05.

wages here in the UK, and the Government has been trying to walk

:20:06.:20:08.

this tightrope between looking after the concerns of voters on that and

:20:09.:20:12.

also the needs of business. People think that with this leaked report

:20:13.:20:18.

saying they would come down much harder than people thought, they are

:20:19.:20:25.

murdering two is -- they are leaning too hard on the side of voters.

:20:26.:20:28.

Everybody thinks that migration brings down wages. There has been a

:20:29.:20:32.

lot of research done, and at the lower end, there is some evidence of

:20:33.:20:36.

a small reduction in wages in some industries, but generally, it

:20:37.:20:46.

doesn't mean that. Unemployment is 4.4%, almost full employment in

:20:47.:20:50.

economic terms. There that many spare UK workers around to up, and

:20:51.:20:57.

there is a recruitment and employment Federation report saying,

:20:58.:20:59.

we're beginning to feel the pinch and wages will have to start going

:21:00.:21:03.

up. The Bank of England will look at that. If wages go up, good - if

:21:04.:21:08.

prices go up, not so good. The Bank of England will be watching those

:21:09.:21:14.

numbers incredibly closely. Many in the hospitality industry trying to

:21:15.:21:17.

recruit those staff would say, they are skilled, the waiters and the

:21:18.:21:24.

chefs. The definition of skilled and unskilled is a Bay Area, probably

:21:25.:21:28.

the subject for another programme. Thank you, Simon.

:21:29.:21:40.

Aaron has been munching his way through TV dinners in our latest

:21:41.:21:42.

million-dollar idea. Precooked, frozen meals in a tray -

:21:43.:21:45.

and we love them. The idea started

:21:46.:21:48.

with in-flight meals. They first took

:21:49.:21:49.

to the skies in 1945. But the packaged

:21:50.:21:52.

dinner to eat at home Picture the scene -

:21:53.:21:53.

it's Thanksgiving, the US food company Swanson has

:21:54.:22:01.

a problem - it is stuck with 260 Well, someone in the company

:22:02.:22:05.

had a bright idea. Turn them into ready meals

:22:06.:22:14.

with all the trimmings, using the same metal

:22:15.:22:17.

trays as the airlines, and they hit on the brand

:22:18.:22:22.

name TV dinners. Swanson sold 10 million

:22:23.:22:26.

in the first year alone. Well, TV was the new craze in

:22:27.:22:28.

America at the time, and the packets were designed to look like TV sets,

:22:29.:22:39.

with the food on the screen. Whatever it was, these

:22:40.:22:42.

little babies have taken off, with ready meals

:22:43.:22:44.

as we call them today now worth more

:22:45.:22:45.

than $100 billion every single year. I wonder if there is anyone watching

:22:46.:23:03.

this eating a TV dinner, or a TV breakfast.

:23:04.:23:04.

What other business stories has the media been

:23:05.:23:06.

Mike Amey is joining us again to discuss.

:23:07.:23:12.

We were discussing passwords earlier, asking people how much they

:23:13.:23:20.

change them - what about you? Do you change that enough? There has been

:23:21.:23:28.

this huge data breach. In all honesty, I probably don't. If our

:23:29.:23:31.

chief technology officer is watching, then I do regularly change

:23:32.:23:35.

it, but I don't think any of us do, really. The challenge, of course,

:23:36.:23:40.

is, if you keep changing it, you have to remember them all. And then

:23:41.:23:49.

you end up writing them down. The key thing is to monitor your

:23:50.:23:52.

accounts to make sure there isn't any kind of payment that you didn't

:23:53.:23:58.

expect to be going up. Exactly. As long as you keep a close eye on

:23:59.:24:04.

it... If you see any unusual factors, just change them

:24:05.:24:07.

immediately. Think a lot of the reason why people are lax about

:24:08.:24:15.

changing passwords it's because we have this feeling that whatever

:24:16.:24:19.

happens we'll be compensated, we'll get the money back. It's not really

:24:20.:24:22.

going to have an impact on us apart from inconvenience. At some point,

:24:23.:24:30.

that's going to change. 143 million accounts have been compromised, so

:24:31.:24:34.

huge numbers of people compromised on that particular one. The risk we

:24:35.:24:40.

have is that we think it is somebody else's responsibility for us to keep

:24:41.:24:45.

our own online security. Ultimately, it is our responsibility as much as

:24:46.:24:49.

anyone else's. Another story making the papers is about how Poland could

:24:50.:24:55.

end up scuppering the EU- Canada trade deal. This is all about when

:24:56.:24:59.

there is a conflict and there has to be a resolution to a trade conflict,

:25:00.:25:04.

isn't it? Very interesting to people like me. The interesting thing about

:25:05.:25:10.

it is, with any Trego, if you have a disagreement between the two

:25:11.:25:13.

parties, somebody has to be the judge, and typically... -- with any

:25:14.:25:26.

trade deal, if you have a disagreement... Poland have the

:25:27.:25:37.

ability to scupper the deal if they want to. An important one to watch,

:25:38.:25:41.

this one. And it shows how difficult trade deals can be. We thought it

:25:42.:25:46.

was a done deal, but it could be unwound. Indeed. Mike, thank you for

:25:47.:25:48.

joining us. There will be more business news

:25:49.:25:49.

throughout the day on the BBC Live webpage and on World Business

:25:50.:25:54.

Report. Good morning. The weather will

:25:55.:26:12.

remain unsettled through today

:26:13.:26:13.