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1:17Hello, welcome to Wake Up To Money. The United States says it has completed a second night of strikes against Iran to limit how much Iran can hit commercial shipping. The price of oil this morning, not far off. $80 a barrel will get more into what is happening in the Middle East, the Strait of Hormuz and the consequences. We've got the boss of Lloyds Bank telling us regulations after the global financial crash have been making it harder for banks to lend to businesses. We'll have more on his view on that and plenty else in the Big Boss interview. And it's been 25 years since we first heard this theme tune.

2:01A key reflection of the British workplace, wasn't it? As much changed, the BBC's cult comedy The Office celebrates that 25 years since it was first released. We'll speak to a couple of members of the show's original cast. Wake Up To Money with Sean Farrington. Good morning. Wake Up To Money on BBC Five Live on this Thursday morning, the 9th of July. We're not far off five past five and let's bring you right up to date with events in the Middle East and right up to date with how shipping companies, businesses around the world are maybe having to change their thinking once again about supply of products that they need, the price and cost of making those products and how much of that is passed on.

2:48What is happening again to so many who work in that shipping industry in the Middle East as the situation escalates? So we're seeing this morning that the United States saying it's completed this round of strikes on Iran. And when you look at the commentary coming out of the US forces and as politicians in the United States, it is clearly a lot to do with, if not all to do with these specific strikes, to do with the flow of ships through the Strait of Hormuz, how Iran has been attacking some of those ships in recent days and how America has been striking back. So explosions were reported by Iranian state media and parts of the country south as well and the port cities on the Strait of Hormuz themselves.

3:38Donald Trump saying yesterday he thought the ceasefire with Iran was over, using some Some pretty strong words when asked if talks with Iran could continue. The president said, I don't care. So lots of people around the world do care about the consequences of all of this. I've got Simon Noble here with me this morning, who's chief executive of Cezanne HR, which provides HR and payroll software solutions for businesses around the country. Simon, plenty to talk about on the show this morning. But here we are again. Good morning to you. And here we are again, sort of wondering what happens next. Is that how it is for businesses around the country again?

4:16Yeah, and we've talked about this before, which is most people want stability, they want predictability in what they can do, and not knowing if their distribution, not knowing if their manufacturing capability is going to be there is unsettling and uncertain. So realistically, the market at the moment just wants to know what's going on and be able to adapt to that and take into account all the changes that need to happen. If the answer to that, Simon, is you can't, you're not going to, which is sort of almost the reality of it when we get a sense of the last couple of weeks there's more ships flown through the Strait of Hormuz and there's agreements being done and the tone is different and the price of oil is a lot lower than it was and then we have a night like we have again last night what then happens?

5:01So you have to take that into account when you come to pricing, when you come to distribution and therefore you're building a circumstance based on a worst case scenario not necessarily what's going to happen. The Donald Trump thing of he's ended the war 20 times so far and isn't he great at doing that to what we've come to now which is we have no idea where this is going to go or how it's going to escalate. People have just got to plan for the worst which means you're going to get inflation in products, you're going to get prices changing and you're going to have challenges at the fuel pumps.

5:32Got Sunaina Sina-Haldea with us as well this morning, Global Head of Private Capital Advisory for Raymond Jayne. Sunaina, good morning. Good morning. How does that trickle through to what you see across the country, how businesses are performing, the decisions they're making, the confidence in the future, if more are, planning for the worst rather than what is going to happen, as Simon puts it? Well, I think it's impossible to know now what is going to happen. Is this more posturing and tit for tat, and it's going to wash through into more negotiations and talks, which is what we've seen for the last quarter.

6:14In that case, I think businesses are going to take this in stride and say that this type of uncertainty is now part of how they have to price in all types of risk, including geopolitical risks, and they move on. However, if this is sustained tonight, tomorrow night, and we're back in major armed conflict mode, then of course the game changes because you'll see borrowing costs increase. We are all going to expect greater inflation at the pump when we go and fill up our cars. And that'll trickle through into grocery prices and so on. Then the long-term trajectory of how businesses plan and how the economy plans very much will be impacted.

6:54So I think it's wait and see as to, is this more brinksmanship? And we've seen quite a lot of it in the last quarter from the administration and from Iran. or is this something more longer term and sustained? Let's bring in Sorana Pavolescu, who joins us now, partner in the Control Risks Dubai office. She's global head of geopolitical and country risk there and they monitor many, many geopolitical events like this and advise businesses on the consequences, potential consequences. Sorana, very good morning to you. Good morning, Sean. Thanks for having me. Thank you very much for giving us your time, Sorana.

7:28How do you view this for all of those businesses, for those households who are trying to plan for a few months down the line and thinking of the costs maybe coming their way, for those in the Middle East who will have been looking to sort of rebuild reputation for the tourism industry. There's so many aspects to this. What are you telling people at the moment? Yes, there are indeed many aspects and direct and indirect impacts from this. Our scenario has been already that we have to brace for more months of this. If you look at the, if I can explain a bit about sort of how we're looking at it. Essentially, you have this MOU, this memorandum that's been signed, is an agreement to gradually open the hormones in exchange for sorting out Lebanon or stopping conflict in Lebanon and paying Iran some opening, I'm freezing some assets and waiving oil sanctions.

8:33It was going well to some extent in the sense that the parties have done the first few steps and was meant to build trust to allow for further negotiations. But de facto what's happening is Iran needs to remind the US that it has control over the hormones. So every time there's a little disagreement or something's happened, as it was the case now, there were quite a few vessels now transiting through the Oman lane rather than the Iran-controlled lane. Iran has to sort of stake its ground again. So it hits some tankers and then you go into the cycle of retaliation where the U.S. hits some military assets, coastal military assets in Iran and Iran responds.

9:18Just on that, Sir Honour, because as we have learned in recent months, so much more about the Strait of Hormuz, a passageway that, as crucial as it was, has barely spoken about in the years gone by, seemingly, because everything has passed through there. despite all that has gone on in the Middle East the past the ships have passed through there being able to deliver and take products out of that region for some time when you talk about those Amman lanes and Iran lanes so we have this narrow passage well just explain a little bit more about what's happened there in recent weeks with regard to having two separate lanes that different vessels could use?

10:03Sure, happy to. So if you can imagine, it's a very narrow strait indeed, it's about, I think, 60 miles wide, and some of the water is quite shallow. So there's a restricted area through which vessels, especially big vessels, can transit. Before the war, what you had is imagine like a two-lane highway, right? One in, one out, more or less. Now what you have is actually a separation of two highways one is hugging the coast of iran and to the north and then one is hugging the coast of oman to the south um the the the mou suggests or iran's understanding the the mou is very vague in its definition but iran's understanding and and request was that all transit um all shipping transit is controlled and communicated to them They didn't say they will request a toll, but they basically keep alerting vessels that they have to tell them they're passing through, and they should use the Iran lane, so the northern lane.

11:07Now, what the U.S. has done is encourage vessels to pass through the Oman lane, the southern lane, where it can provide air cover. But, of course, Iran's incentive is not to allow too much traffic through the Hormuz before it gets the money from the U.S., essentially. So they will, as soon as traffic picked up on this Oman lane, Iran started to both sort of threaten vessels through radio comms and tell them, no, you shouldn't go through there, you should use our lane, or more recently now starting to attack tankers to sort of make it very clear that they should be using only the Iran lane. And that's a lot.

11:50Sorry, go on. Sorry. What I was saying is basically Iran has to maintain that leverage over the hormones in their calculation to make sure that the US does its part of the deal. And that it seems to be what these last couple of days is all about, is that leverage and how the United States is attempted to sort of mitigate it and degrade it, as the word has been used by the US forces. So, Sorana, has your view at control risks because of the last couple of days changed compared to a couple of weeks ago or even a week ago when we were talking about increasing number of ships coming through? Are you now changing your tone a little bit when you say, you know, brace yourselves for many months of this?

12:39no no it's it's really part and parcel of what we were expecting which is this cycle of some negotiations and seeming progress uh which means also a bit more traffic through the hormones but then punctured by this tit for tat retaliation and at many escalation for now they're of course every escalation has a risk of further escalation but yes i i don't think there's there's no intent from either the US or Iran to restart the war as such. Sorana, thank you so much for your time this morning and your very clear explanations of what has been going on the last couple of days, that by context of recent months and years as well.

13:22Sorana Pavolescu there from Control Risks Dubai office. Simon, what difference does it make to the world of business, to employers, to their employees around the country when you're planning for a worst-case scenario, not necessarily what might happen? How does that filter through in the meetings, the mood? It's one of those where, like we've said, if interest rates are going to go up, the cost of cash to fund the business or the access to the cash to fund the business becomes more expensive and rarer. So ambition and growth becomes more challenging. You don't hire as many people. If you've got cost pressure coming through, there's a delay in terms of passing that on to the customer.

14:05So you're working in an environment where your margins are tighter, your ability to do things is slightly different. So you move slower and with less profit as a business. So it's really just about how you grow and the investment to grow. And therefore, am I hiring people? Am I making decisions to be positive and invest? They just become a lot harder to make. And Sinena Haldaya, who's with us from Raymond James, looking as many will do, the sort of first port of call if they're thinking about costs will be the cost of petrol, the cost of oil, whatever that might be to filter through. We've seen it go up in recent days, now looking at it being just under$79 a barrel.

14:50Still, you know, still a bit of a way off that over$100 a barrel we were talking about for many months it felt like. Is there a sense that we're heading back there? I think that there will be a sense that we might be heading back there if this continues to be back in conflict mode. I think the markets have gotten used to this whiplash effect of we're negotiating, now we're not. We're holding their feet to the fire with some strikes, now we're back to speaking. And this back and forth has become priced into how the markets are viewing the price of many things, including the price of oil and therefore the expectations of inflation and so forth.

15:32So as you rightfully said,$79 a barrel is where it has been during other boom times in economic growth. So it's not that high relative to where it was when the conflict started, where it shot past$110 a barrel. So we're not back there yet. with the flowing of oil, with the Hormuz having opened for a few weeks, we'd seen the volumes pick back up. And that was helping to fill back the reserves that had been depleted quite significantly. You have to remember that the world entered this conflict with peak oil reserves that we were all able to draw on. So the impact of the crisis was not as severe as one would have feared.

16:14However, those reserves are depleted. So we can take this for a few days, maybe a couple of weeks as a global economy, but not for much longer than that. We'll see impacts on jet fuel prices and airline tickets and so forth flow through very quickly. 85058, your thoughts as you hear these developments, whether the whole escalation that we've seen in recent months has changed your view, your habits, your life decisions about where costs might go next and what that might mean for you next. And when you hear this this morning, you know, those experts keeping a close eye on this every day, as we heard from control risks, not really changing their view this morning because they were aware that this cycle, these kind of ups and downs of what will happen in the Middle East will be coming for many, many months.

17:05Is that how you saw it? Or were you feeling a bit optimistic? Does it change things? A little later in the programme, we're going to be hearing from a couple of cast original cast members of the office the british version of the office the original one uh that was the bbc's on the bbc 25 years ago um and it's been it was it was at the time quite a reflection on how the british office works things have changed a lot haven't they particularly in the last few years more working from home and and certainly attitudes in offices have changed as well. So let's get a little taste of what some of those original cast members really thought about the consequences of a successful comedy like The Office.

17:49Here's Vincent Franklin, who played Rowan in the fourth episode of The Office. That's the one about the away day, and he was leading that away day, much to his frustration with many members of David Brent's team. He told us how he assesses the legacy of the series. Anyone who's worked in a dull office, you know, not a news desk or the power halls of Westminster, but a place that sells paper by the ream to other dull offices. Just people relate to that because we've all done those jobs and everyone saw their mates and the people they worked with in those characters. and so as a result we could care about them.

18:29You know, I think at the end of that Christmas special we were absolutely desperate for Tim and Dawn to get together. We cared about them not just as comic characters but like characters from the best of soap operas really. And I was, you know, I was really lucky to be a really, really tiny part of it. So, yeah, I think and I hope people will be watching it for a very long time. So more to come on the legacy of The Office. Simon, does The Office have, does the TV series have a legacy for yourself? I think everybody who works in an office can relate to some of those things. Like you said, it's more of a period drama now when you look back of people being in their nine to five, the technology on the desk, the way they operate.

19:12But it wasn't about that. It was about the characters and the people. And I think, you know, every office, as someone who's a David Brent, he sometimes has the boss worried that it might be you. But, you know, you see that and the characters are still fantastic and it's still worth watching on a rerun. Did it really call out? I mean, now, I don't know, 25 years ago, you wouldn't have been in charge of as many people as you are now. So you've gone through your sort of boss journey in the aftermath of the office. Does it call out sometimes the worst of management? Do you ever see it in yourself, heaven forbid, catch yourself?

19:48Well, it was the thing with David Brent of his desperation to be liked rather than be respected as a boss. And anybody who's new into those kind of things, who doesn't want to be liked? So there's a bit there which you kind of go, ah, but it's a lesson of what not to do. It's a cautionary tale more than it is an instruction manual. But today, when you think about the workplace is dominated by the conversation about the culture, the well-being of people and those kind of things. And absolutely, the jokes that they would have today would be more about what AI did to David Brent's email that he wrote and those kind of things rather than what he got up to.

20:27But, I mean, the dance is still legendary. Yeah, AI will never take David Brent's dance away, will it, surely? Right, let's talk about one of the bosses of one of the biggest companies in the country. The chief executive of Lloyd's Banking Group says regulations that were put in place after the financial crisis have made it harder and more expensive for banks to lend to businesses. So this is Charlie Nunn, who looks after 28 million customers in the UK. He's been chatting to Will Bain for the latest episode of Big Boss Interview. Worth pointing out, they spoke before President Trump said the Iran ceasefire was over, and we've seen some of those escalations overnight.

21:01They spoke about the growth of the economy in the UK. Prospect of Andy Burnham introducing new taxes on the banking sector as well. And they also discussed the challenges British businesses had faced in the last few years. Huge year of political uncertainty. Cost of energy is difficult. the political stability doesn't help the political environment, costs of employment have gone up. There's a whole set of things going on. We spend a lot of time trying to make sure we can lend to businesses. At the moment, it's not the easiest time. But just longer term, do I think the UK enables businesses to take enough risk?

21:33I think it is one of the questions we need to look at. The UK has put in place regulations and constraints on lending to the real economy that I think is below where it needs to be for the long term. There's two regulators, there's a prudential regulator and a conduct regulation. And both of those actually have regulations that make it more difficult to lend to entrepreneurs, businesses or more expensive for them than I think other countries have got. So I think there's an ongoing regulatory reform. Now, the great thing is, actually, the last few governments have put that at the top of the agenda for the regulators.

22:07They've introduced this thing called a secondary objective around competitiveness and growth. And are you seeing it? Because we hear it a lot in the media. But are you actually on the ground physically seeing that in terms of decisions being made by regulators? We're seeing their priority on that being made. There's actually something going through Parliament at the moment, which is the first big intervention called the Financial Services Markets Bill. But I think that needs to be a real focus for any government going forward is to get the right level of risk taking as we look at it. Where are those businesses right now?

22:34If you could sum up, I guess, how they're feeling, their health, their optimism. Look, I think it's a mixed picture at the moment. The good news is financial resilience of businesses in general, not all sectors, and I can come to that, but businesses and households is actually at the best level it's been since the financial crisis. So when you look at cash flows and savings, and then indebtedness, it's actually at the best levels we've seen since the financial crisis. I always like to talk about it as a we have the potential to get moved to a higher investment and growth trajectory. But look, for businesses themselves, they've had a tough time recently, there's huge geopolitical uncertainty.

23:10The political uncertainty doesn't help. Their costs of employment, costs of borrowing, and then costs of energy are really quite high at the moment. And as a result of that, business sentiment is actually okay. But their ability to invest, employ people, and look to the future is not that great at the moment. When I talk to business leaders of your scale, huge companies, right down to people employing a few people who come on some of our programs, who seem to all say the same thing, and it doesn't matter really what their political background is, that actually the sort of political noise and chopping and changing has been really difficult to work through.

23:45Yes, I think you need to go one step bigger first and say the world and the geopolitics of the world has been challenging for a while now. But obviously, let's see, we're just going back five years coming out of COVID. Obviously, the invasion into Ukraine, conflict in the Middle East, and then two oil shocks on energy. That's a really difficult context for economies and for businesses and the UK has actually weathered it pretty well. When you look at the policy decisions of the various governments, they have been committed to increasingly trying to make an environment where the UK stays a very attractive investment destination.

24:21We are, depending on which measure you look at, either the first or the second outside of the US, best country to continue to invest in. And then when you look at the strength of some of our industries, as you know, because I know you talk a lot about it, we still have some of the leading industries in some of the most exciting growth areas going forward. That's why the commitment around things like the fiscal rules, which will give people confidence that there'll be a financial framework for the UK that businesses can invest in and international investors can invest in the UK, remains really important for businesses as we look forward.

24:49And then just getting some clarity on what the policy framework is so that we can just start to move forward and build for that future. We'll talk about it as though it's team Burnham, right, because it does seem it's going to be. The difficulty with that, having those fiscal rules and then also saying that you're not going to touch the big personal taxes again because perhaps for some of the reasons that we've talked about already as well does lock you in decisions wise doesn't it and it does then as a result start looking around for sectors that look like they're healthy yours your profits look healthy oh we'll have a winful tax on that so i think the first thing before we go to worrying about that is what has worked in the last few years and it's been really interesting when I came into this role we spent a lot of the time working with local combined authorities with mayors with regions on three or four really big things housing and getting housing going infrastructure investments which could be transport it could be broader science parks that kind of stuff and then supporting SMEs especially linked to our great universities and we're lending again this year 35 billion to corporates in the UK linked to that activity what's been really interesting is local combined authorities the mayors and then the local leadership have been very effective at mobilizing that kind of activity.

26:00What's been interesting about, we'll see who will be the new prime minister, but one of the things he's talking about is continuing to accelerate all of that activity. And for me, that's a really important thing. Focus on what's working and keep it going. We need to create incentive for businesses, an environment and incentives for businesses to want to invest and to build the businesses, the jobs and the growth of the future. Tax on any sector is a political decision. We're already the highest taxed sector in the UK and in financial services across any advanced economy, but it'll be a political decision.

26:33I'm going to stay focused on what we do. So that's Charlie Nunn, the chief executive of Lloyd's Banking Group, biggest bank, biggest lender to people around the UK, one of the biggest mortgage lenders. So important what he has to say. We put some of that to some of the regulators, given these concerns, are they, or reflections on what regulation has done to the banking sector. And the Bank of England says that these reforms had put banks in a position to be able to absorb shock. And the Financial Conduct Authority pointed towards what they called have been the widest ranging set of changes to financial regulation in over a decade.

27:11I'm interested in Simon and Sinena's thoughts on some of that as well. the role that banks have with businesses and growth around the UK, how that's changed. We'll get to that a little later. Graham in North Yorkshire has just been in touch. He says, so the banks that wrecked our economy due to their reckless behaviour now want regulations to be relaxed so that they can take more risks. Unbelievable, says Graham. Do you agree with Graham? Do you agree with Charlie Nunn? 85058. Wake up. This is summer at its peak. Whole Foods Market Summer Fruit Fest is your invitation to eat the season. Fresh, organic and bursting with flavour Start your day with peaches and organic blueberries and yoghurt Build a grazing board with fresh fruit, prosciutto and artisanal cheese Then fire up the grill with no antibiotics ever Proteins and fresh produce Savour the season Shop Summer Fruit Fest at Whole Foods Market Up to money with Sean Farrington There we go, all back in order I need the ducks in order this time of the morning I can't possibly do the second half of Wake Up To Money without hearing something say what the programme's name is and my name.