ChatGPT Maker Goes Public

26:39etc. And different countries will take different approaches. So we've heard, for example, that the Republic of Ireland has said, sure, come build your data centre here, but you have to make plans for your own power. You're not getting it from us. So I think there will be different approaches taken in different countries. But I think it does reflect that the general public is, I think to say it's meeting all of these developments with excitement, I think would be a mistake. Yeah. And even in the Republic of Ireland, seeing people putting maps up of where these data centres are and questioning why they're going to be there.

27:09Interesting, isn't it? My colleague Gideon Long on the World Service did a fantastic piece about this. People want to hear a bit more, particularly of some of those concerns in Missouri and the United States. It's been a real flashpoint, as Sunil was saying, of all of this, but also some examples from here in the UK, from Slough, in the south of England as well. Gideon's piece is called How Do We Live With Data Centres? It's on the Business Daily Sounds feed, or you can find it on your podcast platforms there. Ever invest in something that seemed incredible at first, but didn't live up to the hype?

27:39Like those$5 roses at a gas station, or a second-hand piece of technology that breaks in the first 10 minutes? Marketers know that feeling. We optimize for the numbers that look great, impressions, reach, and reacts. But when they don't show revenue, well, that's a not-so-great conversation with the CFO. LinkedIn has a word for that. Bull spend Now you can invest in what looks good to your CFO LinkedIn ads generates the highest ROAS of all major ad networks You'll reach the right buyers because you can target by company, industry, job title and more So cut the bull spend Advertise on LinkedIn The network that works for you Spend$250 on your first campaign on LinkedIn ads and get a$250 credit for the next one Just go to linkedin.com slash broadcast.

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29:43Wake Up To Money with Will Bade. Yeah, morning. Welcome back to Wake Up To Money on Tuesday, the 9th of June. Our panel this morning, Vic Stewart, the Chief Financial Officer of the Alchemist Bars and restaurants and Sunil Krishnan, head of multi-asset. At Aviva Investors, we will be talking World Cup a little bit later on in this half hour. We'll hear from some Scotland fans packing their bags, getting ready to head out to the United States for their first game this weekend. Five Live, of course, the place to hear it all. John Murray live from the Azteca Stadium on Thursday night when Mexico kicked the World Cup off at home to South Africa.

30:17We're going to turn to something a bit more North West based though, because we've spoken frequently haven't we on this program about Manchester's growth story the city has been a star performer of the UK economy since 2008 according to new analysis by Oxford Economics and could provide a template for other major cities looking to grow their economies Liam Sides Associate Director in Oxford Economics's Cities and Regions Department is the author of the report and joins us now Liam morning morning it's a pleasure to be here thank you it's great to have you with us talk us through what you found them so I think the main thing that comes out in the report is really the sort of impressive nature of the growth in Manchester and the sort of unique nature of it as well so the thing that Manchester's been able to do is combine strong gains in employment activity with relatively robust gains in productivity and what I mean by productivity is the output per person it's your sort of measure of living standards within a place and I think we all know is that the UK's had a productivity problem over the last 15 years, or at least since the global financial crisis.

31:23Manchester's sort of booked that trend and has posted relatively strong gains. And I think that's something that other cities can look at. Right. So how has it done that then? So I think there's sort of two ways of looking at this. One part of it is the what. What has it done? And that is it's delivered really strong gains in service sectors of its economy. And I mean here the sort of knowledge intensive business services like head office activities, occupations like marketing, advertising, law and finance. So it's really been service centric growth. The second is around how has it done that? And I think the big thing that you can sort of take away with Manchester is it's really focused on its urban core to drive that development.

32:07So I'm talking the city centre here. And that growth has been made possible by housing-led regeneration in the centre and big investments in the Metrolink tube system, well, metro system of the area. And what's that essentially done is it's increased the effective density of the city centre, making it more attractive for businesses and workers to want to be in the region. Right, because that element has been, certainly over the years, we've reported on it plenty of times here on Five Live, fairly controversial. And anybody who's not been to Manchester for a long time but have been in the past, I think would be shocked at the number of high rises for example in the in the city centre now massive tower blocks everywhere right that no that's completely true I mean I went to Manchester recently and it sort of blows your mind how quickly that city's changed over the last decade or so and you're absolutely right about the controversial nature of it and I think part of that stems from a miss well I don't want to say a misunderstanding maybe that's a bit too harsh but but a feeling that if you grow the centre it sucks activity in from elsewhere.

33:08I think the report that we've pulled together here sort of pushes back on that notion slightly and says in a service-based economy like the UK's and if you want knowledge intensive businesses to locate here you want to accept concentration of services in one place because it's good for the businesses that are there. They can share the labour, they can share the transport services, they can share the wider infrastructure and really benefit from those knowledge spillovers that you get from from clustering businesses together and our view is that what should be the measure of success is how able are people in the surrounding areas to access that city centre.

33:45Well I wanted to come exactly to that because you've talked a lot about Manchester City Centre right Liam what about greater Manchester itself? So I mean one thing that is noticeable is that the really strong GDP and employment growth has been in that sort of central three districts of Manchester. So we're talking here Salford and Manchester local authorities in particular, but also to a lesser extent Trafford as well. So the growth really has been based in these three central areas. But that's kind of expected, as I've already mentioned, from a service sector economy. Other areas have faired weak, so I'm thinking here Rochdale, Stockport, Tameside, Oldham and so forth.

34:27But what you do also see is that income, So household disposable income gains have been much wider spread around the area. And so have house price gains. And we can talk about that in a minute. But what that sort of shows me is, yes, the job growth has been in the city centre, but the opportunities have been widespread. So these other parts of the city have been connected into that growth. And you can see through that sort of commuter patterns into the centre, but also in that income growth, showing that the spread of benefits is going wider. So which bits then are, well, one, which bits are replicable, do you think, for moving around the country?

35:06And what are the keys to getting those right? Is it, for example, that transport, that sort of commutability that you're mentioning? So it really depends on the place. I think if you're a major city region, like sort of the West Midlands of Birmingham there, if you're Newcastle, Leeds, Glasgow, you'd look at this and say, you know what, focusing on that urban core is right. housing-led regeneration will open up the centre, it will attract skilled workers and innovative businesses, that's a good thing to replicate. But it's not just about getting the centre right, it's ensuring other parts of the city can connect into it.

35:41I think if we have a conversation about equitable growth, it's that connectivity and opportunity that other places in the surrounding area can get by accessing the city centre that's really important for policymakers to follow. So that's one part of it. The second part is the importance of, I don't know, a stable political framework within your local area. So what Manchester's done really well over the last few decades, and probably even longer than just the last few, is deliver a consistent and stable policy framework. That has meant that private sector investors can be confident about where they're investing in because the policies aren't flip flopping and changing all the time and they can also sort of have a direct line of sight into the decision makers within within that local area as well i think where it doesn't work is where you've got inter-authority sort of arguments about what should be growth where where should the growth be and that you've got sort of political uncertainty undermining the confidence of private sector really interesting liam where can people find um more of the report if they want to have a little read online etc so what we're going to do we'll put the report on the website that means that the readers can jump on there have a read of it this is the second of sort of two reports that we've done the first one looked at the main drivers of growth this is looking at the challenges of that growth well thanks so much for coming on and talking us through it this morning really appreciate your time thank you very much liam sides associate director in oxford economics cities and regions report there lots of interesting texts vic coming in on that two different ones one anonymous why isn't this guy mentioning uh this guy being liam that people want to be in manchester because of culture and then wayne has also text a similar similar point culture has driven so much of the reason people want to be there there would be little housing demand without it how important culture here too as as um as someone who's built a business here i absolutely think culture is super important i think the marketing manchester team have done a tremendous job of thinking about what it is that people associate with manchester and how people can connect to that i would say culture which includes the music heritage that includes the the restaurant bar culture and it includes the sporting um culture of manchester as well and those things they attract people to university here they help us to keep people here and they keep it vibrant for businesses to locate so i think it's a hugely important part of why manchester succeeded interesting the political point sunil there because again fairly controversial when those sort of regional mayors around the country were starting to be rolled out, West Midlands, North East, Greater Manchester, of course, as well, London.

38:20Does it solve some of the problem of having sort of too many local authorities that perhaps have different agendas? And is that perhaps giving more powers to those mayoral authorities down the track as the government continues to kind of search for growth, perhaps something it can consider? Yes, I think it will be interesting. We probably haven't seen the structured research about what have we learned from the experiment with the mayor project across the cities and regions. What have we learned from that? What's working well? I think one of the interesting things about the report is the difference that it's calling out in terms of the progress of Manchester, maybe other cities.

39:04So I don't think we can say, well, all you need to do is get a mayor and everything will be fine. And I think we need to recognise also that even the powers of mayors are limited. They are still very reliant on effectively getting a big pile of cash from Westminster. But I think what it does potentially show, I think it might be interesting to look into, for example, how has that affected the development and planning culture? And Liam was talking about the high rises in the centre of Manchester and potentially the improvements in transport links as well. And the question is, could that happen in the other cities with or without mayors?

39:43But certainly for those that have mayors, what would stop those types of things from happening in those other cities? I think that is an interesting question. It does seem quite striking to me that when you visit Manchester, it does feel different from other cities outside of London right now. And I think more investigation of why that is, I think, could be a really fruitful avenue. Yeah, it's really interesting. And the pace of that change, I'm always struck by whenever I'm here as well. I've been looking out the window here in Media City, just all the way into central Manchester, down the canals.

40:10Now you can see the scale of the building work going on. If you're a long term Manchester resident, as well as some of other texas have been, let us know what you think. 85058 is the text number to get in touch with us. 08085909693 is the WhatsApp. app. Now I mentioned this on the programme yesterday, some of the UK's best known chefs say the pressures facing hospitality businesses are now reaching breaking point and as a result the industry are calling on the government to cut VAT for restaurants and pubs from 20 % to 10%. We spoke to the Michelin star chef Tom Kerridge, restaurateur, pub owner of course, who's spearheading what's called the VATS the problem movement.

40:49Talk to us through some of the aims. We have three hospitality businesses closing and shutting every single day. So to relieve the pressure, we want VAT to be dropped in line with the rest of Europe, where it sits anywhere between 8 % and 12 % through Spain, France, Italy, Germany. We're calling on the government to have a proper conversation with us about the reduction of VAT to allow businesses to give them a bit of breathing space and operate, stop those closures and allow growth. Vic, are you guys involved with this? Yeah, it's actually, the hospitality industry as a whole is a very sort of open industry.

41:24So So this is being shared widely across senior leaders across the industry. So, yes, very much supportive. Give people a sense then of the pressure. Tom Kerridge kind of touching on it there. Three premises a week, was it he was saying closing? He was saying even his own, you know, very high end premises under pressure, hiring freezes, struggling to train people in the sort of wider chat I had with him. What are you seeing across your group? Yeah, I mean, I think being honest, I think we've never seen anything like it in terms of the cost pressure that we're under. The amount of additional cost that's been put into the industry over the last two years, really, is incredible.

42:04I think we've seen... And is that all policy cost? As an employee, things we've talked about, you know, national insurance, minimum wage, that kind of stuff? A lot of it is policy. So I think when I look from March 24 to now, the cost of employing a 19-year-old has gone up about 60%, 6-0. so the kind of that we've traditionally employed a huge number of young people and the kind of cost rises that associate with that have been enormous the the business rates which have actually gone the wrong way for us not the right way this year the cost of energy which to some extent isn't policy but to some extent is um have also made a huge difference but employment cost has been the biggest one so how much of an impact is actually a vat cut that tom's talking about there actually make to some of that?

42:52The great thing about a VAT cut is that it's instant relief so I think that would be really welcome some of the other forms of relief that people are talking about might take longer to feed through and actually hospitality needs help right now that the scale of closures is quite scary actually and when you look at some really big names across the industry that have been struggling. We're seeing lots of restructures, you know, CVAs, administrations, and a lot of businesses that are just stopping investing, which just isn't good for UK PLC either. Why is that? Why is the VAT cut so quickly effective, as you put it?

43:35Is it because you can drop price quickly? I think at the moment, most operators probably wouldn't necessarily cut price very much if that came in. It's more that it's relief for the underlying business. Right, got you. So, Nill, the backdrop, of course, to all of this, and I was chatting with Tom Kerridge about it in the wider interview as well, is the government's not really looking for tax cut opportunities at the moment, is it? We saw reports in all the financial papers again through the weekend that they're actually looking for cuts in departmental spending to try and raise more money to spend on defence, for example, as an area?

44:14Yes, I think you summarised it pretty well. And I think you'd probably also say that VAT, maybe for the reasons that Vic has just outlined in terms of the instant benefit of it, is perhaps one of the least attractive areas to reduce rates for the government because the impact is immediate. So it feels unfortunately like a little bit of a zero-sum game at the moment. and perhaps reflects a problem that we've had in the UK for probably some decades now where the approach to taxation policy tends to be individual policy by individual policy and therefore quite hard to get a grip of the broader problem and say, what can we afford to do in the near term versus what might be the longer term changes that could be made?

44:57How might a tax policy connect to improvements in employment and productivity? And unfortunately, those connections are not being made very often. And it makes it, I think, very hard to create a really sound case and a case that effectively people will back at the polls to say that's why this is the tax that should be reduced and potentially this other tax is the one that should be raised. Yeah, interesting. And the fact that VAT has just become so complicated over the years as well. Right, too. Vic, are there any glimmers of light as we head into the summer? I'm looking at the middle of the business pages of The Times this morning.

45:32Heatwave in May fueled rising consumer spending. This is British Retail Consortium and there's some Barclaycard data out and about as well. Are we starting to see a little bit more confidence for some of your customers? Yeah, May was better than April. And I think actually probably worth mentioning that I felt like we'd had some of those green shoots coming through in January, February this year. the kind of inklings of more stability and therefore this kind of small improvements coming through in confidence. Obviously, the Iran attacks kind of put paid to that. And what I'm really hoping for is that if that situation stabilises, that what we've seen in May is just a slight uptick back in confidence.

46:14And that is hugely important to our sector because I think it's non-discretion we spend. So we need that confidence to keep ticking up for people to come out. Yeah, and again, sort of a potentially slightly silly question, but how quickly does that mood shift, if you know what I mean? How quickly does it sort of come and go? Yeah, I always think that bad news hits extremely quickly and good news takes a little bit longer to filter through. In terms of some of those pressures then, Sunil, are we seeing any of that in the sort of market? Listed companies thinking of retailers and people like that, seeing any of those sort of green shoots, as Vic put it?

46:53Perhaps a little bit early. So if you look, for example, at smaller companies versus the big kind of international FTSE 100, I think they probably struggled in the first, shall we say, four to five months of the year from the same things that you might see if you look at the gilt market or the value of sterling, which is the combination of a sort of sluggish economy and one that was not thought to be that resilient to, for example, the effect on energy costs that might come from the war in Iran, together with some of the political uncertainty that we had. So I think we probably haven't escaped that yet in terms of how certainly how investors are looking at the companies.

47:37But what we have seen in the past, whether that be in the kind of later reaction to the mini budget after late 2022 reaction to the pandemic, is that the UK does have a way of creating value opportunities that do attract international investors. So essentially, when the sentiment is sufficiently beaten up, people recognise that there is actually more continuity than change in Britain. And that is something that can bring those investors back. And Vic, obviously, as you and Tom Kerridge have mentioned, the industry working hard to try and sort of change minds in government and make your case in terms of the tax burdens.

48:14But are there other things that you are trying to do to sort of capitalise, build on those green shoots, turn that into fully fledged optimism? I think, you know, there's a lot of very optimistic people in our sector. I think that's hospitality for you. I think I'm obviously, as a CFO, I'm here to be pessimistic. So that's my job. I have a very optimistic CEO who is the counter to me. I think there will always be people who want to go out. It's the fun of life. You know, hospitality is there. It's an escape. It's where people meet each other. It's the vibrancy of life. So there will always be opportunity if you execute well and you have a great business.

48:55Yeah. And what's going on kind of regionally? Because, again, you've obviously got bars right across the UK. Are we seeing pockets where that confidence and as a result that spend is bouncing back quicker than other places? Yes, we are. London definitely suffers less than outside of London. And I think, interestingly, some of those cost pressures are actually worse outside of London than inside London in terms of changes that we've seen. But even within certain cities, you can actually see the microcosms of the exact areas that people are in. And I think the business communities are actually still spending more strongly than the leisure community.

49:33That is when that becomes a sort of political headache too, doesn't it, Sunil? When people feel like things are going at different paces, I suppose, in different bits of the country. Undoubtedly, that really connects to Liam's report in terms of, I think it's often the political dynamic and the debate takes the form of, well it's either London or it's nothing and I think maybe the success stories and the example of what's actually worked and trying to share that practice is going to be really important to try and move that discussion on but I do think there is a very important point also that was implied by the Manchester report which is you do have to focus on your areas of strength so the growth in Manchester has not been the return of the cotton mills it's been the growth of services and again I think that's very important that when we think about our plans to try and grow across the breadth of the country, nostalgia doesn't really have a place in that.

50:33And I think that's something that's going to be very important in terms of how credible the plans are in the future. How important the World Cup then for spending, Vic? It's very important hospitality. I think it hugely benefits pubs over everything else. But, you know, I think a lot of businesses like us are looking at how we can take advantage of the opportunity. So we've three sites from Edinburgh, Newcastle, Birmingham, who have private rooms and they're available for World Cup players. So even though we are traditionally more of a restaurant bar, we've got these pockets where we're going to be capitalising on the World Cup.

51:08So that's for people wanting to enjoy the World Cup at home. What about those lucky enough to be heading out to the US? Rachel Vaughan is one of them off at the end of this week to follow Scotland. Morning. Good morning. How are you? I'm good, thanks. How are you? Are you packed up yet? Mostly. I've got a few bits left, but it feels like I'm packing forever. So what's the itinerary? So we go down to London on Wednesday, so tomorrow, fly to New York. We've got a few days in New York and getting a supporters bus over to Boston for the game and back. A few days in Boston for the next game and then five days in Miami.

51:45Amazing. That's around the Brazil game then, I'm guessing. Yes. And how many of you going on the trip? It's me and my partner and then we've got quite a few friends that we follow Scotland with that we'll probably see over there as well. So it's a business programme, so I'll do the negative bit before the fun, fun bit. Have you had to close your eyes and just sort of punch the credit card numbers in a couple of times? A hundred percent. It's worked out a lot more expensive than I originally planned, I have to say. And which bit has shocked you, I suppose? I think we knew the hotels would be expensive, but it's the travelling around, you know, from one place to another, not even necessarily the flights.

52:19It's the trains, it's the hotel transfers and things like that. So you've managed to get one of these buses, have you, rather than some$200 train that I think they were trying to do out to Gillette Stadium at one point? Yeah, so for one of the games, we thought we were smart booking a hotel near one of the train stations close to the ground. It turns out that that train isn't actually running on a match day. So we've managed to find a bus that's actually going on the game. I think that cost us about$50, which wasn't too bad in comparison to the$100 odd that we would have had to pay on the train and the extra time.

52:54But it's still a lot. And what about when you get out there, food and drink and stuff like that? Have you stocked up the war chest sufficiently? Well, we worked out if we're making the most of New York for the first five, six days, it was going to come in at about$600 at least just for food each. Okay, turn to the fun bit then. How excited is everybody now? Oh incredibly I keep seeing more and more people booking on last minute It's good I mean hotels seem to be dropping prices and I think people are you know they're worried of missing out now so they are doing the last minute bookings it's just an incredible atmosphere I can see people already out there and yeah And what do you think when you get out there especially seeing how the warm-up games are gone is there going to be a bit of an itch where you turn to your partner and go should we book for the knockout phases as well?

53:43Never say no. I mean, look at us qualifying. I think we all went 100 % of that and we did. So I think if we win the first game, there's a good chance I might be saying that. Yeah, yeah. So what, you think Scotland come out of the group in what position? Second, potentially. I think if we get a win against Haiti and then Morocco, we might scrape second. But as I said, you never know with Scotland. Well, safe trip. Hope you have a brilliant time. Perfect, thank you. Extremely jealous. Rachel Vaughan there off to the World Cup to follow Scotland, as she was saying there as well. Vic, are you excited for it now then?

54:17Oh, I can't wait. My husband's Scottish, so we've got Scotland and England in our house. Brilliant. You've got it all covered. One of my favourite things is those sort of, whether it will happen in London with the late games, but everybody's sort of piling out of work and into all the bars around you. Yes, 100%. Some other industries tend to pile into the pubs. Even earlier? Even earlier, pretty much as soon as they opened. Not around me. Managing teams the next day, that will be interesting too. Good luck to our bosses doing that. Vic, thanks so much for your time as always. Thank you. Vic Stewart from the Alchemist Bar, Sinel Krishnan from Aviva Investors.

54:55Thanks so much to you as well for listening to us here on Wake Up To Money. Wake Up To Money with Will Bain.

55:05Ever invest in something that seemed incredible at first, but didn't live up to the hype? Like those$5 roses at a gas station, or a second-hand piece of technology that breaks in the first 10 minutes. Marketers know that feeling. We optimize for the numbers that look great, impressions, reach, and reacts. But when they don't show revenue, well, that's a not-so-great conversation with the CFO. LinkedIn has a word for that. Bull spend. Now you can invest in what looks good to your CFO. LinkedIn ads generates the highest ROAS of all major ad networks. You'll reach the right buyers because you can target by company, industry, job title and more.

55:48So cut the bull spend. Advertise on LinkedIn, the network that works for you. Spend$250 on your first campaign on LinkedIn ads and get a 250 credit for the next one. Just go to linkedin.com slash broadcast. That's linkedin.com slash broadcast. Terms and conditions apply.