A subdued Spring Statement

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1:15Wake Up To Money from BBC5 Live. Hello, welcome. It is Wake Up To Money and markets again have taken a bit of a battering as a result of the ongoing US-Israeli war in Iran. Stock markets overnight in Asia taking a hit. We're going to have a look at bond prices, the prospect for interest rates effectively and what people think might happen there, what investors are telling us. Prices for oil and gas have been rising quickly, continue to rise, it seems, this morning as we look at the oil price. Our experts will tell us why that is, the consequences of it, how long this might go on for. Your questions do keep them coming.

1:56We're going to have a look at what was always billed as a low-key spring statement that was felt like a budget in previous years from the Chancellor. We'll find out how the conflict in the Middle East might actually impact Rachel Reeve's plans. And with the United Arab Emirates being among those hit by Iranian strikes, we're going to speak to some of the Brits who've moved to make a living out there. Wake Up To Money with Sean Farrington. Good morning to you. It is Wake Up To Money and it's Wednesday the 4th of March. We're just coming up to five past five. I'd like your thoughts this morning on working in the Middle East.

2:33You may have done it yourself. It may be something friends, family have done. You might work in a business that had offices in the Middle East as well. and just your thoughts on that, what that has been like for those that are out there at the moment. You may be able to pass on some insight about what life has been like as we will delve into that a little bit more later ourselves in the show. Would you consider it? Have you considered it? Does all of this change things or not? We know Dubai in particular often gets quite a mention when we've talked about whether it's people leaving the UK because of tax policies here, for example, when they prefer the much lower tax environment, no tax environment in Dubai.

3:17The kind of different industries that we've seen grow there as well. And those countries around the Middle East, the United Arab Emirates, when we look at what Abu Dhabi and Dubai have done, Qatar as well. In recent years, their influence on the world, the growth in entertainment and sports and all of that. Maybe you've been involved in some of it. Your thoughts, 85058, as we learn a little bit more about what life is like there if you make that move and what life is like right now, what that means for those that want to get out of the region at the minute, waiting for flights to be back online at the levels that they were a week ago or to those that are looking to stay and how they feel about the prospects of the defence systems in the Middle East from those responsive attacks from Iran at the moment.

4:09I've got Caroline Bright with us this morning on the show, Chief Strategy and Commercial Officer for Ricoh Europe, the global digital and printing business. Caroline, thank you for your time this morning. A pleasure. Hi. Caroline, am I right in saying you have amongst your many offices, one in Dubai at the moment, so are you having to take specific action there? Yeah, well, of course, over the weekend, that was our first thought and priority to contact our employees in the UAE. We don't have so many there, actually. We've got a network of very loyal business partners. So we contacted them all to, of course, make sure they were OK.

4:52We've seen reports as we wake up this morning that the likes of NVIDIA and Amazon have temporarily closed Dubai offices. Is there a sense to you that there are, whether it's Western companies that have offices there or just industries there themselves, are shutting down at the moment? Is that what you're advising your staff to be doing? Yeah, certainly. We immediately said, you know, make sure you're safe and please work from home. And I think that as days go by, you see, you know, slightly more exposure with any American connection. But as I say, our kind of direct business, direct employees is fairly small.

5:37So we don't fall into that category. but of course we are speaking very closely to our partners they're not international subsidiaries they are local businesses so that may be a slightly different dynamic yeah and when and when you say a sort of a different dynamic there is that because you're you're not sort of able to directly make decisions on what they can and can't do because they're partners yeah exactly well they know their region far more than we do. So, you know, for us, priority number one was to check in on all of our people to advise our own employees to please be safe, stay at home, check everyone was okay.

6:17The second reaction from us was, of course, business continuity, which is mainly about our supply chain into the region. And then third is kind of anyone's guess at the moment is that more sort of future business planning. So we're very much focused on one and two right now. Yes, and so on number two, what has happened there with supply chains? So for, you know, I'm sure every business is different. So we are looking at alternatives to obviously delivering goods to and across the Strait of Hormuz. So as of yesterday, things changed very quickly. Our partners were saying, OK, the port of Jeddah is open.

7:05We will kind of use the Red Sea more and then access on land. So, you know, for us, it's pivoting the supply chain in the least disruptive way. So is this deliveries you're making into the region? Exactly. In and out of the region. Exactly. And so is there production there, a part of your supply chain there? Not for us. So it's more shipping in. Yeah. And it's, Phil, like on Wake Up 20, we learned about, it's focused on the geographies of these regions around the world and the various shipping routes increasingly in recent years. And when you talk about the Jeddah port, that is, as you say, on the Red Sea.

7:49On the Red Sea. The other side. Exactly. And it wasn't yesterday we were talking to logistics companies and one boss was telling us how, you know, the Suez Canal, which the Red Sea leads into or comes out from, has had its own issues. And at times has felt effectively closed for the last couple of years because of because of local issues there as well with the Houthis. Yeah, exactly. And obviously, the Yemen situation, you know, going sort of that bottom west corner continues to be something to monitor. But I think, as you've just said, right, you know, these sorts of reactions and contingency planning, you know, a bit more dusty in prior years.

8:34but more recently, you know, it is kind of normal course of business to be activating contingency plans and to be reacting, sadly, to geopolitical issues or disruptions in the global supply chain. So, you know, I guess the only sort of positive for business is we're a bit more used to it. But, of course, we'd prefer not to be. Does it change at all where you're getting your stuff made or the parts for your products and where you're basing your offices, even just the story of recent years, and some might feel increasing escalation in the region? Well, I think that last time we spoke, actually, we talked about the resilience of global supply chains.

9:20So I think for a global business, the benefit is you have more options. You can shift more easily. We have multiple manufacturing sites. We have very agile supply chains. We have a network and an ecosystem of partners. We try not to make knee-jerk reactions. You know, you have one eye on how to respond, as I say, from a business continuity perspective. And then, of course, you are constantly looking to build in that resilience. But with tariffs, you know, we had to pivot and we can pivot again as necessary. I'd like to bring in Dr. Hassan al-Hassan, who's the Senior Fellow for Middle East Policy at the International Institute for Strategic Studies, the IISS, also former Senior Analyst on Foreign Policy and National Security at the Office of the First Deputy Minister of Bahrain.

10:15And you're in Bahrain, am I right in saying, Dr. Hassan, this morning, thank you for your time? Well, thank you for having me on the show. I am indeed in Bahrain, that's right. And so first, can I just ask you, given the location of Bahrain on the Persian Gulf, you know, right next to Qatar, opposite Iran, for you, recent days, have things changed? Yes, things have changed quite considerably. We had a very first, a very intense first day of the conflict. Bahrain was targeted rather heavily on the first day with a focus initially on U.S. military assets. And then we saw Iran gradually expand its targeting set to include civilian infrastructure.

11:07So we saw multiple attacks on high-rise buildings and hotels. But things have tapered down quite significantly. I think the second, third, Fourth days have been much more calm. The attacks have been much more frequent, much less frequent, pardon. And it seems that air and missile defences are operating quite effectively. And in terms of, you know, we've got much to talk to you about on the show today. This topic that first started off with Caroline about the working environment, what people are being told to do, what people are choosing to do at the moment. And we've heard a little bit about some of those companies temporarily closing their offices in Dubai.

11:57Is it a similar thing in Bahrain? Well, I think the government has a very well-established protocol that I think dates back from the COVID years, where it has the ability to, and many businesses and government institutions and schools have the contingency plans in place to be able to pivot to working from home as and when necessary. So that's not entirely new, and it's something that happens fairly smoothly. We've had at IISS, for instance, contingency plans in the works for quite some time because as geopolitical analysts, we had a fairly wide expectation that this war was coming. It was more of a question of when and how.

12:44And so in a sense, I think many people have been able to activate those contingency plans. And I think that has minimized the level of disruption. Now, Iran has been trying to go after, for example, data centers to make it more difficult, for example, for certain networks and certain services to be online. But there are active recovery plans in place. At the moment, schools are operating remotely. And so there is overwhelmingly a working from home configuration in place at the moment. For many who have seen the story of the Middle East in recent years, the diversification of industries around the Middle East, the United Arab Emirates, Qatar, and more recently, I think Saudi Arabia has probably gained a fair few more headlines for its involvements in sports and entertainment and its investment there.

13:39Yeah. Have you seen this in the last few days, do you think, change the view that whether it's investors, businesses, individuals who may be looking to work and base themselves in the region? Has it raised something that maybe hadn't occurred to a lot of people beforehand about the vulnerability of the countries in this region? so the long-term business model of the gulf states is built on being is built on on reputation of being safe havens from almost in in every sense they tend to be the most stable uh parts of the middle east they have fantastic internal security very low crime rates very predictable attacks and financial policy and so on so in a sense i think the the biggest risk that they run over the long term as a result of this conflict is the damage that is potentially being dealt to this reputation.

14:41Now, the war, I think, highlights two things. It highlights their vulnerability on the one hand, as you suggested, the fact that they are geographically close to Iran and therefore within reach of Iranian missiles and Iranian drones is obviously a vulnerability. But it also highlights resilience, the fact that they have been able to achieve fairly impressive interception rates of those projectiles, that there have been no major outages, for example, in the utility sector, in any of the Gulf states. And the fact that casualties have been extremely minimal, given the number of projectiles launched at them.

15:19I think these, not to mention the contingency plans that go into effect, I think all of these also highlight a degree of strength and resilience. I know that the Saudis and the Emiratis in particular have been trying to make people stranded in Saudi or Emirati airports more comfortable. I think the Saudi king has vowed to essentially bear the expenses of individuals stranded in Saudi airports, tourists stuck there. And the same applies, I think, to Saudi Arabia. So there is an ongoing effort. That's very much what we've been hearing from those that have not been able to get on their flights that they wanted to in the region in recent days as well.

16:00It's certainly a test of that resilience, isn't it? We've seen some reports, there's more in the papers here in the UK today, in the Daily Mail, Gulf states could run out of anti-drone rockets this week. Some some questions about the depths of that resiliency and the length of time they are able to be as resilient as they have been, given this seems like quite a new situation to be tested for them. Yes, I think all parties to the conflict have to operate under certain constraints. Of course, the main consideration for the Gulf states, as you suggested, is the depth of interceptor stockpiles. How many more interceptor missiles do they have to shoot down incoming Iranian projectiles?

16:52But the Iranians are operating under constraints as well. They need to make sure that their missile launchers are not being actively, which they are, of course, targeted by Israel and the United States in particular, preemptively. And so the U.S. will go after Iranian missile launchers just as they're trying to fire. The U.S. has been bombarding heavily Iran's missile cities, these underground bunkers that essentially house large numbers of Iranian missiles and UAVs. And so the Americans have been going after those. The Iranians have a very large target set to choose from. I mean, the region is quite large, and there are a number of high-value targets.

17:31And so the Iranians have to worry about how they manage their own stockpiles and inventories of drones and missiles. What targets do they prioritize? And then finally, they also have to worry about managing their inventory so as to be able to stay in the fight until the very last day of this war. Because if the war drags on, the Iranians want to be able to continue firing, even if the numbers are much lower, until the very last day of the conflict. So all parties here have to sort of operate under various constraints. It's not a one-sided disadvantage. 85058, your thoughts on this as we hear more about what life in the Middle East may be like, working there, what it has been like, what it will be like, how those states around the Middle East are reacting to this.

18:17Once enclosure of the airports alone will damage the Gulf states, this is not business as usual. John in Suffolk says, I'm happy for anyone who's decided to move to Dubai and enjoy the low tax life and winter sun, etc. However, what really annoys me are the ones who've left the UK and then used social media to go on and on about how great Dubai is and how awful the UK was. 85058. Do keep your thoughts coming. Lindsay James also with us this morning, investment strategist at Quilter. Lindsay, good morning. The energy commodity markets, oil price, gas price, getting pages and pages of headlines this morning.

18:55You know, energy bills could go up to by£500. There's one headline, one bit of analysis in the mail that I've just got in front of me there. Lindsay, what have you seen as we wake up this morning as the major moves today? Well, I think gas prices are worth mentioning here. We saw another big move yesterday, over 20 % in European gas prices. But I want to just contextualise this because there's certainly no reason to panic here. When we saw war break out previously between Ukraine and Russia, we saw sharp spikes in gas prices, but in a completely different order of magnitude. They went over 300 euros per megawatt hour.

19:33We've seen a spike in the last few days, but we're still under 60 euros per megawatt hour. And also bear in mind, we've had the energy price cap fixed from April in recent weeks. So really, if this turns out to be a relatively short-lived situation, and all signs are that it will be, then this may never actually particularly hit bills at all for retail customers. Of course, companies aren't protected in that same way and they will be impacted more quickly. But, you know, I think it's important to recognise here that it's not the same situation. this is we've seen disruption from ration gas now for three years so the situation at the moment in the Middle East is that we could have resupply you know it starts again in a couple of days it could be a couple of weeks it could be a couple of months it's hard to say but equally it is likely to be a temporary situation so that I think we should hopefully calm a few nerves on gas prices the other thing I would just draw attention to is moves in European markets so Spain was one of the weakest.

20:37That fell 4.5%. And that, of course, was a reflection of Donald Trump's comments around cutting off all trade with them because they wouldn't allow the US to access their bases. So as usual, we're starting to see them bring trade policy into areas of foreign policy and linking the two again. Well, and our own Prime Minister has not dodged the criticism of Donald Trump either with his comments of saying that Sir Keir Starmer is no Churchill and he was unimpressed, Donald Trump, with how Sir Keir Starmer was working with the United States in the early hours and days of this war and the plans for it.

21:19Where do you look, Lindsay? You can see the Spanish stock market and that tells you a bit about the Spanish economy. The FTSE 100, our biggest stock market, as we often discuss, is quite a global index with companies reliant on trade right around the world. So where do you look to see if there's any concern about the UK's prospects with the United States and the impact that might have? Well, we would be thinking, as you say, it is a very global index. We'd be thinking predominantly about how energy price rises impact those companies. And there's quite a good rule of thumb, which is that for every$10 per barrel rise in crude prices, that takes about 0.2 percentage points off global growth.

22:03So, you know, we're still at the end of the spectrum where it's pretty muted impact on global growth at this point in time. Of course, the UK index has got more exposure to things like mining companies and financials. Those are particularly cyclical companies. That means to say if the global economy does slow, they're going to be particularly exposed to that. And that's one of the reasons why the UK market was weak yesterday off 2.75%. Yes. So that was the FTSE 100 yesterday down a fair amount. And when I look at how the Japanese index is this morning, down nearly 4 % overnight our time, Lindsay.

22:43So just briefly on this one, do you feel like that is going to continue into the day or is that catching up with the rest of the world's moves yesterday? Well, I think a bit of it's a degree of catch up. Of course, in Asian economies, they are typically energy importers. So they have been more exposed to this than, say, the US. When I look at futures markets this morning, it looks like it's going to be a more stable day. So pointing very modestly up for Europe, pretty much flat in the US and gold recovering a little bit after a drop yesterday. So, you know, hopefully a more stable day in markets today.

23:19Hassan, when people talk about the length of time of this war, we're hearing it from many businesses, from market analysts about the consequences of this. Given that you were saying, you know, you and your colleagues and the work you do on policy in the area, you had a feeling that at some point this would arrive. When you now see that this situation has arrived, do you think it can be short? It's very difficult to tell, to be honest, because it depends on the amount of pressure that the Iranians can take before they blink. The way they see this is that they are in an existential battle. And they believe that they must survive this for as long as they can.

24:09They can't be the ones to blink. And this is the current Iranian mindset. And with indications that the new supreme leader chosen very recently to succeed, the one that was killed by U.S. and Israeli strikes, is the son of Ayatollah Ali Khamenei. That's Mujtaba Khamenei. very much cut from the same cloth, a hardliner, and likely to continue down the same path. So at the moment, we don't yet have an Iranian leadership that is more likely to compromise at this stage. And so it's very difficult to tell how long this is going to last. We don't know how many missiles and UAVs the Iranians have left.

24:52And at the same time, it also depends on how long President Trump will be able to keep up the pace and tempo of operations. At the moment, I think both sides are planning for either scenario. I think both sides have prepared themselves for a fairly longer engagement. If that's the case, what I expect would happen is that we would have a short but intense period of exchanges and strikes. I mean, we've already seen the number of Iranian attacks dropping precipitously over the past few days. So you might have a short but intense period, followed by a longer and less intense period and more episodic period of exchanges of attacks.

25:37But it's difficult to tell really what the exact timeline of this is going to be. Dr. Hassan Al-Hassan, who's with us this morning, a senior fellow for Middle East policy at IISS. 85058. We've got questions for any of our guests this morning. Do get them in. We have experts. We have people running businesses in the region. We're going to speak to people living in the region as well. Some Brits who have decided to have a chunk of their career in that region and to hear what life is like for them at the moment as well. So keep your questions coming there. Lindsay, even though the spring statement yesterday, what in previous years has felt like a budget with lots of policy announcements and analysis of the economy and prospects for what might happen next, is the government within its borrowing rules or not, that's what we would have been used to in previous years.

26:32Yesterday, Rachel Reeves delivered a spring statement and she wanted it to be low-key and on many aspects it was, but it's still generating front-page headlines, partly because of what is occurring in Iran at the minute. at the front of the Financial Times, economy at risk, a very significant hit from Iran, fiscal watchdog warns. So the Office for Budget Responsibility still making its predictions on the economy, but this stuff happening in recent days. What did you learn from the spring statement of 2026? Well, that's a very good point because, to be honest, not a huge amount in terms of the headline levels.

27:08She talked a bit about higher fiscal headroom. Of course, that's the gap between tax receipts and spending. But those forecasts rely very much on factors which are now in recent days, at least in reverse. But there's nothing to say that the pattern of recent days will continue. I think there were a couple of things aside from that, though, that we did learn. The first is that we are seeing government finances more sensitive to net migration figures. And they are forecasting that those net migration figures will fall. Of course, that is explicit government policy. But if they do, if they were to fall all the way to zero, for example, from current forecasts around 235 ,000 a year, they have come down already quite significantly, then that could be around a 30 billion black hole in government finances.

27:58So that's something I learned. And then the labour market predictions were also, I think, you know, Front and centre in terms of forecasting unemployment now has peaked up 5.3 % this year, up from 4.9 % just three months ago. James Smith is Developed Markets Economist at ING. James, good morning to you. When we look at some of those numbers that Lindsay's highlighted there, look at the prospects for the UK economy, was there much of a surprise? Often if it was a big sort of budget style day, there would be headlines the next day about just reminding us how bad things are or where the optimism might be.

28:37For you, what was your take? Yeah, well, not very much changed in honesty. Lots of the forecasts were kind of the same. But, you know, as the theme of this programme has been so far, things are quickly changing. And, you know, a forecast is only as good as the sort of inputs you put into it. You know, what are you assuming about oil prices? gas prices and markets more generally. And of course, all of that's moving very quickly. So I don't think it was a bad thing in that environment that the spring statement was actually quite low key. And I think certainly as well, after all of the speculation we had going into the autumn budget, the fact that the budget or the spring statement this time was more low key, again, I don't think it's necessarily a bad thing.