This round's on them

0:00Wake Up To Money from BBC 5 Live. Hello, morning. Welcome to Wake Up To Money. This morning we hear from the boss of one of our biggest investors. I think there are more reasons to be optimistic about the UK, and I think the UK has been oversold. Much more to come from Antonio Simoes, the legal and general boss on growth, investing outside the South East, and why he's worried we're not saving enough for our retirement. Also on the programme today, the Prime Minister is set to land in China with a delegation of some of our biggest companies to talk trade with President Xi. And finally, news of that relief package for pubs.

0:35But is it enough? We'll hear from the industry a little later on here on Wake Up To Money. Wake Up To Money with Will Bade. Morning. Welcome back to Wake Up To Money on Wednesday the 28th of January. Just gone five o 'clock in the morning. Will with you this morning. Yes, lots for us to get through this morning. We're also going to hear from the boss of Cisco. He's been speaking to Faisal Islam. As I say, we'll hear from the boss of Legal & General. By many measurements, one of our biggest investment firms in the country. We'll also talk pubs and we will be chatting about what on earth is going on with the finances of Welsh rugby.

1:04As that, I think it's fair to call it a psychodrama at this point, continues to rumble on a week and a half out from rugby's big shop window, the Six Nations as well. So absolutely loads to get to this morning. Would love your thoughts on it. If you want to join the conversation this morning, 85058 is the text number to do so. 08085 909693, the WhatsApp, should you prefer to get in touch with us that way. Going to have a busy morning, our panel this morning. Nick Greenan is back with us. Nick's the Chief Executive of Tyneside Cinema in Newcastle Independent Cinema, with its own Bar Cafe as well.

1:37Nick, morning. Great to have you back on the programme. Good morning, Will. Nice to be here again. And thanks for coming in late for us. I hear you were batting relief for us as well, so even kinder to get the very early morning call at the last minute. How's business going at the moment? It's going all right, actually. We had a fantastic night last night. We had Bill Bailey in the house last night doing an episode of Desert Island Flicks for us. So it was a sold-out show, lots of laughs and a really fantastic evening and nice to see on a Tuesday night people battling the weathers to get in to experience that event.

2:12Yeah, a wet, windy Tuesday night in January. That sounds great. Has it been a bright start to the year then? Do you know what? It's not been too bad. We've had some good titles and the likes of Marty Supreme and Hamnet have done well for us. Not as strong as some titles in previous years, but actually they're still doing good and they're kind of bringing numbers in day to day. So that keeps our January ticking over. But hospitality tough, but admissions still jumping along, which is good. Yeah, we'll get you to pick through both of those a bit later. We'll ask you specifically about the hospitality side of the business.

2:44perhaps when we get Emma McClarkin from the British Beer and Pub Association up a little bit later on in the programme to talk about all of that too. Alongside Nick this morning for the next hour, and alongside me in the studio, which is always nice for a bit of company, Tervais Williams back with us. Tervais, the chair of equities at Premier Might. Morning, Tervais. Good morning, Will. You bounced into the studio this morning, very excited about what's going on with stock markets. Why so much for spring? Well, actually, what's been interesting is the markets have started well, share prices are up, but most particularly UK equities are outperforming again.

3:11They outperformed the Magnificent Seven last year. And best of all, for me, many of the smaller companies, the AIM market, that kind of thing, has not just started off well, but it's probably one of the best performing markets in the world. Because, yeah, just explain to me, you've had a big background with that in particular, and AIM, the kind of junior market of the London Stock Exchange, if you like. That's right. I mean, we've seen for the last sort of five years, particularly a lot of capital being exported to the US to support the Magnificent Seven. They've clearly outperformed, they've generated some amazing returns, but we've starved our local companies of cash.

3:38And we're beginning to see that just beginning to peak out maybe some capital coming home, plenty of upside potentially over time. And we'll pick through a bit more of that after we hear from Antonio Simoes, because that's something that's part of our chat this morning and that chat. The longer chat, it's live at the moment as well. The Big Boss interview podcast, he's the latest subject of that as well. Let's kick off, though, in China, because the prime minister due to touchdown shortly in Beijing, the first UK leader to visit China since Theresa May did in 2018. He's due to meet President Xi on Thursday.

4:09The United States, of course, will be looming large in the background of all of these talks. Tensions with President Trump most recently over that pursuit of Greenland have driven some of the country's natural allies, the US's that is, to look at closer ties perhaps with the world's second largest economy. The Prime Minister insisted that he does not need to choose between the US and China. That was with an interview with Bloomberg earlier this week. But Jeremy Hunt, former foreign secretary, former chancellor who visited China as the foreign secretary on that trip in 2018, had this warning for the PM.

4:39The main purpose from Beijing's point of view will to be as friendly as they possibly can in order to hasten the breakup of an already fragile Atlantic alliance, particularly after last week. Their interest in us is not so much economic. It is geostrategic. It is the fact that we are America's closest security partner. And if they can prise apart that relationship, then it will have been a good visit from their perspective. Well, joining Gervais and Nick, we're also joined by Alicia Garcia Herrera, chief economist for Asia Pacific AcneTixis, the investment bank. Alicia, morning from us. Great to have you back on the programme as well.

5:18Good morning. Do you think that's a fair comment from the former chancellor? or do you think that there is more genuine interest in closer trade ties too from the Chinese perspective? I think that coming is right on point. It's very important for China to see US allies and we just saw, of course, Canada. And we're going to see Mertz and we saw Macron. All of that is a coordinated action. Let's call it charm offensive. from China's side to isolate the US. That's what it is. Now, of course, we have very good reasons, in a way, to think away from the US, to look for alternatives. But the question is, we really need to know what's happening.

6:07And I think that's very, very important. Gervais, jump in with your thoughts on the trip. Generally, I think it's quite interesting, because I think we can actually drive our own agenda now in the UK, because we're outside the EU, which means actually we've already done a trade agreement with India, for example, which the EU have just done, and we can actually build our own ties. So, yes, we want to stay close to America, but, yes, I also think on top of that, I think the direct Chinese trade will be important to us too. Just looking at the list here, they've got it on the government website, basically the type of companies going.

6:40Some, I guess, no surprise to you at all. Anglo-American, Bigfoot C100 listed company, minor. China, we know, very hungry for natural resources. AstraZeneca, the boss there, Sir Pascal Sourio. pharmaceuticals big export there as well but then further down lots of kind of well not really companies you know big museum leaders national galleries of scotland national museums of liverpool national theater national history natural history museum northeast museums up in next part of the world as well and then also interestingly some of our own green energy firms too octopus and people like that good interesting mix is it that soft power though the sort of um getting chinese investment through things that they like theater and arts and that kind of stuff that's perhaps part of the play there in some of those some of those debt parts of the delegation that's right i mean the uk has extraordinarily long heritage long trading relations long commercial relationships long political arrangements arrangements with all of the different countries in asia and that's obviously a big area of access to grow the uk economy in future so absolutely all of those different institutions represent the best of the uk alicia lots on this list as well of the delegation of these business leaders with the prime minister who are in kind of I guess those sort of plumbing type fields behind big business right like big law firms insurers that kind of stuff as well is that still where from the UK's perspective is that still something that perhaps we can offer to China yeah well indeed I mean the deal here is that China is not going to stop moving up the ladder and exporting goods increasingly sophisticated goods to the UK and the rest of the world.

8:17But the UK, as a major exporter of services, does want to get, you know, inside of the equation in China. The problem is that China's import of services has long been constrained by all kinds of, you know, regulations, controls. And I think the key here is to get that solved, basically for UK financial services, but also legal services, culture, to really have better access to China. That, I think, is the key here. And therefore, that shift that we're seeing from everywhere, Canada and so on, the more coordinated the shift is, the better, because that's the leverage that we can actually gain for China to move towards a more open economy and accepting more services from the rest of the world, especially the UK.

9:10Gervais, you're nodding. Yeah, I mean, ultimately, the Chinese economy is very much based upon manufacturing. It's been a wonderful manufacturer. It's been very successful. A lot of its exports are very competitive in every way. But it does need to be balanced towards the services part of the economy. And if we can help them and they can help us, then that's a win-win situation. There's no question here that they're going to want us as part of this trade talks, though, to buy more of their goods, whether they be solar panels, electric cars, all that kind of stuff. Absolutely. And although we do have some local companies which are involved in car manufacturing, there's no reason why we shouldn't import a lot more Chinese car cars.

9:45I mean, they're very competitive, very low cost. You know, many of the Teslas you buy come from China, actually. It's not just Chinese companies. Nick, pick up on that. First of all, play the role of consumer for us a bit. Do you personally, or people you know perhaps, do you bluntly care where products come from or is it about price? You know, I'm thinking in particular electric cars where those Chinese electric cars are so much cheaper right now than everything else on the market. I mean, I think we'd be ignorant to not think that price does impact it. You know, there's a few people in the world that can sit there and think, well, actually, you can make decisions based on ethics.

10:21But actually, so many people are having to make decisions on cost, aren't they? So, you know, if you're sat there in a position where you can do an ethical decision, usually you're in a better financial position is the reality. Interestingly, I think it was 2020, I was on a delegation trip to China with, what was it? It was the Leeds Lep back in the time from West Yorkshire with the leader of the council and a number of businesses. And I was there as the cultural representative. and back then it was kind of interesting where they were I was trying to understand why did they want to know about what was happening culturally and what were going on with our gems like Opera North and Northern Ballet at the time and it was about that soft power it was understanding that they wanted to move away from this kind of sort of being as seen as a dirty manufacturer if you like into a clean cultural kind of sort of maker of of of of cultural powerhouse stuff so you know that was back in 2020 and you know it's still it's interesting to hear where we are now really interesting what was that trip like what did they have you doing it was a bit bonkers it was fantastic because you're kind of a little bit like wow this is this is just like you know it feels very different and you're escorted everywhere and everything is kind of curated to the last inch of everything.

11:42But it was, just seeing the technology and how things were moving on was fascinating. And have you kept any of those ties? Or have the organisations, do you know, kept any of those ties? I'm just looking here actually, off the north, not on this list. No, I think one of the biggest outcomes from a cultural perspective actually was that Hisense that have a HQ in Leeds. So as in the Chinese tech company this is, make TVs and things like that. a sponsor of Leeds United. Yes, they are indeed. And you see them around a lot of the football grounds now as well, don't you as well? Alicia and then Gervais, what do you think, to round us out, what do you think is a good outcome here for the Prime Minister and the UK delegation then?

12:24Well, I would say the good outcome would be to go step by step, not to make a big announcement of a new trade deal, negotiation or anything like that, for a very simple reason. even Canada in a way McCartan is paying the price of making a big statement on that regard US wise with a threat for high tariffs but most importantly is because from the Chinese side you cannot sell your leverage which is basically your market too cheaply you need to first make sure they do open their sectors for UK services so in that regard I think it is important to put a value to the UK market for the Chinese so that they actually come with an offer, with an offer that, again, can only be open in their market.

13:15Otherwise, your trade balance, your UK trade balance with China will remain very, very.

13:24Yeah, I mean, what's interesting really is, of course, the Chinese have been huge investors in the US. They hold huge amounts of the U.S. bonds, for example. A good outcome. I mean, they do need diversification. They do need to allocate that capital elsewhere. If we can get them to buy more U.K. bonds, if they can buy more of our companies, generate U.K. jobs as a result of that because our companies get supported, that would be a massive win. Yeah, it would be really interesting. I'm sure Fliss will be picking through anything that is or isn't agreed on as we move through the week here on the programme as well.

13:53Thanks so much for your time this morning, Yanditia. Thank you. Garcia Herrera, their chief economist for Asia Pacific at Natixis Investment Bank. Now, at 18 minutes past five, the boss of the US tech giant Cisco has told the BBC that winners will emerge from the current boom in AI, but there will be carnage along the way, as he put it. Chuck Robbins is the chairman and chief executive of Cisco Systems, one of the world's leading technology companies, and is now behind some of the critical IT infrastructure enabling day-to-day operational use of AI. He told our economics editor Faisal Islam the disruption caused by AI would only be similar to previous bursts in technology.

14:31Every major technology revolution that we see feels like hype to begin with, right? And there's been a lot of discussion about is this a bubble? And the answer is probably yes. But we had a bubble in 2000 with the internet and look at where we are today. So the winners emerge and there's carnage along the way, but it is going to be bigger than the internet. I went through the dot-com crash and then came out of it. And this doesn't feel like, maybe it does feel a little bit like that. It feels a lot like it. But what happens is you'll have money that will be invested in companies that won't make it.

15:02But the winners will emerge. The applications and use cases will begin to evolve. Think about when the iPhone came out. We loved the iPhone, but we had no idea the applications we'd be using on that phone five years later. And I think that's where we are in the AI era. Gerace, what did you make of that? Absolutely. I mean, these things do feel kind of OTT early on, but they do change our lives. But in ways we don't always expect, it's not always easy to predict quite how it unwinds. It unwinds often in a way which is very different, but good in many cases. From a pure investment perspective, are you a bit worried about the level of debt kind of going on and being sold around some of these companies?

15:39Does it feel too much to you as a kind of veteran of that space? Absolutely. I mean, it's been easy to adopt debt because the valuations of everything is going up. But most particularly, if you look at the bond markets, the cost of US debt, UK debt, then whilst interest rates may be coming down, the longer cost of debt, 10-year debt, 30-year debt, is going up in price. And that's a worry. If we carry on like that, then we will have to change our behaviour. At the moment, collectively, our national savings are less than the government spends in budget deficit every year. And Nick, from your perspective, particularly in the film industry, it's talked about a lot, wasn't it, as this all began to emerge.

16:14Has it settled down a little bit? Are people founding their way through the rules and regulations? Are the concerns passing or as this gets bigger, are we still worried about the impact it might have on creative arts like yours? Yeah, I think I think it's still very divided. And there's a lot of confusion still as to where's the work. Again, going back to that thing I said before, I think it's about the ethical lines of some things. so if you know if I look at my organization and I ask the kind of sort of the team there'd be a split opinion on the use of AI in the organization where you've got some people will go actually it's really good for efficiencies around administration and we are looking at kind of sort of simple things like when we do board meetings and using it to take minutes and create reports that kind of thing but then there's a real sense of the creative element it the creation and content aspect of it and design and creative sort of curation around wording and how you sell films and everything like that.

17:13So there's a real still, you know, and I think there will be for some time, a real split in how you use it without it kind of sort of taking away the creativity element of what we do and how that doesn't lose that kind of sense of individual kind of creative production. That feels a bit of the frustration with it, doesn't it? Why can't we just invent something that does all the menial tasks and we can do the fun and interesting stuff. That's perfect. That's what we want. Exactly, yeah. Well, if you agree with that, 85058 is the text number to get in touch, 08085 909693, the WhatsApp. From the boss of Cisco to the boss of one of the UK's biggest investors now, because we've been chatting to Antonio Simoes, the boss of Legal & General, for the latest episode of the Big Boss interview podcast.

17:57And he reckons the UK has been oversold, i.e. that the country talks itself down too much. LNG is the UK's largest pensions provider, managing more than£1 trillion in assets for more than 12 million customers. And Mr Simwesh told us why he thought we needed more confidence as a nation and that he'd welcome a reset of the UK's relationship with the European Union. But before that, we asked him about how he felt British savers were doing at the moment and whether they were putting enough away for retirement. Pensions are the sort of silent powerhouse of the UK. And I think we can make much more of the power of pensions.

18:33But to your question, we know that 14.6 million, that's 43 % of the adult working population in the UK, is not saving enough for retirement. And so although we have this very large savings pot of 3.2 trillion of pensions in the UK, it's not evenly distributed. There's the parts of the population that are simply not saving enough. I've advocated that from the first day that you start working, you should be able to save for your pension. At the moment, the minimum age is 22. But if you start working at 18, you should be able to start saving for your first pound. At the moment, there's also a minimum hurdle.

19:11Then there's an interesting group in the population, 45 to 55-year-olds. So if you're, in a way, young enough that you didn't get your final salary pension, the defined benefit pension, but in a way you're old enough that you didn't start saving with the auto-enrollment that only came in in 2012, there is a cohort where people haven't saved enough. And so it's not too late. We have 5.2 million workplace customers. The average age is 42. And what I would say for those individuals is that every little bit counts. So you need to save every day. So as a nation, we have a big pension powerhouse, as I said, but individually, there is a cost of living crisis and many people that can't think about the long term because they need to think about the cash for the short term.

20:01But for the rest of the population, we need to save more. And yes, as the CEO of the largest pension provider in the UK, I would say that, wouldn't I? Do you think that the levels, the rates of that auto-enrollment need to go up? What is it? I'm just glancing down on my notes here. 5 %-ish from employees, 4-5 % from employees. There are colleagues in the pensions industry who think that should all just go up. Absolutely. So I've made that point. We had a blueprint for growth and that overall report, which by the way, has a 0.7 % GDP increase by 2035. It doesn't sound like a lot, but it's 220 billion of additional GDP growth.

20:40There are six levers and one of them, several of them, the government is already acting on. But this particular one that I've advocated for is an increase of that percentage, which is currently, as you say, is 8 % to 12%. So that in between employers and employees, over time, we increase the rate of contribution to pensions, start from 18 years old, but also increase the contribution to 12%. That's what Australia does. If you do it now, you don't need to do it now in 2026. you can do it progressively but an increase towards that 12 % will make a big difference for those 14.6 million people that I talked about.

21:16Break it down for us then how would that split work in the 12 % first of all in your mind? So obviously I'm a business leader it's for the government to decide but we've said that the 3 % from employers goes to 6 % and the employee contribution goes from 5 to 6. It's very difficult isn't it for business leaders I speak to them big and small particularly those medium-sized ones that come on our programs every morning yeah great idea in theory but where am I going to find that when I feel like I'm being squeezed absolutely everywhere what we are advocating for is a glide path for that increase so we're not saying increase it in 26 or 27 we say progressively over time and I think as a nation that allows us to to think about the future I you know we've been around for 190 years as a company this year we were created in 1836.

22:02And I hope that 20, 30, 40 years down the road, people look back and said, in 2026, the Pension Commission advocated for this glide path. And we're now much better off as a nation. Got written in block capitals on my notebook in front of me here, risk. Yeah. That feels like the word in your world at the moment, right? Whether it's around policy, whether it's around decisions that you guys yourselves make. Where do you think we sit as a country in terms of our appetite for risk? As a country, maybe I make a bigger point, which is I think we're lacking confidence, actually. I think there is an element of we talk ourselves down as a country, and therefore that happens with individuals as well.

22:38If you think of the different markets around the world, you see individual investors being more confident, and therefore in that risk-return, they see both the risk, but they also see the return. And we tend to be, as a society, more risk-averse. It's amazing that, isn't it? I've gone to work in America a lot, and the number of kind of just everyday people who have an interest in what's going on in the stock market will understand what's going on, will want to talk about it. I mean, that is completely different to the culture. But there are many other countries around the world. I lived in Hong Kong for some time, and you're with a cab driver, and you're saying, oh, yeah, tell me about the dividend.

23:09Is the dividend progressive or not? And they would kind of argue with you and kind of ask you questions. That doesn't happen in the UK. Why not? I think we don't have the same investment culture, but I'm a glass-half-full type of guy. I think we can do that, right? So we have so much power in the savings that we already have as an economy. it's us collectively and I don't think this is on government is on us as well as business leaders to to help educate people and and right now we're taking specific actions the FCA is helping we are doing this as firms so I think there's there's a potential to to to change that.

23:43Where else do you think the UK is lacking in confidence you've got a good kind of perspective? I moved here in 2000 actually I was studying in New York and I came to to London and that was there was a place to be. People were like, this is, you know, London, the center of the world. I've lived most of my adult life here in the UK. I'm in a way, I'm more British than Portuguese. But a few years ago, I was working in Spain. And then I came back to lead LNG. And when I came back, people were like, why? Why are you going back to the UK? And so in just over two decades, the sentiment towards the confidence, to use your word, in terms of the UK has really deteriorated.

24:22And I... Is that Brexit? Look, I think the UK has been oversold. I think the reality today is much more positive than what we give ourselves credit to. I think we talk ourselves down. And I know you know this, but it's worth rehearsing. So we're an open economy with stable institutions, with reasonably good foundations. Number two, we have a lot of innovation, talent. I talked about Oxford, but we also work with Cambridge, Edinburgh, Manchester. So we have world-class universities. And finally, okay, the U.S. is a much bigger market. But apart from the U.S., it's really us, Canada, Australia. There are not many out at Japan.

25:05So 3.2 trillion of pensions. That's a huge opportunity. And right now, we have the planning reform to help us build better. We have the pension reform that is helping us deploy more of that capital, as we talked about earlier. So I'm more positive right now. I'm more confident than the consensus. And there's some, yes, growth could be higher and we have structural problems around growth, but inflation is coming down. We'll see probably two Bank of England rate cuts this year. The FTSE has been at an all-time high throughout last year. So I think there are more reasons to be optimistic about the UK.

25:39And I think from a sentiment, I talk to a lot of investors, I think from a sentiment perspective, the UK has been oversold. The government's talked about a reset with the European Union now. Sensible, do you think? I think so, actually. There is, it's good to have allies, good to have partners. And I think from an economic, you know, actually, as a CEO of a company, if I think not of the politics, but that the economics, it makes sense that the economic block, we are part of Europe that that and, and we've seen more of the coalition of the willing of different European countries getting together to get stuff done.