For S-ale

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0:41BBC Sounds. Music, radio, podcasts. Wake Up To Money from BBC Five Live. Hello, morning. Welcome to Wake Up To Money. Unemployment up, pay growth slowing and inflation falling. Lots of economic data to chew over this week and our Friday panel are here to do just that shortly. Also on the programme today is the craft beer brewer Brewdog calls in specialists to sell the company. We'll look at what's gone wrong and hear from one of the thousands of small investors who could be set to lose out as part of that sale. And also today.

1:23We'll be speaking to a cinema boss about the half term boost as Wuthering Heights becomes the biggest film of the year so far. Wake Up To Money with Will Bade. Yeah, morning. Welcome to Wake Up To Money on Friday, the 20th of February, just gone five o 'clock in the morning. We're with you again this morning. Great to have your company as we round out the week here on the programme. Yes, loads for our panel to get to in just a moment, isn't there? All of the stories that we've brought you through the week around inflation and what's going on with youth unemployment in particular. We'll be diving into that in just a moment.

1:52But in the second half of the programme, we'll be having a bit of a longer look at what was one of the kind of pioneers pioneers of the British craft beer boom for a while, Brewdog expanded so rapidly, now has put itself up for sale, could be broken up potentially as a result. What it means for some of those early investors who were known as equity punks, you might remember, those people who put their cash in to try and get the company off the ground and growing, what will happen to them and their investments. As part of any sale, we'll be digging through all of that in the second half of the programme.

2:24So if you would like to get in touch about that or indeed anything else you hear over the next hour, you can text us on 85058 to join the conversation or the WhatsApp number is 08085 909693. Should you prefer to get in touch with us that way? Right, let's introduce you to the panel this morning because they've got lots on their hands, as I mentioned. Claire Burnett is back with us. Claire, the co-founder of Chococo, headquartered in Holton Heath in Dorset. Claire, morning. Great to have you back on the programme. Good morning, Will. And there was a lot of reaction to you earlier in the week talking about chocolate prices and cocoa prices.

2:56uh-oh in a in a in a helpful way in a very good way yeah i think people slightly disappointed that the um the falling overall price wasn't necessarily going to mean cheaper chocolate by uh by easter though which was well explained by you there as well just um for people who weren't with us earlier in the week uh just remind people a little bit about chococo and how business is kind of going to kick off the year well um yes we we are a dorset based company we're actually coming on We've been going for 23 years now. We're in peak season. We have now six chocolate houses across the south, two in London that we've opened.

3:28Well, one in December and one literally 10 days ago in Westfield, Stratford City. So we're feeling positive. And we are trying to ride out all the volatility that we've been experiencing over the last couple of years with the cocoa price shock. And as we were talking on Tuesday. So yes, folks, sorry, your Easter eggs are not going to be dropping in price because obviously all our Easter stock was made with chocolate that was bought at a higher price. And the lower cocoa price, as long as it stays, you know, so that the futures hold lower, those lower prices won't filter through for another few months.

4:08But it's not the only cost that we're facing. So I don't expect your chocolate prices to come down anytime soon. Well, we'll get you to expand on those a little bit as well when we get to talk inflation, because, of course, we had overall official data for that. And just tell us a little bit how the opening go, 10 days or so. The openings, yes. So far, so good. Going into a shopping centre is very, very new for us. All our existing stores are very much more on high streets or not even on high streets, on side streets. So very much more sort of community based stores in Winchester and Exeter and Horsham and obviously Swanage, where we started.

4:45and Dulwich was most recently. So it's exciting times, but also, yes, quite nerve-wracking times. That seems a good set-up for this morning, I think, actually. Yeah, the challenges that are there, and perhaps we'll try and dig out some opportunities as we go as well. Anna MacDonald's going to be alongside Claire for the next hour as well. Anna, the investment manager at Albury Capital Management, joining us from Edinburgh. Morning, Anna. Great to have you back on the programme as well. Thank you. Good morning, Will. We'll get into it in a bit more depth, obviously, in a moment, but just the sort of overall takeaway of the sort of market reaction to all the data from the week?

5:20Well, the FTSE 100 hit a new all-time high on Wednesday, which was pretty positive. It's actually, I was checking yesterday, it's the fifth best performing market worldwide this year. So it's been very strong, although we do know that the FTSE 100 is quite international facing market. But yes, it's been doing well. Yeah, it's one of the sort of other kind of contradictions, I suppose, of things, if not a contradiction, that sort of some places going better than others within the economy at the moment, as Claire was mentioning as well. A final member of our panel this morning is Paul Dales, who is the chief UK economist at Capital Economics.

6:01Morning, Paul. Thanks for being with us. Good morning. Why don't you lead us off then with a kind of overarching thought? And you can probably start the sort of steering of the conversation if you like as well. Which bit of data to you as someone who watched this as closely as you do was the most important and why? It's the weak labour market for me. So we had some figures earlier in the week that showed on some measures, at least, the number of people employed is declining. and the unemployment rate is rising. And I think this is really crucial because it doesn't just tell us what's happening right now.

6:40It gives us some insight about what's going to happen to other things over the next year or so. So it suggests that the economy, I think, is going to be quite soft over the next year. It suggests that wage growth is going to slow from current rates. And it suggests to me that inflation is going to fall further. and as a result of that if there is a silver lining to all this it's that the Bank of England will be able to cut interest rates a bit further than most people think so at capital economics we think interest rates will fall from 3.75 % now to about 3 % by the end of this year which is a further fall than most people are expecting.

7:19Yeah it was stark wasn't it those youth unemployment figures let's hear a little more about those well Alan Milburn former minister in the Tony Blair years and Jordan Brown years and the Labour governments there was on the BBC earlier in the week because he's now the chair of the Young People and Work Review which is due to report in the summer to the government and he told us young people are facing an existential moment. We're seeing something dramatic changing in the labour markets. Neat rates, young people non-education employment and training have been rising for the last four years. Youth employment rates have been falling.

7:54So this is not a short-term phenomenon. It's a long-term one. And I think it's something structural. So the thing to hold on to here is that youth unemployment is rising, but something even more profound is happening beneath the surface. 60 % or more of those 1 million young people are economically inactive. That means they're not even looking for work. They're detached from the labour market. So the most horrifying statistic of many that I've come across is that 45 % of 24-year-olds who are not in education, employment and training have never had a job. If you haven't had a job, that's by 24.

8:31That entails a long-term scouring effect and you're probably then stuck on a lifetime on benefits. That was Alan Milburn speaking to the BBC a little bit earlier in the week. Paul, just expand on that a bit then as well. The economic inactivity that Alan Milburn is talking about there why so stark what why would someone like him be so concerned about that well it could have really big long-term consequences for the economy and also society really because the evidence shows that if you're out of work for quite a long time that it is just really hard to get back into the workforce or join it in the first place if you've never had a job and what that means in the future is that the um there's fewer people able to work than otherwise that means the economy can't grow as much as otherwise and it also well can lead that self can lead to many issues um but um it also leads to lots of social issues really because um without employment there is a greater issue of um mental health issues physical health issues but also um it It just creates lots of problems in society.

9:43So having this happen to the relatively young people, which are the future of the economy and the future of the country, is a really big issue that we do need to tackle. And Anna, often anecdotally, particularly with that age group, sort of 18, 24, 16, 24, however you want to kind of catch it in those numbers, when they're looking at economic inactivity, that's often as well, isn't it? padded out in those age groups by graduates, because graduates might not necessarily go on and go, you know, sign on to universal credit or turn up at a job centre and appear in the statistics as looking for a job that way.

10:22So actually, it's telling us kind of about another cohort of people who are struggling to get into the workforce at the moment as well, potentially. Yes. And I think that we are seeing some signs that that graduate entry level jobs are could actually have some signs of pressure on them as well because of artificial artificial intelligence, for example, and taking away several of those kind of professional services jobs. So I think it's really, really tough. I think the Times was reporting on Wednesday that perhaps the government is going to delay the change in the national living wage to make it even between younger people and the 21-year-olds and over, because they were trying to increase that national living wage quite substantially, which was putting off employers, taking on younger workers.

11:16So I think that should, to some extent, help. That's though for looking at people who do want to work and who aren't disengaged from the workforce. Well, I want to get Claire's view on that as an employer in just a moment. But we talked to Andy Prendergast from the GMB union here on the programme earlier in the week on exactly that story, actually, Anna, as well. They represent more than half a million private sector employees. And this is what he had to say about the suggestion of any kind of delay to linking those two levels of minimum wage. Now, there is an issue with youth unemployment. Some of this is cyclical.

11:51Some of this is a long-term problem. However, when you look at companies offering reasonable opportunities, people like Centrica bringing on hundreds of apprentices, BAE systems, they're getting loads of people coming in. And I think what we have to realise as well, you know, I was a worker when I was, you know, I was got jobs from when I was 14 onwards. I didn't do less because I was young. And when you're looking at a country where there's huge gaps in care, there's huge gaps in retail and hospitality, The idea that the solution to this is frankly to exploit young people is just fundamentally wrong.

12:22Andy Prendergast going on to say he would be disappointed in the extreme. In fact, he basically said he couldn't use the language that he would like to use at half past five in the morning to describe how disappointed he would be if the government did move away from that manifesto pledge. Give us an employer's perspective right now, Claire. Well, yeah, this is one of our biggest costs that we're facing, cost increases that we're facing. is the cost of employing people. There are two major costs, employing people and the costs of property costs for the increase in business rates, but that's a different subject.

12:55But the cost of employment are a factor at the moment in terms of us having to look at our prices. Because we are very much a people business. We're not an AI business in the sense of we have now six chocolate houses and they're very much about customers coming in and having an interaction with a real person, not with a screen. We're not the sort of place where you go in and you order your coffee or you order your burger from a screen. You talk to a real person and that person makes the hot chocolate for you. That person packs a box of chocolates for you and you have a conversation about what you want and what's in it, dietary issues and flavors, et cetera, et cetera.

13:34And as a people business, you need a minimum number of people to be manning your stores. And those costs just keep ramping up and up and up. And we historically have very much enjoyed employing young people and training them and giving them some life skills. Back to Paul's comment about the impacts on society. You know, we often employ teenagers who then work with us through their school holidays and they go off to university. They come back in holidays and then they go off into the real world or stay with us. And so you are teaching them life skills, how to smile at customers, how to make eye contact, simple, simple things.

14:11how to engage with adults that aren't parents or teachers. And, you know, we're often the first adult environment for young people. But I was just having a little look at some of the stats. And like just three years ago, to employ under 20-year-olds, the costs have changed over three years, have gone up by 45 % for 18 to 20-year-olds. And under 18s, the costs have gone up by 52%. So it is something that we will factor in. we are factoring in is actually the younger people are relatively so much more expensive and they need time to train. They need time to learn. So if you're looking at an older person who's got experience in the sector already and a younger person who's never had a job before and will need to be trained up and it's going to take a bit more time, the risk is you're going to go with the older people and that for the long term is not healthy for the economy, whether it's in our sector in retail and hospitality or whether it's in things like hairdressing all these sorts of things if the young people aren't getting the opportunities and the work and businesses are kind of going we're going to pare back we're not going to have as many young people in our businesses the GMB chap was talking about major massive companies not small SMEs.

15:28Yeah so in Paul's world there's been a lot of debate in the last few days economists Claire talking about that it's policy, that it's all those policies. And actually, we were talking to Nicola Downing from Tease Law and Wealth Management yesterday on the programme saying it's not just what's within those policies, but that they're all kind of coming together at the same time. Do you put your finger on it as to that making it more difficult to hire those younger people? I think it is, yes, absolutely. It's just this constant, what's the word I'm looking for? It's a sort of constant drain on businesses.

16:06You know, last April, it was the rise in minimum wage plus the NIC changes. So that was like a double. It was almost a triple whammy, wasn't it? Because the NIC went up and then the level at which you had to pay it dropped. So that was a whammy. You've now got property costs and the change in business rates. It's another whammy. And it's just as constant for small businesses and SMEs. It's just as constant drain on things that are affecting your margins, impacting your costs that are just making it so much harder. And you can see why there are businesses and pubs and shops and closing constantly because it's exhausting.

16:47Yeah. And Paul, from that kind of growth perspective that you were talking about, is there a balance to be struck, though, in terms of, you know, we know that younger people are also the ones who do quite a lot of the spending in some of these areas, too. They're not just the ones, as Claire rightly says, who are often employed in some of these sectors, hospitality, retail, etc. But they're also the ones doing quite a bit of the regular spending there. So is there, from a policy perspective still, a balance there in terms of giving them that financial firepower too through boosting things like the minimum wage?

17:22Absolutely. There's always a balance with these things and a trade-off. So there is some evidence that if you raise the minimum wage, then actually that can boost the economy. because younger people have what economists call a higher marginal propensity to spend. In other words, they spend a greater chunk of their income than perhaps some other age groups. But it is about a balance. So some time ago, the UK's minimum wage was actually quite low relative to the medium wage in the UK and was quite low relative to some other OECD economies. but now after the increases in recent years we have a minimum wage that is in the you know the top half of the pack when you look at the the OECD nations and I agree with Claire I mean I don't run a business so I don't employ people but all the economic statistics I look at show very clearly that a lot of the weakness in employment over the last year or so comes down to the policy changes and that increase in nicks and the increases in the minimum wage.

18:34You can see that because it's the hotels and restaurants sector and the retail sector that have had the biggest declines in employment over the last year of 2.6 % and 1.5 % respectively. And those are the sectors that typically employ a higher share of workers on the minimum wage. So at the moment, at least. I mean, there is certainly some evidence that AI is playing a part, but I think that's a small part. I really do think a lot of the weakness in the labour market is due to the government's policy decisions. I've got a whole load of questions on text about AI. So let's come to that in just a moment.

19:07But let's go through all three of you then in terms of how we iron this out, perhaps. Anna, why don't you steer us off? What would make sense about easing perhaps some of the pressures that you guys have flagged? well um both paul and claire have highlighted that for companies for like like hotels hospitality retail property costs and employment costs make up about two-thirds of all their costs i mean it's a really substantial thing so i think trying to sort out business rates and also possibly delaying the implementation of higher national higher minimum wage for for younger people does make sense.

19:45I mean, it's a great idea to have it there for the longer term, perhaps, but it's not something that needs, you know, maybe it's something that needs to be delayed so that young people can get back into the workforce and that people are willing to employ them. So I think that would be good, as well as also trying to cut energy costs. I think energy costs faced by employers are too high. Claire? Totally agree 100 % with what Anna just said. and paul i think the government needs to work harder to um give uh businesses the economic environment to flourish really um when i look back at what this government has done so far there's just been a lot of policy changes that just make life harder for businesses um and you know there's some good stuff the government has done um but the consequences has been businesses squeezed and just to give an example of this uh our forecast at capital economics are that the economy will grow by only about one percent this year which is a bit subpar really you usually expect something like one and a half percent but actually the real um uh the really interesting bit of this is that most of that economic growth is going to come from government spending and government investment um so that's that's great if you're a business that uh really hinges on what the government does but if you're a business that relies on the spending of households or the spending of other businesses then actually there's not going to be much growth there at all and that's simply because of government decisions it's raised government spending funded it by taxes and that squeezed the private sector so you can still have an economy growing but it's not really a long-term sustainable growth model so from a sort of long-term growth perspective actually sort of done some of those things in the wrong order yes i think that's right um i think you know there is certainly an element here that government investment is a good thing if it's done productively and in a good way and that will help the economy in the future but i just think you really want to give businesses the conditions to invest that is the absolute key and also i suppose well what we've seen is those those measures particularly in the 2024 budget they actually led to stickier higher services inflation because wage costs went up which has made that whole sort of path to interest rate cuts any it delayed it really and that's been hard for growth.

22:12Claire did you want to come in there? No I was just I was just agreeing that it it feels like we are we're doing a lot of the heavy lifting for the government at the moment. And it's, as I was saying, it's pretty exhausting as an SME because it's just relentless in terms of, yes, I hadn't even mentioned the energy costs. You know, that's another factor. So, it's just, it is relentless on all fronts. And we in the chocolate industry have obviously also had the chocolate and the cocoa price shock. So, it's just, it's all these external factors that just make it harder and harder. And we We constantly are trying to improve our productivity such that we're not passing on these costs because, you know, we still, well, we don't want our customers to be like, pardon, how much for, you know, the chocolates or the coffee or the hot chocolate?

23:00So it's relentless in terms of how we as a business are trying to sort of manage these costs and not pass them on too much. I'd just written down as you were speaking, Claire, and I don't know whether this is a silver lining per se or not. But when you were talking about people being potentially an investment, you know, and these younger people coming back to you year after year in their school holidays and things like that, is that a silver lining perhaps? Because lots of our listeners are in a similar position to you, running sort of smaller or medium-sized companies as well. Have you seen that as a sort of investment, that if you can take that gamble, if you can find the room in the budget, that it can pay off having a sort of longer relationship with some of these younger workers?

23:44well we we we do we we do what we can i think it's probably the the way to summarize that and i suppose yes there is there is that because we as a chocolate business are very busy at say christmas and easter um and where we started in swanage seaside town we are counter cyclical to all the other hospitality and retail businesses in the town so we we have been able to we're always kind of like welcoming back um the students in their holidays it's like come and help um and come and help us in our HQ with packing and dispatching and things like that. So, you know, there is that. But I suppose in the greater scheme of things, it's a small silver lining.

24:26Right. Yeah. Anna and Paul, you guys both raised AI. So I wonder if I can put these to you. Perhaps, Anna, first, you want to take – well, I'll put them together, actually. So Paul in St Albans has texted in, Alan Milburn is right in principle, but there's a paradox here. Government and business hail the marvels of AI. But by definition, AI is a human job replacement tool. Until that Catch-22 question is answered, the problem Alan Milburn and others flag can only increase. And another text along the same kind of lines. Morning, I just wanted to point out that young people using AI and technology is what preventing young people getting work.

24:59I'll give you an example. I work for Network Rail and they spent millions on new technology machines, meaning they could slash staff levels and labelled it modernising maintenance. But hundreds of jobs on maintenance teams went, meaning less opportunities for people, including young staff, as the machines took over. Paul, tell us what your data suggests around that first, because you mentioned that and then Anna come in on that as well. well i think um at the moment for me when i look at the statistics from a top-down level um i don't see the huge amounts of evidence that ai is displacing jobs right now um so there's some bits of evidence here and there but it's just not overwhelmingly comprehensive and if it was happening then we'd also be seeing other statistics that show that businesses are heavily ramping up their investment in AI related spending.

25:55So that could be on hardware, software and research and development. And there's a little bit of evidence that is happening, but it's certainly not happening on the extent that you're seeing in the US economy. Now, this doesn't mean it isn't going to happen. I just don't think it's happening right now. And then you get into the bigger question, like the comments you read out there, where it's, is AI going to be a net positive or negative for the economy? At Capital Economics, actually, we've done huge amounts of work on this. And our conclusion is that in the long run, it's actually going to be a positive because it will boost productivity growth.

26:40It will boost the size of all major economies around the world. And actually, somewhat surprisingly, the UK is one of those economies that we think is going to benefit by more than a lot of other economies. So more than France, Germany and Italy, for example. So that's a really good positive thing. Why so? Well, the UK has got a few things in its favour here. It's got a really large services sector. So that's where this technology is going to come through, whereas in the past it's often been in manufacturing sectors. the UK's got a reasonably flexible labour market certainly compared to a lot of European countries so it means that our workers and our businesses are going to be able to adjust a bit more and we've also got relatively light touch regulation and a history of innovation so it just means we're better placed to harness it and there's going to be you know problems along the way there is going to be some dislocation in the labour market there's going to be a reallocation of jobs but eventually if you look back through history every time there's been similar technological leaps and there's always an issue about what's going to happen to jobs there's always some problems but in the end if the economy is bigger and people have more incomes then actually new jobs are created and usually the unemployment rate remains higher.

28:10So it might take us a while to get there. But I think we're in the very early phases of this journey. We've got a few bumps to go through, but actually further ahead, if we talk about the UK economic outlook, it's actually one of the positive things we can point to. Anna? I think that AI is possibly best thought of at the moment as replacing certain tasks. There are some tasks that are better done by humans, and there are some tasks that are shown that could be quite well done by AI. So it can, as Paul said, change the shape of the workforce. It can change what the workforce needs to do, and potentially it could grow.

28:52But I would point out that when I mentioned earlier that the FTSE 100 had reached highs this week. One of the reasons it reached highs is it's quite full of companies that aren't software, that aren't services, because investors are concerned about what is the future, what is the valuation of those companies. And actually, the miners and the banks and those kind of stocks have been the ones that have been performing best because investors like the fact that they don't think that they will disappear over time because of AI. They think that, in fact, they'll be able to perform better. And we're bumping right up against the news here as well.

29:35But I just want to squeeze one more text in. Thank you, because we've had lots through the first half of the programme here. Paul, I think this is for you here from John in Suffolk. Question for your economist. If the increase in employer national insurance has led to fewer people being employed, Has this increase led to a lower tax take than the Treasury would have got if there'd been no increase? I'm pretty sure they've been taking more in tax, haven't they? Well, yeah, overall tax revenues have been going up, partly because of that, but partly for other reasons as well, such as the freezing income tax thresholds, which means more people just naturally slip into higher rates of tax.