Fed up

24:50It's a detailed game. One BAM's pitch to get the Federal Reserve contract with the next person there as well. And certainly going to be a headline that we're going to keep talking about here on the programme as well, isn't it? Just getting that stuff right, Kim, then. How do you stop an overrun like that? What are the key things to get right? Well, it depends what you mean by an overrun. I mean, the whole point is we don't do single stage tenders. Part of the reason I came is to get risk management right in our business and occasionally you do lose your way. We focus on margin, we don't focus on revenue.

25:28If the right jobs aren't around, we won't do them. So it's a matter of having the right clients. So we work closely with the DfE, we're working with the new hospital project hopefully. We work with a lot of people that really know what they're doing, British land, Crown Estate, who understand the value proposition of what's there. They've got an idea of what they need for the project. We've got an idea about what's involved. But it will take, under a pre-construction agreement, 12, sometimes 18 months to work through the detail of what's actually involved. If it's an existing building, you don't know what you've got until you've uncovered it.

26:02And there's only so much you can do before you enter into the contract in order to know exactly with precision. What you're doing is narrowing the boundaries of where the future discussions are going to be. Most of construction and infrastructure is solving problems in real time. So we get rid of, when we understand the planning regime, we'll take a certain amount of risk around it. When we understand that this is what you're wanting to achieve and these are the sustainability credentials, we'll take a certain amount of risk. But if there's an existing building, no one can say what's involved until you've stripped it right back.

26:33And then you'll understand, for example, how difficult the fire stopping is going to be on it because it's an existing structure. And ideally you wrap all of the steel membranes. but if they're attached to a facade you want to keep, you're going to have to have another solution and it's going to be more expensive. So it's a matter of this is an in advance with the client. This is going to be something we think it could be this, it could be that. When this happens, let's sit down and talk about it and we'll make the decision together at that point. Interesting insight there as well. Lots more from our panel in the second half of the program where we're going to be talking about the high street again and our shopping centres and what went on over Christmas as well.

27:10Wake Up To Money with Will Bane Morning, welcome back to Wake Up To Money on Tuesday the 13th of January our panel this morning here in the studio with us Kim Sides, Executive Director of Construction for BAM UK and Ireland and Russ Mould, Investment Director at AJ Bell talked a lot in the run up Russ didn't we to Christmas here on the programme as well about how important well one, always important for retailers and hospitality Christmas, New Year Cash flow, absolutely. But two, given everything that had gone on with the budget and when the budget was and all the things we talked about lots, about what that would tell us about kind of sort of spending power and people's power in their pockets.

27:49Now, the last couple of weeks, your kind of world, the big stock market listed companies, actually had quite positive results, right? Whether it be Next in kind of clothing or M &S in food or Tesco in food, et cetera. Yeah, it's varied a lot. And generally, food has done better than non-food. I think there's been the clear theme that we've seen. Sainsbury's numbers were fine, though. Argos was tricky. M &S food was good. Clothing and merchandising was difficult, though some of that may be the lingering effect of the cyber attack. Tesco's the same. And all right, there was a profit warning from AB Foods, which owns Primark, though.

28:20That was probably more down to Europe than the UK. But overall, it's been a fairly clear trend. Food sales have been strong. Clothing, non-food, not quite so good. Yeah, and that latter half of that is why the British Retail Consortium today, they've got this monitor where they, month by month, look at what's going on out on the high streets in our shopping centres, calling it a drab Christmas for retailers and in particular pointing to exactly as Russ said. Food, fine, kind of hanging in there and a bit of inflation, propping that up as well in terms of the sales. But growth falling, total UK retail sales increased by 1.2 % year on year in December.

28:55That was compared to 3.2 % for the previous Christmas. Let's get a bit of a snapshot from out and about as well. Andrew Hines is going to join Kim and Russ for the next few minutes here on the programme. Andrew, the owner of F Hines, the jeweller's more than 130 stores right around the UK. Andrew, morning. Thanks for being back with us on Wake Up To Money. Good morning. Thank you for having me. Drab, says the BRC. What do you reckon? Yeah, I recognise that. I would say it was probably a little bit better than Drab for us, but I certainly recognise the pattern of the year as they presented it, which was not too bad the first half and then getting steadily tougher through the second half.

29:32and ending up pretty flat in December. Well, explain it out then. Is it all because the easy kind of takeaway and certainly what all of the trade bodies, and that's their job, right, to lobby the government, have said, well, it's all to do with the budget, it's all to do with policy. Was it? Or are there other things as well? There's long-term slight changes. The end of the year has become a little bit less important as a total of the year if you're going back over decades now. With things like people got a little bit more affluent, particularly things like clothing, I think if people see something, they tend to buy it now, whereas 30, 40, even longer ago, they'd wait to be given it, wait for an event, wait for getting some money and going to the sales.

30:11There have been more recent things, I would say, trends like Black Friday tend to pull sales forward. And you even get pre-Black Friday promotions now because obviously Black Friday tends to have such implications for margins. If you can pull a little bit earlier than that, but doing some promotions that aren't quite so painful, all of that pulls stuff into November. and then you tend to reap the soap what you sow in December when it all gets clawed back again. So there have been trends like that. But I would say quite a bit of it is exactly as the trade bodies have been saying. It's that there's nervousness out there, even though a lot of the tax rises haven't really kicked in yet and won't do for quite a while.

30:49We're hearing so much news about how terrible everything is. I think that's caused quite a lot of people to rein in the purse strings. Well, jewellery is a great kind of indicator for that, right, isn't it? One, that it is a luxury, and two, that it's not, as a result, it's not a necessity either. People don't have to choose to buy it. So what are you seeing across your stores? Any trends? There are definite trends. We've had a bit of a special case in the last couple of years with precious metal prices. First of all, the gold price, which is 50 % up year on year, and that's been followed more recently by huge increases in the silver price and platinum as well.

31:24So that's changed the patterns. it meant footfall has been down and down and down year on year but average sales been up and up and up so you because you have to you have to move prices with the uh with the the up the costs increasing um what it does mean is you can't increase prices for any other reason because they're already going up so much because of the metal so it squeezes you a bit but um we've noticed footfall down but the two seem to have netted each other out a little bit there have been a few other trends but they've been more year-round things things like lab-grown diamonds of course some people to make different decisions in in what they might purchase but that tends to be things more like engagement rings which are a year-round purchase what we found probably at christmas is because it's such a gifting occasion the average sale is lower because you tend to be buying a lot more smaller presents for for family members rather than major purchases and people have definitely been very conscious of their budgets they've been having to pick the thing they can afford to buy and there's definitely been less flex in terms of people saying well i'm going to push the boat out.

32:23Really interesting. Russ, just coming on, those prices, what's going on with gold and silver in particular? Well, given what we've been talking about earlier on with the US Federal Reserve and worries over independence in the world's largest economy of its central bank, gold and silver prices, I'm sorry to tell Andrew, went up again yesterday and silver hit$85 an ounce for a new all-time high. That's up about 160 % year-on-year. Gold's up about 60 % year-on-year. Where they're going, I don't know. If I knew, I promised I'd tell everybody, but at the moment the more you get uncertainty about the world's biggest economy behaving a bit more like an emerging market, then people will look for havens and gold and silver, potentially that kind of fit the bill.

32:58And Kim, just interested just what's going on with kind of input costs, because certainly in construction, I heard lots about kind of raw material prices as well. What's going on at the moment? To some extent, we've got a little bit of protection on it because this is where strategy comes together. We procure primarily locally because we want to know where things have come from. So we tend to use more domestic produced steel. We're not doing a whole lot of things with the big foreign exchange exposure, which is a difference from having worked in Australia and in Asia. So that certainly is one of those cases.

33:29We keep a close eye on it, but we don't do big hedging or anything else. It's more a matter of procuring sensibly with our supply chain and trying to look for great shocks that are likely to affect them. We don't use a lot of sexy metals, frankly, in ours, but steel is expensive. Steel energy costs are still our biggest import in relation to all of those aspects. Copper? Copper. There's some. There's some in relation to it. That's going through the roof as well, isn't it? And the issue we have with that, of course, is the temptation for people to jump over and steal it. The security aspect. I mean, these have an effect on all parts of society, these aspects.

34:05Is that a concern in the stores as well, Andrew, with the prices that Russ is talking about? I mean, we've heard a lot about the kind of issue with kind of theft in retail full stop over recent years. Is that something you're having to, I'm presuming it's always a focus, but is it something you're having to put more focus on at the moment? No, not especially. We're a little bit different from most retailers in that there's a lot of customer interaction with members of staff. We don't tend to have sort of pick and mix displays, as you would have seen in Woolies with all the products. Don't get me nostalgic for that, Andrew, this time of the morning.

34:39that's right so uh so there's obviously a level of security there um that uh that a member of staff's always involved when anything of any value is uh is being shown to a customer so yes it's always a concern because uh because there's there's people out there going to try and take things from you almost whatever you try to do but it's i would say we're possibly less frontline in that than uh than a lot of places and you're interested from both you and kim about confidence We've talked about this lots on the programme as well. You mentioned this in one of your answers a moment ago, Andrew, as well.

35:11Is it a real thing then, is it? So if people listen to this programme, they see it on the 10 o 'clock news or whatever, they read it in their newspapers, do you see that filtered through to your stores in terms of the number of people who come through the door? If suddenly there's lots of doom and gloom news about what's going on in the UK economy, does that really translate to people not walking through the door and choosing to buy a bracelet or whatever? I can't tell you for sure what's the cause and effect, but we all hear it. We look at things and think, well, there's reasons for optimism.

35:40There's reasons of concern, aren't there? You look at the next year and you think, well, the tax rises have been delayed. Interest rates are coming down a bit. So those who've got mortgages should have a little bit more to spend. Obviously, older customers who might have paid them off and be earning interest on their savings might be affected the other way. So when you look at it, there are things, good news, potential good news and bad news. But I suppose what we tend to hear is the drip, drip, drip of bad news. And if we see footfall down, if we see people being careful, you tend to make the link.

36:07But I can't say for sure how much of that is direct cause and effect. Well, when we're talking about this and in the economic jargon, what we really mean is you guys out there listening and what you're doing. So tell us what you're doing. Are you tightening the belt a little bit? Are you feeling cautious about what you're spending? 85058 on the text to do that. Kim, the importance of confidence for a bigger level for a company like you. Confidence comes from lots of things. And I think I was interested in Andrew's point about that Christmas is less critical than it was. So one thing I think you always have to keep in mind in the UK is how much weather has an effect on confidence.

36:43So if you looked at the year, I'd be interested to understand from those that look at these things much more carefully than I do. We had a fantastic spring and summer. So a lot of discretionary income was probably at the pub or at a slightly longer holiday or actually having a summer dress. you could actually wear last year because it was one of those glorious summers that you advertise to the world as every year, which I've got to tell you it's not. So I wonder whether how much spending was spent in the spring summer, because for example, it was a huge wedding year. So hopefully Andrew saw that in his engagement rings and other things.

37:18But if you've had to go to somebody's wedding and it's been delightful, you've had a hotel, you've had a transport, thought money gets spent, there is not a lot of spare in people's pockets, but a lot of it is on experiences. And again, that's not necessarily a footfall item. Andrew is smart in the fact that that customer element people will still come out for, but there's an awful lot of last minute shopping or shopping for vouchers for experiences that are now a major feature in Christmas as well. How they turn up in the figures might be something different from five or 10 years ago. Yeah, I think that's right.

37:48I'm thinking Lord Wolfson at Next did talk a few years ago about a shift in consumer spending away from goods towards experiences but then his firm clearly has got the magic formula of right product right price for the right demographic in the right format so it still can be done so what's the outlook for 26 for the rest of this year andrew all right well i'd say we start every year cautiously optimistic i think if you don't then you're almost setting up to fail aren't you so we look at those positives we look at the opportunities um we we invest in the stock i think one thing that's been a factor is it's not just confidence with consumers it's also confidence with businesses particularly seeing it I think with smaller independent businesses on the high street and and the whole of hospitality is that if you're stuck with with costs that you find unsustainable you tend to cut back where you can you cut back on staff you cut back on opening hours in our sort of business people might cut back on stock and while that might make you more able to weather the storm it's not going to help you take more money if you reduce your opportunity to trade that's not going to help the economy it's not going to help growth but it might keep some more businesses afloat so we we tend to feel you've got to have the stock to to take money so we start the year positively um and we just do the best we can every year um again we can't necessarily second guess the consumer you you can't go crazy in terms of uh you know thinking there are going to be huge increases but we tend to start with a positive outlet it's that point again isn't it felicity was talking to james daunt the boss of waterstones about before christmas as well good neighbors the whole ecosystem out there on the High Street.

39:16It's hospitality and shops. You can't think of them kind of in isolation. Andrew, really great to have you on the programme as always. Thanks so much for your time. Andrew Hines, the owner of F Hines, The Jewelers, then bringing us to about 12 minutes to six here on Wake Up to Money. A little bit later on this afternoon, though, we will get a bit of an idea of what the Scottish government is going to do with its tax and spending in the next financial year. The finance minister, Shona Robertson, will deliver a speech and then we'll get some more details after she's done. Our Scottish business and economy editor, Douglas Fraser, has a little bit of a look ahead for us.

39:50Today's should be the kind of charismatic splurge of a budget speech that sends the ruling Scottish National Party into the electoral battlefield buoyed up with enthusiasm. But that's not Shona Robison's style, which is more bookkeeper than magician. And she's in the unusual position of setting out a budget for Holyrood's tax and spending from April when she's one of several ministers still in post while not standing for re-election in May. The budget is mainly funded by the block grant that comes from the UK Treasury. Less of a constraint than seemed likely before the Chancellor, Rachel Reeves, had to U-turn on welfare policies, releasing more money to Edinburgh, Cardiff and Stormont through the Barnet funding formula.

40:31Holyrood gets to set most aspects of income tax in Scotland, which this year means six bans, up to a£28 lower annual tax bill for lower earners than they face in the rest of the UK and a much higher tax bill for those in higher tax bands. At£50 ,000 income, you're paying£1 ,500 more. There's been divergence with UK income tax over recent years, but ministers have pledged not to diverge further this coming year with higher rates or more bands. Spending is tighter across public services, made tighter by public sector pay settlements, free tuition fees for students and prescriptions, and some devolved benefits and social care more generously distributed than you'd find elsewhere.

41:13Capital spending is tighter still, meaning difficult choices in an election year where the SNP has yet to upgrade the roads it promised, the NHS hospitals, prisons and notoriously ferries for the Hebridean and Clyde Islands. After a long delay, we'll get an update today on that pipeline of projects as well as a spending review taking Holyrood to the end of the decade where the gap between forecast income and expenditure is opening very wide. And just as the Office for Budget Responsibility publishes its assessment of the Chancellor's budget, so the Scottish Fiscal Commission today publishes an equivalent document, being careful not to do so as the OBR did several hours too early.

41:56Douglas Fraser there, and of course we'll have more on that on Five Live a little bit later on when that budget is unveiled, and I'm sure it'll be me tomorrow again, And so I'm sure we'll be chatting through any of the big headlines through it here on Wake Up To Money as well. Russ, you were saying a little bit earlier on in the program, Alphabet becoming a$4 trillion company. That's the big kind of market story. Not a crazy surprise, but interesting, isn't it? Because a lot of it's driven by AI and lots of people in the kind of early days of, say, ChatGPT or whatever, which isn't, of course, owned by Google.

42:24Google had been left in the starting blocks a little bit. And yet, Gemini yesterday was chosen by Apple to do a reboot of Siri. and I think that's one of the reasons why the Alphabet share price, the parent of Google, went up yesterday, a$4 trillion valuation, second most valuable company in the world, pretty much a valuation more than the UK's GDP, which is an intriguing kind of... Which would you rather have? You can have the magnificent seven companies of NVIDIA, Alphabet, Apple, Microsoft, Amazon, Meta, Tesla. You can buy them today for$22 trillion or you can have the GDP of China for something really pretty similar.

42:59Which would you prefer? I like the food. But it's just in terms of the hopes and expectations that are built into these companies really interesting. And Gemini's, Alphabet is going up because it's been seen as an AI win. As you said, originally the war is it would lose. But at the moment, if you think about the brands that Alphabet has got, Gmail, YouTube, Android, Maps, Gemini, Chrome, the number of users that they have, hundreds of millions, billions. So in terms of a customer base that's there, data that the company can access, data that they can use to tailor services, provide what people might want to see, it's a really powerful starting point.

43:31So I think that's what the market's thinking. But equally, the moment stock markets are thinking everybody's going to win in their AI. All of these major players that are spending huge amounts of money on it, I'm not sure that's necessarily going to be the case. I think what's interesting for these firms like Meta or Alphabet is they were asset-like businesses. Now they've been doing asset-heavy businesses because they're building all these data centers which are going to be there and depreciate and their use for life is quite short. And also they're leaving their own little private wall garden.

43:58They're all kind of in their own phenomenal niches. And now they're all moving out to compete with each other directly for the first time. So I can't necessarily see them all winning. And it's going to be fascinating. And as you see, we've got newcomers coming up the rails like ChatGPT. It'll be intriguing to see who does emerge on top. History would suggest that ultimately one generation's disruptors becomes the next generation's disrupted. Kim, on its most basic level, it's quite interesting, isn't it? because one of the reasons that Google share pricing kind of those early days of the AI wars about a year or so ago was not doing as well, was that people thought, oh, everybody will ask ChatGPT or whatever instead of searching it through Google.

44:34I mean, just practically. I mean, do you have that split personally yet? Do you ask a chatbot what you would have traditionally just put through your search engine? I mean, we still search for things, particularly when you're having a debate over the dinner table about something because you don't wait to look it up at home anymore. It is an interesting thing and it's one of the things I've set myself as a personal challenge this year is getting properly to grips with AI. We are doing it though very carefully because cybersecurity is still one of the biggest risks you have in our business and I think in modern business generally.

45:05So we actually have a proprietary system under the Microsoft system that is dedicated to us as using our own data and we control our data. And so there is still that proposition. You've got the sort of go and take over the whole world, Apple, Google approach. And then you have Microsoft, which is you still need that security for business. And you need a business aspect to it because AI can't all be about putting, you know, fluffy ears on cows. It is actually quite important that it's useful. But we all need to come to grips with it because this isn't going away. I just find it really interesting that, you know, if you'd said to someone 10 years ago that Apple was going to do a deal with Google on anything.

45:43Yeah. That is how far we've come and how disruptive this business is and how things have moved on. It's quite extraordinary. And then you had the government in the US that was trying to break up Google and was calling monopoly powers on its search engine. As it is, Google's mucked it up so much that it's barely the useful thing it used to be. So maybe you just need to wait long enough for them to resolve the issue yourself and you don't need to put a government input into it. But that market is moving so quickly. But the world has changed, absolutely changed. But it's another tool for business to not get too excited about, to stick to our knitting, to make sure our own proprietary information is kept very solidly for us.

46:19And then we need to grow up and use it like everything else, because while my business won't be as affected as some others, you're still going to need great people in construction. It's one of the great things for recruitment for us. A lot of our jobs will still exist and a lot of our really, really satisfying jobs will be supported by AI, not ejected by AI. One of the areas where it's really reshaping things is marketing and advertising, isn't it? Russ, we've seen that with the big stock market listed advertising company, WPP. Share prices have been crushed. Having a massive shift already. Traditional marketing, very traditional marketing, very, very traditional marketing, in fact, being used, though, by some of the biggest technology companies.

47:01Because strange things, I don't think you can move. I have actually never, my wife is obsessed with strange things. Kim's shaking her head at me as well. I'm not a watcher. I miss this whole thing. Kids were the wrong age. I was joking with your producer yesterday that it'll be one of those things that I'll watch when it comes around in 20 years' time and everyone's nostalgic for it. The marketing blitz that's gone with it, though, is extended from everything. Crisps, radio streams. Well, now the Royal Mail is jumping aboard the hype train, as Olivia Hutchinson has been finding out.

47:29After captivating its audiences worldwide with its combination of horror, adventure and coming-of-age drama, Stranger Things is about to make its mark here in the UK quite literally in the form of a postal stamp. I think perhaps the fact that stamps are used and collected all over the world mean that as a commission it's something pretty prestigious to be associated with. David Gold from the Royal Mail says the collab has been more than two years in the making. If we've got on our horizon big anniversaries or big events, and clearly the finale of Stranger Things is a big event among its audience, we've got the time to reach out to, in this case, Netflix, and to be able to talk to those that they work with and to see whether they're interested in collaborating.

48:23And if they are, whether they'll help to open the door to the people who are really going to make this come alive. So it obviously then requires quite a lot of work to secure licences and to get the intellectual property rights all agreed. And what's a stamp without its artwork? I've always been really interested in art. Basically spent my entire childhood sat in front of the TV drawing all my favourite cartoons and movies and stuff like that. Kyle Lambert there, British artist and official Stranger Things illustrator. It's his work behind this latest collection. Speaking to BBC Radio Manchester in November, he recalled moving to LA to follow his dream, and it's fair to say it paid off.

49:09I basically really wanted to work in the movie industry. I wanted to create the artwork that everybody saw and that went along with my favourite movies, and I basically realised that the way to do that would be to be in the US and try and be close to the entertainment industry. So I moved out here and eventually worked my way towards LA. Netflix and the Duffer Brothers simultaneously found my work and thought it was a really good fit for the show. Both stamps and the series share themes of collectability, storytelling and nostalgia and it's hoped the collaboration may even revive traditional letter posting.

49:47And there are a whole bunch of people who are fans of the show and may not normally go out and buy stamps. But looking online at some of the social media and the sort of things people are posting, clearly there's massive excitement for when these stamps come out. It's not just a case that they're collector's items anymore, although that's a big part of it. I hope that this set will help to keep that tradition alive and introduce it to new and possibly younger senders of mail. Olivia Hutchinson reporting there. They do look amazing. I'm just looking at them up on the web now. Kim, marketing budgets for these things are incredible.

50:27This is the modern world, but the great thing for the UK, the UK is a powerhouse of creativity. The film studios, we built Sky Studios, and that's where Wicked was filmed, and they didn't do it by a half-assed CGI or anything else. They actually built sets. That employs a lot of people in the UK. It's a good story. Nothing half-baked here in the Wake Up 20 studio this morning either. Thanks so much. Kim Sides there, the Executive Director at BAM. Russ Mould from AJ Bell. Big thanks to all of you for listening to Wake Up To Money.