21/03/2018 BBC Business Live


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21/03/2018

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This is Business Live

from BBC News, with Sally

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Bundock and Rachel Horne.

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Taxing the tech titans -

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the European Commission is set

to make big changes to the loopholes

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open to the likes of Amazon,

Google and Apple.

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Live from London,

that's our top story

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on Wednesday 21st March.

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The EU slaps down Silicon Valley -

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reports suggest that new measures

will stop the practice of shifting

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profits to countries

with the lowest rates of tax.

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Also in the programme,

more investor reaction

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to the Facebook data row.

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The social media giant suffers

another big drop in market value.

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Does Mum knows best?

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A mixed day emerging markets in

Europe. We will talk you through the

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winners and losers.

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Does Mum knows best?

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We'll be looking at a new social

network designed to help mums

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share their experiences.

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And #deletefacebook has been

trending on Twitter -

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we want to know have

you checked your privacy settings?

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Just use the #BBCBizLive.

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Hello and welcome to Business Live.

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Welcome to the programme.

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Let's start with a focus

on the tech world.

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The European Commission plans to get

the world's biggest tech companies -

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the likes of Google,

Facebook and Amazon -

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to pay their fair share of tax.

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These firms have been criticised

for booking their profits

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in countries with the lowest

corporation tax rate.

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Brussels' plan is to tax a companies

digital revenues based

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on where users are located,

rather than where their

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headquarters are.

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For example, the French

government collects just

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over 33% in corporate taxes.

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This compares to a tax rate

of just 12.5% in Ireland.

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Under the EU's plans, there will be

a blanket 3% tax on sales,

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collected in the country

where sales takes place.

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It could include products

such as Google's

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advertising services,

or Apple's streaming services,

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although the details are unclear.

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With me is Oliver Smith,

senior reporter, Forbes Europe.

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Oliver, let's start. -- let's start

there, the details are not the

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clearest. How will they define these

tech companies?

Countries like

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France have been calling in Europe

to act on this problem for years,

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now finally they are. They are

defining these companies as those

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that make them money from streaming

services, subscription services and

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advertising. Companies like Google,

Apple, Spotify are all potentially

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in the limelight.

What is

interesting is 3% may sound like

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quite a low tax bracket. But it is

3% on revenue, not profit?

That's

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quite unusual. It is quite a blonde

force approach. -- blunt force

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approach. Because of countries like

France and Britain, who were coming

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up with their own taxes because

Europe has not been active, so now

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the EU feels it has to do something

and act quickly. This is the

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quickest way of putting down a

blanket tax across Europe.

They are

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announcing today. It has to be

ratified by EU members. When should

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we see it come into play?

We really

don't know. It could be months, it

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could be longer. The EU wants to

come up with a longer term plan to

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stop profit shifting around Europe.

These things will take a lot of

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time. Not any time soon,

unfortunately.

Say I run a company,

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and you are my retailer in Germany,

Sally lives in Italy. Where does the

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tax get paid?

Sally is the

subscriber to the digital service,

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the country she is in is the country

where the tax will be collected.

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That is very different to how it

works today, where the tax should be

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collected at source where the

company is headquartered. That is

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the shift. It is where the consumer

is based rather than the company.

A

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lot of people will look at this and

think, these big companies, deep

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pockets of resources, they will get

out of this one?

Yeah, and I'm sure

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we will hear about stories just like

that. The good thing about taxing it

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where the customer is based, is it

should give the EU more power to

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actually see where the money is

moving. When you are trying to

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figure out the profits, it becomes

quite complicated, especially with

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the system is the companies have. We

have to wait and see but hopefully

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it gives them a good tool to use.

Laura Smith, thank you.

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-- Oliver Smith.

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Let's take a look

at some of the other

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stories making the news.

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German prosecutors have raided

the headquarters of BMW

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as part of an investigation

into the suspected use

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of emissions cheating software.

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About 100 police and law enforcement

officials searched the luxury

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carmaker's Munich headquarters

and a site in Austria.

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They opened an investigation last

month over suspected fraud.

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Toyota has suspended US tests

of driverless cars on public

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roads, following a fatal accident

in Arizona involving one

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of Uber Technologies'

self-driving vehicles.

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Toyota said it was concerned

about the "emotional effect"

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the incident might have

on its test drivers.

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Facebook is being investigated

by the US Federal Trade Commission

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over the alleged misuse of user data

on the network.

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It comes after allegations that

50 million Facebook users' private

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information was misused by research

firm Cambridge Analytica.

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The UK-based firm suspended

its chief executive on Tuesday.

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We'll get more on this story

later in the programme.

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China's Tencent, the

owner of the popular

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we-chat messaging app,

is now about $72 billion more

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valuable than Facebook as the US

social networking giant deals

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with a string of controversies.

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There is a lot going on in financial

markets at the moment.

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Tencent is due to

reports its latest set

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of financial results later today.

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Sarah Toms is in our Asia

business hub in Singapore.

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Sarah, this is interesting, how

things are changing. As Facebook

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Foals, Tencent is seen as more

valuable?

That's right. Tencent is

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often known as China's Facebook. It

seems very appropriate at the

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moment. The two social media giants

have been neck and neck in value for

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quite some time. But now the gap has

widened after the crisis. Billions,

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tens of billions of dollars in fact

have been wiped off the value of

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Facebook. And of course as Facebook

is dealing with this crisis, China's

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largest corporation is riding on a

huge wave of success. It has got

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some new hip games, a growing ad

business, and the momentum is still

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growing for a wee chat, the all in

one messaging service that drives

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it. Tencent is just about to release

its earnings. This is a very

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important timing. Investors

expecting some strong results.

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Tencent is projected to report a 56%

growth for the last quarter of last

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year. This is bound to be a positive

impact on the Tencent stocks

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tomorrow. As a result, we could even

be seeing a bigger gap between

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Tencent and Facebook.

Yes, we will

watch this space closely. Let's look

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at marketing General. We had a day

of no action at all in Japan. That

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is actually Tuesday's close.

Elsewhere in Asia we saw a mixed

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day. Monday and Tuesday were days of

is quite significant declines for

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Asian share markets. Today wasn't

too bad. Emma Gees shares were in

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favour. -- energy shares. Opec is

accelerating plans for curbing a

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worldwide supplied last. The oil

price has been going up, energy

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stocks in favour. Lots of corporate

news out today. Take a look at the

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Business Live page, which keeps you

up-to-date. B&Q shares down 7% in

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London. Disappointing results. Moss

brass -- moss brass shares down as

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well. A disappointing trading

statement. I Street retailers really

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struggling. News of -- news of an

emergency loan from Carpetright. It

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has got emergency funding. That

gives you a sense of what is going

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on. Very busy. Add to that the

Federal reserve. It will wrap up

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it's two-day meeting.

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And with more details

on the Federal Reserve

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meeting later today,

Kim Gittleson has this

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report from Washington.

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He has the wisdom and leadership to

lead our economy through any

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challenges are great economy may

face.

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On Tuesday, Jerome Powell got to

live the dream. He began his first

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meeting of the head of America's

Central bank.

The Federal reserve is

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one of the most important

institutions in our government.

Most

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people expected -- expect the

Federal Reserve to impress interest

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rates. -- increase. But the problem

is who will be impacted by an

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increase. There are three main

groups. Savers have not been able to

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learn anything on their savings for

nearly a decade now. But slowly,

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very slowly, savings are starting to

increase in the United States. The

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second group are American workers,

who may have to pay a little bit

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more for a mortgage or a car loan.

American workers are taking on

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bigger paycheques. They should be

able to weather a rate increase. The

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group that should be worried is US

corporations. Today one in ten of

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them are zombies. Instead of gorging

on brains, they have been gorging on

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cheap debt. Now they are not making

enough in profits to cover the

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interest on that borrowed money. So

when the Fed starts raising interest

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rates, well, the walking dead could

be headed for the unemployment line.

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It is not often you see zombies on

Business Live! We are open to

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everything.

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Joining us is Ben Kumar,

investment manager at

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Seven Investment Management.

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Let's talk about the Federal reserve

decision. Everybody is expecting a

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rate rise, aren't they?

They are.

Everybody has talked a lot about the

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new governor coming in. He is part

of the establishment. He has been on

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the Fed for years, he has been on

the Treasury. He is not some random

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guy. He is embedded in the policy in

the US. People are not expecting any

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different process than we have seen

already. A rate rise today and a

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couple more in the next six to nine

months.

Rates could go up four

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times. What you just said about

Jerome Powell, business as usual,

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that is a help right now, isn't it?

Absolutely. The Fed has done a

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fantastic job of getting interest

rates up. That has kept markets

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calm. It is important the

continuation of that is his policy.

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You will see him struggle a little

bit with the first communication he

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has to make. But that is OK.

Let's

talk about a story Sally has been

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excited about. Amazon and alphabet

have overtaken Amazon in terms of

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market share. Other way round,

sorry!

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It's just kind of showing us about

sentiment and perception at the

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moment about Facebook shares, Google

shares.

Your thoughts? Alphabet

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makes most of its revenue from

advertising. It is Google ads. They

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are targeted, they do involve data.

Amazon is a bit different. It makes

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money from lots of different places

and not so much the advertising. It

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does get a sentiment kick when we

see companies like Facebook and

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Google being pressured by people

asking, are they doing nasty things

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with my data?

The concern is more

tighter regulations, and companies

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like Facebook having less scope to

make money out of our information?

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Absolutely. The digital world has

undergone some scrutiny. The EU tax

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we talked about. The idea of data

and privacy, regulators are starting

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to get up to speed.

Nobody knows how far this could go.

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You will be back to talk about the

papers at the end of the programme.

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It is not often he has more to do.

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Still to come - mum's the word!

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Later in the programme we'll take

a look at the new smartphone app

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which is helping mums meet up.

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You're with Business

Live from BBC News.

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Insurer Lloyd's of London has

reported a £2 billion

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loss for last year,

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describing it as "one

of the costliest years for natural

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catastrophe in the past decade".

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It was the insurer's

first loss in six years.

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That compares with a £2.1

billion profit in 2016.

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Earlier we spoke to Inga Beale,

the chief executive

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of Lloyd's of London.

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This really shows Lloyds,

I would have said,

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to its full strength.

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We have been around for 330 years

now supporting businesses and people

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get their lives back together

when disaster strikes.

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We saw some very tragic

scenes last year.

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We had hurricanes

sweeping through the US -

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Hurricanes Harvey, Irma and Maria.

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There was also an earthquake

in Mexico, there was flooding

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in South Asia, wildfires

in California, I mean there were

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so many tragic events happening.

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But then Lloyds stepped

in and we paid out last year

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about £18.3 billion in claims,

basically putting people

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back on their feet.

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And despite that, Lloyds

is in a really strong position.

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At the end of the year

no syndicate failed,

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every syndicate is still in business

and was recapitalised,

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meaning that Lloyds is in a really,

really strong position.

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When it comes to something

that we can model, we do a lot

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of statistical modelling around

the risks that we take on,

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all of those exposures,

and in fact the whole insurance

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sector has spent billions

trying to understand this.

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When something like climate change

is impacting these events,

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we have to build that

into our modelling and our

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forecasting of how much

these events can cost.

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But while we can quantify

what they cost, we don't know

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when they will happen

and that is one of the difficult

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things nobody can assess.

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But we make sure, therefore,

that we have enough capital

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in the market to support those

potential disasters and that is how

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we run our business model.

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And of course we have to make sure

that we collect premiums in,

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that we look after those premiums

and invest those premiums

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because on the other side we pay out

claims but we also make

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some investment income.

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That was the chief executive of

Lloyd's of London. There was a story

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we mentioned, copyright clinching an

emergency loan from looking at a

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voluntary agreement to help it

reduce the property issue joining

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the likes of Biron and Jamie's

Italian, all struggling on the high

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Street.

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You're watching Business Live.

0:16:330:16:36

Our top story -

the European Commission is set

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to announce new measures to prevent

tax avoidance by the world's

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biggest tech companies.

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The new rules are expected

to force the likes of Apple,

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Amazon and Google to pay taxes

in the country where sales

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are made, as opposed to the current

system where companies pay taxes

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where they book their profits.

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More detail on that on our website.

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Let's get the inside track

on a new social network

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which is hoping to provide parents

with friendship and support.

0:17:030:17:05

Mush was born when Katie met

co-founder, Sarah Hesz,

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in a playground on a rainy day.

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The pair struck up

a chance friendship,

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but realised that technology

could provide a far easier way

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for like-minded mums

to meet one another.

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With us is Katie Massie-Taylor,

co-founder of mum's

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networking app, Mush.

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Thank you for coming in. This was an

invention born of necessity, you

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were feeling a bit lonely and

overwhelmed and you met up with

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Sarah and it went from there?

She

came and chatted me up in the

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playground! That was three and a

half years ago and three months

0:17:380:17:43

after we had spent every day

together doing average stuff, we

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realised the lifeline the friendship

had been and there was not

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technology there to make it easy for

local mums to meet other mums in the

0:17:500:17:56

area.

We have heard from other

social media website, even Peanut

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which is a similar app, but what is

unique about your app?

We were the

0:18:030:18:09

first ones to come out with an app,

websites had existed and done a

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wonderful job of giving online

support but what we wanted to do was

0:18:140:18:18

facilitate off-line meet ups. Mums

can find other mums nearby and

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message and meet up together and

meet in a group as well. That is

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what we stick by now. We have group

meet ups through the app which sets

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it apart from anything else which

maybe looks at 121 friendship.

How

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are you making money?

We have been

fortunate to get VC funding, people

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who spot the opportunity for social

network to come from this. By happy

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consequence it has been something

that mums really love and are asking

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us for features and functionality

that we can add as a premium

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feature.

So basically it is free but

if you want more you have to pay for

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that? And a monthly fee?

That is the

idea, it is a year away but that is

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where we will ultimately end up.

You

are a social network, at a time when

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social networks are in the headlines

overprotection of user data so what

0:19:190:19:24

are you doing to your users safe and

have you been approached by

0:19:240:19:27

companies looking to buy the

information?

Safety is key for the

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users, it is something mums feel

passionately about, the data about

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themselves and their children

remaining safe and that has always

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been at the forefront of our minds.

We don't sell any third party data,

0:19:390:19:45

we proudly keep it to ourselves and

partly the reason we are looking to

0:19:450:19:51

monetised over premium substituent

is so we're not playing to the

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Browns. This is an attractive

audience to them -- Iturbe brands.

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We want to make the product

brilliant for the mums rather than

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to sell their data.

0:20:020:20:05

This is the whole issue of what apps

you are using and the information

0:20:060:20:11

you are giving out, you don't know

where it might end up or how it is

0:20:110:20:15

being used but I guess you are

saying with your app that you pay

0:20:150:20:19

for a service and that it intends up

out we are monetising it, when not

0:20:190:20:23

being paid to push clothing wear on

you or health products or whatever.

0:20:230:20:29

There is no hidden agenda. Last week

I looked at our privacy policy and

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made it clear, there is nothing to

hide, we are here to help and

0:20:350:20:38

support mums, there is no other

agenda.

Thank you very much for your

0:20:380:20:42

time. The other co-founder is

watching, server.

She has just had a

0:20:420:20:52

baby!

Congratulations -- Sarah. Here

is how Tuesday in touch. Stay

0:20:520:21:00

up-to-date with all of the business

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Business Live page weather is

analysis from our team of editors

0:21:030:21:06

around the globe. And we want to

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0:21:060:21:14

involved on our web page. And on

Twitter and you can find us on

0:21:140:21:20

Facebook. Business Live come on TV

and online, what you need to know

0:21:200:21:27

when you need to know it. Ben is

back. We have the issue of Facebook

0:21:270:21:39

which is very much in the press.

Let's talk about some of the

0:21:390:21:42

coverage. We were talking about the

share price. One thing I was put

0:21:420:21:50

into a low-cost bond and in San

Francisco, in the long-term, how

0:21:500:21:53

damaging is this for Facebook? It is

hard to measure at this point?

We

0:21:530:21:57

have seen a few privity scared in

the last decade and has managed to

0:21:570:22:03

come back and improve privity

settings but this seems to go wider,

0:22:030:22:07

this is selling data with it seems

like Melissa 's outcome and that is

0:22:070:22:12

troubling.

Let's look at what people

have been saying -- malicious

0:22:120:22:18

outcome. Luke says he did check his

settings and yet deleted his

0:22:180:22:23

account, he will not be using it

again. Andrei said he always update

0:22:230:22:28

his proceeds settings but shies away

from some of the more confidential

0:22:280:22:31

questions. Another says yes, I have

disabled apps. A lot of people are

0:22:310:22:37

looking at everything. And also on

Twitter there was one from Nordea

0:22:370:22:44

who have said they have put Facebook

investment on quarantine in their

0:22:440:22:49

sustainable funds. When you get big

corporations like that voicing

0:22:490:22:52

concerns about what can it mean for

something like Facebook?

It is a

0:22:520:22:57

real problem, sustainable funds are

getting larger and larger. When they

0:22:570:23:01

avoid an industry or a sector it

damages it. Think of the oil

0:23:010:23:05

industry and people moving away from

it. Facebook and companies that

0:23:050:23:09

cannot prove they protect their data

could be in trouble.

Let's talk

0:23:090:23:13

plastic which is in the news. A new

scientific report is warning us that

0:23:130:23:19

in the next decade the amount of

plastic in the sea will treble.

0:23:190:23:23

Despite the fact there has been so

much publicity about this problem it

0:23:230:23:27

is going to get worse and commercial

organisations are making the most of

0:23:270:23:32

the oceans which is interesting.

It

is the ocean is 70% of the world and

0:23:320:23:37

it is not really regulated. Other

than close to shore, corporations

0:23:370:23:41

can get away with it, and there is a

lot of press but mainly in the

0:23:410:23:46

developed world. In emerging market

company is basically able to dump

0:23:460:23:51

stuff in the ocean without

consequence.

We talked about

0:23:510:23:55

harvesting the sea bed for seaweed

or putting up wind farms and some of

0:23:550:23:59

this is being done without

regulation and companies are taking

0:23:590:24:02

advantage of a free resource is how

many people see it.

So much is

0:24:020:24:06

readily do on land, companies are

looking that there is masses of

0:24:060:24:11

space and Rhys Oates and nobody is

controlling what they do.

Another

0:24:110:24:14

interesting story in the New York

Times, the Saudi Arabian crown

0:24:140:24:20

prince is in the US, he met with

Donald Trump yesterday. It is all

0:24:200:24:28

over the media. They are talking

about how they get on extremely

0:24:280:24:31

well, the White House reinforcing

Trump's commitment to air apparent.

0:24:310:24:38

It seems they are on the same page

on many issues.

They seem to have

0:24:380:24:42

some sort of camaraderie, there is a

lot of support between them. The

0:24:420:24:46

interesting thing when you look at

Saudi Arabia and Aramco, are they

0:24:460:24:53

pulling back because the oil price

has gone higher?

That is the market

0:24:530:24:58

listing of the state owned Aramco

which is worth a heck of a lot and

0:24:580:25:03

the stock markets around the world

want a bit of the action. It has

0:25:030:25:07

been a couple of years there has

been talk of this listing in London

0:25:070:25:10

and New York both trying for it to

be listed.

The size of this company,

0:25:100:25:15

it will be the first trillion dollar

company, maybe even $2 trillion also

0:25:150:25:23

at flotation. It is why people want

to get involved. Saudi Arabia are

0:25:230:25:29

saying, maybe we like it being a

state run and not having to tell the

0:25:290:25:33

market exactly what we do behind

closed doors.

Interesting. Thank you

0:25:330:25:38

for your time.

0:25:380:25:40

That's it from Business Live today.

0:25:400:25:44

We will keep you up-to-date

throughout the day on our website

0:25:440:25:49

and also here on the BBC. Thank you

for joining us, we will see you

0:25:490:25:54

tomorrow. Goodbye.

0:25:540:25:55