Cool profits in a hot market

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1:15So 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. Wake up to money from BBC five live. Hello, welcome to wake up to money after a few hot days, sweaty nights. Retailers tell this program about how sales of air conditioning units have spiked alongside the temperatures elsewhere. We're going to have a look at the plight of The energy giant BP, more turbulence at the top. The chairman there, Albert Manifold, removed from his position less than a year after taking the job.

2:05We'll get all the latest market reaction to more developments in the Middle East. And we'll hear from the butcher in the West Midlands as the UK's Muslim communities enter Eid al-Adha. Wake Up To Money with Sean Farrington. Good morning to you. Wake Up To Money on BBC 5 Live. Thank you for joining us on this Wednesday morning, the 27th of May. It is just after five o 'clock. Plenty for us to chat about this morning, whether we are looking at how much people are spending around Eid to how much spending people might have to do on their energy bills later in the year. How much are you doing right now?

2:43Not trying to heat that home, but trying to make it a little bit cooler and more besides. So let me know you're thinking 85058 on all we are chatting about. We've got Jane Sydenham with us this morning, Investment Director at Rathbones. Jane, very good morning to you. Good morning. You got air con in your home, Jane? A little bit. Do you? Yes. Yeah. What does a little bit mean? Have you got like a small box somewhere? Are you poking it out a window? Is it built in? It was built in because a few years ago we renovated the house and just put some in the bedrooms and it does make a difference. Interesting.

3:17It's hot like this. Rowan Crozier, Chief Executive of Brand Hour, a metal stamping specialist in Birmingham. Rowan, good morning to you. Good morning, Sean. How are those factory floors at the moment? Hot. Yeah, it was very hot yesterday. The guys were working hard. We managed to make it through the day. We're hoping it's going to cool off a little bit back end of the week. I mean, over the years, Rowan, you know, on Wake Up To Money, we've been to many a modern factory. And even if you're in the middle of a manufacturing floor, where there's a lot going on. There still may well be air con around for the workers, but is it a bit harder when you're doing something like metal stampings?

3:55Do the surroundings mean you can't just drop the temperatures to a delightful level at all times? Sadly, yes. There are some areas which are air-conditioned where we measure all the parts. It's highly accurate, and that's in an air-conditioned room, as is where we manufacture some of the tooling components. but the actual factory floor is near off impossible to put air conditioning in efficiently. So sadly we have to have windows open and try and, you know, just keep people as cool as they can, as happy as they can. And, well, I don't know if people might be listening and thinking, blimey, another sweaty night and another grim morning ahead.

4:33And I thought the same. Put my shorts on this morning and decided to go shorts into work. I just couldn't bear putting the pair of trousers on. stepped outside, cool breeze here in Greater Manchester this morning. I was very surprised and would just like to let the nation know that it may not be quite so grim outside as it is inside at the moment. How is home right now, Jane? I mean, I can't hear an air con unit in the background. Are you in a warmer part of the house now? Yes, yes. No, I mean, it is cooling down a bit, but it has been a really hot night, actually. I can't claim that I got much sleep and then I had to get up to talk to you.

5:13Well, charming. You could tell Jane didn't get much sleep. Blimey, you'd never hear Jane kick off the programme like that. Rowan, where are you, Jane, by the way? Just so we're getting an idea where the country has been warm, cooling down at the moment. I'm in London. Right. And Rowan, whereabouts are you? I'm in Litchfield in Staffordshire. And the weather update there, climate update, Rowan? It has cooled off. I've just opened the back door before talking to you and walked outside and it was pleasantly cool. So, yeah, it has cooled down a little bit. Good news. Well, all of this plays into the fascination around the purchase, what might actually be a bit of a impulse purchase at times of air conditioning.

5:57Or is it that we're actually thinking longer term, year after year, after we get these ever hotter days in May. In recent years, we've had those 40-degree days at times, didn't we? We had those one or two days around that level a few years ago. And so in your mind each year, are you thinking a little bit more, right, I need to actually do something in my house to enable it to cool more quickly on these peak days? Wake Up To Money has discovered the number of people purchasing air conditioning systems and fans has spiked during this current heat wave. We've got some numbers to back that up as well.

6:31the UK's largest online retailer, By It Direct has told us that it sold one air conditioning unit every six seconds on its website yesterday. Meanwhile, AO.com told us total sales on fans and air conditioning units were up more than 14 times. John Lewis saying similar. Sales of fans, air conditioning units, air coolers up almost 12 times as well, all compared to the week before. So clearly a major drastic change. Even though we knew some of that hot weather was coming, people still waiting till it hit to be able to make those purchases. Others have been turning to somewhat cheaper ways to beat the heat.

7:12The BBC spoke to these people by a paddling pool in Birmingham. It's lovely for the kids and it's free, so it's nice for them to be able to come and just enjoy themselves and the sun. It's come a lot of times, even after school as well, because it's open till late, so yeah, the kids really enjoy it. I feel like it's a good family space for everyone to come. I've literally just said to my family, good chat, to have a planned picnic, because we didn't know about it. We literally said it on TikTok. So I live local, and definitely that it's free, yeah, that the kids can just come out and have fun, without going to, like, swimming baths, that you have to pay, like, memberships and stuff for.

7:44First time, absolutely brilliant for the kids, first time. Free. What else can you make of free? You can't make nowhere else free with the kids. We've actually been here for the last three days. We sit here with all of our blankets, with the family. It's a nice place to come for the children and when funds are quite low and you want to take the kids out and stimulate them with something different, it is really nice to come here. I just love to go in the water with my brothers and my friends. It's just so good to go in the water with everyone and with the guns. It's so fun in the water. Well, there we go.

8:16Family's taking advantage of half-term, the sun coinciding with it. But with it, of course, comes some tricky decisions about what to make about your home. And as we heard there, many budgets are tight. Maybe the option to buy an air conditioning unit isn't necessarily there for cost reasons. Maybe it's something that further down the line people might think about saving up towards because there are more permanent solutions than some of these brief things that people are trying. Sophie Davenport is the Managing Director of SFE Services in High Wycombe. Her company provides both commercial and residential air conditioning installations.

8:55Sophie, very good morning. Good morning. How are you? I'm well, thank you. We've just about got the air con here on here. Wake up to money towers. There's a thermostat in our studio here. I walked in this morning and I don't know whether somebody's done it as a joke, but it was cranked up to the max, which has meant it took a little bit of a while for the temperatures to drop. But as you're asking, Sophie, I'm OK. Thank you very much. First up, in High Wycombe, how are you weather-wise overnight this morning? It's been warm. It's been very warm. I think we've got a lot of tired engineers and, yeah, we feel like we've been sort of fighting the good fight for the last couple of days.

9:33Well, I bet. So give us an idea of some of the numbers that you've seen around air conditioning requests, installations. Yeah, I mean, in terms of installations, sort of on a day-to-day basis, we've probably seen about 25%, 30 % uplifting inquiries. Um, so it's quite a lot to sort of deal with. Um, and then predominantly we're sort of seeing a lot of breakdowns as well. We probably see about a 50 % increase in call outs, uh, where the weather gets really, really hot like this. Interesting. So, um, on the breakdowns, why does that sort of kick in at peak times like this? I mean, we're sort of dealing with extreme sort of heating and temperatures.

10:16so it can be maybe lack of maintenance you know you need to have these systems installed and then looked after um sometimes that doesn't always happen so you know parts can break we then get uh you know just things like people are setting the temperatures a little bit too low on these systems um you have to remember like the air on temperature to an outdoor unit while it's 30 degrees outside if it's on a roof it could be 40 degrees plus if you're setting that temperature are very very low you're asking a lot of a system you know to try and get down to temperatures as well do you feel like there's a sort of year by year education that people are going through with this stuff because as you described that then um you know it made me think i wasn't really aware that you know you could set it to a too low temperature is are people maybe not up to speed with how these things work well enough yeah i think a little bit i mean obviously we you know we get in the offices, we still get the wars of, you know, the controller, you know, some people like it a little bit warmer.

11:17Some people like it absolutely freezing, you know, keep mucking around with the temperature doesn't help. I think the sort of misconception as well, you know, you go in a hotel and it's absolutely freezing is not the same as maybe what you're going to install in your home. It's, you know, smaller scale systems and things like that. So, you know, we do find a lot of the call outs as well can sometimes just come down to not use error, but maybe a little bit more guidance needed. Interesting. And those requests that you've had, that you've seen peaking in the last day or two, 20, 30 % increase, what proportion of those turn into purchases?

11:53Around sort of this time of year and temperatures, a fair number of them do turn into insulin installations. People are just so hot. They're just desperate by that point. I would really advise anybody if you are considering air comm don't leave it until you know the hottest day of the year to you know make your inquiries you the air conditioning company is going to be so busy at this point and how quickly if if somebody called up and and was really interested was like right we've had enough we want an air conditioning unit installed how quickly can you install one at the minute purely due to demand we're looking at easily sort of three to four weekly time if you've got the sort of capacity if you're just installing maybe a bedroom split you could probably achieve that install maybe in one to two days and do you expect you know if people wake up this morning and open that window and feel a cool breeze coming through does some of that unravel if the heat wave we experience is pretty short and people actually even if they've made orders start to make cancellations.

12:59Does that occur? No, I mean, we don't really get cancellations. I think definitely sort of, I would say maybe a week, sort of two weeks after, even really, really hot weather, you're still getting quite a lot of inquiries. You know, people do not want to not be sleeping in terms of residential and in terms of commercial as well. You know, there's a level of expectation now. You know, if you go into a shop or you're working in an office, you expect to be cool, you know. So it's not really something people are prepared to sort of put up with anymore. So it does remain very busy. And for residential air conditioning installations, what price are we talking here?

13:33People have one of those bedrooms that is just too much and they've heard, oh, there's solutions out there. What would be the standard thing people would get fitted and what's that cost? I mean, for just a standard size double bedroom, I mean, you are probably looking around costs between£1 ,200 to maybe£2 ,000. you know it very much depends on the application so it is not a cheap you know option to do it is an investment I mean aircon now does heating and cooling so it is an all-round solution um so I still would you know highly recommend that it's it people do look at it for an option and what sort of homes are you mostly getting requests from Sophie so we we find a lot of barn conversions, they get very, very hot.

14:23But especially at the minute in new builds, the insulation levels are a lot, lot higher. They are in older homes. We're getting more glass in properties. So, a lot of people have bifold doors, conservatories. These are things that all attribute to much more heat in the home. Just opening the windows and things, especially on days like yesterday and the day before, is just not going to do it. so you know people have to look at alternatives and are are there still the sort of the classic air conditioning unit i have in my head is something where you're sticking a tube out of a window would that be something you'd be providing it's not something we personally do um we do sort of fix systems but the portable air you know aircon units certainly have their place in the market you know if we're only getting a couple of days you know really really hot weather That's certainly an option for people.

15:14I mean, costs for them very much range from£150 up to sort of£400. All I would advise anybody really with that is to sort of do your homework on the system. Make sure it's big enough for the room and things like that. And most of these online sites give you sort of room sizing and things. Rowan, when you've sort of thought about your workplace and the temperature of it, Do you have any rules in place already if the office or the outdoors gets to a certain temperature that you change working habits for your staff? Yeah, we do. So if we have a sustained period of more than two to three days, we will look to potentially change the working hours.

16:00So that means an earlier start and an earlier finish. But it's difficult because not everyone can get in for an early start. So it's not straightforward just to, yep, we're going to flick it to start in at six and finishing at three. So it's quite challenging to organise at the moment because most of the hot weather's fallen over the bank holiday weekend when we were shut. We're hoping we won't have to do that. But it's definitely an option for us and we will do it if it's a sustained sort of hot period, which is usually over about 35 degrees. Is that in the office, 35 degrees? It's in the factory.

16:41In the factory, yeah. Sorry, yes. Yeah, yeah. Right. Yeah, because that's interesting because we've had the Climate Change Committee were talking last week about needing or suggesting there might need to be a maximum legal working temperature indoors. So 27 degrees for sedentary work, 25 degrees for light physical work. What would you make of that? That's an example of what occurs in Spain, I think. Would that make life easier for you if there were some fixed rules around this? Easy is a strong word. It's challenging enough to run a manufacturing business without more and more rules being put in.

17:22However, I do take the welfare of the staff very seriously. and if there was some guidance put in place, then I guess we would find that helpful in terms of being able to manage it. We can actually then dictate when start times might change and what they might change too, so people at least can be educated into what the rules are and when. So yeah, thinking about it, that's probably going to be a helpful thing. Jane, but as Roan reflecting there, There's potentially more costs coming that way for businesses. Have you seen, we've heard from the Climate Change Committee many a time that these heat waves intensifying due to climate change.

18:07Do you see business costs going up to handle the extreme temperatures? Quite likely, yes. Historically, because this country has been relatively cool, cool. It's been really rare that it's been too hot for people to be working. But if this is going to become more common, then businesses will have to think about how they're going to cope with it, which means more strategic thinking, which probably means more investment and more cost. So yeah, that seems quite likely. And Sophie, when you speak to businesses on your commercial side of your business, what are the main requests that come in there?

18:46Are they so short notice? They can be short notice. I mean, predominantly, the commercial market's sort of grown just year on year, sort of steady. Like I said before, it's almost expected now. You know, if you kind of walk into a shop that's not cooled, you're not going to stay in there very long. And business owners know that, you know, they want you to stay in, you know, a shop as long as possible. So, you need to be comfortable. Certainly, in the office space, there's still sort of a gap and people probably are still installing um but it's it's a cost that they just need to factor in um and plan for and like i said it's not cheap but it's a it is a long-term investment interesting well sophie how do you expect the day-to-day to be if those whether if the temperature forecasts are a little bit lower and there's maybe a bit of a more of a breeze about i think we're still going to get a lot of install inquiries i'm hoping the engineers might get a little bit of a respite on the call outside of things.

19:44Just, yeah, all the aircon engineers that are just working really, really hard, you know, keep going. We will get a break at some point. Well, our thoughts are with those aircon engineers, Sophie. I hope you all have a good day. And it's a fascinating aspect of how we're changing our habits with the weather changes and the fact we're getting maybe a bit more used to aircon elsewhere and being a bit more reliable in cars, shops, holidays, wherever it might be. Sophie Davenport there, who's the Managing Director of SFE Services, based in High Wycombe. If you've had a muggy, sweaty night and the windows aren't open, give them a little bit more space there.

20:23It might be that you can get a little bit of a breeze coming through that bedroom right now, as you're getting ready for work the day ahead. Have a step outside, open that back door, as Rowan has done. It might just be that the coolness is where you are in the UK now, but it was a warm night for many. you might have made one of those impulse purchases for air conditioning, had a request put in, thinking about it for future years, 85058. If you've made any changes in that world to your home at all, somebody getting into it saying, get a portable air conditioning unit under£300, walk out of the shop with it, perfect for most homes and UK weather.

20:59It was fascinating. If you missed it, go and subscribe to Wake Up To Money on BBC Sounds and have a listen to our conversation with the boss of an air conditioning installation company a little earlier where Sophie was explaining some of the things you do need to keep in mind, the fact there are so many breakdowns occurring in the last couple of days because people misusing these systems, maybe having a bit of a misunderstanding about how they work and to what extent they might work. It's not quite the same as walking into a chilled hotel room in a heatwave as you might do when you've been on holiday around the world.

21:33And so, are you making those purchases? Let us know how they go, what those thought processes are behind it. Jane, exactly the same moment, we are going to be getting an update on what might happen next with energy bills later today. So this off-gem price cap that it puts in place about how much the variable, people on variable tariffs, how much they can be charged for their energy set to come in. And it feels like there's going to be quite a change compared to the last one. I mean, we started the year thinking, oh, energy prices could be making their way down throughout the year and steadying.

22:17Then we had the war in Iran. What are we expecting now to happen to energy bills at home, particularly for those on variable tariffs? Yeah, I mean, they're likely to go up, aren't they? and prices have moved up significantly. And, of course, it's been long enough now. The war has been ongoing since the end of February that it is starting to have a longer-term effect on the energy price. If it was just a short-term increase and it goes back down again, then that's fine, but it's now been quite a while. Yes. So if we look at what some analyst expectations are, we'll get all the details at 7 o 'clock, So maybe as you're listening to this, if you're listening on the pod, the numbers have come in, but predicting a rise of 13 % on the current cap that is in place.

23:07So that would mean a household using a typical amount of gas and electricity paying£209 a year more than now. So with an annual bill of£1 ,850. That number, Jane, it just reminds me of when we used to talk about how much the average typical home, typical usage cost of energy would be. And it wasn't that many years ago where we'd be talking around the£1 ,000 a year figure. And in fact, it was a major moment when it went past£1 ,000. It's indicative, isn't it, of how much the price squeeze has been in the last five years or so, particularly when it comes to energy? Yes. I mean, we've, you know, everything was relatively steady in terms of inflation, really, until sort of 2021.

24:01So after the COVID pandemic, which then disrupted supply chains and started to push inflation up, and then the Ukrainian war started, which really pushed energy prices up. And since then, we kind of haven't looked back. Generally, prices have been rising at a much faster rate. It'll be interesting to see as well. We get some numbers from Ofgem about average usage of how much people are actually using energy. So when we get those numbers, we'll keep a close eye out on what exactly that means for the average home because obviously our average usage of energy has gone down a little bit, but the cost per kilowatt hour is jumping quite a bit.

24:42That can muddy the waters a little bit, but the long and short of it is energy prices going up. I mean, Rowan, it doesn't quite work the same for businesses, does it? The protection that households get to a certain extent by the regulator of how much prices can go up by. Absolutely not. It's pretty much unregulated for business energy costs. so yeah it's a slightly different challenge. And Rowan where are you at with that at the minute with have you have you seen I mean we've learned on this show it's all about when you've managed to fix your tariffs and if you've timed it well if you're protected for this year or not how's Brandauer doing?

25:26Pretty good I mean over the past four years really we saw energy costs jumped from about 100 ,000 a year for the factory up to about 500 ,000 pounds a year, which was an absolute killer. We had to put in surcharges for our customers, sadly, to help us recover some of that, not all of that. But we've worked quite hard with our energy broker and working quite tightly with them. We've been able to source our energy slightly differently and more in advance to secure better pricing and more importantly, fixed pricing. So we know what we're going to pay for a longer period of time. And we've now seen our energy costs fixed for this year come down to around£200 ,000 a year.

26:23So it's still doubled to what I would call normality, but nonetheless, it is significantly lower, which means we can remove surcharges and be a bit more stable about how we operate. And do you make investments yourself as well? Have you seen a lower energy usage or are you able to produce your own energy in any way? uh sadly we we have made investments but um we can't put things that which are written about quite a lot about solar solar energy there's quite a lot of funding out there for smes to be able to install that sadly our our roof isn't suitable to install a decent sized um solar farm on so we can't do that but we have made it in other areas so the factory's fully lit with led lighting um which actually is is better for the working environment as well as as our pockets and the other thing we've done is is install an optimization unit for our voltage which essentially optimizes it that's reduced our energy cost by about 15 000 pounds a year for electricity and the final thing we've done is heat recirculation so okay it's not in the current heat it doesn't really matter but when we're operating in the winter we've got fans blowing we've got compressors running and those areas are hotter than others so we transfer the heat from the hot areas into the colder areas of the factory and we are making those investments and the crozier home rowan has that needed investments to try and cool the house down in those peak times yes yes it has so we've uh we've actually um we've got three uh portable air conditioning units for the bedrooms and I've just had to buy the third one this week because my son and his girlfriend have moved back in and their room was too hot so absolutely we've got three running and they're a lifesaver if I'm honest.

28:22And when you say portable ones so is this you sticking a tube out the window? Absolutely it's your analogy there we've got three three I think there's two smaller ones one larger one for the size of the room so that's really important to get right so pick the one that's right for the size of the room and then seal up around the window with the tube out absolutely and it works they work like a treat they really do very very good right so you open the window but you you put some you have a sort of a seal around okay i'm getting the image of this now do they make a racket uh no i i again they're they're i suppose what we pay about 200 pounds for the smaller one and about 300 pounds 350 for the bigger one um they're a decent chunk but i tell you what they're a lifesaver for the sort of week or two a year when it is a bit too hot to yeah to to be comfortable so yeah we we made that investment uh jane whatever rowan's got he's not as grumpy as you this morning he clearly had a better night of it i'll let you two chat about air conditioning units so that i'll make i'll make a note whenever the temperature's above 30 degrees and then jane's jane's on the next call jane Don't call Jane.

29:34Well, plenty more to come from Jane, who is definitely getting a bit chippier, more chippy on Wake Up To Money. And chirpy is the word I'm after. From chippy to chirpy on Wake Up To Money this morning. More from Jane. We've got lots to talk about, Jane, about BP as well. More turbulence at the top of that business. And we're going to have a look at the spending around the Eid celebrations. Perhaps you've been up for a good few hours celebrating or into the night last night. do let us know if your spend has changed year on year for that.