This is a City AM Studios production.
SPEAKER_02Hello and welcome back to Business as Usual with me, Martin Kimber. And me, Matt Kenyon. Coming up on the podcast today, Brewdog's chief executive resigns after just a year in the job.
SPEAKER_04Andy Burnham's pledged the biggest social housing building spree in a generation. But does it make economic sense?
SPEAKER_02Plus, why banks might soon be introducing digital ID? Welcome back. So big story on the agenda today. This broke on Wednesday. The chief executive of Brewdog has resigned after just a year. And so far, it doesn't look like he will necessarily be replaced at all. So our city slicker, Simon Hunt, joins us to talk about the once punk beer brand.
SPEAKER_00Good morning.
SPEAKER_02Simon, what's been going on here? Because I think we all remember how the founding leadership of Brewdog exited the company. They've been replaced. There's been all sorts of uh changes uh in terms of ownership. What is the story so far? How have we ended up at this place today?
SPEAKER_00So the the chief executive, James Taylor, who started in that role beginning of last year, he sort of oversaw this whole transition process where the the company was rescued by its new owner, US investment firm Tilray. Tilray has now decided that as a as one of a number of its brands, Broodog no longer needs its own CEO. So they have gotten rid of James, amicably, they say, and they won't be replacing him as far as I can tell. So there's just going to be a Broodog will be a CEO-less business.
SPEAKER_02So who will be the most senior person? Will be some sort of like brand manager who then reports into a broad business.
SPEAKER_00So they are keeping their uh chief commercial officer, someone called Lauren Carroll, uh, and they'll then just report straight into someone at Tilray.
SPEAKER_04But they are quite optimistic still that it's going to be cash flow positive in the not too distant future, right?
SPEAKER_00I think that's right. Yeah, they I mean they had a pub estate that was not going well, with a lot of the pubs shuttered uh during that takeover, but they've kept the profitable ones going. So that you so those those parts of the business that have survived, they expect will pick up. Tilray being a US brand is trying to grow brew dog's presence over in the US, and they hope that will be a big growth market for them as well.
SPEAKER_02I suppose with the US and the East Coast, they are probably in the same craft beer moment where we were at in, I suppose, 2013-14, when brew dog was in its ascendancy. We were talking on the podcast probably just a few weeks ago about uh James Watt, the founder of one of the founders of uh Brew Dog and his and the ex-CEO. He has a new venture and he has made it pretty clear that he wants to at some point buy back brew dog. What do you think this means for his intentions if there is suddenly not actually a leader of brewdog?
SPEAKER_00Yeah, it's I mean it's interesting because if if he would want to buy it back, it's quite hard to buy sort of bits of a bigger company. If uh brewedog is run as a as its own entity, as its own subsidiary of Tilray, uh with its own C-suite, then it's much easier to strip that organization out of the bigger thing. If you're instead having to just pick up bits and bobs like the brands and the pubs or whatever, it's it's a much harder to project to have done, I would think.
SPEAKER_02It must feel quite humbling as well to create something like that and then to watch it not only be acquired, but then be stripped of actual leadership to just become a pure subsidiary brand. Yeah. Especially having been saying we are the punks of beer, we're not just another massive corporate with endless different subsidiary brands.
SPEAKER_00Yeah, yeah, and now they are just a brand, and that's it.
SPEAKER_04Well, we shall be watching that story with great interest. In the meantime, Simon, why is the war in Iran leading to a crash in the sugar market?
SPEAKER_00This is uh news that we had out yesterday from uh ABF Associated British Foods, a uh member of the FTSE100 and a big uh food importer and distributor.
SPEAKER_04And still the owner of Primark for now.
SPEAKER_00For now, yes, although it's about to spin off Primark into a separate uh company that will have its own separate listing on the FTSE 100. They've said they expect their sugar operation to deliver a loss of as much as 60 million pounds, which they say um is down to the war between uh the US and Iran, which they say increased uh gas price expectations and impacted their profit outlook. So um, I guess you know the bit the big sort of fallout um from Iran was obviously the closure of the Strait of Hormuz, as we've mentioned lots of times, and just the the cost of shipping worldwide went up during that period. And so if you know if your main business is moving things around the world, you're going to be impacted.
SPEAKER_04So this is mostly like uh I suppose some of those bigger ships run on LNG, but then also like creating the sugar is quite energy in energy intensive as well, I suppose.
SPEAKER_00So yes, and I think so far that those costs have not been reflected in sugar prices, and so they are taking the cost of you know all those increased energy costs without being able to pass them on.
SPEAKER_02One more thing to talk to you about, Simon. Why is an Irish pub right here in the city of London turning into a hostel?
SPEAKER_00Yeah, well, it's uh it's a hostile takeover, if you will. Um, that's very good. He's been sitting on that. He didn't tell us he was gonna say it. It'll take me hours to come up with that. But no, I mean uh it does. I think this is a bit of a tale about what's changing in the city. Uh, you know, there are this is an example of you know, maybe people are drinking a bit less, so we don't need as many uh pubs in the square mile. I mean, there are dozens of pubs in the square mile, you know, in terms of like pubs per square mile, the square mile must have. So there, you know, few pubs closing. And also over the last couple of decades, the city has become a bit more of a destination. There are a lot more hotels than there were years ago. You know, pre-COVID uh and obviously during COVID, uh the at the weekends, the city was a complete ghost town. I mean, there was nothing going on. Most shops were closed on Saturdays and Sundays, but it's now becoming more of a destination with people actually visiting as tourists and wanting to stay in the square mile. And there was a particular line in a planning application that I noticed uh that relates to this conversion of this Irish pub into a hostel where the planners say this offering addresses a key gap in the city of London where much of the existing hotel supply is traditionally high-end. In other words, they're saying that there aren't enough packers. There aren't enough low-ends.
SPEAKER_04I was thinking that because there have been a few times where we've been to the pub after work and it's gotten quite late. And I've just thought actually it'd be quite nice just to put my head down on a bunk bed rather than uh travel all the way back to South Park.
SPEAKER_02I'd be so impressed if you ended up like coming back into work one day, having been overnight at a hostel in like Fenchurch Street. That would be I don't know that could be quite a good lifestyle. Do you think the lifestyle pages would commission me to write that? I think they almost certainly would. I also I think it's very true though, like there should be more to do in the city at the weekend. I've often found myself maybe on the way to something in Shoreditch or in Soho over weekend and kind of needing to run some sort of errand on the way in, and then just finding that every normal shop in the city is is closed. But at the same time, there is a passing trade. There are tourists who presumably are quite confused because they're walking around what they think is the sort of like the central Manhattan of London, but like nothing's open and they they look lost, they don't quite know where to go.
SPEAKER_00But I think more is open than it used to be. I mean, old timers at City AM will tell you that when they had to put a Monday print edition together on a Sunday, uh, everyone had to bring in a pack lunch because not a single cafe was open in the square mile. And yeah, you know, I've done the odd um weekend/slash bank holiday shift, and not everything is open, but it's not like there's nothing you can find out there. There are a few things open, so it is changing a bit. God bless Greggs.
SPEAKER_04Uh thank you very much, Simon. Really appreciate you coming in. Right, coming up after the break, Andy Burnham has promised the biggest social housing building program since the Second World War. But does it make economic sense? We'll be right back. Now, our potential, nay probable, future Prime Minister Andy Burnham has pledged the biggest council house building program in a generation. The project will be overseen by the new number 10 in the north. But is the old adage of you can't go wrong with bricks and mortar really true in this case every time? Joining us for its business as usual debut is our brand spanking new deputy editor Charlie Conchy. Welcome to the studio. Thank you very much for having me. Pleasure to be here. One social housing operator has sadly just gone under. What's happened there and what does it mean for the industry more widely?
SPEAKER_01Yeah, so this is a company called Orderly Group, which we've been uh looking into a bit over the past couple of days. It was pitched to investors essentially as a means of making a very high return, up to 17% per year at times, whilst also, of course, doing your bit to help house people on low incomes in the north of England. But the actual sort of company itself hasn't really turned out that way. Um, this was marketed as providing that sort of steady annual return with, as it said in some of its marketing materials, no risk at all, no market risk, no construction risk. We've been speaking to a few of the investors in that scheme over the past couple of days. They say they stopped receiving their payouts in January this year. Um we've looked at some court filings. This was hit with a winding up petition in May, and it's now called in the administrators as of early June. So this was very much retail investors, so amateur investors who had backed this project. Up to £40 million has now gone missing as a result of that, completely unregulated as well. So it's looking as though the retail investors are going to have lost the vast majority of that money. Um, so it's it's slightly up in the air where those retail investors are left now. But for the uh for the time being, the founders are nowhere to be seen. Uh they can't be contacted by any of these investors. The the amateur sort of group have banded together and turned to a law firm called RH Law who are trying to bring a claim against the the founders of that company at the moment, but it is looking like a pretty worrying, uncertain time for a lot of them.
SPEAKER_04And it's even more worrying for kind of amateur retail investors because for a very long time people in this country have been told put your money in bricks and mortar, you know, buy land, they don't make it anymore, you'll be absolutely fine. But uh in this case, that's obviously not transpired.
SPEAKER_01Yeah, and I think if you look at the demographics of that retail investor base as well, a lot of retirees in there, people who've we've been speaking to essentially saying we were relying on this money to have a comfortable retirement. It's now looking like a very different picture. One woman I've been speaking to, based in Spain now, she's got a 92-year-old mother in the UK. She's now saying I can't travel back to the UK to visit my mother as much as I would have liked to. I can't do you know all the things that I had planned for for so long. There's no way of me getting this money back. So it does really kind of throw into sort of sharp relief how damaging this kind of collapse is to those sort of investors. And I think just in terms of the way that these schemes are marketed, as I said, it's an unregulated corner of the industry. I'm really struck that it is unregulated.
SPEAKER_02I suppose uh have there been pushes to get this under some kind of oversight because it feels like quite quite extraordinary that you can have an area of investment that can be sold as if it is completely low risk. Yeah, low risk in this case.
SPEAKER_01The the structure of this is is quite important here. So these were sold as loan notes. So rather than orderly group essentially going and borrowing from a bank, what they've done is go to retail investors, marketed on social media, they've relied on a slightly shadowy part of the financial industry, third-party introduction firms who have gone out and made these connections. And within these loan notes, they've obviously made these very lofty promises, but these are amateur investors and they don't always have the sort of financial know-how to pick these term sheets apart that we've been looking over. And some of them are quite staggering when you look at these term sheets. It's promises of 17% with no market risk, which is clearly a you know the fact that that advertising isn't banned, you know.
SPEAKER_04If you fall under the ASA somehow. If if Apple put out a uh or a big FTSE100 or a big SP 500 company put out a an advert saying invest in us, there's absolutely zero risk, you know, the someone I'm sure would would slap them down.
SPEAKER_01Yeah, well, I think one of the things that this group and the law firm RH law are calling for now is just more regulatory scrutiny on this area because yes, we're looking at Aldi Group, it's £40 million in the context of a a thousand investors who've lost their money, that's a lot of money. But it is a drop in the ocean of a kind of wider industry here that which is it's operating on social media, it's operating just outside of the traditional channels, and regulators at the moment are sort of leaving this slightly untouched.
SPEAKER_04And just very briefly, I mean, it does kind of underline actually how complicated the social housing system is. I mean, you know, I I'm sure a lot of people just sort of think like, oh, the government built a house, they rent it out, and you know, that's that. But actually, no, there's tons of private players involved, there's lots of different schemes. Like, if you own a flat, you can and the council wants to use it for social housing, like you can actually agree a deal with a social with the with the local authority and stuff.
SPEAKER_01Like it's unbelievably complicated. A huge amount of sort of web of private players, and it sounds slightly distasteful, but a massive amount of money being made in the middle of it. I covered a a company a couple of years ago that went under where people were making huge introductory and transaction fees in the middle just by flipping these social houses, bring a tenant in, the value of the property goes up sort of tenfold, and you can sell it on. So it's it is a strange area of the world for those who don't follow it where there is so much money being made, um, and people still can't getting in and making a quick buck on an area of the industry which is at the end of the day, it's there to house people on low incomes, homeless people, and it's um often abused.
SPEAKER_02Well, I'm sure this will be something that we will be closely following, especially with all the Chinese government and uh seeing how housing quality evolves. Charlie, thank you very much for joining us for your debut. I'm sure we'll have you back very soon.
SPEAKER_01I look forward to it. Thank you.
SPEAKER_02And finally, banks want there to be a digital ID system, but they don't want you to call it digital ID. And the reason behind that is quite obvious because the Illuminati. Well, if they do this, and if they want to do this, they will be walking into one of the most divisive issues at the moment in British society.
SPEAKER_04There are people who, where I live, they they're every Sunday are on a crossroads with yellow signs about digital ID, how COVID vaccines are evil and hands off our kids and stuff like that. There are genuinely those people out there.
SPEAKER_02Well, our senior city reporter, Sam Norman, has been writing a column about exactly this on the banking side. Sam, what what's your take? Because this is thorny.
SPEAKER_03See, it's it's an interesting issue, and I think there are a few tiny little discrepancies between the two. Obviously, the bank's one is voluntary, it's called the digital verification service. Uh, it's currently in uh the trial part of the rollout, so they're just currently live pilot testing it before we run.
SPEAKER_02And this is this is something which, because I know you were writing about this as a news thing a week or two ago. This is something which is a kind of an industry-wide opt-in scheme, yeah. So basically a framework. Who runs the framework?
SPEAKER_03So UK Finance, which is a banking industry body, is launching it with like the high street heavyweight. So Network is on this, Lloyd is in on this, Barclays is on this, and it's like a voluntary scheme that basically have an added layer of protection in your banking app. Now, in one sense, it's uh it's a noble effort. You kind of applaud it. I mean, we had figures out earlier this year, of around 1.2 billion was stolen by criminals through payment fraud last year. So there's a problem, and that's gone up. It's it's a problem that's like on the rise. Yeah.
SPEAKER_02And banks are very having to really double down on their know your customer. Absolutely. They're having to do a lot of public information campaigns around don't answer calls. Yeah. Um, there's already face ID on my app, my banking app.
SPEAKER_04Like what's just on device, isn't it?
SPEAKER_03It says it added a layer of protection per transaction, which and I I I applaud it. I I think it's a great idea, but the digital ID debate now is so toxic. I mean, uh earlier this year there was that leak, which remember like over a hundred thousand uh passport scans were leaked. And the digital ID critics lord, they loved that because that gave them all the ammunition they needed to be like, well, they forced Gistarmer into a U-turn, so the banks have done one thing in sense of making it voluntary. They've missed that first U-turn that Starmer had to make. But I just think is the battle already lost because the optics are just so bad around this.
SPEAKER_02Without wanting to wade into the debate itself, because I I I'm not sure I can take that from the YouTube comments. Um what if you were, say, the chief marketing officer at a bank at the moment, Sam, how would you brand this? And how would you go about cons like uh how do you go about persuading the public that this is something they should buy into?
SPEAKER_03I I genuinely think it's an impossible challenge because every every day my inbox is filled with data around how customers don't trust their bank. Whether that be do you trust them to have the best deal for you, do you trust them to be have the best offers, to have the best promotions? And people just don't, but they don't want to do anything different about it because Brits just don't like change their bank account. Now, I think the biggest thing that we can't skip over here is the outages part. I mean, there's all this um idea about security around the government's digital ID. Would you trust a bank who's having I mean, other I think it was 803 hours last in the last two years, banks were down?
SPEAKER_02Last year was particularly bad.
SPEAKER_03It was always just been bad as well. Like the Lloyd's one this year, rogue transactions appearing in your account, but not yours, other people's national insurance numbers that you're gonna use this bank to be on digital verification service.
SPEAKER_04And I think it's a great idea, but well, this is this is it. Like, and I I'm I joked about the slightly strange people near my house earlier. But there are lots of people who aren't crazy who do have genuine objections to this, who I think are very sensible and and make very sensible uh objections. You know, uh would you trust the government with your IT given the kind of background of that? And then, you know, why why should you trust the private sector with all that? But then on the other hand, like you've already given all your details to Facebook for the last few years and you know, all that sort of stuff.
SPEAKER_03So I guess it is voluntary, so there's that element to it, but obviously it's not just voluntary they want to do it if they wouldn't be doing it if it if it wasn't a thing they think they can get behind.
SPEAKER_02I feel like just going back to the question about how to sell it, there is a question. If people don't trust their banks necessarily getting them the right deal, I think being within a trusted consortium of banks who know your details and you can cross over to could be quite a good sell because you can say, actually, if I'm getting the wrong deal, and that's a bank trust that you've got.
SPEAKER_04The neo banks are yet to build up that kind of history with people, right?
SPEAKER_02Yeah, and that's and that's a whole different question about like building that kind of pedigree.
SPEAKER_03Frankly, though, like I think it's a different argument. I uh to me, and ones I I guess I relate to more if it was like a digital ID concern, it's the idea of your history being leaked, like what websites you're going to or what different stuff you're doing, or like your scans being leaked. And I guess you can still have that with a bank, but the transaction element, it's uh it's a positive having that associated with your bank account. So I don't almost see the security or protection argument as much for this. I I do think there's great grounds for it, but I just think the marketing mission to go up against all this like bad pressure around outages and the government's ambition, it's um yeah, it's a bit of a.
SPEAKER_02I think I might be more optimistic than you are. I think only because also, as a sort of an elder gen Z, I always basically everything I do online, I kind of always assume probably is probably is never fully private. You are the oldest Gen Z person I've ever met. And I mean that in every way. And actually, before we get into any more um ad hominem attacks, uh, which I probably deserve for all for saying things like computer games rather than video games, I'm gonna call an end to the statement.
SPEAKER_04Sam Well Sam, do you want to stick around for the Thursday night uh weather forecast that we're gonna do in a sec? Absolutely. Are you ready for this, Sam?
SPEAKER_03What have we got? What have we got?
SPEAKER_04So it's gonna be on Thursday this week, 26 degrees and sunny. That's so clemen, which is excellent. It sounds like the oyster shed. It sounds like the oyster shed. I will see you there. Thank you, Sam. Thank you, Sam. Well, that's just about all we have time for today. Thank you very much for listening to Business as Usual.
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