17/01/2017 World Business Report


17/01/2017

The latest business news with informed analysis from the world's financial centres.


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with Sally and World Business Report.

:00:00.:00:13.

Business leaders and investors are braced for the British Prime

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continues to sink against the US dollar.

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And we gauge the mood among the delegates gathered in Davos.

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With the rise of populism are the elite in retreat?

:00:36.:00:38.

In a moment I'll be talking to Inga Beale, the Chief Executive

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of Lloyds of London who is at the World Economic Forum.

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Theresa May will today deliver a highly-anticipated speech

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on the UK's future outside the European Union.

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The speech will focus on global Britain and how the UK

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can be an outward facing nation as it seeks new post Brexit

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relations with its trading partners.

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Reports over the weekend suggest the British Prime Minister will use

:01:06.:01:09.

today's speech to signal the UK will pull out of the EU single

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market, although Downing Street described this as speculation.

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Despite this, the pound hit its lowest level

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for more than three months on the reports,

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sterling dropping more than 1% to below $1.20

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The EU single market guarantees the free movement

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of goods, capital, services, and people but the UK government has

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indicated they will want to limit the movement of people as part

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With me is Kathleen Brooks, Research Director at City Index.

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Good morning, nice to see you. It is the most anticipated speech,

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probably one of the most important in her career so far? About

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absolutely, and the markets are fully focused on this. It they have

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already priced it in almost, they're not confident about what she has to

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say so she will have to deliver big to turn the pound around because

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it's been an incredibly volatile currency in the last six months and

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mostly negatively. Most are expecting more negativity today

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because if she does say what we're all expecting, Brexit means Brexit,

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what some would describe as a hard Brexit, as in we are fully out as it

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were, and she doesn't want to have any similar deal to that of other

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countries, it would have a big reaction in terms of the pound?

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Certainly it's not fully priced in what a hard Brexit is and we're

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going to get a new reality of that hard Brexit today, but if she's

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going to announce we will leave the EU, leave the single market, leave

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the customs union, is there going to be a void? In one speech she surely

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can't say what will fill that and that will give investors another

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reason to worry, we may see further downside for the pound but the FTSE,

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which has done well since the vote, could worry on the back of that as

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well. Including those running businesses, big exporters, those

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trading with Europe all the time, 50% of exports go to Europe, does

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this give them time to prepare whether they think it's a good or

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bad idea to get ready for the possibility of us being completely

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out? It depends if they have a transition deal, that is what they

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hoped for, to see us through the period of negotiation. That's what

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the big businesses will do but if the pound takes a dip significantly

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below $1 20 then she will do those exporters a favour. For the City of

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London, I would assume it has so many ramifications and for financial

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centres in Europe, they will look for a special arrangement or special

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deal? It seems like that but the special arrangements aren't likely

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to be mentioned in this speech, largely because she has to keep some

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of her cards behind but we know the chief negotiator from the European

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side has said he doesn't want a disorderly Brexit and he wants

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European financial sectors to have access to our financial sector. It's

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a 2-way process and the Europeans know keeping the financial centre of

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London stable in this period is as beneficial to them as us. Also when

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you look at the politics, many in Parliament are saying, hang on,

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there's still a way to go in terms of the legality of the whole thing?

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Definitely, we haven't had the court ruling on Article 50 so it's likely

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if she does say we are leaving the single market there will be cries

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from the opposition saying she can't do it because chances are we will

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get that court ruling on Article 50 and she will have to put whatever

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plan she's going to put to Europe to the parliament. She has many

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constraints about what she can say, what is legal and how she packs the

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market, a huge balancing act. Thank you for coming in. We will be right

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across all the reaction when she does deliver her speech later today.

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Also on the agenda in a few hours, Xi Jingping is expected to look for

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more inclusive trade deals as he becomes the first-ever Chinese

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president to attend the World Economic Forum in Davos.

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This year's gathering of global leaders is focusing on how

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policymakers should respond to the rise in populism

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and protectionism currently sweeping the globe.

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There's a chill wind in Davos this year, and I'm not just talking about

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extremely low temperatures and piles of snow. The political backdrop is

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also pretty unforgiving. Top names from the worlds of business and

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politics are meeting here to cut deals at a time when a backlash

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against globalisation and elitism is only gathering pace. The forum's

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pounder says social inequality will not be reduced by raising barriers.

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I hope that all countries will favour open global systems, may be

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fairer global systems. I think we will have as a whole, as a world, as

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a whole, we will have a big setback if we go back to the old times of

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big walls around our nation states. And stepping in to champion the pro-

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trade message this year is Chinese President Xi Jingping. Traditional

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protagonist, America, is keeping a low profile, allowing the world's

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second largest economy to take centre stage. A welcome prospect for

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young trade entrepreneur Leila Dong. President Xi coming to Davos shows

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the world a statement that China is very willing to take the world

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leadership role and also working closely with other countries in

:07:12.:07:15.

terms of world security, globalisation and providing more job

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opportunities. And he has a very high profile audience for his

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message. Other top attendees include Colombian singer Shakira. Facebook's

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Cheryl Sandberg. Ali Barack Obama's Jack, and the IMF's Christine

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Lagarde. But in battle to European leaders Francois Hollande and Angela

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Merkel are staying away. For those who feel they can tear themselves

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away from domestic troubles, the World Economic Forum will be awash

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with ideas and debate as to whether ever freer trade is now a certainty.

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Tonia Beckett, BBC News, Davos. Well, let's go live to Davos

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and talk to one of the delegates attending, Inga Beale,

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Chief Executive of the insurance Nice to see you again. We spoke this

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time last year when you were at Davos. There's a very different mood

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this year given Brexit and the outcome of the US election. Yes

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indeed. Brexit is going to be one of the topics I'm interested to learn

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more about today. Obviously we're going to hear Theresa May talking

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later. But interestingly we're still going ahead with our contingency

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plans, we're not going to put those on hold because I don't think we'll

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get any real secrets about what will be in store for certainly the City

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of London. So I'm here to perhaps have some meetings that will be

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useful in terms of where should we go to set up our subsidiary when we

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have to do that in the EU. And that seems to be what you and other big

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institutions in London are thinking at the moment, isn't it crazy that

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you have to have a contingency in Europe on the continent given the

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fact Theresa May clearly is going down the hard Brexit route. Yes. We

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must bear in mind for Lloyds, being a very global business, it's

:09:20.:09:23.

affecting directly about 5% of our business. So we're looking to set up

:09:24.:09:27.

a subsidiary just to protect that 5%, not the whole thing. Is she

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right to take this line? In terms of being quite tough? Well, I think she

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has to be quiet on some of the France in terms of not revealing the

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negotiation tactics. I think for business, though, I think we've got

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to take our own precautions cash fronts. We are in the risk business

:09:55.:09:59.

being in insurance so we want to make sure we're around and we have a

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secure future for our clients. Are you concerned about this period from

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now until we exit and the impact it will have, the uncertainty, the

:10:09.:10:14.

volatility? Yeah, it's always the uncertainty business leaders don't

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like and of course customers and all our policyholders don't like that

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either. That's why we're going to be securing our future regardless of

:10:23.:10:26.

the outcome of those negotiations. None of that means that it can't be

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perhaps rolled back if access to the single market can still be

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negotiated by the UK government. All right, chief executive of Lloyds of

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London, Inga Beale, thanks for joining us live from Davos. I will

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be back in a moment when we review all the stories in the news. Cabaye.

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-- goodbye. Elections have been called

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in Northern Ireland where the power-sharing

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government has collapsed. The Assembly will be dissolved

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later this month and the vote

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