Flying on fumes

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1:41Wake Up to Money from BBC Five Live. Hello, morning. Welcome to Wake Up to Money. A UK minister warns of higher fuel and food prices for up to eight months because of the war in the Middle East. We'll be hearing from the Air Ambulance Service and for the pharmacy trade about what the disruptions of global shipping is already doing to their business. Also on the programme today, they're back. Wait, wait. I hope that's not what you're wearing to the dinner. That's all. Yeah, the all-star cast of the 2006 film The Devil Wears Prada reunites 20 years later for the next instalment. Wake Up To Money with Will Bane.

2:20Hello, morning. Welcome to Wake Up To Money on Monday, the 27th of April. Just gone five o 'clock in the morning. We're with you this morning. Plenty to get our teeth into as we kick off another week here on the programme. Yes, the Devil Wears Prada cast back 20 years on. Is it just those sort of film remakes that boost the box office or is it a lack of creativity? Or is it actually exciting to get them back again? Something you're looking forward to seeing. We'll be speaking to a major cinema chain a little bit later on in the programme, but loads of other news as well, including that intervention from Darren Jones over the weekend, the chief secretary to the prime minister warning that those high prices, inflation because of the war in Iran could last with us for up to eight months as well.

3:05So lots for our panel to get into this morning, lots for you to get your teeth into too, should you wish to join the conversation in all the usual ways. 85058 is the text number, 08085 909693 is the WhatsApp number. Full house in the studio this morning as well. Let's introduce you to them. Matthew Scullion back with us. Matthew, the chief executive and founder of Matillion. Matthew, I'm going to let you do the explanations of Matillion because I'm sure you'll do a better job than me. But morning and great to have you back on the programme. It's great to be here. Well, thanks very much for getting me out of bed, Swilly.

3:36Run us through then a little bit of what you do and also your sort of hats beyond Matillion as well. Sure. So I run a company called Matillion. We are the makers of an AI platform called Maya. And what Maya does is make data useful for businesses and organizations to fuel AI. and it's just an example of what's happening with AI really across the world and across industry where we can now use this magical new technology to augment and accelerate the work humans used to do and therefore allow businesses to do amazing new things much quicker and cheaper. And then, yeah, side hustles, I think you were alluding to, Will.

4:17I am a member of the Capital Markets Industry Task Force, which is a treasury appointed task force to look at the exam question of how to make the UK better at starting growing scaling and keeping consequential companies and I'm also a board member at Manchester University so there you go plenty of the scope of the background that Matthew's going to bring to the program there as well also alongside Matthew this morning for the next hour Sophie Queen back in the studio with us as well morning hello morning Sophie with us from BNP Paribas Asset Management, if I can spit my words out this Monday morning.

4:56What have you been watching as we kick off another week? It's going to be a big week, isn't it, in terms of tech results and all that kind of stuff from a stock market perspective? Yeah, no, exactly. So you're going to have most of the hyperscalers, so the MAX 7, so the biggest technology companies in the US, which are going to report results, highly expected and looking forward to have a look on their capex plans so how much they're going to spend on data centers over the coming years when there's already articles about how in 2026 half of the data centers plan are going to be either postponed or canceled because of the lack of power yes so energy tech it seems like where a lot of our panel are going to be this morning so we'll chat about that as we move through the program this morning as well but we will start with those latest round of talks to end the war in the Middle East.

5:45They've stalled once again, President Trump saying on Saturday he had cancelled a visit by special envoys to Pakistan. And that means no obvious end in sight for the deadlock, which is cutting off that passage through the Strait of Hormuz, around a fifth of the world's oil, of course, normally flows. The Chief Secretary to the Prime Minister, as we were mentioning, Darren Jones, was on the Laura Koonsberg programme at the weekend here on the BBC, and he outlined what he thought it all meant for inflation. I think our best guess is eight plus months from the point of resolution that you'll see economic impacts coming through the system.

6:19So eight months after the end of this mess in the Middle East. So people will see higher energy prices, food prices and those types of issues, flight ticket prices, as a consequence of what Donald Trump has done in the Middle East. Eight months, Sophie, what do you reckon to that as an assessment, first of all, of how long this inflation might hang around for? I think it all really depends on when the Strait of Olmos is going to open. If it were to open now, we did some scenario analysis. If it were to open now with, let's say, 50 % flow, you're still going to end up with shortages because the amount of oil drawing out of the reserve is bigger than the flow that is going to come in because the Strait of Olmos is going to open, but it's going to take some time for the oil tankers to arrive at destination.

7:09so almost a month in Europe two weeks in Asia so it's a bit shorter so I think it all depends on when it's going to open so let's say the Strait of War was open I think the summer it would be way too late so I'm just wondering yeah the inflation impact is going to be there but how much you need to take growth into the equation as well yeah and how much I mean from the companies that you look at for example how much is the pressure on already in terms of shortages or or companies flagging that they are perhaps running out of key components key inputs particularly obviously those that use oil perhaps but there's definitely this domino effect so it started in asia but if you look and try to compile other hard rationing measures that have been announced recently you see that it's starting to pick up quite a lot in europe compared to asia and yeah companies flagging shortages.

8:06So in Asia, for example, because of the lack of nafta, which is one of the oil derivative products, there's this rush to buy garbage bags. So it's the same toilet paper phenomenon. It's like a key kind of, it's the bit of oil that makes, I'm massively oversimplifying, but it's sort of the bit of oil that helps you make plastic, basically, isn't it? Exactly. And so there's a run on bin bags, basically. So it was the same as when it rolls during COVID, but this time it's garbage bags. So you're starting to see shortages here and there. And the longer that lasts, I think what we're not taking into account is the reserves are not unlimited.

8:49So at some point, we're going to have to take the growth component to account. So inflation, yes, but how much a growth slowdown is going to play out first. Matthew we've perhaps fairly obviously focused a lot on the program on sort of goods type companies that those right on the front line being impacted in sort of obvious ways I guess to our listeners what about in sectors like yours and in services and those kind of high-end tech firms is it having any impact so far and if so how you know not quite yet but I think we expect it to so I mean first of all on the internal side how it affects the company just practical stuff we're a british company over 90 of our revenue comes from outside the uk so we spend a lot of time on planes and uh plane tickets are a really um significant line item cost in our p &l and also inflation that you know i was quite refreshed to see the honesty from the minister commenting that it's pretty obvious inflation's going to go up so it's nice to see him commenting on it but you know that makes the parity of the salaries all of our people are paid worth less and so we either need poor or less happy employees or need to pay them all more.

10:07I think on the flip side the thing we worry about more strategically is you know what does this do to the global economy because if all of our customers are performing slightly less well with these growth and inflationary headwinds, then that makes everyone's trading life more difficult at the time you're trying to grow, right? So it's all very inconvenient, particularly as I think most of us would conclude it's a political own goal. I know you were saying just before we came on air that you've just been travelling recently. I mean, is it something that comes up that people are talking about as well at the moment, or are you trying to focus still on, you know, the fundamentals of the businesses you run?

10:47Yeah, I mean, in my sector, I think it's mostly on the fundamentals, you know, it's corridor conversation. But certainly I'm thinking about it internally. And, you know, there's a slight irony. We sort of try to run our business efficiently. And we were recently talking about travel prices. But, you know, I spend two weeks out of three outside of the country with my teams in other countries, particularly in the US. You know, two thirds of our revenue comes from the US. It's a long flight. If the gas is twice the price, then it shows up. Sophie, again, just before we came on, you were saying, have you booked your holiday yet?

11:26To me, I mean, is that is that the sort of type of thing that our listeners should be thinking about? When and where they've booked it to? So, yeah, I was asking because when we're talking to commodity specialists, they were incentivized to book the tickets for the summer. But I'm wondering, yeah, you can fly out. But what if you cannot fly back? This is because of the jet fuel shortages. Exactly. So you're not consuming. The Strait of Wormers is closed, but we're not consuming crude oil as it is. The product needs to be transformed. and Europe is 50 % dependent on jet fuel from the Middle East.

12:05So at some point, we're going to start depleting the reserve and something to take into account is the refinery capacity. So like processing crude oil into products is quite constrained. So if there's some damages in the Middle East, then it's going to take a lot of time to go back to full capacity. So you need to take that into account into our flight ticket. So yeah. Perhaps, obviously, the major airlines have been slightly coy about what this means at the moment, haven't they? But we certainly have heard some of them talking about when and how long this might last. I mean, do you think that's a realistic outcome, potentially, this summer, that it gets so tight in Europe, across Europe, that actually we are going to see impact on, at the very least, flight prices because of that?

12:54Because, you know, they're presumably going to end up running fewer flights, for example. We started to see both. So there's been on one side consolation on the most unprofitable routes. But on the other hand, we've seen prices going up as well. So, yeah, it's definitely going to start materializing. And we're going to see it more in the headlines because for now it's been really muted. It's more like the short-term holes that have been impacted. But one is going to start impacting like if you're flying to Asia or let's say to America. If this flight starts to be impacted, that's really when we start to understand that the shortage is starting to get real.

13:32Matthew, how do you build that in for a business like yours, where, as you say, being face to face with people traveling, massive part of growing the company? Yeah, I mean, I suppose the pandemic did a little bit of a favor as far as we're all very well set up to run digitally. But you're absolutely right. I mean, a third of my team worldwide is outside of the UK, maybe a little bit more, actually. and most of the points spending time with customers and partners. I don't see flights not being offered. I just see them getting a bunch more expensive. So that's money that we're spending on jet fuel instead of spending on employees building AI products.

14:12You know, as a business builder, it's just frustrating. As the guys say, obviously a headache if you want to go on holiday, obviously a headache if you're trying to run a company like Matthews. More serious than that, perhaps if you're flying emergency aircraft, as Anna Perry, Chief Executive of the Great Western Air Ambulance and her team try to do, sector carries out 134 missions a day, says higher prices are already putting real pressure on already stretched budgets in the charity sector. And Anna joins us this morning live. Morning. Good morning. How much is that pressure on already then right now?

14:49Or is it is it coming? I think it's fair to say that it's coming and it's making it really difficult to plan. It's really difficult to plan your charity's budgets. It's really difficult to work out how many missions you might be able to afford to go on in the future. At the moment, we're reasonably confident about the immediate supply. Everyone's got fuel tanks of various sizes with aviation fuel. Everyone is operating as usual at the moment by a helicopter or critical care car. But it's just the uncertainty. You know, we look at the news every day. We just can't predict whether that aviation fuel supply is going to be there reliably and at what cost.

15:34Right. So it's the cost right now rather than the supply of it, is it? Yes, I think so. I think so. We hear things like that there's only four weeks worth of aviation fuel in the supply chain. our great restaurant ambulance charity our um our aviation fuel supplier has indicated that as well but when we ask questions like well are you going to get a top up is it gonna is it going to replenish um then then we're not we're not getting clear answers at the moment so it's the same uncertainty as every other industry is experiencing but when other people think about fuel shortages they think about queues at petrol stations or not being able to go on holiday or maybe their holiday is costing more but for the air ambulance charities across the UK fuel shortages to us mean whether we can get somebody in need of a life-saving emergency aid whether we can get a critical care team to people when they're having the worst day of their life and ultimately whether somebody lives or dies so it puts a quite a different spin on it absolutely can you give us a sense of the change in that cost already Anna sort of roughly for what you would have been paying for your fuel to what you're paying now?

16:42Well aviation fuel every time you buy it you are you're you you have to pay the cost of the the global the global oil market plus an amount agreed with your supplier to cover delivery or the administration costs and things like that so it's always quite difficult to predict but having said that it's normally stable over years and years and what we've seen over the last month or so is is cost doubling so for great western air ambulance charity then our costs are going to increase by probably between 40 and 50 000 pounds a year um so that's quite a hit for the for charities to take uh air ambulance charities in england are dependent on charity funding and people donating money grants gifts and wills things like that so every extra cost um every extra bit of cost from aviation fuel means that either people have to give more or the money has to be diverted from somewhere else so that's that's really difficult yeah and what have you learned from kind of other squeezes i suppose that's sort of the cost of living pressures from what two or three years ago the really high inflation spike after the russia ukraine war did you see that that that really impacted the amount that people were able to donate to you guys?

18:02Yeah, when COVID first started and people started being really worried about their jobs, we definitely saw a drop off in direct debits and people playing our lottery as people basically try to cut their expenditure. At the moment, fundraising is really tough. There are some people that can still afford to give and still do, but a lot of households are having to tighten their budgets and so fundraising environment generally for charities is really challenging and i don't think we've seen everything start to bite yet in that in that respect people's budgets are still protected in some ways if you're on energy fixes or you know still had a fuel tank of petrol and haven't used it all and things like that and but the other thing of course that we're worried about is that the costs aren't just about the fuel price itself increasing what's happened with previous times when the cost of everything has gone up, when inflation's been high, is every time we come to renegotiate a contract or buy something else, the costs of everything increase because everyone's trying to pass on their costs.

19:08So we'll see delivery costs increase. I'm sure we'll see anything involving transport increase. And that just means that the effect is magnified and compounded and and just so so difficult to predict yeah it sounds like a tough period ahead was one of the few silver linings I mean did you have a good day with London yesterday was it where any did you have many runners out and about on the marathon raising money for the for the air ambulance yesterday I I know nationally several air ambulance charities did and air ambulances UK which is the national charity were there cheering I don't think my charity had any run is it's really tough to get to get places in the ballot if you're if you're not one of the chosen charities but i'm sure lots of charities did very well out of it well i hope people keep you in mind as well going forward and thanks so much for speaking to us this morning thank you uh anna perry they're the chief executive of the great western air ambulance charity wake up to money with will bade thanks for your texts already coming in on 85058 brent in sheffield text us Hopefully one day the government will actually increase the mileage allowance for business miles in personal cars.

20:18It's staggering that this hasn't increased in 15 years. Both fuel and car repairs are massively higher these days. And a question from Dave, who's also been in touch on text this morning. Can we use other means to obtain oil, e.g. pipelines from other countries, etc.? Sophie, they've been trying this for a long time out of the Gulf in particular. The difficulty is it's geography, isn't it? So it's a long way from the places that produce the oil to us. And that's why this argument about the North Sea keeps coming up the whole time. No, definitely. So the UK, from that perspective, on the crude side, is less dependent on the Middle East than, let's say, Asia.

20:55But I think going forward, once the Iran war finishes, I think it puts back in the forefront any kind of like supply chain diversification. why are we so dependent on one specific region. But from a Middle East perspective, I think being less dependent on the Strait of Olmos, so having plans on pipelines running through Europe, but Asia could be on the plan. But definitely spending on infrastructure are going to be in the forefront so that we have much diverse way to get oil rather than having like one fifth, as you said, of the oil tankers going through such a small strait. The issue is tons of geopolitics, though, isn't it?

21:38I remember making programs on the World Service about this, the Qataris for gas, the Saudis for oil, been trying to build these pipelines for decades, it feels like. But actually, you've got to get tons of agreements and planning on all these countries that it travels through as well. It's not as simple as just sort of whacking these things down. No, it's definitely a political decision to make. But if you look at Qatar, as you mentioned, Qatar is all LNG. They don't have any pipeline. So I think they're going to have to do it at some point. Same as Russia pipeline for both in Europe to Asia being built.

22:13They have also LNG. So there's going to be a need to be much more diverse in terms of how these exporting countries are getting their commodities out. but also in terms of us as consumers, how you need to diversify but also stockpile, which is going to be the key issue for the coming years. And Sophie making that important point as well, that it doesn't actually matter whether this oil is coming to us or not because it's an international market, because it's a squeeze on the overall market. That is why we're being affected rather than whether we can get enough of it ourselves here as well. 85058, if you've got a question for our panel this morning or a comment you'd like to make, 0808599693.

22:53is the WhatsApp if you want to get in touch with us that way. Matthew, this felt like very much in your hitting zone this morning, just looking at the Financial Times' website this morning. Jeff Bezos, he of Amazon fame, looking for a new artificial intelligence lab, a space in King's Cross in London. Good news? Bad news? Squeezing local talent? Or good news that a big company wants to get involved? Where do you come down? I don't know. I read the article. and I thought to myself, this sounds like a London property developer trying to get his very small office space. That's what I like, a nice dose of cynicism on a Monday morning.

23:33I mean, it's not a big company. It's a very valuable and very exciting company, but it's like a 200-employee company, I think. And consequently, the office space is quite small. But, I mean, there's like a million and a half square feet of AI or AI-related office space in use in London already. And I think that was forecast to grow 3X. And, you know, Jeff's is a little tiny one. But for me, there's two maybe interesting underlying pieces. And from what I know about it, I don't know this company well, but it's quite an interesting area of AI that Prometheus is looking at. And part of the reason that they're building a team out in London, it's not just sales and marketing people.

24:21I'm not sure it's at all sales marketing people for this lab. It's technologists and AI researchers. And I think it's worth remembering the UK is actually pretty good at AI and machine learning in this area of computer science. So that's why, in part, you're seeing people opening up branch offices here because we're pretty good at this in terms of our talent. The flip side is, I don't know, going back to the cynical side of it, Will. the UK does always seem to get very excited when big American companies open branch offices here I'd be even more excited if that was a British AI lab that was opening offices in London I was going to say well continue that thought because the way you're talking about that what is going on at the moment then and kind of we hear about this often framed as a race don't we where are we here in the UK at the moment in that space you're right in it what's it looking like I suppose if you break the race down there's different chunks isn't there so at the kind of frontier laboratory end and at the silicon end on the frontier lab piece I'm not sure that the UK is in terms of its own companies anywhere as to be fair most other countries apart from the US and maybe China.

25:44The big famous models are open AI, Anthropic. Google's Gemini has got a big union jack in the middle of it because it's DeepMind that's at the heart of that, and that's British, but of course owned by Google, which is very much an American company. There's lots of interesting things going on on the silicon side, actually. So with AI, you have to train your models, But then when you're running them, when we all do our Claude or ChatGPT queries, that's called inference. And I've met a bunch of companies over the last few months here in the UK that are deploying the expertise we have on our shores to come up with interesting new approaches to inference that use less energy and are more cost effective.

26:29And it's nice to see us investing and innovating in that area. The bit of the market I work in is, I guess, what you'd call applied AI. So this isn't coming up with the frontier models or the chips that run them. It's applying that foundational technology to solve the world's problems. And, you know, there's definitely companies doing interesting things here in the UK around that space. we're one of them and our business is accelerating off the back of our AI product line which is called Maya and I think there are others out there as well you know on the flip side I'd love to see us backing ourselves a little bit more around this.

27:14Well what does that look like especially with your capital markets out on? Yeah so from the backing ourselves point of view I'm not really talking about the flows of capital actually i'm right i'm more talking about the um uh the propensity of uk plc to use its own technology and so um i always find it slightly ironic as a software company from manchester that the vast majority of our revenue comes from outside of the uk and one of the reasons for that is it's so hard as uh i mean we're a decent sized company nowadays and been around for many years and yet I still find it much easier to sell our British applied AI technology to an American customer than I do in many cases to a British one and so there are interesting things going on in AI in the UK and I hope at the beginning of this next you know technology mega trend and you know perhaps industrial revolution scale change in the way that we all live work and play that is AI I hope the UK gets better at buying some of its own technology both to create value but also for reasons of sovereignty.

28:20And why is that? Yeah, I don't know really. I think it's cultural. Yeah, I think it is. I think it's cultural. I think it's the British disease. I think UK mid-managers like to buy proper American products. And so, as I say, the interesting irony is that the British companies can do quite well in the US. Yeah, no one willing to take that risk, I guess. Yeah, yeah. Interesting. Plenty more from Sophie and Matthew in the second half of the program here on Wake Up to Money. We're going to be talking about pharmaceutical supply chains. We're going to look at the carmaker BYD and we're going to talk about cinemas as well and whether you've just got to replay the hits these days to try and get people through the box office doors.

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30:21At the bakery, grab seasonal treats like their strawberry pretzel cream pie, and you can't go wrong with a ready-to-heat quiche Lorraine, deviled eggs, and fresh-cut fruits to go. Celebrate mom with Whole Foods Market.