Fashionably Rate

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1:00to buy, sell or attain any specific investment or service. Wake Up To Money from BBC5 Live. Hello, welcome to Wake Up To Money. It's been a week of big decisions from central banks. The longer this goes on, the more difficult this becomes. No change on UK interest rates for now. Some big news for quantitative tightening enthusiasts. In just a moment, we will be trying to cut through the jargon, hold your attention and hike our understanding. No, I did not write those interest rate Bank of England jokes. My producer did. Elsewhere, concerns about fuel prices, AI and European trade measures that are in the works.

1:40We will cover it all with our fantastic Friday panel. And also... Vice of Michael, the brand name of Marks & Spencer. M &S is off to London Fashion Week for the first time as it marks 100 years in fashion. We'll hear from someone who saw plenty of its change from the inside. Wake Up To Money with Felicity Hanna.

2:26very soon. But I want to hear from you this morning. I want to know if it's changing your habits, if it's changing how much you drive. Are you cutting back on journeys? Are you finding other ways to get around, maybe car sharing? Do you perhaps live somewhere where you've got no choice but to keep filling up? Get in touch. Let me know. You can text me on 85058. You can send me a WhatsApp message on 08085 909693. And if you're on social media like X or Blue Sky, use the hashtag wake up to money. And I will keep an eye on that. I will also be keeping an eye on my panel this morning. Joining me is Dan Warne, founder and CEO of Sessions, a hospitality and technology business, which, Dan, make sure I've got this right.

3:09This is aimed at helping independent restaurant brands to scale nationally without opening new sites. How does that work? Good morning. That's right, Felicity. Morning. Don't know how you have this level of energy first thing in the morning. I mean, it's sickening, isn't it? Our listeners all kind of turning the volume down yes we did um so the way we work so i used to be the md of deliveroo for five years and obviously delivery was about moving demand for restaurants from the in-house experience to ordering at home and having food delivered at home but what it didn't do was help restaurants with the distribution so while you can deliver from a restaurant to two miles away you can't deliver from a restaurant to the entire UK population.

3:56So what Sessions does is we have a vast network of delivery kitchens. We have nearly 500 of them. And we work with top brands that consumers have shown that they want, that they love. And we help them to expand across our network without requiring additional capex for new sites and without requiring additional labor to expand. And labour is one of the biggest cost bases in hospitality. So it helps those brands become more like IP than physical restaurants, which is a way of leveraging the internet, which sounds like a weird thing to say in 2026. This internet thing's catching on. Restaurants haven't really been able to do that.

4:38Fab. Well, we'll talk more about it in just a moment, Dan, because it's a delight to have you on the programme. But also joining us today is Micah Curry, Head of Personal Finance for the digital pension consolidation firm PensionBee. Morning. Good morning. And I'm very pleased to say as well our economist this morning, Douglas McNeill, former chief economic advisor to Rishi Sunak when he was in number 10, now a consultant for companies in the private sector. Morning, Douglas. Good morning. So, Douglas, let's start with you. We'll talk fuel shortly, but have you seen any fuel shock? Have you filled up recently and just sort of stood and gasped?

5:14I have exactly, yes. I filled up the car the other day and it cost me a pretty penny. And that is one of the things about the fuel price. You know, it's not always easy to detect the way that other prices in the economy are moving. But the fuel price is very visible. People can see it on the petrol station notice boards as they drive past. And so it's a very visible, obvious reminder of the way that the overall price level is moving up at the moment. Micah, that's very, very true, isn't it? We've had a message from someone on Blue Sky who says, with diesel now topping£2 a litre, it will cost me£110 to fill up.

5:48Frustratingly, this is still cheaper than a monthly train ticket to work. That's a massive part of the problem that ties us into fuel reliance. This is one of those funny prices where, you know, if eggs go up, it all sort of goes in your basket and you might notice, but you might not. Whereas fuel, it's on billboards. It is, and it is eye-watering at the moment. And I think the interesting thing about diesel is it doesn't just stop at the petrol station and when we're filling up, but diesel also goes into the lorries that move our food, the machinery that's used on farms, it's used on building sites and supply chains, moving goods around Britain.

6:25So when we see these prices go up, eventually it will have a massive knock-on effect on what we see in our shopping baskets. So it is very, very concerning. Yes. So the average price of both petrol and diesel went up this week. This morning, The average per litre price for petrol is 171.76 pence. So basically just under£1.72. The average diesel price is also quite high, just below£1.95. That's according to RAC Fuel Watch. Hang on, let me make sure I'm getting that right. Yes, 194.72 pence for diesel, so just below£1.95. Both those prices are up over 10 pence this month alone. Prices are expected to keep rising due to the high cost of oil.

7:11And of course, this is all in part due to the conflict we're seeing in the Middle East. Leslie O 'Brien, Managing Director at Freightlink Europe, which is a logistics business based in Europe, has been speaking to us about this. It owns and operates a fleet of 33 vehicles. This is an ongoing story, isn't it? Of course, yes, it's reached an all-time high. And, you know, it's one of our highest costs. And of course, it's not just us, is it? We have to pass it on to the consumer. If I look at the cost of diesel today, as compared to what it was at the beginning of the year, it's gone up 51p, that's 48%.

7:50And what that means to my bottom line is£33 ,000 per month. And of course, we just cannot absorb that. Michael, we'll talk about what it might mean for interest rates later on in the show. But this is going to potentially affect a lot of prices, isn't it? Not just the price that people see when they're filling up. No, it feeds through to everything. And as I say, most crucially to our weekly shop. Now, for now, we haven't seen food price inflation go up as much as the Bank of England has predicted. But we talk about something known as second round effects. When those price increases eventually impact how much we're willing to spend at the shops, how much businesses are willing to spend on employing people.

8:37And that is the real concern. And we also need to look at this in the wider context. So are we heading towards an inflationary environment? Because we are seeing things like AI, you know, the massive need for investing in AI infrastructure. We're seeing the effects of El Nino and the weather conditions. So that are pushing up prices across the board. And these are global shocks. They're not really within our control, but they do have a massive impact on UK household finances at a time when people are already struggling with this ongoing cost of living crisis. Dan, it feels like there are just all these prices outside of businesses' control pushing things up.

9:23Is fuel one that you watch? Fuel is definitely one we watch. possibly slightly less closely than we would watch something like protein but as Mike has said the second order effects of fuel impact protein quite significantly as she said it impacts the costs of HGVs which take the food from A to B and that isn't just the cost of transporting it but the cost of refrigerating it so unlike other forms of food if you're trying to take beef or chicken from A to B, you need to keep it cool. So even if you're not driving, if it's in the depot, it still costs you money, you still need the diesel to run the refrigeration.

10:07So it's actually more significant than people think. And I have to say, even our supply chain team, who are really on the money with watching any inflation, are probably not as tight on this as they could be and are now insuring they are. Especially if they're listening this morning. Indeed, indeed, they will be. So that's the message for the two. I mean, is it going to affect prices, do you think? Is that just inevitable? It will definitely affect prices. So the increase will be passed on almost 100 % from the kind of logistics arm of the cogs that make up about 25 % of the cost base of our franchise partners.

10:54So it definitely does. It's a reasonably small portion of that price. So beef until the summer inflated about 27 % year over year. So beef inflation was crazy. It's actually settled now and it's beginning to move back in the right direction. And the portion of that is reasonably small. But nevertheless, it is a factor and these things add up. And it's fairly well documented that hospitality as an industry is facing lots of cost pressures. And so food inflating like this is not wildly helpful. And then off the back of beef, having inflated through the best part of the first half of the year, Now that's settled, but now chicken is inflating quite significantly.

11:44So not an easy climate to navigate. Douglas, not an easy climate to navigate. And going by the messages that I'm seeing on social media, something that's already affecting people's mood. Let me see. Adrian says, I have no choice about driving. It's a 22-mile drive each way to work. There are no buses at 4.30am. stopping work is becoming a more realistic option the way things are going. These kinds of price increases, first at the pump and then in the supply chain, they have a real impact on people's moods. Yes, that's right. I mean, it depends how much you drive, but swings in the fuel price can easily mean that you are hundreds of pounds a year worse off for some people and might even edge into four figures.

12:30So that is money that you can't spend on other things. People may resort to more use of public transport, where you're sort of spreading the cost of the fuel across a greater number of users, but that's less convenient for some people. And like the chap you just mentioned, not possible for everybody. And yes, I think it does sour the national mood. It feeds into politics in a way that can be difficult for the government of the day. I can say that from experience, having worked for a government that had to grapple with a lot of inflationary pressures. My rule of thumb is that for the price level in general, once the inflation rate hits about 3%, people really start to notice and they really start to suffer and to care.

13:113 % doesn't sound like a big difference from the Bank of England's target level of 2%, but it does seem to actually make quite a difference in the way people register and feel these things. Well, let's talk about the Bank of England then, because it held rates steady yesterday. In contrast to the Fed and the Bank of Japan, Fed raised rates earlier in the week. Bank of Japan just in the last couple of hours. We've also seen the latest figures on both inflation and the labour market. So, as you say, inflation at 3.1%, unemployment remained unchanged, average pay growth 3.5%. Lots of different numbers for the bank to factor in.

13:50Here's Andrew Bailey speaking after the bank made that decision to hold rates. Well, the important thing is that we stay very focused on the impact of energy prices on inflation across the economy. and that's what we will do. So it's early days yet, but so far we've seen quite a subdued pass through, but we're watching this very carefully and we will continue to do so. And we've given a very, very clear message today. The longer this goes on, the more difficult this becomes. Dan, the longer this goes on, the more difficult it becomes. I imagine that's being sort of echoed by a lot of the businesses that you work with.

14:24It has, yeah. But interestingly, I think, and this comes from my experience working at Deliveroo, one of the most material cost impacts on a typical restaurant is that over the last eight years, food delivery has become a huge part of the restaurant kind of modus operandi. And the operating model perhaps hasn't really had a chance to catch up with that. So if you speak to a typical restaurant, they'll talk about labor costs, they'll talk about the increases in rents they'll talk about the increases in food prices we've discussed but they probably won't realize quite the impact of a change in mix in their restaurant from what was 100 % in-house to possibly for some restaurants 60 % in-house and 40 % at home and 40 % at home comes with a circa 30 % commission to the delivery platform.

15:24So that is a very meaningful shift in the cost space that isn't really factored in. And what we think about as regards to that is you're essentially unlocking the kind of consumer desire for restaurant quality food, but you're not giving the restaurant the distribution power that the internet offers, which is what we're designed to do. So if you are selling that much online, great. We'll take that IP and make it available everywhere. So you do much better than running just an individual restaurant. So you're kind of transcending the bricks and mortar in order to monetize it more effectively. And I think the industry needs to recognize that the cost base isn't just inflationary and all the things we're discussing today, but actually there's more of a structural issue in the industry that needs addressing.

16:14I'm always a little bit surprised at how relatively cheap it is to have a whole human being bring you your food, whichever sort of app you use. Sometimes it can feel like maybe three quid to get your kids fast food, tea delivered when you're in a bit of a rush. And that does seem sometimes like that's very low for the service that you're getting. Do you think that the increase in fuel prices is going to change that? I doubt it, to be honest. The change in the delivery platform landscape over the last 12 years has been pretty significant. So DoorDash has acquired Deliveroo. Uber is obviously a very well-capitalized business with Uber Eats.

17:00And then Just Eat has been acquired by a company called Prolo, an investor called Process that owns a number of delivery platforms. So I think you'll see, because all three of them are fighting for market share, that they'll still be seeking to grow very aggressively. which generally means good news for the consumer. There's no kind of one monopolistic player. And so therefore, some of it will probably be subsidized by that investment. But the reality is that the majority of the the way they make money comes from the restaurants, not from the consumer. So hence, the consumer is still able to buy whatever they want to buy.

17:41it could easily just be a pack of cigarettes from the local corner store they're only going to pay a delivery fee of two or three quid on that but there's then a 30 % commission which is passed on to that corner store so that is the core cost base that presents this problem but rather than, and I think this has been a lesson for the restaurant industry rather than rallying against that consumers have kind of spoken, that's what they want and we believe that there's an opportunity to provide that at scale which then improves the economics of the industry immeasurably I mean it's very different to getting a that decrease from Andy Burnham from 20 % to 10 % I'm not saying that that's not a thing we'd love to see but you know that is less significant actually than being able to take your brand and run it across two sites today and 200 sites tomorrow via a platform like ours.

18:39It's interesting hearing the sort of the industry view from you. I'm going to share the view as well from Ben, the trucker, who's just messaged the programme to say, I just want to point out that diesel is over£2.04 at a services on the A1 today. Oil is only just over$100 a barrel. Actually, let me double check because I think it's currently just below$104 a barrel. But yes, Ben says oil today is just over$100 per barrel presently. And in April, oil was$126 a barrel and diesel was the same price. Therefore, we're potentially looking at£2.20 per litre for diesel very soon. That is indeed some of the warnings that it could reach even£2.30 by the end of the year.

19:19Thank you for that, Ben. Keep your thoughts coming. 85058. Micah, the governor of the Bank of England, Andrew Bailey, suggested rate rises could be on the horizon. In fact, I think three voted in favour of hiking rates to 4 % and six voted to keep it where it is. What would that mean? What would a potential future hike mean for our pockets? So as we know, rate increases feed through to every aspect of our lives. If we are savers, it's good news because we're going to get a higher interest rate return on our cash savings. But the biggest concern is the increase in our mortgage costs. And often mortgage rates can move even if the Bank of England doesn't increase the bank rate because mortgage rates are priced on future expectations of where interest rates might go.

20:16And we've literally seen it this week. Mortgage rates are going up by the day. I was actually talking to my mortgage broker last week about fixing my mortgage rate. and we're seeing people come off really low five-year fixes of around 1.19 % and who will now have to face mortgage rates of over 5%. So that is going to increase possibly their biggest expense, monthly expense. Then as we've spoken about at length, the petrol pump, the cost of diesel, the electricity bill, the shopping trolley, the airline ticket and also our pensions and retirement income. So it is an exceptionally challenging backdrop for UK households at the moment and one that the Chancellor will have to confront in next month's budget.

21:04Douglas, I'm sure that you have some sympathy for any Chancellor of any party trying to grapple with this. You've said you saw some similar challenges when you were advising Rishi Sunak. It's quite interesting, isn't it, that there were some pretty stark words from the governor of the Bank of England warning about the potential impact on inflation. Yes, I mean, he was saying that they now expect inflation to rise to 4 % or more in the first quarter of next year. So roughly twice what the bank's target level of 2 % is. So that is a problematic outlook. And certainly the governor and other members of the committee were hinting pretty broadly that their patience is running out and that they will move at the next meeting of the committee, which is in November.

21:55And what else did the Bank of England announce? They announced a temporary, potentially, pause of sales of government bonds or quantitative tightening, which is just not fun to say before 6am. Let me ask you to explain what that means to our listeners, which is perhaps also not fun before 6am. Well, people will remember some years ago that the bank engaged in a lot of quantitative easing. That is to say, it bought a lot of bonds from the market, government bonds from the market. And that was a way of injecting cash into the financial markets. That was the other side of the transaction. Insurance companies and other people who own these bonds received newly created money from the Bank of England in return.

22:37and that promoted liquidity in the economy and probably brought interest rates down a little bit at the longer end of the curve, as we say, that is to say government bonds that mature in 5, 10, 20, 30 years' time. And that was a way of stimulating the economy back in the dark days immediately after the global financial crisis and then again in 2020 and 2021 when we had the COVID problem. and these crisis situations have now passed and the bank is left holding a whole load of government bonds which isn't really its job and so it wants to get rid of those bonds and it has been getting rid of them over the past few years in some cases because the bonds simply mature they reach the end of their life the government pays back the money that it has borrowed to the holder in this case the Bank of England and then in some cases the bank has been engaging in what's called active quantitative tightening, which is where it simply sells the bonds.

23:34It doesn't wait for them to mature. It sells some of them straight back into the market. All of this has a slight upward effect on interest rates. Remember, the point of the exercise in the first place was to try and bring interest rates down a little bit. So reversing the process tends to set them up a little bit. The bank is now going to pause on this programme for about six months, perhaps a little longer. And it's going to conduct the whole process a little bit more slowly than it previously said. But it is going to make sure that it gets out of the market altogether by 2034. So that will be a full 25 years after the bank first entered the bond market back in 2009.

24:15Now, as you say, gilt yields fell on the news. And that means that the cost of government borrowing, some government borrowing fell slightly. What does that mean? Could it mean more fiscal headroom, as it's inevitably called now, for the Chancellor in his budget speech next month? Yes, it's a little bit helpful, but probably only at the margins. So government borrowing costs fell a little bit yesterday in the long term part of the market by about 0.1%. Now that's not nothing, but the rate had already run up in the past few weeks by about 0.5%. So you can see that the effect was relatively limited.

24:57The other thing is that what really counts is what the OBR thinks interest rates are, what assumption it makes for interest rates when it draws up its financial projections. And it usually does that over a period of a week or two, some weeks out from the budget. Now, we know that the budget is on October the 28th. We don't know exactly which weeks or days the OBR is going to use in taking its reading of the bond market. But I suspect that the period has probably already closed or is about to close. So moves in the price of money in the markets at the moment probably won't make much difference to the OBR's thinking and its projections.

25:39Well, we will be talking about this a lot more in the run up to the budget. It's like our Christmas here at Wake Up To Money, isn't it? We get very, very excited. Lots of you getting in touch this morning. Anastasia says, good morning, Felicity. The rising rates of interest are good for savers. So I will be very pleased if interest rates do go up. Joe in Yorkshire says maybe the fuel price is a shot in the arm for the EV industry. And Veronica says, I'd like to think I second guessed the oil and gas price rises and therefore the cost of fuel and electricity, but I didn't. I just planned to make the change by introducing solar panel and moving to an EV and fixing my energy tariffs all just before the Iran war.

26:16It was a fluke for me. I'm very fortunate to be able to do this as I've not noticed any fuel or energy cost rises yet. In fact, there's no surprise that my outgoings have dropped. Veronica, it's all right for some. I'm glad to hear it. Keep your thoughts coming on 85058. We could talk about this for the rest of the programme, couldn't we? But let's talk about the other big story of the week, the apparent 10 % chance that AI could kill all humans. These were the warnings from a researcher at the AI company Anthropic. AI bosses gathered then at a conference in California. And here's Sam Altman, CEO of the chat GPT maker OpenAI, at the conference earlier this week, explaining why he was backing rival Anthropic's call for a slowdown and for more regulation.

27:02The world should trust that we are going to do the right thing because it's the right thing and because we feel the magnitude of this. I think it's great for our industry to say we want to come together and we want to be able to coordinate and make sure we have enough time to do this safely. But when there's any implication that because of the commercial pressures and the race, some company or between countries, some countries might not do the right thing, I think that's when people get very scared. There you go. You should trust the companies to do the right thing is his view, but other views are certainly available.

27:39Here's Jensen Huang, CEO of the chipmaker NVIDIA at the same conference. The market forces are already there. We don't need any new laws. We don't need new regulations. We just need companies to decide that when it's, you know, run as fast as they can. I think innovation speed and safe products are not, it's a false choice. You could definitely have both at the same time. So run as fast as you can. But if you feel at any given point in time, the company's out of control or the product's not going to be safe, take a pause and make sure you get it right. Take a pause. Finally, Mustafa Suleiman, CEO of Microsoft AI and original co-founder of DeepMind, was speaking to Nick Robinson on the Today program yesterday.

28:25I think that it is totally right to be concerned right now. I think it is justified. Forgive me, concerned is a very sort of neutral word. Alarmed. No? We should be alarmed. I mean, fair enough. We should be alarmed. These are very concerning events. We should be very worried. And I think it's right to pay attention right now because there are very practical things that we can do to add additional guardrails and controls to how these models are developed. Dan, are you concerned? Are you alarmed? Are you unconcerned? I'm not concerned at all because we should trust the big companies. I am kind of head down, not sleeping at night on the basis that when you're running a company, you just have to be so on top of this and the speed of change.