In dire Straits

24:20Sean Farrington:Yeah, Sané, are there certain goods that, you know, whether it's Easter eggs that might be right round the corner, that you would suspect would be some of the first to take the brunt of delays and holdups? I don't see much impact right now for goods to the UK because most of it is actually already going around the Cape of Good Hope because the Suez is also effectively closed. Where I do see some near-term impact is more goods that are going through the air, so air freight. Because a lot of the air capacity is provided by Middle Eastern carriers like Emirates, ATIHAD, with hubs in Dubai, Doha, Abu Dhabi.

24:59Those airports are also closed or running at very low capacity. So what you actually see, if you compare a day this week, let's say today or yesterday versus the same week last week, the global air capacity has declined by 13%. That's a massive number. The day before yesterday, it was even 18%, which also shows that resilience again, that these carriers are starting to reroute and that trade is starting to flow in different ways.

25:28Sean Farrington:And Sani, just to pick up, when you said in there that the Suez is also effectively closed as well, So this is the route through the Suez Canal to get to the Mediterranean. Yeah. What is that for the same reasons as the Strait of Hormuz being closed? What are the issues there? Well, the Suez has been closed for nearly two years effectively, and that is because of the Houthi unrest in the Red Sea. It started to reopen. Some carriers were starting to send vessels through the Suez because it started to be safe again. Now, the Houthis are aligned with Iran, so that has effectively stopped immediately.

26:18And all carriers have announced that they will go around the Cape of Good Hope again for those vessels that were going through the Suez. But that was already a drop in the ocean. Most of it is going around the Cape.

26:29Sean Farrington:Sanim Anders, president of Flexport, thank you for your time this morning, logistics technology platform there. Marcus, thank you as well. Marcus Baker there from the specialist insurer Marsh McLennan. Rachel, the Rachel Winter partner and investment manager at Killican Co is with us this morning. So you're hearing there what is happening very much or what is not happening at those key shipping routes and potential consequences for supply. At what point, Rachel, because we've been through this a few times, do you start to see this stuff impacting inflation here in the UK? the rate at which prices are rising?

27:05Well, it depends how long the disruption lasts for. But if we look at how markets are trading at the moment, there are a few hints that some people are expecting higher inflation. So one example is that the price of gold is going up. That is something that people tend to buy when they're worried about inflation. Another example is that we've seen some weakness in the price of bonds. Now, bonds pay a fixed rate of return and a fixed rate of return is less attractive if you expect inflation. So the fact that bonds have sold off a bit over the last couple of days does suggest that some people expect inflation.

27:37Sean Farrington:85058, do keep your questions coming. We have experts on the show to answer your questions directly, to answer plenty of mine and to give us lots of insight into what is going on at the moment. Megan Sutcliffe is with us for the whole programme from Sibylline, where she's a principal analyst for the Middle East and Africa. Megan, it's remarkable, always reminded of how key the Middle East is not just for oil and gas production, but for shipping routes full stop. And from what Sané was describing there with the longer term issues with the Suez Canal as well, there is huge consequences for instability on global shipping when there are escalations in this region?

28:28Absolutely. And this is a dynamic that we've seen playing out really over the past two years. It was in November of 2023 that the Houthis began launching missiles and drones towards commercial vessels in the Red Sea, in the Bab al-Mandeb, essentially the other side of the Arabian Peninsula from the Strait of Hormuz. And that was extremely disruptive for global shipping. We saw the mass rerouting of vessels via the Cape of Good Hope in South Africa, something many of us will have learned about in history class as the primary route for navigation in the 16 and 1700s. That extended shipping times by almost two weeks for supply chains that were running from East Asia to Europe and had a major impact on inflation because it substantially increased the shipping costs that companies were having to absorb when buying and selling goods.

29:21If we look at that dynamic, which will possibly re-escalate in the next few days, and we pair that with a restriction of movement through the Strait of Hormuz, what we're looking at is essentially the pressure on two global trade choke points really being turned up. And that's before we even consider the broader economic impact of major disruption to the Gulf economies. In the past few years, we've seen the Gulf economies really putting an emphasis on economic diversification away from oil and gas. And that's meant that there's been major developments in sectors like tourism, hosting major events, but also things like developing AI capacities, data storage centers and artificial intelligence development.

30:04If there's a disruption and a sustained disruption to the stability that has really underpinned that effort, that undermines the opportunities for things like investments for many firms, including those based in the UK.

30:17Sean Farrington:We've had messages come in. Shuvik, hopefully we've just answered your question, Shuvik, in Orpington, saying what is the cost of rerouting shipping to the Cape of Good Hope? again. John's been in touch saying we have a friend's daughter who works in Dubai currently. What are the best ways for her to come home to the UK, please? Well, we're going to be speaking to somebody based in Dubai a little bit later. John, we'll get into that topic there. Joe in Pembrokeshire, who is an HGV owner operator, says our fuel card price was£1.08 per litre on Monday morning. That rose to£1.21 per litre at midnight.

30:53Sean Farrington:So, Rachel, even though sometimes, you know, we talk Talk about there being delays in increases in the oil price filtering through to our forecourts. Already, people are starting to see some movements in certain parts of the fuel industry. Yes, and unfortunately, some providers will raise their costs when they expect the price of oil to go up. Sadly, we don't see quite the same speed when the price of oil comes down. So I think consumers can sometimes lose out there. Yeah, I think, Joe, in Pebbershire, you may have felt that over time, Joe, if you are an HGV owner operator. It's certainly something we've heard from campaigners in that industry as well.

31:34Sean Farrington:Where are we at with a barrel of Brent crude? Just looking now, Rachel, a barrel of Brent crude just ticking over$80 a barrel this morning, as you mentioned a little bit earlier. These are very significant levels compared to what we've been used to in recent times, aren't they? They are. So back in December, a barrel of Brent crude was below$60 per barrel. However, if we go back to the COVID era, at that point, oil did go above$120 per barrel. So we're still significantly below that level. 85058, do keep your messages, your points, your insights coming in. We appreciate them. Jane has been in touch with questions about aviation and flights.

32:16Sean Farrington:We'll see if we can get an answer to those. Jane, Eddie's been in touch with one about food stocks as well. So we'll go through a few of those, see what we can get into. Do keep them coming, 85058. We've got experts to answer your questions as well, and we will keep you updated with the very latest developments. Wake Up To Money with Sean Farrington. Good morning. It is Wake Up To Money on BBC Five Live, just coming up to 22.6. Jane in Oxford has been in touch saying, will the situation affect flights to Atlanta in the States? A family member has a flight this weekend. Well, Jane, from what we've seen at the moment, there hasn't been discussions, particular major news of major delays from flights from the UK from Heathrow to Atlanta in the United States.

33:02Sean Farrington:It's been more about those flights that would be passing through, going via the Middle East. Now, Dubai and Abu Dhabi airports have partially resumed flights. And Etihad Airways plane arrived at Heathrow last night after taking off from Abu Dhabi. there have been more than 4 ,000 flights a day being cancelled across the region, according to the Flight Tracking Service Flight Radar 24. The ongoing war has shut airspace over a large part of that region. Hence, there's been hundreds of thousands of travellers who are stranded. One of those is Tegan McFadden, who travelled to the United Arab Emirates from Northern Ireland for her 21st birthday, and she witnessed a missile attack in Dubai.

33:43Sean Farrington:She told the BBC she was waiting for news from the government and her airline. All of a sudden there was just a missile coming down towards the city and then the next thing I knew it was getting intercepted and you could see debris falling from the sky. I haven't had any updates from the airline. I'm petrified here. I've got no friends or family here whatsoever. The government says it's working to evacuate up to 300 ,000 Britons currently in the region. Megan, with regards to potential evacuations and the amount of people who can end up feeling stuck in the Middle East, whether they live there or have just travelled through there.

34:28Sean Farrington:Has that changed, those levels changed quite drastically in recent years? Well, it has and it hasn't. Over the past few years with the push towards diversification in the Gulf, there's been a real emphasis on showing that countries like the UAE and Qatar are tax-free locations where individuals can engage in business practices that will be very lucrative and that are safe and reputable business operating environments. And so that has triggered an increase in the number of individuals who have moved to places like Dubai or Abu Dhabi, but also the number of individuals who will regularly travel there on business.

35:08So we do have a higher number of people who are in the Gulf at the moment. But at the same time, it is worth noting that even though hundreds of thousands of people have registered with the Foreign Commonwealth and Development Office, that doesn't necessarily mean that they are imminently asking for evacuation right now. Many are sitting tight because their lives are in Dubai or Abu Dhabi. And so their registration is more part of a push from the FCDO to establish accurate information about how many British people are in countries that are being impacted in the event that things were to escalate and an evacuation would be necessary for all parties.

35:47Sean Farrington:85058, do keep those questions coming. We have Megan on hand to answer, Rachel with us as well. We'll be talking to people who live in Qatar, Dubai a little bit later, so they'll be able to give us some specifics on what they're hearing, whether it's from the UK government or from friends, family, colleagues who are going through some of this as well. Let's turn attentions for a few minutes to the spring statement later today. Rachel Reeves, the Chancellor, will be making it. And, you know, for many a year, this has been held up almost as another budget throughout the year. But this time round, Rachel Reeves has wanted us not to do that.

36:26Sean Farrington:The talk has been it's not going to be anything like on the scale of a budget with loads of policy announcements and loads of forecasts about whether the government will meet its borrowing targets or not. Rachel Winter, who is with us from Killikinclough today. Rachel, what are you expecting Rachel Reeves to deliver today? Are you looking out for anything? Well, we're expecting and hoping for an incredibly boring statement with absolutely nothing happening. So as you alluded to just then, we've just come through two recent autumn budgets that have really been quite dramatic. There have been a lot of changes that have caused people to have to seek advice and change their plans.

37:05And it would just be nice to have some continuity and a statement without any particularly massive changes happening.

37:12Sean Farrington:Now, I've got Jane Somerville with us, who's Managing Director of Bowers & Jones, which provides services to the metal forming industry. Jane, good morning. Thank you for being with us. Good morning. Now, it's supposed to be, as Rachel laid out there, it's supposed to be a boring day ahead, but it is still an opportunity. for Rachel Reeves to be discussing some various policy, giving us updates on where they're at, the government's at with major things that it's looking to implement. Is there anything that you would be looking for, as boring as it's supposed to be? Yeah, well, I'll concur with Rachel's views there.

37:49I'm not expecting anything radical to come out of her statement today, but what I would be looking for the government to be helping small businesses with is in the light of the disruption in the Gulf, I mean, one of the highest costs we have in the business is energy. So, and being a small business, we're disproportionately affected by energy cost disruption because we don't have the big buying power that some of the big energy consuming businesses have. For instance, we've got our two-year energy contract coming to an end at the end of this year. So normally we wouldn't be talking about renegotiating that until probably the second half.

38:37But in light of the cost increases that we're likely to face because of the glove, I'll probably be looking to do that sooner rather than later.

38:45Sean Farrington:Yeah, we've become much more aware on Wake Up To Money in recent years of how businesses, not just households, go about contracts with their energy supply because you didn't get any of the level that households would have got of governments paying energy bills when we had the huge energy price spike as Russia invaded Ukraine. No, we had to just... We actually moved away from our fixed contract during that period and we joined a consortium of some oil businesses to try and buy ahead to sort of level out the high peaks that we might have seen had we fixed a contract at that time. So we were able to buy sort of six month blocks at a time and fix ahead, which meant that the fixed contract price which was a lot higher at the time we were sort of protected from.

39:49But that was one of the things that we, as a small business, would never have considered doing in the past. And so in 2024, you fixed for two years.

39:59Sean Farrington:So what's your feeling now? You knew this was on your agenda for 2026. And in the last few days, we've clearly seen the escalations in the Middle East. Does that actually change your prioritisation of your energy bills and what you might do next, your thinking? Well, yeah, I mean, what I'll be probably doing this week is going out and seeing what a fixed deal would be to fix from the end of this year for the next two years. I mean, we did go out to the market last week just to sort of test the water and it was going to be a higher price already. And what was interesting was the longer we fixed, the higher the price was going, which doesn't seem to make sense to me.

40:41You would want to sort of, the longer that you fix, then you would hope the price would be lower but it wasn't, it was higher. So we thought we'd wait a couple of weeks and see what was happening. Now that might be the detriment of our, you know, to our detriment if prices are going to go up. But as somebody said earlier, we're maybe hoping that this conflict doesn't last very long and therefore we might not fix right now. We might sort of leave it till closer to the end of the year and just see how things go. But I mean, the things that we are disproportionately affected by are like the green subsidies, high dependence on the foreign gases.

41:18We're a very high energy consumption, electricity consuming business. And over the last few years, we've invested in low energy machines. You know, we're running all electric cars. We've changed the factory to have LEDs and motion sensors. and our consumption is actually down significantly from what it was in 2021 but our energy bill is still double what it was in 2021 and it's just, I think a lot of small businesses around the country are in the same position that I'm in.

41:46Sean Farrington:Explain why that would be the case, that you have reduced your consumption so much but your energy bills are still double. Well, I think the actual price of the electricity has come down but the standing charge that you pay has gone up and it hasn't come down and I think the reason the standing charge has stayed high is because of all the energy subsidies, the investment returns that the government want or the companies want and all the upgrades that they're having to do. So it's like although the per kilowatt hour rate has come down, the standing charge hasn't. So that's what's made the price double.

42:22Sean Farrington:Does that feel right to you, feel fair? No, not at all. No, I think it feels disproportionately unfair to small businesses that we seem to be paying for the lack of investment that maybe the government or the companies in the UK haven't put in in recent years to lower the dependence on foreign gas. And also, we are paying for the government's, to reach the government's targets on the green energy aims. Jane, thank you for your time this morning, particularly timely as we talk about rising gas prices, wholesale gas prices, wholesale oil prices as well. Jane Somerville, Managing Director of Bowers & Jones there, which provides services to the metal forming industry, sort of relaying to us what we'd heard a little bit earlier about what it is like when you're running the business at the minute and you're on a fixed contract.

43:22Sean Farrington:And so it's not necessarily that Jane's bills will be going up tomorrow, but that prospect when she has to look to make a decision later in the year about her energy bills again, that could be when she sees big energy price changes if these wholesale prices stay high, as they have done. We've been getting messages from you, questions about what it's like if you're living in the Middle East, travelling through the Middle East at the moment. We mentioned earlier 300 ,000 British citizens are thought to be in the Gulf region. Many can't get home because of travel disruption, as we heard a bit earlier.

43:53Sean Farrington:Others have had to shelter from Iranian retaliatory strikes on US allies as well. One of them, one of our producers here at Wake Up To Money, Jeevan Nguyen, who has been stuck in Punjab in northern India, couldn't get her flight home because of closed airspace in the Middle East. Jeevan sent us this voice note. I got here about eight days ago for a family wedding, and the plan was to go back yesterday straight from New Delhi, about 11 hours direct flight to Manchester. Obviously a couple of days ago the situation escalated in the Middle East and our flight was cancelled pretty much immediately.

44:26So we started looking for other flights but I mean they were being cancelled left right and centre literally while we were putting our details in or they were going to cost thousands and thousands of pounds. We finally managed to find a route now but it's slightly more inconvenient. We're going from Chandigarh in northern India down to Bengaluru in southern India over to Addis Ababa in Ethiopia then to Marseille in France and then finally back home to Manchester and the whole thing is going to take about 24 hours and that's if none of those legs are cancelled or delayed or anything like that so fingers crossed all goes well but hopefully I should be back at work on Friday.

45:06Sean Farrington:Well fingers crossed Jeevan good luck we need you back at Wake Up To Money Towers so that is Chandigarh to Bengaluru to Addis Ababa to Marseille to Manchester. And so Jane in Oxford who got in touch earlier asking if, you know, any disruption to flights to Atlanta and, you know, we haven't particularly sort of seen that being spoken about at the moment. But when you have so many people around the world who will be, you know, on those websites contacting airline customer services, trying to do very similar to what Jeevan's been doing as well. These places are going to be busy. There's going to be disruption and you're going to do well if all of that works out, aren't you?

45:42Sean Farrington:Government officials are understood to be formulating plans to evacuate UK nationals from the Middle East should airspace in the region remain closed. We've got Ian Scott with us who's currently stranded in Doha in Qatar. He's from Somerset, was travelling to Venice from Melbourne when he got tied up in the chaos. Right, Ian. We're right around the whole globe there with your situation. So, how are you at the minute? Where are you? So, I'm in Doha. it's a very tricky situation really. I mean, we are in the middle of the conflict here. I was flying out of Doha to Venice just on a transfer on Saturday morning.

46:25We got up into the air and as we got towards Iraq airspace, we circled for about half an hour and then we had to turn back. They weren't allowed to go any further and landed back in Doha sort of three or four hours later. And I've been in Doha since. We were in the airport through Saturday night, all the way through Saturday and Saturday night with explosions going on around us as they intercepted missiles. We then were evacuated, had to get evacuated out of the airport due to risks of missile attacks. And so by six o 'clock Sunday morning, we were all on buses and thousands of people being put on buses to go to various hotels.

47:02We got to a hotel that was full. They'd sent too many people there. And so we were all sort of in the reception area when a big explosion happened outside, you know, incepting a missile quite close. And we were sheltered in the car park underneath in the basement for an hour. We finally then on Sunday afternoon got to another hotel where we're now based. And, you know, there is there is just, I mean, thousands of us. The hotel is doing a great job and looking after us. But yeah, I mean, last night there were two extremely large explosions from the two ballistic missiles that they intercepted coming in, helicopters and planes in the air.

47:42And the crazy thing is we just don't know what's going on. The airspace isn't open. There's no idea when it will be opened. We've had no information from the government, really. I think the government said, the Foreign Office said that the embassy had rapid deployment teams that were appointed on the 1st of March. Well, we haven't seen any of them. And I suspect there's only probably 20 hotels or something with all the transfer people. So it wouldn't take much for them to come to each hotel. You know, they do it in a few hours and to update us on what's going on. But we have no plan, no idea how we're going to get out at the moment.

48:16And we're sort of just stuck here.

48:18Sean Farrington:And how do you feel, Ian, about being in that situation with the noises, the explosions going on around you? Well, obviously it's a bit worrying at times. You know, Qatar have a big defence system and so they are taking these out before they land. I think there's been some debris in parts of, and I think a couple got through to the airbase. But, yeah, I mean, it's, you know, when you hear those, the last two were sort of 1.30 this morning. And, you know, it's quite disconcerting. It's weird. You're in a lovely hotel, but you know that you shouldn't be here really and you don't really want to be here.

49:03But there's no way to get out. Some people have been getting private cars and whizzing across Saudi Arabia to try and get out.

49:10Sean Farrington:Front of the Financial Times this morning, half of Dubai is booking expats drive 10 hours to Saudi Arabia for flights out. And they are doing that. And we had an American here that was with us that, you know, the Americans have been given the message, just get out. And he jumped in a cab, you know, for six and a half hours across the desert to Riyadh and then was going Riyadh to Jeddah, Jeddah to Istanbul. But realistically, I mean, you know, there's huge risks in doing that. So we are here hoping that the government's going to do something, which at the moment doesn't seem like they are. Just want to bring in Professor Dame Heather McGregor, who's the Provost and Vice Principal of Heriot-Watt University, Dubai.

49:50Sean Farrington:Used to write the Mrs Moneypenny column in the Financial Times as well. Good, well, good morning to you. What have the last few days been like for you? Well, they have been, you know, very, I have to say, very stressful. The Financial Times, you've already quoted one of the pieces today, But there is also a very informative chart in the FT today showing that the UAE has been disproportionately targeted. We've had 645 drones and 169 missiles sent over from Iran, whereas, you know, QA, Qatar, Bahrain and Jordan have all had substantially less. I know it's very frightening. We've just been hearing from your correspondent based in Qatar.

50:35but you know it is the truth is the vast bulk of this has come over the UAE.

50:40Sean Farrington:Does that change things for the perspective of the UAE and for Dubai given a university like Harriet what like having a base and an arm there? We have a community of 6 ,000 people here and we've been here for 21 years and I absolutely expect to be here for another 21 years. The whole University was founded in 1821 and I expect it to still be here in another 204 years. Will it have seen anything like this in those last 21 years? Well, we've certainly seen it in the last 204 years. Herit Watts Campus in Scotland was taken over by the Norwegians during the Second World War. So I firmly expect this too will pass.

51:21But what I would say is all universities here have been sent online. You know, we have all All universities and schools in Dubai have been closed for four days. The last of those days of closure that we have been requested to do is tomorrow. We will firmly expect the government to give further direction. When you send a community of 6 ,000 people home to be taught online, it's like COVID. It's not easy for people. Some people are at home and not in conditions that are easy to work with at home.

51:51Sean Farrington:I don't know how many of your students are from Dubai or from abroad. So we have 126 nationalities of student. How many of the 6 ,000 want to just go home if their home is abroad? So of our students, about 55 ,000 are what we call domestic students, i.e. even if they have a different passport, their family are here in the region. The other 45%, I'm sure it is a very stressful time for them as well because their family will all be very anxious about them. They will be away from their families and their families will be anxious. And one of the things I want to say to everybody is the UAE government is very strong on this.

52:32They have superb air defences. They are very conscious that the economy of this country is dependent on them being able to maintain it throughout this kind of bombardment. And so it is being highly professionally run here. It is really, really very strong and secure.

52:52Sean Farrington:We're going to have to wrap there, but thank you Dame Heather McGregor, Professor from Heriot-Watt University. Thank you to everybody who's been in touch. That's it from Wake Up To Money. Wake Up To Money from BBC Five Live. That's it from Wake Up To Money. You can download the podcast every Monday to Friday, so please make sure you subscribe. We'd also love it if you left us a review when you do. Get in touch, keep the conversation going any time as well on social media. Use the hashtag WakeUpToMoney.

53:25What they are ultimately trying to create is going to replace humans.

53:29Sean Farrington:What it's doing is parboiling the inside of your brain. This could be a turning point in the history of social media. Welcome to The Interface, the show that explores how tech is rewiring your week and your world. Coming up next in our latest episode, we look at the secret meetings at the world's biggest AI summit. the truth about the mystery of a brain-melting weapon, and the lawsuit that could shift the future of social media. Listen on bbc.com or wherever you get your podcasts.