This is Bloomberg Daybreak Europe for this Monday, the twelfth of June in London.
Coming up today, Britain adrift.
The evidence grows that the UK has gone from charting its own course to going off course.
We have a special report.
A warning from the Chairman of M and S, Archie Norman, tells us Sunak's government desperately needs to rebuild the business ties. Boris Johnson swept away.
One hundred and sixty seven years of independence comes to an end. UBS finalizes its takeover of troubled rival Credit Sweee.
Plus political dramas worthy of Shakespeare. Boris Johnson quits Parliament and the former Scottish First Minister, Nicholas Sturgeon is arrested.
That's all straight ahead on Bloomberg Daybreak Europe. The business news you need to start your day in just one fifteen minute podcast on Apple, Spotify, the Bloomberg Business App and everywhere you get your podcasts.
Good morning, I'm Stephen Carroll and.
I'm Caroline Hetger. Here are the stories that we're following today. Some of the world's biggest companies are highlighting the deteriorating investment climate in the UK. An investigation by us here on Daybreak Europe and the Bloomberg Newsroom has found that business leaders believe the government has failed to meet the twin challenges of Brexit and the foreign subsidies arms race. Here's what the chairman of Marx and Spencer, Archie Norman, told us.
Other countries are saying, No, we need laboratory as systems. No we need more coders, No we we need more data suntists. We seem to be agnostic. We don't know what we need and that's not good enough. The footprint of government is too big in the economy to say we're just hands off.
And we'll be bringing you more of our interview with Archie Norman, as well as a host of other conversations with leading business voices later in the show.
The criticism from the business community comes on the same day that the Bank of England policymaker Katherine Mann has called on the government to move economic policy to a more sustainable footing. In an essay for the Resolution Foundation, the rate setter says fiscal and monetary policymakers need to transition from a crisis policy phase to a longer term agenda.
Catherine Mann's word, they are a warning to both Prime Minister Rishi Sunak and the opposition Labour leader kir Starmer as each begins to set out their agenda and spending plans for a general election expected next year.
The growing chorus of voices calling for a new approach by government come just as the Prime Minister faces a major political challenge from his predecessor. On Friday, Boris Johnson resigned as an MP, with two of his allies also stepping down from Parliament in a row over COVID nineteen
rule breaches. The resignations trigger three by elections that could highlight softening support for the Conservative Party, but Johnson's former communications director, Ghetto Harry claims that that wasn't what drove the former Prime Minister's decision to stand down.
I don't think this is part of an elaborate plot to sort of destabilize and topple Rishie Sunac. I think there is an opportunity for him now to go off and seize new opportunities.
Despite itet Harry's assertion, the by elections complicates Sunac's hopes of further narrowing the gap in support with Labor. Recent opinion polls have put the opposition party up by as much as fourteen points against the Tories in Scotland.
Former First Minister Nicolas Sturgeon says she knows beyond doubt that she's innocent of any wrongdoing. That's after she was arrested as part of an investigation into the SMP's finances. Sturgeon was questioned by police before being released without charge. Professor of Politics at the University of Strathclyde, John Curtis says it's fire from the SMP's only electoral issue.
I think in truth we've probably been anticipating that at some point the police would also want to talk to Nicholas Sturgion. Any conclusion we can draw from this so far as the investigations concern is that the police have everently decided it is still worth continuing.
Strathclyde Professor of Politics, John Curtis, speaking there. The SMP is set to hold a special conference later this month to consult party members on the way forward for its independence campaign.
Now away from politics, Crispin ODI's main hedge fund will now be run by his co manager, Freddie Neve. The move follows a decision by Ode Asset Management to remove its founder, who is facing fresh assault allegations. Crispin Odi denies those allegations and declined to comment on the decision. The Financial Times also reports that the Hedge Fund is discussing restrictions on investor withdrawals from its EU funds as part of emergency measures to contain the fallout.
UBS says it's completed its takeover of Credit Suisse. The bank made the announcement in an open letter published in the Swiss Enzz newspaper. It comes as The Financial Times of reports that the UBS will impose restrictions on bankers from Credit Suisse, including a ban on new clients from high risk countries. The paper says a list of almost two dozen red lines will apply to Credit sweet staff under the merger.
And finally, Ukraine's President Vladimi Zelenski confirmed yesterday that the long expected Ukrainian counter offensive has begun.
Counter Offensive and defensive actions are taking place in Ukraine. On which stage I won't say in detail, and we for sure will feel all of it. I wouldn't trust those or other telegram channels and especially putin.
Hey's comments come as Ukrainian forces say that they have retaken three villages in the southeast of the country. The gains couldn't be independently verified, and Russia's defense ministry called the situation fluid.
Okay, so those are our top stories on the program this morning, Karlin, so much more on this theme of is Britain adrift? But first I just wanted to mark this news that we're having in regards to UBS's takeover of Credit Sweee. The milestone moment has arrived. UBS has taken over its former rival. This ends the lenders one hundred and sixty seven year independent existence. This of course
capping two months of uncertainty for employees. After this Swiss government brokered takeover nine billion Swiss francs guarantee against potential losses on credit swiez asses. It's been a massive story in the financial sector and today we're turning another page in it.
Yeah. Absolutely, this is the expectation. We had that note to employees from the Credit Suisse a CEO on Friday that was expected to happen. So now the details are actually out this Monday that UBS Credit Suisse takeover is complete.
Now yet more political uncertainty in the UK, and a growing number of business leaders are left wondering if Britain is a drift. The challenges the economic challenges for the UK are clear, the damaging consequences of the pandemic, the war in Ukraine and Brexit, but the UK is also at a crossroads in need of what business leaders see as a long term, ambitious planned from government that is deliverable. Caroline, this is something that you've been looking into in some detail.
Yeah, absolutely, I think there was a moment in the newsroom where we were thinking about this. Bloomberg is doing a deep dive into the state of the British economy. The past couple of months have seen this criticism from a host of business leaders wondering concern that the business and the policies that the government is pursuing and trying
to execute perhaps are not the right ones. Think James Dyson think of the criticism from Stilantis Revolute, Microsoft's Brad Smith, Rigie sou NAC's Five Pledges, which are largely economic, and the Chancellor's Edinburgh reforms simply have not quelled the chorus. Indeed, the government only looks increasingly bogged down now and precarious. So I've been speaking to business leaders about this. Archie Norman the chairman of Marks and Spencers since twenty seventeen.
A lifelong Conservative. We know former MP himself, former CEO of ASDA. I met him at mns's headquarters in Paddington and I spoke to him at length about this issue. Where is the British economy right now? Is the UK adrift? This is what he said.
I think there's a huge appetite for a new agenda, for a sense of where are we trying to compete in the world? What is our strategy post for exit is no good just saying we left and we're going to have some trade agreements. Is how are we now going to compete in the world. We've created this dislocation, We created friction fal trade. No rightly or wrongly, that's what people voted to do. Now we need a plan for how we compete and that used to be called
industrial strategy. Now this government, for whatever reason, has an aversion to the expression industrial trait. It's what everybody else calls it, so they can't bring themselves to say it. But I don't care whether it's a growth strategy or competitiveness. It's got to be a profound point of view as to how Britain's going to compete.
So a profound point of view Archie Norman speaking to me there, he also made a lot of other interesting points on skills. The government is agnostic, it doesn't know what it wants in terms of people's skills acquisition. That's not good enough, he says. For the economy of the future. He was scathing about recent policy blunders on a price cap on essential foods. He called that hair brained. His advice to Sunak if you want to be re elected, you've got to be the future, not the past. We've
lost the plot. When it comes to getting firms to list and headquarter themselves in London, that is a long list for government.
Yeah, it certainly is British business. More broadly, though, Carolyn, there's this battle ongoing for who represents and who works with the government on addressing these concerns.
Well, that's it. It's about the relationship with business and the interplay with business and government. The British Chambers of Commers is trying to supersede the CBI as the biggest business lobby. Martha Lane Fox, who is herself perhaps Brittain's most successful techre entrepreneur, is the president of the BCC.
She's been traveling across the UK and again I spoke to her at length and she says that there needs to be policy across a breadth of sectors, a particular focus on increasing trade, on getting the sales of UK businesses abroad up. This is how she described the moment domestically.
There's also a sort of holding a collective breath, waiting to see what happens over the next eighteen months with political situation, not just here in the UK, but in the US and more broadly, I guess across Europe, and that's a confidence piece to a large degree. So I think you have to be careful not to talk ourselves into a position where we're saying that the UK is all at cduse your words, you know, adrift. That's a propriate language in some ways, but in other ways it
really isn't. I think the UK has a huge amount to offer. We have a lot of extraordinary businesses and amazing talent pool. We have to be careful, I think, not to talk ourselves into a dark spot, because that's not the UK that I think I recognize and that I think we will want to build.
So, you know, business leaders and entrepreneurs like Martha lane Fox are not pessimists, that they're always looking on the bright side, emphasizing the advantages that the UK has, especially universities, innovation entrepreneurs. But lane Fox does also talk about there being a people crisis in the UK. People's crisis, the
difficulty of finding staff and retaining them. She talks about needing a businesses needing to feel most importantly that they can look ahead with certainty and there's not going to be this constant rotation and chaos. Those are her words. So this is reflected in the Big Take, the Deep
Dive imprint that we've got. It's on the front page of the Bloomberg dot co dot UK websites, also on the terminal this morning talking to a lot of businesses about what they think about investibility within Britain.
And what we're hearing from the people that you've been speaking to is that this is a pivotal moment for the UK and one that needs policy solutions.
Yeah.
And Xavier Julie was also in London, so I had a long conversation with him. He was the CEO of the London Sock Exchange between two thousand and nine twenty seventeen, he's now nonexecu UIR and Ashore Capital, another well known company. Very frustrated that there isn't a more serious conversation in the UK but also in Europe about how we fund businesses, how we get them to grow. Very critical of the fact that in the UK, in Europe we use debt, we use bank lending, and in the US it's obviously
done far more through equity. He talks about today we're at a point of needing radical reform.
Here's his arguments.
If you have equity markets there are one tenth the size of US. The cost of raising equity here, particularly for a high growth industry, cost is much higher here. So the best, fastest growing, biggest value creators moved to the United States, and then we end up with that productivity deficit. Over time, you end up with a low growth, low productivity, debt focus funding environment, and the best of what you've invested in your universities, your entrepreneurs and others.
Migrates the US are leveraging that. But in the US business runs, business investors make the choices as to who are going to be the winners on the technology side. In the UK and Europe. It is still today government you know, these talks of sovereign funds and all sorts of initiatives government driven. Eliminate the regulation that prevents the long term holders of capital insurance companies and pension funds from investing inequities and let investors make the choices. You'll
see what happens. We could grow our equity to be on part of the United States. With these changes, we could grow the liquidity of our equity markets in the UK by tenfold.
So that was a Zevier rule speaking to me about the kind of the difficulties that the UK and Europe has in terms of how we fund high grade businesses. I mean, he says very said, to be very clearly, you can't scale up the industries of the future, particularly tech, without far deeper equity markets. And he was very concerned that there wasn't a lot of responsiveness to that idea.
Carolyn, from these conversations, what are you taking away is Britain adrift?
Well, the economic issues for the UK have again been superseded by these internal party politics of the Conservative Party. So on the one hand, we understand the depths of the economic issues in the UK. On the other hand, the more positive and optimistic outlook might be this is a moment right for big ideas, well thought out long term industrial strategy, accountability. It's what Archie Norman was sort of saying. The footprint of government is too big in
the economy to say we're just hands off. We've got to get on with it in post Brexit Britain and actually deliver for the growth economy of the future.
Okay, Carolyn, so much more coming from your conversations throughout the program this morning. You can find that Big Take report the Bloomberg website and I Big Take it for using the terminal, or you'll see plenty more. Two on social media, Caroline, you can find our c hepger on Twitter as well, or of course by looking up Bloomberg Radio. But of course this has bigger implications than just in the business world.
Two.
Growing the economy one of Ritchie Sinac's five key priorities. Does the Prime Minister, though risk being distracted by more Tory infighting follow the resignation of Boris Johnson and two of his key allies. Well, our UK correspondent Lizzie Burden is with us for more on this. Lizzie let's start on I suppose what is the government's current plan in this area, What is the government's plan for growth?
Well, the government would argue that it's number one priorities having inflation by the end of the year. That would create stability as a platform for growth. And you've just seen SUNAC in the US to shore up ties there specifically to boost growth. For example, it's pumping a billion
pounds into the semiconductor industry. But that pales in comparison to what the US are doing through the Inflation Reduction Act and what the EU's doing in response, and it leaves the UK heavily reliant on its allies to fill in the gaps in the rest of the supply chain. You heard there in Caroline's brilliant reporting. Business leaders are queuing up to put forward the notion that Britain's closed for business, that the government isn't doing enough to compensate
for the economic damage of Brexit. You had as well last week almost one thousand tech companies, including Alphabet and Apple, warning that the UK's falling behind in sectors like AI, like semiconductors. So on the UK Politics podcast this week, we're going to be speaking to Oliver Dowd and the Deputy Prime Minister at Founders Forum in front of a room of tech bosses and founders about this very question.
Is Britain adrift? What is the plan for growth?
So do tune into that on Friday's episode on Bloomberg Radio at twelve pm.
Okay, great stuff. The reporting also comes though, as the Bank of England's Catherine Mann has called for long term strategy for the economy.
What's she been saying?
Well, she's the hawk of them and a try policy committee, as you know, And this essay for the Resolution Foundation really argues that the focus of the government needs to be on the long term, especially on sustainability, rather than on fire fighting because of course we've had the successive shocks of Brexit, the pandemic Ukraine. But I have to say frankly, even for Labor which has promised a more activist state in response to Bidenomics, secure Anomics.
Is what the Shadow Chancellor Rachel Reeves calls it.
That's centered around investing twenty eight billion pounds a year on the green energy transition. Labour's had to scale that plan back and now the plan is to ramp up spending rather than hit that twenty eight billion pound target in the first year of a labor government. Labour says it's because of persistent inflation, meaning higher rates since that plan was announced, and it's necessary, they say, to cut
back a bit to maintain fiscal responsibility. So you've got both parties battling it out to be the party of Business, to be ambitious on growth within a very.
Politically and fiscally constrained environment.
Okay, Lizzie, this is all happening at a time when, of course we've been also watching what's been happening inside the Conservative Party. What's the risk that these events surrounding Boris Johnson and the resignation of two of his allies as well, will take away from the government's focus of the economy.
Yes, so much happened over the weekend, didn't it.
Well.
The announcement of Boris Johnson's resignation and the timing of that announcement does look designed to inflict the maximum damage on the Prime Minister. Of course, Johnson blames Sunac for his downfall, and Johnson even said he's exiting politics for now, so hinting again that he hopes for a comeback as his allies have been. It reminds me of when he said Asta la visa baby when he left as Prime Minister, suggesting that like the terminator, he's going to be back.
And of course the comparison to Donald Trump is well done. You know, Johnson resigned even on the same day that Trump was indicted on federal charges. But the key difference says Johnson's isolated within the party, but scandal only seems to boost Donald Trump.
Among the Republicans.
The bigger picture, as you point out, is whether or not Johnson's comeback is realistic. It's a distraction from the diligent government that sunac's trying to present. It's also an immediate challenge for SUNAC in the sense that Johnson's resignation, along with those of his two allies, Nigel Adams and Noddine Doris, triggers by elections. That is going to be embarrassing if SUNAC loses. The opposition Labor parties already calling for a general election. Some polls show that they'd win
a landslide if there were an election. And over the weekend you also saw Nikola Sturgeon, the former First Minister of Scotland, arrested.
She was released after several hours.
But it adds to this sense that her party's imploding that would benefit labor, and so Sunak's going to be watching very closely what happens north of the border.
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