Burnham, bonds and by-elections

23:27If I don't get it, I'll go backwards and I get swallowed. So unfortunately, in that situation, I have no choice but just get my head down and move forward.

23:35Felicity Hannah:And, you know, is that possible? I mean, what would, if prices stay elevated, you know, for the coming months, if we see a really, really prolonged round of inflated prices? Could that mean that you can't make those investments? Potentially, yes. It's difficult. I mean, our customers have been very supportive with us in the main and they understand that our prices have had to increase to cater for the extra cost. And because we have good customers and we have good financial management, we're in a situation where we can move forward. But that's our business. A lot of our colleagues in the industry are not in that situation.

24:11Credit lines start to get eaten up very quickly because the price of fuel is so much that they can't get what they used to be able to get with their fuel cards. So the amount of fuel they're purchasing is eating their credit up and they don't have the cash to keep on top of it. That's where it gets dangerous.

24:27Felicity Hannah:Yeah, and it shows as well the different ways that the elevated oil price can feed into oil prices beyond just the sort of filling up your car or buying an airline ticket or whatever it is. It feeds into the whole economy, doesn't it? That is something that the Chancellor is anxious about. We know that she's going to make a cost of living announcement this week. And there are reports this morning from The Times, The Telegraph and The Sun suggesting the Chancellor could scrap potentially, this is not confirmed, potentially scrap a planned 5p rise in fuel duty as part of that announcement. Would that be a big relief for you?

25:02Felicity Hannah:Because that hike was meant to come in September. It would be significant help for everybody in the supply chain. it means our prices will hopefully drop. I say hopefully because whether that will feed through will remain to be seen. But it's not just the price of fuel, as you alluded to there. Tyres, they use oil. They're expecting the price of tyres to go up. A truck tyre now, best part of£400 each. You've got eight on one of my trucks. That's the signal that's increased to us. You've got AdBlue, which is the additive for the diesel. That's almost gone 40 % in price since this began. unfortunately I think we're going to start to see more cost increases later in the year at the moment we're a bit shielded from the true implications of what's going to go on what about your drivers are they seeing their own prices go up their own bills go up and asking you for for more money to help ease the pressure on them everybody's costs are going to go up you know it's if you think 80 percent of all food stuff of products 90 percent of food moves in the truck So, you know, by right of passage, if the cost of moving it in the truck is going to go up, the cost of the product inside the truck is going to go up.

26:11And that's a slow, slow burner, but that will eventually feed through to the floor.

26:16Felicity Hannah:I want that, Tim, I want to bring in Shanti, who's still with us, Shanti Kellerman from Seven Investment Management. Shanti, Tim's sort of illustrating just what a wider macroeconomic impact rising oil prices have. When you sort of think about things like tyres, obviously, yes, those are made partly using oil derivatives, but it's not immediately obvious to people the different ways in which a rising oil price can really compress the economy. Yeah, oils and a lot of things, you know, fertilizer we know about, you know, because that's been in the news a lot, but, you know, rubber. And it's also just industrial processes.

26:55So if you're a manufacturer, you need energy and, you know, the energy cost goes up. But I think the simplest way to think about global oil prices, they're essentially just a tax. And then, you know, if the tax goes up, you've got less money to spend on other things. That's what's happening here. They tend to be a drag on global growth. So we'll probably, you know, see slightly tougher times ahead. I think there's still a path to resolve things in the Middle East. But the problem they'll have now is they've got to if they did all, you know, you open the straight tomorrow. You've got to get all the ships back into place.

27:31And a lot of those ships have gone all over the world, have started optimising to do other things. So it would take a couple months to get back to normal, also with refiners starting up again. So I think we've got a bit more to go, sadly, is probably my message this morning.

27:47Felicity Hannah:Tim it's probably not the message that you wanted but I suspect it's the message that you've already taken on board that it will be a long process to get oil back up and running even if this conflict was resolved this week. Tell me where you're finding optimism as a business. Tell me where you're kind of looking ahead and planning these investments. Is that giving you some grounds for optimism that there could be growth that 2026 could be a good year? There has to be. As I said too early, it's everything we have in our houses and we're eating. Well, at some point, almost certainly been on the back of a lorry.

28:25So people are always going to want goods to move around. We're a nation of consumers. That consumption, I don't see declining to that extent. I say fortunately for my business, we're in a good financial position. And so we can do this. So I think we will survive. We'll get through this and we'll come out the other side in a stronger position. Whether or not the industry will be in the same place is debatable. As I said earlier, the biggest problem with people is credit lines and cash flow.

28:57Felicity Hannah:Tim, thank you so much for beginning what sounds like a very busy week for you with Wake Up To Money. We appreciate your time and we'll speak to you again soon, hopefully when things are calming down. Wouldn't that be good? Get you on for some good news. But Tim Ray, thank you. Tim Ray there, Managing Director of Multimodel Logistics, which has a fleet of 76 lorries, which does put it all in context, doesn't it? All right, that is the first half of Wake Up to Money. J.G. Lucina, Shanti Calamon, stick around. There's lots more to talk about. Save now at Whole Foods Market. It's the summer splash event with great everyday prices on 365 brand ground beef for the grill and ice cream for dessert.

29:38They have yellow sales signs on ready-to-cook beef or chicken kebabs too. Level up with savory marinades, spices, and rubs, and complete your cookout with a crowd-pleasing cherry pie and their balsamic chicken salad. Available at the prepared foods counter. Get Summer Splash savings now at Whole Foods Market. Wake Up to Money with Felicity Hanna.

30:03Felicity Hannah:Good morning. If you're just joining us on Wake Up to Money, then welcome to the new week. Welcome to Monday. Welcome to a chat we're having about AI, which we've already been hearing in the programme, can do some fantastic things, can be really, really useful to businesses. I'm joined on the show this morning by Jega Glucina, Managing Director and Chief of Staff at Luminance, which is an AI platform that reviews legal contracts for businesses. So Jega has been pointing out all the many, many ways that AI can help businesses. it's interesting though because later on in the show we're going to be hearing that people are using or misusing AI to essentially doctor photographs of items they've ordered online and ask for a refund and then they keep the refund and they keep the item we'll be hearing about that just before six o 'clock this morning so I've been asking you today when if you've been caught out by AI or how you're seeing it being used in different ways Eddie and Hitchens says Parents are now using AI to send letters to school to highlight send and EHCP concerns.

31:04Felicity Hannah:So that's potentially a useful way that parents can use it to navigate what can be quite a complex system. Somebody who doesn't give their name literally lists themselves as a non says AI legal problems. If the AI makes mistakes, who takes legal responsibility or liability for that? Is the client protected or caught by small print? Jager, that's an interesting question. I suppose you have your own in-house AI program, don't you? So presumably you've worked quite hard to make sure it's never hallucinating. That's right. It's really, really important in specific fields and legal is one of those.

31:43You know, if you're a lawyer, if you're a client of a lawyer, you expect complete accuracy when you are, when you're retaining your counsel or when you're referring to, say, legal textbooks or research. with ai products it's it is an interesting one and it's a question that always comes up of course as you can imagine when we're speaking with customers or prospective customers it's how do we know the best way to use this so the way that we we've designed the product is to obviously reduce hallucinations to the greatest extent that we can which is important and we've designed our technology in a way that we feel has a very high degree of precision traceability transparency sightability.

32:25Look, we would never say that the AI is 100 % accurate all of the time, because I don't think any AI program could actually claim that today. But that doesn't discount the huge amount of efficiency, productivity, risk reduction, and actually the ability to unlock costs and revenue streams for businesses that our program brings. However, we do, of course, disclaim that throughout the product that this is a product and it does not take the place of legal databases and legal counsel, but it's there to be used as your assistant. And again, if you can think about the huge benefit of having AI remember the actions that businesses are taking every single day and then build up that context so that every future decision is informed, far more informed than it would have been before without that assistant, then you're actually, you know, you're making a huge amount of ground.

33:21Felicity Hannah:Well, I would like to hear from listeners this morning, the good, the bad and the ugly when it comes to AI85058. If you want to send me a text on WhatsApp, it's 08085 909693. Still plenty of time to get in touch. But we must talk now about defence because despite an initial due date of autumn 2025, The government's defence investment plan has still not been announced. Now, of course, there is the potential leadership challenge for Keir Starmer on the way. Only potential. I should reiterate that. It's not actually happening yet. But what could it mean for the UK's defence sector? Let's ask someone who knows.

33:59Felicity Hannah:Hannah Croft is Vice President of Strategic Engagement and Government Affairs at the British defence technology company Rowden. Hannah, good morning. Hi, good morning. How are you? Well, I'm curious to know what you think of this, because the government's defence investment plan could not be more important, could it? It's going to set out spending on defence for the next decade and it's delayed. How important is it to your industry that you get it as soon as possible? Yeah, I mean, it's a really good question. But if I'm honest, I think that typically the public conversation seems to really fixate over the inputs as opposed to really discussing the outcomes.

34:37And I guess what I mean by that is that we can talk a lot about the sort of the final amount of money. But actually, it's allocation of capital. Like, where are we going to spend the money? In what types of technology areas? And in what type of capability areas? Like, what are the capability gaps that we need to address in the near term? And then what are the sort of core technology areas that we want to prioritize over the long term and invest in kind of sovereign capability? So I guess what I would say is that it's, yeah, of course, that the UK public and frontline commands will always argue for more investment, as will industry.

35:14I think the more interesting question is, yeah, as I said, where is that capital allocated? And also the pace in which that investment into technology becomes operational capability. I think that's the more important conversation.

35:26Felicity Hannah:OK, but the conversation can only really start when we get the plan. And there were reports late last week, including in The Times on Friday, suggesting that the plan could be approved as soon as this week. Do you think perhaps the political instability is actually kind of hurrying up the investment plan's approval? To be honest, I really couldn't say. To be honest, I think any potential changes at that sort of level, I wouldn't expect to impact necessarily some of the strategic intent around building a stronger industrial base, investing in core capability areas like I mean you you were just talking there about AI like technologies like autonomy so I wouldn't expect there to be much of a change in what the intent is in terms of like the pace by which they're able to release it I'm I'm I'm really not sure but you know following it very closely as most people are in our industry.

36:21Felicity Hannah:When you look at the potential political movements at the top of government do you kind of look at that and try and assess what the different potential candidates might feel about defence, how it might affect your sector? Or are you pretty confident that once this report is, this plan is out, that things will be locked in for the next 10 years? Yeah, I think it's a really good point, actually, because I think like, ultimately, we're operating an environment where technology cycles are moving much faster than they did historically, which is kind of quite an obvious thing to say, but it's particularly prevalent for our sector and it is directly informing a lot of the sort of procurement reforms that you know ultimately the mod and the government are trying to address the pace by which they're able to move like invest in money and ultimately deliver capability so i guess all that brings me to is like i think there's probably a discussion about like how long term investment planning um evolves alongside the need for like much greater agility and capability development and acquisition i think government recognizes that challenges but i think there's probably a trade-off amongst like um needing to develop you know every sort of four or five years a sort of longer term strategic plan certainly the industrial strategy i think is reflective of that um which is a longer term planning around things like skills pipelines and and talent within the uk and sovereign control over certain technology areas but then equally at the same time they may not be able to they don't those plans don't necessarily capture the speed by which technologies or threats are unnecessarily evolving.

37:57So, yeah, I guess there's a little bit of a balance between the two.

38:01Felicity Hannah:Let's bring in Shanti Kellerman now, co-chief investment officer at Seven Investment Management, still with us. Shanti, presumably when this plan, defence investment plan, does come out, the markets will be looking at it, investors will be looking at it and looking at defence businesses, and we could see a market reaction. We already know that defence spending by the government is likely to go up because that's been, you know, kind of announced across all of Europe. So I think some of that is already in the price. And you've already had some quite, you know, defence has been a really strong sector over the last year.

38:32I think there's definitely an interest on exactly where it's going. You know, are we going more towards tanks? Is it drones? Is it the technology side of it? Because defence can mean a lot more than it used to. And I think it's like as a sector, it's probably broadening out to a lot of, there's lots of different ways to you know to fight a war so I think it'll definitely have some investor interest but it's also that bit of a 10-year plan are they actually going to stick to it so I think people will still be very concerned about you know what's the current year budget allocation and have a little bit less weight on what they say it's going to be in five years.

39:08Felicity Hannah:Jager I'll bring you in now because Shanti's right isn't she that it can broaden out enormously and in fact Luminance your company works with various defence firms and uses AI tools to assist with the procurement process. Yeah, that's actually right. We do work with some of the biggest names in defence, especially in Britain. So Rolls-Royce, for example, is one of our customers. And when there is uncertainty, I guess, at the policy level, we see those effects firsthand because our customers are coming to us and saying, hey, we've got this idea. Can we have a look at this? And can we review this in our contracts, especially when it comes to supply chain?

39:43So So that's very specific to procurement, as you say. And so projects get delayed, budgets get redrawn, the procurement teams and the legal teams are at the front of this in companies and they suddenly need to know exactly where they stand and they have to look at their position across thousands of contracts. So you can imagine previously that process would have been months, weeks, you know, even longer than that. And now with AI, they're able to understand the landscape far quicker, build up a picture and make a far more informed decision off the back of that which is I think one of the most powerful things that AI can help businesses with it's the detail but it's also the bigger picture thinking and the ability to understand what's happening at a glance so you know traditionally you'd have a team of lawyers or you might even outsource that work to your external counsel and that would be incredibly costly but now you can do all of this in-house within a couple of clicks.

40:41Felicity Hannah:Hannah, I wanted to ask you a little bit about, not Brexit, but closer alignment with EU. Because you talked a little bit there about sovereignty and the government did talk about moving closer to Europe in the King's speech last week. How important would that be for the defence sector more widely, do you think? Yeah, I think it creates a lot of opportunity in terms of, you know, if you look at it from a military perspective, of like increasingly strong alignment and interoperability between basically different technologies or capabilities that our militaries use and that directly informs some of the decisions that are made around how like what types of capabilities are built and how they're designed but I think certainly for industry that shift potentially opens up more opportunities for export, but equally like joint partnerships, potentially with other European nations where you may be partnering on other European, like major European defence programmes.

41:42So I think it does certainly create really exciting opportunities for industry and opens up a wider market in which they can potentially team up to go forward together.

41:54Felicity Hannah:And just briefly, the government announced on Friday new rules that mean suppliers can be paid up to 10 % more for completing projects to time and budget. This is in an effort to reward suppliers who actually get equipment to the armed forces faster. Is that a significant change to the rules and will it affect the way your business runs? Yeah, I genuinely think this is a really important and positive step for the sector. I mean, it is, I guess, to sort of specify, it is only focused on single source procurement. So that's essentially where it doesn't involve a competitive process. But I think, importantly, this is about understanding, like, well, how can we move faster in procurement and create the right incentive structure to do that?

42:42So improving things like pace, delivery, productivity. um i think that this is yeah as i said a really important um step that the the mod has made and i think um is sort of suggested of wider reforms that they're making um within procurement i mean ultimately like the question is like how do you contract for good behaviors like how do you drive the right outcomes that you want for a particular program where you're dealing with increasingly complex technology. And so I think that this is probably the right step and we're starting to see other types of reforms. For example, how are competitions designed and executed to get the right outcomes for teams that are delivering projects?

43:25So increasingly now we're seeing the MOD run competitions where rather than selecting one supplier based on, for example, a paper-based bid, they might down select four or five suppliers and ask them to build a prototype within a few months. And then they'll evaluate those technologies before making a final decision. So this is another way of driving the right incentives around pace, being able to evaluate technologies in the right way. And again, I think this policy change is sort of indicative of that for reform. So I think it's incredibly positive.

43:56Felicity Hannah:Hannah Croft, Vice President of Strategic engagement and government affairs at the British defence tech company, Rowden. Thank you very much indeed for joining us. And an MOD spokesperson, thank you, told us the government is delivering the biggest uplift in defence spending since the Cold War with£270 billion of investment across this parliament. And they said, we are working to finalise the defence investment plan. It will be published as soon as possible. And no doubt when it is, we'll be talking about it on Wake Up To Money. Again, loads of you suddenly getting in touch with your kind of AI uses, your AI stories.

44:29Felicity Hannah:Chris in Sussex says, morning team. Morning, Chris. I am having huge success with using AI. It's made the process of planning applications much easier for me and I've gained permission for projects which would otherwise have been very difficult. In all aspects of my work, it has sped things up and improved output. I don't see it replacing me at my age and stage of life and career, 45, but I do see the younger generation getting started in their careers, struggling to get those entry level jobs. My advice is to understand it and master it. AI won't take over the world, but someone who uses it will.

44:58Felicity Hannah:Chris, thank you for that. Keep your thoughts coming. There is still time, but we're talking about AI because we are discussing potentially the ways it can create potential, positivity, but also pitfalls, challenges for businesses. And one area where it can create some real trickiness is in shopping returns. Maybe not where you would immediately think of it. Now, Forta, which is a global e-commerce fraud prevention company, has told us it's seen a 15 % increase in return abuse over the last six months. And it says it's driven almost entirely by AI doctored images. So AI being used to adapt a picture of the product that the person's genuinely received and make it look like it's spilt or broken or torn or ripped.

45:47Felicity Hannah:The chief executive of FOTA is Michael Reitblatt, regularly on this show. He also said that 80 % of all attempts to commit fraud are being done by AI. When we talk about AI fraud, we can mean different things, right? It could be as simple as people using AI agents to automate the way they do fraud. So instead of doing it manually, it's very simple now for a not very sophisticated fraudster even to create an agent or a set of agents that will commit fraud on a kind of a one-a-minute across hundreds of thousands of attempts. I think a second thing we're seeing is how easy it is for not sophisticated and not even, let's call them not criminal organizations, but maybe people that sometimes think of themselves as savvy shoppers or such that are committing a victimless crime, so to speak.

46:35They are doctoring photos, right? So they're ordering an item. They're saying, I bought this pair of shoes and I actually don't want to pay for it. So let me claim that the pair of shoes that I got were faulty. There's a hole in them. It's the wrong size, color. I don't know, they're dirty or something. It's very easy for them to take a picture of the shoes they just got, upload it to one of the picture generated, kind of could be the new Chachapiti image too. It could be Gemini's Nana Banana and say, create this pair of shoes with a hole in them. Then you submit a a claim with the retailer you just bought it from and say, I got faulty shoes, I want a refund.

47:14They will ask you to upload a picture and you're uploading the picture you just created. And it oftentimes is very, very hard for people to see that something's wrong, especially since it goes to some call center. They're not trained in detecting AI doctored images and they'll just refund it and you just got a pair of shoes for free.

47:32Felicity Hannah:And you're seeing a rise in this. You can document that this is on the increase? Yes. And we're not just a general rise. We're seeing that every time there's a new image generation model, there's a spike in usage for that context. How many? I mean, are we talking about a rise from a very small start? No, we're seeing, I think, thousands of those on a weekly basis. Usually, you won't be able to do it too often, right? If you're an organised crime, you're trying to make a million dollars, You're not trying to get a free pair of shoes. So more of that we're seeing around people that misbehave, right?

48:06What they're doing is illegal. What they're doing is against the terms of policy, but they oftentimes don't think of it this way. We actually see some people post on their own social media profile of, hey, you can do this thing and get the free item, which is kind of dumb because they're admitting a crime. But there's clearly some misconnect between the fact that they're thinking that they're doing something that's maybe okay.

48:28Felicity Hannah:How are they keeping the shoes there? Is the answer for this not simply for all retailers to insist that faulty items are returned for a refund? Well, some of it, but there is a competition on service, right? So a lot of the, especially the very large retailers, right, Amazon being probably the best of them, will tell you the moment you submit a claim, we'll issue a refund for you because they want to make sure that consumers have confidence in buying from them. because oftentimes the returns are there because there is something wrong with the item. It's the wrong size. It's the wrong color. It's actually faulty.

49:03And the second thing is, depending on the cost of that item, it's often in the best financial interest of the retailer to just tell you, you know what, keep it.

49:10Felicity Hannah:AI is really changing the game for fraud, isn't it? Right, I'll give you kind of one stat because we do track it on a daily basis. Now over 80 % of all attempts to commit fraud are done by AI. They're not done by humans. And we expect that to probably be over 90 % within less than a year. AI enables you to commit better, more sophisticated fraud and do it at a larger scale. So that is the chief executive of Forza, Michael Reitblatt, just outlining some of the AI challenges for businesses. But it's not just businesses, is it? We're all selling stuff online now. A lot of people using sites like Vinted or eBay and selling items that way.

49:49Felicity Hannah:and they need to maintain their reputation as a seller, just like the big businesses need to very, very quickly kind of make consumers who want a refund happy. So let's hear from an individual seller. This is Polly. Now, she downsized her property. She sold some of the excess household belongings online. And she's experienced this. This is her experience with a return scam. So this was actually on eBay. And I got a message saying that an item that I had sent had been damaged. and so I looked at the photo and it wasn't what I sold and it was it was damaged but it wasn't what I sold it wasn't what I packaged the product in I think what really surprised me was the product wasn't actually worth that much I think I'd sold it for about 15 pounds so to me it seemed an awful lot of effort but something to go to to try get refunds 15 pounds now I did refund them because You refunded them.

50:42I did, yeah, because for£15, it's not worth sacrificing decent rating online. I think both, because I saw on Vinted and eBay, some of those platforms, trust is absolutely everything. And people will look at your ratings. From my perspective, it was actually worth maintaining my rating and giving£15 back rather than getting potentially a bad rating. I think AI now, it's just so easy to do these things. So nothing surprises me with reselling these days. I will tell you that for nothing.

51:13Felicity Hannah:Oh, Polly, no, we don't want to reward the people doing the scams, do we? But you can see exactly why it would just be the simplest answer. Jega Glucina, Managing Director and Chief of Staff at the AI platform Luminance. I know this is not your area. This is a whole different kind of area of AI misuse. But it is interesting, isn't it? This does show that businesses are going to have to fight back against stuff like this. And I suppose some businesses, maybe your business, might be thinking, well, AI is probably part of that fight back as well as causing the problem. Yeah, that's a really good way of looking at it.

51:49I definitely think this is sadly one of the dark sides of AI becoming so accessible now when you've got the same tools that have helped legitimate businesses create really compelling content and products. Then also having to deal with this fraudulent element. And sometimes I think actually very often it's very, very hard to spot. but we are as human beings getting better at it so I think we need to keep at that we need to you know really really assess what it is that looks good and and it's you know think to ourselves if it looks too good to be true maybe it is check the reviews check the returns policies in this particular scenario and then buy from trusted and established providers where you can I think it's awareness awareness regulation and also now platform responsibility that's really important to platforms yeah sorry sorry sorry but that

52:41Felicity Hannah:awareness is so important isn't it because what what ai has really done in many areas including these problematic areas is kind of lower the the barrier for entry i i can't photoshop but i can tell a um an ai program to to whip me up a picture and it'll be done in in moments and i haven't really needed any skill and that's you know that that is the the issue for the kind of the dark side of these technologies. It is. I think we just have to really, really be conscious about what we're doing and what we're using these systems for. You shouldn't necessarily just trust every AI just because it's AI and it's accessible.

53:19I'd be looking at what this AI is, where my data is going, if anything I'm entering into it could be used in a harmful way. And it just is the case now that these tools are being used for both good and bad.

53:31Felicity Hannah:So we have to really be aware. We are just absolutely on the brink of a major change. And not everybody has quite kind of got their heads around that yet, have they? Jager Glusina, Managing Director, Chief of Staff of Luminance, absolute pleasure to have you on the programme. Thank you for joining us. Shanti Kellerman, same. Thank you very much for being with us. Shanti Kellerman there, Co-Chief Investment Officer at Seven Investment Management. I just want to finish with a message from Liz in Devon that I quite like. She says, I think AI will have an even more toxic influence on society than social media, but it's already too late to do anything about it.

54:03Felicity Hannah:A small example is when people send you masses of boring photos of their holidays, most of them alter to look more glamorous using AI. That's it for Wake Up To Money. Wake Up To Money from BBC Five Live. That's it from Wake Up To Money. Don't forget to subscribe on BBC Sounds or wherever you get your podcasts. And when you do, we'd love it if you'd leave us a review. You can also contact us anytime on social media using the hashtag WakeUpToMoney.

54:33Felicity Hannah:Welcome to the Wayne Rudy Show. We're joined by Wayne Rudy. We are joined by the actor James Nelson-Jones. Is that him, lads? Is that him? We've got to get you in season three. We've got to do it. Bruno, this is the first interview I've ever done. Very nice to be here with you. I played against you. I got the shirt off you, but you don't know it. I asked Juan to get it for me. Paddy, thank you so much for being with us today. I know I'm going to win the belts. That's in my destiny. It was just, that wasn't my time. The Wayne Rooney Show. Watch your night, player. Listen on BBC Sounds.