Benefit of the stout

0:00BBC Sounds. Music, radio, podcasts. Wake up to money from BBC Five Live. Hello, morning. Welcome to Wake Up To Money. Could we be set for three$1 trillion stock market listings before the summer's out? Weeks after SpaceX said it plans to list on the US stock market and with some reports suggesting OpenAI is going to do the same. Another tech company, Anthropic, has said overnight that they are going to get in the game as well. We will talk about what that means shortly. Also on the programme, the water regulator Ofwat has now intervened in the ongoing supply issue affecting properties in Kent, says South East Water must get a grip.

0:40We'll hear from one business who definitely agrees with that. Anne, are you a fan of a pint of the black stuff? It's like heart, soul, passion, Guinness. I don't really know what stout is, to be honest. I mean, is it a type of beer? I like Guinness, and I like Guinness a lot. I tried it in 1988, and it was like sucking an iron bar. A bit of a Marmite set of views there, but more and more of us apparently are turning to stout, and it's setting up what could be a summer of stout wars as the boss of Wetherspoons will be on the programme to tell us all about a little bit later on Wake Up To Money.

1:12Wake Up To Money with Will Bain. Yeah, morning, welcome to Wake Up To Money on Tuesday the 2nd of June, just gone 5 o 'clock in the morning. Will with you this morning, great to have your company. Yes, lots going on, big tech on the programme, more water problems, some more kind of sort of unforeseen price rises, I guess, coming from the war in Iran. and yes a summer of stout wars might be a bit early to be thinking about pints just now but murphy's beamish guinness it seems to be a battle that will rival the world cup this summer and tim martin the boss and founder of weatherspoons is going to be live with us on the program a little bit later on on wake up to money to talk to us about that so we'd love to know what you think of any of those stories or if you want to join the conversation at any point this morning 85058 is the text number to do so 08085 909693 is the whatsapp should you wish to get in touch with us that way as always panel of guests with us this morning for the full hour as well julianne ponen back with us julianne the chief executive of creative nature which makes uh allergy safe foods and baking mixes morning great to have you back on good morning tell us a little bit more about uh about creative nature for those who haven't heard you on the program before julianne yeah sure so um i started the company over 10 years ago now um it does a range of foods because I suffer severely from anaphylaxis.

2:30So I'm allergic to peanuts, tree nuts, sesame. And we do baking mixes, snack bars, superfoods that are sold in over 18 countries now. And how's business going at the moment? Business is going well in terms of we're really happy with growth for the second quarter. However, costs are rising. That's been quite tough. And the business in the Middle East has definitely been a challenging time for us. Yeah, absolutely. And we'll bring you in. We're going to talk about the price of aluminium spiking a little bit later on in this half hour, but it will be a good place, I think, to talk to Julianne as well about perhaps some of those unexpected things that are still rising because of the war in Iran.

3:07Alongside Julianne for the next hour, Teneke Afrika here in the studio with me, Senior Fund Manager at W1M. Morning. Great to have you back. Good morning. Nice to be here. Three big IPOs. Does that get you sort of rubbing your hands together, you guys in the city? yes i mean it's exciting we we like uh you know learning about new tech and we like to explore companies so um with a lot of very big prospectuses coming up there's lots to explore yeah i was gonna say we've never as we said at the top we've never had a trillion dollar stock market valuation the thought that we might have three by the end of the summer kind of tells you the enthusiasm for this for ai i guess yeah i mean we we're really riding an ai wave um and And obviously, we're talking about the valuation is going to be$1 trillion plus.

3:53The actual amount of money raised is not$1 trillion because that would be a real concern. Where else does money come from, right? So for SpaceX, for example, it's about a$1.7 trillion potential valuation and they're raising$75 billion. So it's 4 % of the valuation. So the amount of capital that's being coughed up is quite small. Well, it's still big, right? We're talking billions versus trillions. These are all big numbers. But yes, the timing is that there's a lot of capital needed to build out this AI infrastructure. Yeah, absolutely. And perhaps we'll talk about some of the drip down as well in the UK as well.

4:33Tinika using that phrase then about the AI wave, someone then who's out there on a dinghy trying to sort of manage her way through all of this is our technology correspondent, Lily Jamali, who joins us from San Francisco. Morning from us, evening to you. Good morning to you. So this came through sort of early evening our time from Anthropic. Either of you, actually, Lily or Tinika, the fact that it was sort of confidential as opposed to sort of a prospectus that SpaceX put out. What's the difference with that, Lily? Why did they do that? Do we know? Yeah, so this news hit right at 9 a.m. my time.

5:10It was no accident. It was quite carefully coordinated. And basically, this is the way the process works. They file a confidential filing with the U.S. Securities and Exchange Commission, the securities regulator here in the U.S. And then we, over time, within probably a couple of weeks, we'll get to look at what is now a confidential prospectus. And that will give us, you know, really our first look under the hood at this company, Anthropic, which doesn't maybe have the same name recognition as OpenAI, certainly as SpaceX, but is a company that has just really taken off over the last six to 12 months.

5:52We are going to see their financials. We'll see their risk factors. And I think what's really interesting is, you know, we know from the company's own messaging that they have seen revenue explode in recent months. What we don't know is, are they profitable? That's a really important question when there's so much skepticism still around AI. Open AI has never been profitable. I've asked Sam Altman about that before. And so I think that's going to be a really interesting question that we will hopefully get answers to. before we get the prospectus and then they will start to publicly list their shares after what's known as a road show yeah um worth taking a step back isn't it because you make a good point lily that perhaps i mean there will be some of our listeners who are completely au fait with this company and what it does but what is it i suppose that's got people so excited you know there's lots of these chatbots right that alphabet have got one that spacex will have got one what is it in in particular about Anthropic and Claude, I guess, being the bit that lots of people will have heard off from it, that has got people so excited compared to its competitors?

6:57Well, you know, they just have very positive momentum based on a couple of particular news events that we can get into if you'd like. But over the last six months, they've just really had the wind at their back. Claude Code has carved a particular niche, a really important market for people who want to be using AI tools, or maybe they have to because of their work, using these AI tools to write software code. They've really dominated in that area with Claude Code. And I think another thing, and you literally walking around the city of San Francisco, we'll see billboards that say, you know, things to this effect.

7:35They are trying to brand themselves as the ethical company in the AI space, as the safety first company. You know, there is some skepticism about that. Keep in mind, you know, they've been sued for training their AI models using pirated material. But I do think that they have successfully branded themselves as such, especially when compared to OpenAI, which is led by Sam Altman, who has really hit, I think, has had a really negative couple of months in terms of his personal brand. He just came out of that Musk versus Altman trial a couple of weeks ago where just witness after witness attested to the fact that they didn't find Mr.

8:18Altman trustworthy. And so I think all of that has really helped create some momentum for Anthropic, which a year ago, I just don't think people were really that interested outside of Silicon Valley. Now they are really becoming more of a household name. Yeah, and if I can sort of add to that, what we've seen in the market and where really companies have suffered that one of the things that Anthropic has done really well is sort of a streams of specific niche launches. So Claude for legal professionals, for example, was one of the latest Claude for financial professionals. So whenever there's announcement that Anthropic sort of launched this, the shares in companies that actually that is their business kind of goes down because the market kind of things where we don't know what take up will be.

9:06But, you know, we have to remember that the whole chat GPT sort of degenerative machine learning is only starting in 2022. So it's very right to think, well, are these things profitable? Because it's an ongoing reinvention and improving on your models and a bit of a leapfrogging of whoever is the best next. And obviously we have DeepSeek in China that seems to be very, very effective as well at their models. So this is a bit of a race and I think that's part of the concern too from the market that billions of dollars are being invested in the next thing in machine learning. But how much money is being made and the prospectuses will be interesting to see.

9:50But, you know, we shouldn't – it's okay to initially not make money. I mean that's the case for Amazon, right, when they launch this and everything. Yeah, that is, if you're an innovative company, initially you have to invest in order to make money. But it does seem to be that this wave of technology is a little, a lot more investment in assets. So data centers, so actually have physical properties rather than kind of intellectual property in software, for example. So it is a more capital intensive AI wave. Lily, I want to circle back to the safety stuff that you were chatting about in a minute, but just to that point that Tinnika was making about, I guess, the utility of this.

10:32Is that the next stage now, too, in the kind of AI race, the AI battle, if you like? Like I was chatting to on the World Service to an investor out with you in Silicon Valley who was kind of saying this, that investors kind of putting their money where their mouth is with Anthropic because they can see that they don't seem to be as caught up on the what people would see as the kind of front of a lot of these things, the LLMs, the large language model. So they are looking for stuff that sort of does bits of work for you rather than having a really good chatbot necessarily. Well, I'm really glad that your guest brought up DeepSeek in China because I've noticed this last day we've been talking a lot about anthropic relative to SpaceX and open AI.

11:13I'm guilty of it, too. But it's so important to be contextualizing this American AI companies compared to Chinese AI. And it is a world of difference. We're just now learning that a lot of even huge tech companies find using tools like Clod and OpenAI's Codex really expensive. They are just blasting through their budgets for this stuff. And then you compare it to DeepSeek or Alibaba's, sorry, I'm forgetting the name of it, Quen. These open source Chinese LLMs, they are a fraction of the cost. and they are actually preferred by a lot of Silicon Valley companies. I was speaking with the CEO of Pinterest a couple of months ago about this.

12:01They prefer those. Not only are they cheaper, they're customizable, and they don't sort of need all of the many features, the sort of everything but the kitchen sink approach that a company like Anthropic offers. So I think that could be a potential headwind as we enter this IPO-palooza, as I've been calling it, for all three of these American companies. And actually, to just chuck another Chinese name in there as well, the Financial Times reporting in the last couple of hours that Tencent, so one of the biggest app makers in the world, it's WeChat app, which to say it's a bit like a WhatsApp is a massive understatement for what it can do when you make payments and all sorts of stuff through it as well, saying that they are going to embed an AI agent within that, which is another big step forward in China as one of people using that as well.

12:45Julianne, just listening to this from sort of the side, I wonder that the talk of safety when we're talking about the scale of the amount of money, does that feel more important to talk about than ever? I think yes and no I think that for Anthropoc and Claude I use it every day and I think for small businesses it's such a useful tool to be able to sort of like drafting supplier contracts reviewing commercial terms things that you would have to pay a lot for I think it gives people a not not a and is that sorry is that still cheaper because Lily's obviously talking about the subscriptions you have to pay for some of those services is that still better value than having to pay for it from an outside source for a non-ai agent if you like yes exactly all headcount for example um you're able to scale back and focus on sort of growth and revenue without having to have another person in the team really interesting so what sort of things are you using it for it's embedded every day to like all of our technology from slack to google drive to um microsoft outlook 365 and that it's it's like a extra assistant that you have that aids the rest of the team so when you are hiring people are you are you now asking them about their sort of proficiency with some of these tools exactly it's how do we lean in more to be able to get people that are ahead of the curve.

14:16So I do think that's something that is going to happen at universities, in schools, where they need to lean into how are they integrating AI courses into the framework. Lily, in terms of what happens next then, is it sort of just a matter of time before, we've heard ChatGPT mentioned a couple of times on the programme already, their maker, OpenAI, and Sam Altman join this kind of IPO race too, do you think? It is a matter of time. It's more when, not if. And actually, Sam Altman was asked about Anthropics big news today. He was interviewed on CNBC. He said it's not a race, but that they are going to move forward when they think they are ready.

15:01So effectively, confirmation that they are planning to move forward with an IPO. Sounds like both you and Tineka are both looking forward to getting your hands on this prospectus and having a look at the numbers of these companies. Yeah, that'll be a whole day's project, if not longer, maybe a full weekend. We'll come back on and chat to us when you've got your mitts on it. Thanks so much for speaking to us as always. Thanks. Lily Jamali there, our technology correspondent, speaking to us from Silicon Valley. Now, Julianne was talking about this right at the top of the program, wasn't she? The prices of things still going up, input prices for lots of things within her business.

15:34The price of aluminium has hit a four-year high yesterday after the US and Iran traded strikes. And of course, Iran said that they would consider the ceasefire over if Israel didn't stop attacking Lebanon. Gulf production of aluminium, which makes up 9 % of the world's supply, dipped to its lowest level in over a decade in May. That was according to the International Aluminium Institute. With uses across transport, construction, packaging, rising prices, of course, could put pressure on manufacturers and those end products down the line. And Dave Roberts is with us. Dave is the chief executive of EvTech Group, casts and assembles aluminium products across sites in the Midlands.

16:12They're a supplier to the likes of JLR, as well as the aerospace and defence industries. David, morning. Good morning, Will. So this has been bouncing up and down for a while, hasn't it, the price? I mean, it's kind of one of these things, isn't it? Once something starts hitting record levels, it kind of stays there. But what impact has that kind of continued high price pressure had? Well, it's a slightly bigger increase than the dollar one because the sterling rate has also gone against us. So actually, aluminium's up over 50 % since the end of 2024. And there's a number of factors that do that.

16:53As you mentioned, the Iran conflict is certainly one of them. Two big smelters in the Gulf, one in the UAE, one in Bahrain, have been attacked. They've both said they're not going to come on to full production for months, possibly a year. The Strait of Hormuz is obviously a choke point for non-Chinese exports, and we all know the story around the Strait of Hormuz. And there's about 4 % of the global supply been cut this year alone, and that's certainly driven up prices. And just so we're clear for your listeners, you can't just restart a smelter, which makes aluminium with a flick of a switch.

17:33These things are big capital investments and they're long lead times. The other factors that sort of play into this are we're using a lot more aluminium. And your listeners will touch aluminium every hour, at least in the UK. It's everywhere. And it's certainly there in a car. Now, the modern premium vehicles use probably three and a half to four times more aluminium than they did, say, in the 1990s. and JLR pioneered the old aluminium body structure. And so every new platform uses more, particularly EVs. We make an awful lot of product around the EV housings, the battery housings, the motor castings, the structural members.

18:15They're all important for lightweighting the vehicle and lightweighting the vehicle equals more range, which of course we all want. So when these prices rise, car makers can't simply switch materials. The tooling investment alone is enormous and already made. So it's engineered into the next generation of vehicles, and it also appears in building, in renewable energy products, aluminiums everywhere. Yeah, beyond cars. Just give people some other areas, because I think that's interesting, isn't it, about where people might see sort of unexpected price rises, David? Well, you'll certainly see it in your home.

18:52You're touching aluminium non-stop, particularly in the kitchen and appliances. You'll certainly see it in trying to make renewable energy in wind turbines, for example. There's a huge amount of aluminium we put into it. The defence industry, the aerospace industry. You know, Airbus is on a very big ramp up in 2027 on its wing programme for planes against Boeing. We've got a fantastic wing assembly planned here in the UK. And aluminium is the key thing for those wings. So it'll affect every part of life if we can't secure long-term aluminium supplies. The other point I wish to make is we produce an enormous amount, the EU and the UK, of scrap aluminium, and we can retake that scrap and recycle it.

19:42So we're proud as punch that we can take effectively a cola can, and 12 weeks later it's being used in modern premium vehicles. It's a fantastic circular economy. Unfortunately, we are exporting nearly all of our scrap because they pay higher prices to China, India and the Far East. They then recycle that aluminium, probably using fossil fuel, and then ship it back here where we pay for it. So actually keeping that at home then would make more sense in the kind of crunch that you're talking about? Or keeping more of it at home? Yes, more sense permanently, actually. So the EU are just about to introduce export controls on that.

20:26Trump has already stopped that with the use of tariffs. We are thinking about some sort of consultation. Now, really, that could stop very quickly. And there's a lot of recyclers in the UK who are running on low capacity because they don't have the feedstock. So it seems odd the Far East is hoovering up all of our UK scrap. we're exporting it and then importing the cost interesting in terms of time frames then for people what is that you know you were talking about since the end of 2024 right that it's up 50 the price is that already being passed on or as far as you're aware sort of your customers are you able to absorb some of that and and is as a result some of that pain to come or is it already being filtered through well you know they all flow into ultimately in our industry and to be able to build costs and and where new car prices are already high you know with with the adoption of ev and the costs associated with that that's yet another upward pressure there's half a million of manufacturing jobs in total in the uk that depend on the automotive sector you know going through the tier ones the tier twos the tier threes and most of them don't have the scale to absorb those costs they just don't so there's some consolidation happening in the industry and some businesses won't survive without support.

21:50Julianne, come in at this point as well, because it's not just aluminium, is it? I mean, you were sketching some stuff out right at the top of the programme. What is it that's also, I guess, people can see the obvious ones, right? The price of oil and things like that going up, but the slightly not hidden, but less immediately obvious price rises, what are you still seeing? I think people don't understand the transport side of things. For example, it's a knock-on effect, we supply nine airlines for example and they are obviously worried about fuel and just being able to make sure all their flights go out and they don't have to cancel but then when that's a knock-on effect down to food and drink businesses it's pressure on the food and drink business to be able to lower their prices or get economies of scale and that's that's quite tough in itself So, for example, when transport goes up, that one penny can really push a small business over the edge at times.

22:48Yeah. What does that look like? What does that mean? Does that mean freezing hiring, letting people go? Well, investing in innovation is one of them. So being able to produce new products, new technology, for example, allergen-free. It's being able to create a product that is free from the top 40 allergens. But do we have time and the resource and the funding to create that? And then also, will the end customer be able to buy it? Because supermarkets, for example, and retailers are just not accepting cost price increases at the moment either. That's an interesting one, David, as well. Is that happening in your line of work too about investment, I guess, freezing, drying up because it has to?

23:32Well, it puts more pressure on your investment decision. You know, manufacturing wants certainty. We all do, don't we? But manufacturing needs certainty if it can get it to justify its capex. Evtech's got a big capex program going on as we speak for our two big foundries in the Midlands. But the honest answer is that you've got to have scale to support your businesses these days to absorb these additional costs. Without it, you're very vulnerable. I don't want to be overly doom and gloom, but is the sense from both of you, perhaps GLAN first and then David, that the pain that we've seen from price rises so far because of the war are actually kind of the beginning, that we're going to see more of this through the second half of the year?

24:16it? Regretfully, I think that is the answer. And if you look at some of the bigger investment banks in the world, several of them are predicting a$4 ,000 per ton aluminium price by the end of this year. And again, one of the issues I have is, how do I deal with that? If banks think prices are going up to$4 ,000, some banks are a little bit less pessimistic. But how do I deal with that in terms of my forward buying of aluminium for the next 18 months it's very difficult. Julianne? Yeah I think that so for example everyone's celebrating that cocoa prices have dropped but the chocolate on shelf today was made with the cocoa brought at record highs so the relief hasn't arrived yet and it doesn't and you won't get that 60 % back so cocoa for example is the headline but packaging, energy, transport are really the hidden story and I think consumers are going to be facing more inflation on food prices.

25:15Sineke? Yeah, no, I was just sort of nodding along because yesterday we had the UK manufacturing PMI survey, which is sort of surveys manufacturers throughout the UK. It was a positive number. So the UK was actually up a little bit from last month. But within that survey, most of the manufacturers are citing exactly what the aluminum story is rising input costs and supply chain challenges. So delays in deliveries. So, yes, there is upward pressure on inflation. Company by company, they do some hedging. So there is a delay, but the pressure is up, not down. And zooming right out from what the guys were saying about individual price rises of certain products and whether you buy a new car or whatever, it also means longer term higher prices.

26:04and presumably that means longer term, higher interest rates for our listeners and their mortgage repayments and those kind of things. Yeah, unfortunately, it's all linked. And clearly the higher inflation expectation, we're seeing that in the yield on UK yields. So they've risen. So yes, the mortgage cost at the start of the year for two year fix were 4.8 and now they're sort of maybe five and a half. So it's all costs more. So we were on a downward trend before the Iran war and that has now reversed and we're on an upward trend. Well, David, do come back on and talk to us again about if and when that support arrives or what that should look like too.

26:44It sounds like from your reaction to that, you're not holding your breath. I don't think I'll be on the programme on that discussion for a long time. Well, fingers crossed that you're proved wrong. Thank you for speaking to us this morning. Really appreciate it. Thank you. David Roberts there, the chief executive of the EvTech Group, casts and assembles aluminium products right across the Midlands as he was explaining supply to the likes of JLR as well. More from Julianne and from Tineka in the second half of the programme where we're going to be talking about these ongoing issues with south-east water and the impact that's having on businesses in the south-east of England.

27:16Your text coming in too, this text anonymous, one way aluminium could affect people is in canned stout. Yes, we're going to be talking stout wars in the second half of the programme. hopefully not too big an impact on that although it doesn't seem to be making a difference at the moment because there seems to be one of the few areas where there is a boom the boss of weatherspoons tim martin is going to join us live on the program to talk about all of that wake up to money with will bade morning welcome back to wake up to money on tuesday the 2nd of june where our panel this morning are julianne ponen the chief executive of creative nature makes allergy safe foods and baking mixes and tinnika free k here in the studio with me senior fund manager at W1M.

27:54Do keep your text coming in on 85058 or on the WhatsApp 08085 909693 if you've got any questions for our panel or thoughts that you would like to get across through the morning. We're going to turn to a story that we've chatted about a couple of times on the programme in the past few weeks. More than 3 ,000 properties in South East England continue to face disrupted water supplies this morning after days of disruption. The water regulator Ofwat has now intervened in the ongoing issues in Kent saying Southeast Water must get a grip of the issue quickly. Our reporter Simon Jones has been in Whitstable where people have faced 10 days of water disruption.

28:30Well, I spent a lot of time over the past 10 days at bottled water stations. Where I am at Whitstable has been one of the worst affected areas. And the number one job of any water company, it might sound obvious, is to supply water to its customers. But Southeast Water has been struggling to do that and the problems really came at the worst possible time. last week was supposed to be really busy, a bank holiday weekend and the school half-term holidays. Businesses hoping to cash in but some were forced to close temporarily as they had no running water. Now Southeast Water blamed a huge increase in demand during the heat wave.

29:05It said some storage tankers reached critical levels. At one point 22 ,000 homes and businesses were affected. The company says the situation is much healthier now but the weather is also cooling down and the company hopes reduced demand will see stocks replenish and it says there will be compensation for homes and businesses affected but what people want here above all is to turn their taps on and to know that water will come out the company says it's working hard to make sure there aren't more problems due to the heat this summer but it says it can't guarantee that so there could be some long sticky days ahead simon jones reporting there from winstable and yes southeast water is the top line of our story on the BBC website has told its customers it can't guarantee supply failures would not happen again if we get another heatwave later this summer.

29:52Not much reassurance then. For businesses in the region, businesses like the Crescent Turner Hotel in Wichita, where Simon was, and Sarah Simmons, operations manager there, joins us live on the programme. Sarah, morning. Thanks for being with us. Oh, good morning. Well, it doesn't sound like you've had many great mornings recently, but talk people through the impact so far. I mean, the most frustrating element is that last year, last July, we had 10 days of no water. And there clearly has been no lessons learned because we're just, aren't we, at the end of May here with no water, no communication.