Shutdowns and shortages

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1:07Wake Up To Money from BBC5 Live. Hello, welcome. It is Wake Up To Money coming up on the show today. We've got the Government Skills Minister, Baroness Smith, Jackie Smith joining us on the show. And there is plenty to discuss, isn't there? Are we skilling up our workforce the right way, whether it's people leaving school, those looking to switch career? Are employers or businesses encouraged to help? Is the government doing enough? Get your questions in. We know it's a topic close to many of you, whether you're off on site already this morning, you're starting out in your career, you've got a child doing the same, you're looking to make a switch yourself.

1:46You've seen it all. What is it that the government needs to be doing? We have the Skills Minister coming up. And in the headlines elsewhere this morning, you see some of those challenges in industry. Sir Jim Ratcliffe's INEOS pausing production at three plants in Hull. Talk of high energy prices causing issues there. Across the pond as well, Prime Minister Andy Burnham has called for a single set of global principles and standards for that thing impacting jobs in so many ways, artificial intelligence. Wake up to money with Sean Farrington. Good morning. Welcome. It's Wednesday morning. It's the 23rd of September.

2:22It's just after five o 'clock. We're, what, a month or so away from the budget. But we don't have to wait till then to talk about so many things that impact our lives every single day. And it's all up for debate. It's all up for grabs. It seems as the budget is putting pressure on the Chancellor to make some very, very difficult decisions. and so much of that is about the world of work, trying to grow the economy, trying to keep people in work healthier. There's headlines galore across the papers today, reports out about all this kind of stuff, whether it's about being off long-term sick, how you get sick notes, the cost of employing younger people, the ability to get that first job, where the skills that you've learned take you in your career and are they the right skills?

3:10All of that, please. Let's take a breath. I need to and talk about this on Wake Up To Money today. So do get your questions into us, 85058. You want to get in touch on WhatsApp, 08085 909693 with your questions, with your thoughts as you hear all we are discussing on the show today. I've got Rachel Watkin with us, who's the managing director of the Tiny Box Company, which is an online gift packaging e-commerce company. Rachel, very good morning to you. Good morning, Rachel. We'll say hi to Rachel in a moment. In the meantime, hopefully I'll be able to say hi to Tim Armitage, investment strategist at Quilter Chariot.

3:53Tim, good morning. Good morning. Yes, a little cheer from the nation there as whatever clicks into place does. Tim, thanks for being with us. The world of work, whether it's the state of the jobs market, how much wages are rising faster than prices, people's long-term prospects. When we talk about trying to get the economy growing in a decent way, so much of it, doesn't it, just comes down to that day-to-day business of going to work and the type of job we have and how that makes us feel. Yeah, absolutely. And none more so importantly for young people. And I think young people need help at the moment to get more people into work.

4:46And it's going to take a lot of time and cross-party effort, I think, to help bring down the number of young people not in employment at the moment. Yeah. And you can see, you know, we've had the former health secretary, former Labour Cabinet Minister Alan Milburn, who has been looking into youth unemployment, people not in education, employment or training, the awful NEATS acronym that is used to describe a growing cohort of people who don't have that pathway right now to a stable income and a career and all of that. So we have that report. I see today that the former boss of John Lewis, Sir Charlie Mayfield, he's been commissioned to do a report by the government as well, more looking at long term health and how that world of sick notes is impacting individuals, impacting employers' ability to grow the way they want to, talking about that as well.

5:49So these are the big issues that we often discuss. When you look at the numbers, Tim, when you compare economies around the world and you look for growth, and that's what many who are investing in the UK will be looking for. Is this a country I want to invest in over others? Do those issues come through in the numbers that they are holding us back when it comes to growing the economy? I mean, it's definitely part of the equation. I mean, part of the issue at the moment is fiscally driven. So employment costs for businesses have risen significantly in recent years. There are other factors, lagging effects from the pandemic, mental health and long-term health issues and so on.

6:40But yeah, it's definitely one factor that goes into growth levels. Rachel Watkin, Managing Director of the Tiny Box Company, online gift packaging e-commerce company. We roll out the red carpet. Good morning, Rachel. Good morning, good morning. Just the one red carpet. That's okay. That's all it is at the moment. There may be more just to get you in to wake up to money. Rachel, thank you for being with us this morning. Great morning to have you on as we talk about, you know, when you want to grow a business in the modern world and you see, you know, the staff that you'll be attempting to recruit, the ones you have already, their prospects, the stresses, the trials and tribulations of life playing into the workplace.

7:24How important is it? Does it feel to you like it's an issue for the nation that we need to get on top of? Have we got a problem with how people get on pathways for their careers, how people manage their jobs when they have them? It's a massive problem. And I think that there's two aspects to it. First of all, it's expectation versus reality. So unfortunately, due to social media and due to influences and due to what they're being told at college or at university, they are, I really feel, are being missold a dream. So just explain that a little bit more. And when you say they, you're on about young people coming out of school.

8:08Young people, yeah. because of the because as I say of what they of what they sold or the perception that they're given a lot of young people are coming into work they're expecting to be promoted within three months can't understand why they're not earning their first million by the by age 19 and it's it's a massive shock to this to the system you know when we were young I'm showing my age here but when we were young you knew you were going to start at the bottom and have to work your way up and you kind of had clear expectations. Whereas now we get so many youngsters coming in saying, you know, after a few months, well, why aren't I promoted?

8:48Why aren't I running a department yet? So that's the first issue. And just on that one, because it's a fascinating one, because when you say people might be able to understand how we all get missold a dream on social media. It's sort of how the algorithm works a little bit, the concept of that Instagram life that others are living and then you meet your mates in real life and it doesn't seem that life is quite as shiny as the Instagram pages declare. But when you say being missold a dream through school and through higher education and further education, isn't part of the point of that to get people to think they can achieve a dream and that's what the workplace and the world of work is for?

9:37Absolutely. But the problem is that a lot of people that have been to university have never had a job before. You know, again, it's a generational thing. In previous generations, many people had to work their way through uni. Well, it was a lot easier to get initial jobs. I mean, that's literally one of the big issues of the day, is that those roles aren't out there for people. It's a catch-22 situation. So we're getting graduates coming in who've never worked before. So they have completely false expectations. Whereas if they'd started as a waitress or, you know, doing a newspaper round or whatever, they'd have a much stronger idea of the fundamentals.

10:17So what do you think you do for that scenario? I know this isn't your, you know, it's not all on you as the boss of Tiny Box Company. I feel the pressure. Yeah, but when you very clearly sort of see that issue and we know that there just aren't the level of waitress jobs as just one of many, those entry level jobs for people to get used to workplace, there aren't as many as there once were. So how do you see the solution for that? Well, at the moment, we have to, as a company, we have to go right back to basics. And when I say teach the basics, I mean it like helping employees understand that if they're working nine to five, they have to arrive at work at nine, you know, and that that's non-negotiable unless there's obviously an issue.

11:06We have to teach them how to to work with their colleagues, like really basic things that you would not expect to be to be teaching somebody who is young. Why wouldn't you expect that? Because these young people are not being given the opportunities that previous generations have had. Exactly. But, you know, one of the issues is that if because the minimum wage for the young people, you know, excluding apprenticeships, but because the minimum wage has gone up so much for the younger people, employers don't want to take them on because they've got to do such basic training. whereas if they take somebody on who's 25 or whatever and the training's already been done and the salary difference is so little, then companies are obviously going to avoid having to take on that burden because we are talking like real basic stuff of how to pick up a phone, how to work out a percentage, you know.

12:04Well, it's interesting. There's a report picked up in The Telegraph today from the Tony Blair Institute, interestingly, when we speak to Baroness Smith a bit later, about the world of work and skills and everything. She was once a minister in Tony Blair's government. And the Tony Blair Institute has this report about the headline goes, Rachel, cost of employing an 18-year-old has risen 40 % in real terms in a decade. Oh, I know. Is that why those opportunities aren't there? It's partly why they're not there, yes. And as I say, it's partly expectation. is partly, it's almost like a breaking in process where the tolerance that you have to give to younger people is so high, you know, of why aren't you in work today?

12:55Because it affects all of the colleagues and it's then training the older colleagues to accept that the behaviour is different. And Rachel, just briefly now, because we're going to talk about this most of the whole show, but you said there were a couple of things. So one was that dream. I didn't want to just scrap your second thought there. We may have touched upon it. What was the other issue? The other issue is the difference in wages and the expectation of wages. You know, the apprenticeship schemes are all very well, but especially in the southeast, if we told a 20-year-old we were only going to be paying them£8 an hour for an apprenticeship, I know what the reaction would be.

13:35They'd be like, well, I can earn£14 an hour at Aldi or Lidl. So whilst it might work in some regions, you know, it doesn't work around here. We've tried apprenticeship schemes and we can't get the candidates. Interesting. Well, look, we're not going to leave it there for sure. We are going to get back into this. It tees us up, though, as just one aspect of the world of work. Your thoughts, please. 85058, the world of work, you know, particularly for younger people leaving school. that appears to be leaving university, leaving the college that they've gone into. What are the skills that they have?

14:13What are the skills that they need? And why, as Rachel's describing there, are we not able to arm more people with the skills that so many employers need? So 85058, keep those thoughts coming. I see them coming in already about the world of work. We were chatting about scaffolding yesterday. Lulu's been in touch about that as well. While others see what message says, I can't believe my blood is boiling already at quarter past five in the morning. Well, have a breath and join in the chat. We'll go through a few of those messages in a moment. Let's catch up on what Andy Burnham and others have been doing over in New York.

14:49It seems world leaders are a bit divided on how artificial intelligence should be controlled. The divide was on show yesterday when Prime Minister Andy Burnham and the US President Donald Trump met for the first time. Burnham has been keen to focus on AI during his trip. He called for a single set of global principles and standards when he was speaking to business leaders. I look back at how we responded to the financial crisis back in 2008. We moved quickly in the G20 and smaller groups to deliver an urgent practical response. We came together to agree principles which everyone implemented at home in a way that was right for them.

15:26And it worked. That is the kind of approach we need now. So we will bring the right people together on the key issues, delivering on the potential of AI for good and dealing with the risks. And we will work towards agreeing a single set of global principles and standards to ensure the transparency and access we need to increase our preparedness and to ensure that AI development is safe. So that's our Prime Minister talking about that. We've had the head of the International Monetary Fund, Kristalina Georgieva, tell the BBC that AI could pose a significant risk to financial stability. Tim, Tim Armitage is with us this morning from Quilter Chariot.

16:08When people like those at the top of the IMF talk about a risk to financial stability, what does that really mean? When we think of financial instabilities over our lifetimes, we think of a financial crisis where economies were almost brought to their knees at times. We think of what happened during COVID or when there's been energy price spikes. How does artificial intelligence bring financial instability? I mean, I think AI is going to impact, and it's already started to impact, so many different levels of finance from the concentration we have at the moment within major markets in some of those huge hyperscalers and some of those huge technology companies that are really at the forefront of the AI boom.

17:02There are significant concerns there, really, that if the CapEx cycle that we're in, the huge amount of money that is being pushed towards building data sensors and so on, if that doesn't result in a return on investment that those companies are expecting, then we might have significant issues going forward. I mean, that's one element just to, I guess, a valuation perspective for companies. And another, it's how involved AI is in actually trading within markets. We've had a long history of technological advances within finance and high-frequency trading and so on. But now, less and less of that will be actually enacted by humans.

17:52And so there are all sorts of systemic risks underlying that that we don't yet fully understand. And alongside all of that is the actual technology itself and how we use it and what it might do. We've heard a few fears in recent weeks. Andy Burnham talking about that single set of global principles and standards. What does that mean? Well, we've got Yang Li with us, who's co-founder and chief operating officer of Cosign, which has UK government backing to build a sovereign AI model. Yang Li, morning. Good morning. What does a sovereign AI model mean? just first up when people will have chatbots in the palm of their hands on a smartphone, maybe using AI in that or using things at the top of their email inbox to do that?

18:36What does a sovereign AI model mean? I think sovereign AI for me means having the technology and transparency to know what went inside the AI, but then also more crucially, making sure that no other nation or no other player has a kill switch. So when the UK government or UK big business built on top of AI, they know for certain they control all of it so they know what goes into it and they have control about when they use it and no one can turn it off but it i mean that's not we're not anywhere near there at the minute are we you've got you know businesses right across the country right across the world using ai models that you know maybe from china because they're a lot cheaper to use that from china they may be from the united states because people feel like that you know some of those organizations are really right at the top of their game and they're willing to shell out for that this doesn't feel like you know it feels like the horse has bolted already i i think i you know there's lots of vectors that we can win on you know we don't have necessarily have to win in every single market we just need to win in the places where it's important for the uk economy you know for us you know winning in areas where the us are very competitive already i think is i agree with you it's it's very very hard but that doesn't necessarily mean that we shouldn't try here in the uk when we should just maybe very focused where we can make the biggest impact so where could that be for example because if we've got the nhs signing contracts with you know the biggest american tech companies what what are you talking about about an area where we could be building on sovereign ai that's important to us and and we're not necessarily needing to tap into others around the world.

20:18Yeah, of course. So I think there's two points to point out here. So, you know, I think the NHS is signing huge contracts with big American providers like Palantir. But Palantir doesn't have their own AI model. The AI brain that is actually powering the whole system, they also borrow from the Chinese open weight models. They also borrow from American providers. And so actually, fundamentally, if we were to build something here in the UK, we would be leading. And actually, I think that this is hugely valuable. So just on that, just explain a bit, what could we be building there? If a company that has, and there's much to discuss about a company like Palantir, but if a company that has a big contract with the NHS is using that Chinese and American tech already, what are you suggesting we could provide there?

21:08Yeah, absolutely. So this is what we're building with government backing here at Cosign. we are building an AI model that adheres to UK law and sort of is underpinned by UK regulation. But at the same time, we focus tremendously on putting in data sets that is relevant to the NHS. So, for example, working with the MHRA about policies about medical devices here in the UK, working directly with companies like GSK, who is one of our coalition partners, where we can input data and rules and regulation that is UK specific. And sort of UK owned data as well. Is that a bit of the point? That is correct.

21:48Yeah, UK owned data, but also synthetic data, which simulates what a UK resident would be using and behaving inside the NHS. So we can sort of picture the idea. We've very much got used to how valuable our data can be and particularly the discussions around it when it comes to our health and what is the health service. So we can see the value in that as part of the sovereign AI model that you talk about. In terms of developing the AI model itself, are we putting in anything like the money that the billions and billions and billions of dollars that the US is putting in and that China is putting in into this technology?

22:26Or is there a risk that the technology we have alongside that very valuable data is just miles behind the rest of the world? Yeah, I think that's very clear that the UK is not putting out the same level of money. But I don't think that sort of takes us out of the picture from winning where it's important to us. So, you know, Cosign is currently building our own AI model on the Isambard supercomputer. That was built by the UK government. And that's the seventh fastest supercomputer in the world. You know, so whilst we do need to build more supercomputers and more chips in order to sort of stay competitive in the future, we have plenty of resources.

23:00We have world-class talent. we have world-class data sets, we have world-class businesses that are very supportive about building AI. And now I think with the current UK government also very supportive about making sure we do have resilience and capability here in the UK. So I think that doesn't take us out of the race. We just have to be more focused. And can you join the dots for us this morning on Wake Up to Money Youngly? Because we're spending a lot of the show talking about young people going into the world of work and about skills and, you know, the traditional aspect which will no doubt come up in conversation is that sort of a lot of the more, you know, manual skills or workplace skills, as we've discussed, you know, taking a call and how to be with your bosses.

23:43They're conversations that have gone on for a long time. But how does all that tally with the world that will be when we have so much more artificial intelligence in our day-to-day lives and day-to-day businesses? I think it's a problem that no company has a complete solution at the moment. You know, we collaborate with lots of big industrial companies, whether it's BAE or Babcock or Leonardo in the defense sector or more specifically in financial services in the southeast. You know, there are issues where you have to encourage young people to be, you know, working on new business skills. But equally, I think we're also seeing in the world of AI where there's expectation that it's higher.

24:26AI just makes a person much more productive. And so managers have expectations that someone using AI will be many times more productive. And so older employees also struggle. How do you meet the expectations when you are unfamiliar with AI or not so native about commanding AI agents on your behalf, which are these virtual actors, right? And so I think a young person would be much more adept at juggling or working with multiple sort of instances of AI at the same time because, again, they've been trained with, you know, social media and apps. And so I actually think it's not just on young people.

25:03I think older employees will struggle when expectations change, when you're asked to 4x, 10x the workload that you have because the expectation of AI is that you'll work much more efficiently. Right, very interesting. And that sounds like a whole show for us in itself at some point. Yangli, thank you for your time this morning. co-founder, chief operating officer of Cosign, so that business that has government backing to try and build that sovereign AI model. Rachel Watkin with us this morning, managing director of the tiny box company, e-commerce business itself. So Rachel, no doubt the advances of tech and AI and all of that is having a ripple effect somewhere.

25:39But interesting what Yang Lee was saying there about, I know we were hearing earlier some of the struggles that you may have with your younger recruits, but it may be in a few years' time, it might flip and you need people who are open-minded to the tech of the day. Absolutely, absolutely. It wouldn't surprise me if that happened at all. And I think also what we haven't touched on is that a lot of the younger generation do have benefits because they have a different mindset. So it's not just tech. They're a lot more – confrontational is the wrong word. They're much less. no they're much less likely to be scared by authority so they'll say what they think and actually if you listen to them it's invaluable because a lot of the time they can see that there are better ways of doing things uh so yeah i don't want it to sound like it is all doom and gloom no i i that and that point that youngly was making you know as as you being a you know partly a tech company as well as the product that you're selling when you when you're in e-commerce and you need to be, you know, I guess you need to be at some extent on top of all the platforms that you're using.

26:53Are people who have had 20 years in a certain sort of career and in a role having to skill up in quite a different way now with the new tools that are coming their way? Without doubt. And it's really interesting when you sort of look across a company and you see the different departments where some departments, because of the department ahead, are much more embracing of the new technology and other departments just don't want to touch it. And yeah, the skill sets are changing rapidly without a doubt. Thank you for all of your messages this morning. Somebody being into it saying morning, my daughter could not get traditional jobs as they weren't available or compatible with studying.

27:38So she found different solutions, taken on a coaching role with the dance school she goes to. She became a tutor, being offered work at accountancy firms. she did work experience with. The work experience was both during school but also voluntary experience during our holidays to get a better understanding of accountancy and to get broader work experience. It's not easy out there, but also not impossible to get a job as a young person, says that dad in Oxfordshire. Very interesting. Thank you for those thoughts. Do keep them coming about where you see it working. I wonder how that dad, how did that offer of work a work experience at an accountancy firm come about because that's a lot of what you know one of the many reports that are around today uh the employee some big employers around the country saying they're effectively going to step step it up a notch when it comes to the first job to work experience to apprenticeships all the different types of stuff that could be on the table for those coming out of school or college or university um others being in touch uh saying unemployment has risen as a direct result of Labour's policies, including the increase in national insurance, minimum wage, increase in regulation as well, all widely predicted at the time the policies were implemented, yet Labour went ahead anyway.

28:53Well, look, we're going to be talking in a moment to the Skills Minister, Baroness Smith, about the world of work, the skills we need, how we're getting them, what we're good at, what we're not good at, where do we need to focus things, what should we be leaning into a little bit more as well. Just before we crack on with that, Tim Armentier, Jews with us this morning, investment strategist at Quilty Chevy. I did want to get in, Tim, a bit of Kingfisher chat, the owner of B &Q and Screwfix. You know, many on the spectrum of skills that we're talking about today, you know, the traditional, but maybe returning to be more important than it has been for a while and valued more than it has been for a while.

29:32You know, that idea of trades and skills and you wonder how that plays out in companies like B &Q and Screwfix in particular, where trades people will be using those what can we take about from the way those companies are doing at the moment yes so uh so kingfisher they had their results yesterday for the second quarter um and more broadly for the for the first half of the year that they announced um their full results um generally pretty solid actually after a well so a stronger second quarter anyway offsetting a slightly weaker first quarter. So whereas seasonal sales in Q1 were weak due to the weather being too wet, there were some concerns among analysts that Q2 might also be weak because the weather was too hot.

30:20That doesn't look like that's held them back too much though. So Kingfisher delivered a solid first half pre-tax profit of£404 million. That was above the consensus expectations. Much of that actually coming from Screwfix, as you mentioned before, like-for-like sales, as well as strength in some other markets like Poland. But B &Q, which is more on the consumer side in the UK, that did see a drop in like-for-like sales. So overall, a decent set of results, I think. And the share price was up around 12.5 % yesterday. Well, if you're in the world of DIY at the moment, they might be reflected in some of those financial results at B &Q and at Screwfix as well.