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1:15Hello, welcome to Wake Up To Money. The UK weather and British politics have both been heating up this week with Keir Starmer announcing his resignation and temperature records for June being broken and then broken again. We will have all the latest analysis. And as we all try to beat the heat, air conditioning and solos are doing a roaring trade. But there are shortages. We will talk to a business seeing the boom. And it's not the only thing in short supply. Either shortages for chips driven by the AI boom mean you could be paying a fair bit more for your MacBook or your Xbox. We will find out exactly what's going on.

1:51Wake Up To Money with Felicity Hanna. Good morning. It is Friday. It is Wake Up To Money. It is almost the end of the heatwave. There's a lot to celebrate this morning. And looking at the Met Office website, as I am just now, it is a traffic light of weather warnings. Yellow weather warnings for storms in the north and the south, amber and red for extreme heat in parts of southern England. Wherever you are listening to us this morning, I hope you're safe. I hope you're well. Thank you very much for being with us. We will talk about the weather this morning. It has definitely been one of the big stories of the week.

2:26We'll be talking about that huge and probably inevitable boom in air conditioning sales. So I want you to get in touch this morning. I mean, get in touch about everything that we're talking about. But let me know, has this been the heat wave that broke you, that meant you finally thought, I need to start thinking about air conditioning? Has this been the week that made you decide? Or maybe you've had it for a while. Maybe you're holding out because these extreme heats are still the exception. They're still not the rule. And air conditioning is not exactly cheap, is it? Whatever your thoughts, get in touch this morning.

2:56You can text me on 85058. You can send me a WhatsApp message on 08085 909693. And if you're on social media like X or Blue Sky, use the hashtag WakeUpToMoney. I'll be keeping an eye on that. I'll also be keeping an eye on my Friday panel. Joining me this morning is Lindsay Bleakley, director and founder of Bumble and Goose. They're an online bakery based in County Down, Northern Ireland. Morning, Lindsay. Good morning, Felicity. I feel like a bakery might be a really hot place to work in a heatwave. Well, yes. However, we did install air conditioning about three years ago. So we are managing quite well.

3:34I bet your staff are really happy to get into it. I mean, I'm only here for the air conditioning in the studio this morning. We'll loads to talk about, Lindsay. Stay with us. Joining us this morning as well is Geoffrey Yu, Senior Market Strategist for BNY. Morning, Geoffrey. Good morning. Have you made a move towards air conditioning? or even just a big fan? Not yet thinking about it. Just plenty of fans in the house right now. I got one of those fans that goes around your neck and you sort of walk around with it. I'm not sure how I look, but I definitely feel cooler. Would you consider one of those?

4:04My youngest has been walking around with one the last two days, actually. So we do have one. Yes. You need to pinch it. They're genuinely quite good. And also completing our panel this morning, Frances Hark, Chief Economist at Santander UK. Frances, hello. Hello. fans air conditioning have cold drinks in the garden what's been your strategy yeah well i think some cold drinks popping into the office for a bit of air con is always helpful if of course you can get in yes yes oh i think yeah working from office has never been as attractive for a lot of people as it has been this week we are going to talk about the heat wave because it is a big business story and it also has a an economic impact but let's start this Friday panel with the news that we started the week with.

4:50The race for number 10 kicking off. Monday morning, Sakhir Starmer resigned as Prime Minister, triggered a leadership contest for control of the Labour Party and, of course, the country. And we heard from Steve Rigby, Chief Executive of the Rigby Group, who told us what he wants from new leadership. I think what we are looking for now is a clear leadership agenda around growth. I don't think we can be using phrases like business-friendly socialism. That isn't a phrase that is understood in a normalised business environment. We've got to really think about how we unleash business and start to get some momentum back in the economy, which we all know, you know, despite the comments around fastest growing in the G7, we are stalling out as an economy, Sean, and we desperately need to put some life back into the country.

5:37So that was the boss of a tech firm that employs about 3 ,500 people. useful to get his views. But a lot of people are looking now for who is the potential successor. And the newly appointed MP for Makerfield, Andy Burnham, is the only candidate who's put their hat in the ring so far for the leadership race. Steve was alluding to him with that business-friendly socialism comment there. Labour MPs, though, they're weighing up whether to challenge Burnham for the Labour leadership. But if no one does come forward, then he could become the next Prime Minister in just over three weeks. So what does that mean?

6:14Are we any closer to understanding what terms like Manchesterism and business-friendly socialism look like? Professor Michael Jacobs is an economist and was an advisor to Gordon Brown. I think the idea of Manchesterism is becoming clearer. I mean, there are actually two versions of that. One is business-friendly socialism, the property development, the attracting inward investment. But the thing that Andy Burnham has attached himself to is this idea that the reason the cost of living is going up and governments don't seem to be able to do anything about it is that we've lost control of some of the key prices that ordinary people feel in their household spending baskets.

6:50So buses is the obvious one, and he's done something about that by taking public control of buses in Manchester. And he would say, let's do the same thing in energy, in water, in rents, in private rents, in social care, sectors where there are private sector providers who are taking huge profits, not investing enough and raising prices. And he thinks that by taking those into public control, those kinds of sectors, you can get the investment that you want, but you can also lower prices, which lowers the cost of living and incidentally will lower the cost of the welfare state. Francis, how much can we take what he did with buses and say that that might be possible for other parts of other key services on a national level?

7:36that is quite a challenge because you know what what will work in one place doesn't necessarily you know translate across to the whole of the UK or or even one sector translate across I mean there are you know lots of challenges that will be faced particularly if you're looking at some of the you know utility companies which yeah I mean we know water has some has plenty of issues at the moment, for instance. We've covered some of those on Wake Up To Money. It has come up. Indeed. So it'll be interesting to see. I mean, I think from the perspective of economists, markets, etc., we're all kind of waiting for this speech on Monday and also to find out who the Chancellor might be, because that will give us some insight as well into this point about growth that obviously was made earlier, which is very, very important.

8:30Geoffrey, are we seeing markets reacting or could we see markets reacting on Monday, given that this is not a done deal? There could still be a leadership race. It's not necessarily going to be a coronation. So mild volatility, I guess. But speaking to clients since the events over the last week or so, a few remarks have been how stable actually things seem. And if I look at sterling, if I look at UK assets, they've really performed quite well. There's just so many other drivers going on, the broader environment's improving, like oil prices coming down. So this could actually be a better environment to push for growth.

9:10And if there is a strategy and fiscal credibility, and if the government sticks to that, then I can actually see UK assets being rewarded. It certainly has not underperformed, at least, and I think that's a good foundation to build on. It's interesting, though, isn't it? Because we know that in an Andy Burnham cabinet, the Chancellor would be moved from her, or we understand that she'd be moved from her current position, offered potentially a more junior cabinet position. So perhaps not continuing as Chancellor is the key point. And in the past, the markets have reacted really strongly to hints that Rachel Reeves might move on.

9:47That time that she was clearly visibly upset in Parliament, we saw a market reaction just to that. So if we look at some of the client feedback over the last two or three months or so, an amazing comment. I've heard multiple times by domestic and international clients is UK actually has strong fiscal credibility right now, not because of who's at the helm. It's because they have a plan. It might not be like the most, the plan that markets like the most. But UK is one of the few economies that's actually sticking to it right now. So I guess it's less about the person. It feels like as long as there's not too much deviation from what was agreed upon in the last budget, I know there's going to be another fiscal event coming through.

10:30Then that's where an individual economy can jump. What I'm looking for is for international investors to come back and validate that as well. If I look at our data, there's been a real spread between what local investors are doing. UK investors are very happy owning gilt market right now. Our yields are good, both in real and nominal terms. International investors, the artificial intelligence trade, I'm just sucking everything in, notwithstanding. If they come back to the UK, I think we can get another lift as well. But again, let's see what the plan is as long as it's stuck to. And the UK has done a very good job in that over the last seven or eight months or so.

11:03Then that's where some rewards could come through. Lindsay, how are you viewing this as a boss? Because we hear so often on Wake Up To Money from bosses saying, well, we've got to be agile, we're anxious about this, there's all these different, all we want is stability, is the constant cry from bosses. How are you feeling with the potential change? Yeah, I think I feel exactly the same. We would just really welcome some stability because that's an environment where we can grow our business. The instability creates uncertainty for our customers, which then obviously directly impacts us. So, yes, just to have a bit of continuity, to have a plan, because you can't plan to grow your business if you don't know what's happening.

11:48So, yeah, that would be. And how do you feel about how Rachel Reeves has performed as Chancellor? Now we're looking at the possibility that she won't be continuing in that role. Well, over the last few years, we've seen increases in wages, employer national insurance and the cost for our ingredients and packaging and energy have all gone up, which obviously takes a huge impact on a small business. So I would love to see a bit of stability so that we can manage that. But it's difficult as a business to plan to grow if you're having to factor in things like increased staff costs, sick pay, holiday pay, ingredients, energy, all of those things impact on our ability to grow.

12:31And all of those things have been greatly impacted in the last couple of years. So we would love to see some balance with that. And it's that sort of the pressure coming at you from all sides. That's exactly it. The pressure of rising prices alongside it. We had a message from someone who doesn't give their name, who says, morning, love the show. Thank you. Your business owners are complaining about their problems with higher minimum wage, business rates, national insurance contributions. There's rarely an employee perspective. I think most employees you ask would say they're happier now they have more rights and more protection.

13:01Thank you very much indeed for sharing your thoughts on that. But it is it is a tricky situation, Lindsay, when you're wanting certainty and we don't we don't necessarily know exactly what Andy Burnham would would do or indeed if it will be Andy Burnham. So what would you want from whatever the next prime minister is? Well, I mean, that's the thing. I mean, I want to pay my staff well and I want to grow my business. But to do that as a small business, we do need support. And that will come from kind of knowing what the future lies. To be able to grow a business, I need to have a good, solid team.

13:41But I also need to be able to have, you know, to be able to generate enough of an income to be able to grow that team. So it's really difficult to strike that balance. We look after our staff really well. Like I say, we have installed air conditioning and this week we've been making sure everybody has extra breaks and my husband's been dishing out ice lattes. So we do really invest in everything after. He's great. We do really look after our staff and that is important. But as a business owner, it's very, very difficult for me to see my costs rising and rising and rising. But we can't knock that onto our customers in an economy the way it is right now because people just simply won't pay more for the product.

14:21So it is such a difficult juggling act. It really is. How is business right now? It has been a little bit quieter this quarter, I have to say, unexpectedly. But I think that has just been as a result of, well, knock on effect of the Iran war. We did see a kind of a scaling back of business spending. And I think that is just an overall reflection of where the economy is sitting right now. When there is uncertainty, businesses don't spend as much on what they would consider luxury. Things like, you know, branded biscuits, branded brownies. They're cutting back on events. They're cutting back maybe on spending for marketing purposes.

15:04So that would have a knock on effect for us. Now, what we have done, we have used that time to invest heavily in our AI presence. So what we're doing is where Google would have been our kind of primary source of people locating us, we have now increased our visibility with the AI searches. And we're definitely seeing a positive impact on that, which has been good. OK, thank you very much. Francis, the BBC understands Andy Burnham is reported to be considering a few different possible replacements for Rachel Reeves if he was successful, including the Energy Secretary Ed Miliband, the former Health Secretary Wes Streeting and the Home Secretary Shibana Mahmood.

15:48And do you have views? Are you sort of looking at what those different potential candidates might mean for that position? Or do you think that Burnhamism, have we done that? Andy Burnham's view is sort of already very clear. I think there are, I mean, it's quite difficult because they're all, you know, the three at least that you mentioned. And I mean, there's Yvette Cooper and some others as well in the mix, I understand. I mean, they're all relatively different. I suppose the things that we're keen to understand is, you know, how sort of politically aligned they are to what could be the new prime minister, you know, and, you know, their confidence, particularly businesses' confidence in them.

16:39And of course, you know, the market confidence in them and and also, you know, how they'll be able to deal with with the Treasury as a whole. So, I mean, you know, there's quite a lot going on and things that you need to unpack when when you're looking at who it might be. But certainly, I think everyone would welcome a bit of clarity around that. But equally, at the end of the day, we also want to understand what Andy Burnham thinks, what his economic policy will be. You know, we've obviously been getting some stuff and particularly it's been interesting to listen to, you know, comments made by Andy Haldane and Jim O 'Neill and Richard Hughes and people like that to maybe understand where he might be going.

17:26Yes, absolutely. In fact, Andy Haldane is the front page of the FT this morning saying, Burnham must simplify complex tax code to boost growth. So really, I mean, this is the point, the time of this process where everyone starts saying what it is that they actually want. And all the different sort of parts of the economy start saying that what is really needed is whatever it is that they want. But, Francis, one thing that a lot of people will be looking at is something that put increased pressure on the current Prime Minister. Defence spending and questions around that, how to fund increases to defence spending is a really big deal for any future Prime Minister, Francis.

18:12Yes, it absolutely is. And how you're going to pay for that is obviously the question that we all have. I mean, I think the majority of people assume that there will have to be some form of tax increases. Of course, how that comes about, we probably won't know more until we see the budget towards the end of the year, potentially. But that will be an issue. I mean, I suppose from our point of view, what we really need to see and understand is, I mean, if you're going to raise taxes for defence spending, I think most people understand the reasons behind it. There's obviously the question of how you do that.

18:55But there's also the question of on the back of that, do you then look at spending? And there has been a lot of talk about whether Andy Burnham will also look at, you know, welfare spending and things like that. in order to try and show the markets, if you're going to borrow more or anything like that, that what you're doing is you're trying to take control. And going back to the comment made earlier about markets want to see the fact that the fiscal rules are in place and that we've got stability. And obviously, if you're going to raise taxes, looking at spending as well, I think is also very, very important from the stability perspective.

19:37Thank you very much. loads of you getting in touch on our air conditioning question one person who doesn't give their name says people seem to forget air conditioning is not cheap to run Keith says regarding the heat I was coping until yesterday afternoon I started to become overwhelmed with the heat and humidity aircon we are looking at it but we'll wait till autumn now when the installer is a bit quieter and prepare for next year thank you very much for that keep your thoughts coming 85058 but it has been the big story of the week hasn't it? The incredible, the epic temperatures. Record-breaking heatwaves have meant some businesses have had to take measures to protect staff.

20:17We've seen some offices close, some other workplaces close. We've seen some schools closing early. Lindsay, you said it's air conditioning and iced lattes. But have you had any other disruption for your staff? Because I know there's been pressure on infrastructure for people to get to work or schools closing so team you know people can't get in yeah so where my bakery is based in county down so we're right on the east coast in northern ireland um about 100 yards from the sea actually so we haven't had the record-breaking temperatures that that you guys have had um kind of the hottest was yesterday after wake up some money um i think the highest temperature we had yesterday was about 27 which is hot for northern Ireland very hot but I suppose staff wise we're kind of good we're used to working in a warm environment but we do have the air conditioning which is really good and really effective and then nice breaks under the parasol in the sun but we've had to kind of you know amend our packaging upgrade our packaging to be able to successfully ship our bakes over to your very hot England so we were able to do that quite quickly and everything has arrived safe and sound But yeah, that was definitely a concern.

21:35We kind of, to some of our clients who were ordering products with buttercream, we suggested, you know, an alternative product because obviously buttercream is not going to do well in temperatures in the high 20s and certainly not the high 30s. But yeah, so we had to make a few amendments, but we've managed so far. Frances, what is the economic impact of a heatwave like this? Because normally when the weather is lovely, we all get out and spend more time. We're all buying barbecues and we're all, you know, we're all buying more ice creams. But this kind of weather has actually, I suppose, stopped a lot of people going out.

22:06What would you expect the economic impact of it will have been? Yes, it's always quite a difficult one to balance the two. I mean, I think travel has been certainly in the south and London travel has been difficult. And let's face it, the UK infrastructure isn't really set up to deal with these kinds of extreme heats. In fact, I think the last time I was on the programme, there was also another heat wave that was at the end of May. But I mean, it was quite interesting. I see Sadiq Khan had his heat action plan out. Obviously, this is London based. But I mean, they reckon that the 2022 heat wave, which was not dissimilar to this one, cost London about one point five billion.

22:55So whilst there may well be retail sales increasing in certain areas, in other areas, the fact that people can't get to work and perhaps spend in the capital will have an issue. Certainly has an impact all round. Geoffrey, does it impact markets? Do investors, I don't know, pile everything they've got into ice cream? Not at this point. If I look at how markets are reacting right now, it's still the tech story. But just taking a step back on this, I always recall one of the famous things that Lee Kuan Yew, the founding father of Singapore, said. He was asked about anything contributes to Singapore's success, and he said air conditioning.

23:33And, quote, air conditioning was the most important invention for us, one of the signal inventions of history. It changed the nature of civilization by making development possible in the tropics. And then he linked it to public efficiency, right? So public service. So it's a productivity argument, right? Right. So, you know, when you have heat waves, so does that impact productivity? Well, right now, people going into offices, right, because it's got air conditioning, but not all offices have air conditioning. And I was just thinking the other day, if like some schools are closed for safety reasons, you know, then that creates childcare issues.

24:05Does that actually cost working days as well? So if this becomes the norm, and I know it's still an if from a productivity basis in a productivity start environment in this country and globally, that really is something to think about. Something else to think about. And perhaps it's a little bit jarring to go straight from talking about the heat wave and the extreme weather to the oil price. But let's oil prices have dropped, haven't they? They're back to pre-Iran war levels as traffic through the Strait of Hormuz is resuming. It's not quite where it was. Its risks are definitely still there. Shipping is well below normal.

24:43But if I go and have a quick look at the price of a barrel of Brent crude, we're down to just below$74 a barrel. So far off from the$120 a barrel that we were seeing at the sort of the worst of that conflict. Geoffrey, it seems staggering that it would be dropping so low when there is still the risk in the region. Things are not all resolved. Are these prices based on sort of objective reality or vibes? So, you know, there are many, many different benchmarks. For example, you know, we're looking. So if you look at Brent crude, we need to look at other things like crude. So Seaborne crude as well, that's actually deliverable.

25:31Omani crude, Dubai crude, and also there's West Texas as well in the US, which is a different benchmark as well. So there are others actually. And also you have to look at the futures curve where future supplies are coming through as well. We even had incidents over the last 12 hours through the straight. But a report yesterday said that 75 % of pre-conflict crude supply has been recovered as well. So there clearly is an improvement. And also we know that the likes of the UAE and Saudi, that they're trying to increase their supply. This will take time for building infrastructure to look at other channels of delivery as well.

26:09That can bypass the strait. So there is a genuine structural improvement. But another thing to look at is what is going to be the new regime. Is there going to be a toll booth at the Strait of Wormuzo to say, what's the future of OPEC? All of these things are coming through as well. I think the latter, UAE has already announced it's leaving OPEC. Iraq yesterday, there were some comments saying they're milling leaving OPEC as well, unless production quotas increase. So is there going to be a ramp up in supply in the future? Is that contributing to lower prices as well? These are things worth looking at.

26:40And finally, Chinese growth has been soft. I think that's a bit underappreciated this side of the world. But demand is coming off in China and that's contributing to the decline in prices as well. Frances, what's your view? I mean, how easily could prices spike again? I think that, you know, very much depends on what happens, obviously, with the negotiations around the memorandum of understanding. you know if that goes if that goes well then you know hopefully you know we'll see oil prices stabilize or even you know potentially go go lower than they are now but you know a lot depends I think we have to accept that there's probably going to be you know ups and downs in this negotiation process and and that will potentially all play out in in the the price of oil but you know, the hope would be that this will continue and you get this stability and that will, you know, obviously help oil prices.