This is a City AM Studios production.
SPEAKER_03Hello and welcome back to Business as Usual with me, Martin Kimber. And me, Matt Kenyon. Coming up on the podcast today, the government has nationalised British steel. Is this a sign of things to come as Andy Burnham promises more public control over British utilities?
SPEAKER_02Only one in six small businesses expect to grow over the next year. What will the next PM need to do to spur growth among Britain's up-and-coming firms?
SPEAKER_03Plus, Shabana Mahmood has pulled into the lead to be Andy Burnham's Chancellor. We'll take a look at what she actually thinks about the economy. Before we start, we need to talk about the City AM Toast Awards.
SPEAKER_02We received over 2,000 entries, and our judges have narrowed down the list of the best restaurants, bars, coffee shops, and green spaces in the city.
SPEAKER_03Now it is up to you, yes, you, the public, to vote for the finalists. Martin, I believe you've nominated some of your favourites. Who did you nominate for best restaurant in the square mile? Oh now I've tried a few. I've tried many. I can imagine to reach the summit.
SPEAKER_02Do you know what I have to say? I really enjoy Wagtail just up the road. It's just got the view. It's also it's also probably a contender for best sort of rooftop. It's got a great bit of a category crossover. Yeah, yeah. Uh it was between that and honest burgers. But um no, it's really, really tremendous. Great view, nice stuff, good wine list, good food, all round what you want.
SPEAKER_03Well, with 15 categories to vote for, we are going to need your help narrowing down the winner. So go to www.ctm events.co.uk slash toast dash 2026, if you can remember all of that. But anyway, on with the show. And this week we have finally seen the conclusion to the long-running saga over the future of British Steel. And it was in one of the last acts that Keir Starmer will ever do as Prime Minister. He nationalised the Scunthorpe Steelworks. Uh our chief reporter, Ali Lyon, our very own markets Minx City's Fengali. Uh you've been all across this. You join us now, Ali.
SPEAKER_02Welcome to the Iron Chancellor.
SPEAKER_03Oh, wait, no, steel isn't iron. Steel is the same thing. It's made of iron. It's called Alpha Metal, bits of it. Bits of iron in it and other things. But we're not a chemistry podcast, Martin. We're a business podcast. Um Ali, is this a sign of things to come as Andy Burnham has been hinting at potentially some more uh nationalisations along the way?
SPEAKER_01Well, uh all will be revealed, but uh that certainly seems to have been uh the rhetoric coming out of the Burnham camp in uh the run-up to sort of his coronation as prime minister. Though, as you sort of gently suggested in in your introduction, he's never fully suggested that he will sort of launch a big national out and out nationalization drive. He has always couched it in this very vague term, greater public control, which no one uh seems to know exactly what it means. Because in the case of British Steelers. Exactly. And so in the case of British Steel, there has been total public control for a year, because, as you might remember, the sort of Chinese owners uh got into a massive spat with the government um in about March of last year, where they basically couldn't come to an agreement on the green transition uh plan to help make the plant in Scunthorpe a lot more environmentally friendly. Jingye basically threw their toys out of the pram, the Chinese owner, and just said, right, we're walking away. Uh, and also uh walking away literally from the site, leaving this uh blast furnace, one of the UK's only last remaining blast furnaces, about to basically extinguish. Uh, and so the government took control of it. Now, what's happened on Thursday is that the government has taken ownership as well. They've used this new legislation that got royal assent uh yesterday um to take, could not just take control, but own it and put it into public ownership.
SPEAKER_02And there's been a huge issue around um steelworks and manufacturing in general, around sort of cost of uh uh energy in the UK, right? Like this is essentially what was making it so unprofitable.
SPEAKER_01Yes, uh, you're exactly right. Uh Jingye, when they were going through all these uh painful, torturous negotiations with the DBT a year ago, said that they were losing a million pounds a day on the Scollanthorpe site, which now uh Joy of Joys is the taxpayer's burden. Um and the OBR said a little while ago, um, in a sort of what was quite an eagerly anticipated uh update, um, basically costing the uh nationalization at the last fiscal, or the taking into public control, I should say, at the last fiscal statement, they costed it about 900 million pounds um a year just to keep just to keep it uh everything going.
SPEAKER_02Which if you just uh gave all the workers their 50,000 pounds a year of taxpayer money, would still be cheaper than to keep this plant going on government funds, right?
SPEAKER_01Uh yeah, but um it's just it's a it is a bind for the government because as uh you as we were sort of saying, or I was saying there, uh it is the one of the only last remaining what's called a blast furnace, which is um the sort of old method of creating steel, which is how you get virgin steel, which is really important, um, because uh, say you're not reliant on any supply chains really with that, or you can afford not to be as reliant. Whereas this modern uh way of making steel, whereby you use an electric arc furnace, relies on basically recycling old steel, um, melting it all down and then building it all again. Uh, whereas uh and the blast furnace is what strategically is so important.
SPEAKER_03And that was a problem because they were sort of bouncing time to make a very quick decision, because if you let that extinguish, it's sort of useless.
SPEAKER_01Or it costs billions and billions.
SPEAKER_03Yeah, yeah. One more thing, Ali. Which company has been the latest to flee the London Stock Exchange?
SPEAKER_01Uh so it's a beloved uh engineering company called Rotalk. Um, they make components for sort of all sorts of technical uh products. Um, and they are a FTSE 250 company that has been UK headquartered since 1950. Um and it is, as I said, a sort of a real, almost totemic loss uh to the London Stock Exchange because it's one of those companies, as uh we were talking about in the newsroom that a lot of people haven't necessarily heard of, but it has just chugged along and done really well for years and years and years and years on the London Stock Exchange. It was bought off at an enormous 70% premium by a Swiss rival. Um, and it's just the latest of, as I've been on this podcast uh with you discussing, as I've heard Simon discussing, so many of these foreign takeovers of London listed companies at huge premiums to their share price, um, which uh has shows absolutely no sign uh of stopping, and that there seems to be almost no appetite uh uh policy-wise to do anything to rectify it.
SPEAKER_03I suppose what does it tell us that even companies that are doing really well are delisting?
SPEAKER_01Well, it tells us that uh foreign companies or foreign investors see them doing really well, see uh international or indeed domestic investors not necessarily appreciating that by uh giving them a share price or judging them uh as being worth a share price that would prevent this happening and thinking, oh God, that's an absolute bargain. I'm gonna pay through the nose to get my hands on it. Um, and then we've basically got this really profitable business that will gradually uh me have less of a UK footprint. All the lawyers and accountants that work on its filings for the London Stock Exchange will no longer um be employed to do that. Uh, and it'll just seep away another sort of cut of these thousand cuts from the from the London Stock Exchange that aren't being replaced by IPOs.
SPEAKER_03Ali, that is a bleak note on which uh we're going into the weekend. But thank you very much for joining us.
SPEAKER_02Now, new research from FSB, that's the Federation of Small Businesses, not the Russian Secret Service, indicates that hopes for growth are at the lowest ever among small businesses, with only one in six small businesses expecting to grow over the next 12 months. That's according to their latest business index.
SPEAKER_03Joining us now is Craig Beaumont, Executive Director at FSB. Craig, how are you feeling about the prospects for small businesses at the moment?
SPEAKER_00So, I mean, these stats are for quarter two. So, quarter two was very tough. Uh, it happened after lots of cost increases happened uh start of April, or whether you have it in the tax year, but loads of things went up. You know, business rates, uh employment, tax, uh, dividends, they all basically across the the whole kind of small board of what small businesses pay, costs went up and that's when they landed, decisions from previous budgets. Um, so that that has an impact. The headline confidence measure has fallen from you know minus 52, which is bad, to minus 57, which is very slightly worse. Um, the the key point though is really about revenues. So if you look at revenues the last quarter, the number of people who say their revenues went up is quite small compared to those who said wait it would go down. But their real worry is over the next 12 months. So of those who say they look to grow, they are several times now smaller than those who say they will shrink, sell, or close. And that's a very dangerous place for us to be in the economy.
SPEAKER_02So a lot of small businesses now have an albatross around their neck. Well, I suppose a flock of albatrosses around their neck. What is the biggest albatross here? Is it tax, is it the cost of energy? Uh, you know, is it is it supply chain disruption due to the war in Iran? Like what are we seeing as sort of the main themes here?
SPEAKER_00I think the main two probably right now are tax. So tax has never been in the top three until about a year ago of real problems, and now it's number one. Wow. Um, in terms of the the causes of the higher costs. Um and then the second one I'd probably say is employment costs in particular. You know, the cost of employing someone is now becoming far too expensive. And that isn't that's partly the living wage, but actually it's mostly the Nix change, the employer and national insurance change. Um so you know, employing if you were at the start in January last year, if you wanted to employ five young people on the living wage, the same money today would only employ four. So if you're looking for a reason to show why young people aren't getting enough jobs, that's the reason. Because it now you cannot get as much young people resource as you could then for the same money. So it's and it's not all living wage, it is this, it's just the employer national insurance thing on top. So it isn't that we're not paying people enough, it's literally the treasury is taking more money per person in.
SPEAKER_03It feels as though there's never been a time, at least in recent years, where people who run small businesses are quite so angry at the government. It's become a like very much a talked-about thing. Are you getting signals which feel any more positive or any rosier from the incoming government and people?
SPEAKER_00I actually feel that there is a potential change coming. So we've got the the kind of the one topic the government's done really well at is late payments. So there's a new bill, tough bill that we've co-designed it. It's very rare for us to you know be in there writing and drafting and improving legislation inside, not just lobbying from the outside. And that that will stop big businesses paying small businesses late. That is cash flow, that is huge, uh, and it's taken us 20 years to get there. So that's really, really important. So we want to see the Burnham administration put its shoulder behind that. You know, we launched it with Keir Starmer and his administration uh almost exactly a year ago today. So now get that legislation passed, pass it by, you know, in the autumn. Uh, it's currently in the Lords, which you've got to be very careful with the Lords. Um, amending legislation is a lot easier in the Lords, the government doesn't control it as much. Um, but then I think uh Burnham's made some promises. Well, one of the biggest missteps this government made was on business rates, where they promised to cut, they ended up increasing them, ended up with this very difficult phrasing of your bills are lower than they otherwise would have been. Um which is just so abstract. It's so confected and it's not right. We could have raised them more. Yeah, exactly. We could always punish you more. And some some people from the government with any people are saying, look, this could have been a lot worse. And if that is the best line you've got, it's not very strong. So we think, but you know, Burnham's made a pledge on small business rates relief. Uh that's been briefed out, it's fairly now, I think, concrete. So that lifts lifts the threshold where you start to pay. You're taking small businesses at the bottom of the tax, which is very important to us. Um, and then there's a move on employer national insurance aimed at small businesses, which hopefully I think means the employment allowance, which is probably FSB's greatest lobbying achievements, about £10,500 off every small employer's national insurance bill. So that if that goes up, and it's already really chunky, and credit to Rachel Reeves for doubling it in her first budget, um, up against the mash, you know, the massive Nix rise at the time, you know, there there are things that I think Vernon administration will do well. So I think small businesses are now waiting to see what happens on Monday. You mentioned Rachel Reeves.
SPEAKER_02There's currently a beauty pageant underway uh for as to who's most likely to replace her. I know you've got to be careful with what you say, but what vibes are you getting from, given this is newer, the new vibes politics era, uh, what vibes are you getting from small businesses about who they think would be best as Chancellor to stick up for the best interests of small and medium-sized businesses?
SPEAKER_00Well, I think the the chart the chancellor choice is a massive indication on Monday, and I think we should we should wait to see. There's been so much gossip, so much rumour. But if you look at the candidates, you can actually start to see which ones are really close and have done small business activity. So as an MP or as an opposition spokesman, so you know, Shabon Mahmood is now, looks like the leading candidate. She was very much visiting small businesses in a constituency, going on the high street. You know, she uh there's one press release where she said, I'm gonna, when she was shadow, I think she was shadow economic secretary to the treasury, uh, she was also shadow financial secretary. So when she said, uh we will, when we come into power, bear in mind this is 2023, when we come into power, I will make sure the voice of small businesses heard in at the heart of government. I think that was the phrase. So you can look at that and go, well, this is what someone said when they weren't going to become chancellor. Um, but that's still indicative of what she thinks. So, you know, that's the kind of thing we'll be looking looping back on, making sure that you know people don't forget the grassroots, because yeah, you know, the square mile is very important, the city is very powerful, um, but there are actually small businesses here too. Um, and just making sure everyone remains anchored and sees small businesses slightly different, you know, that they're the ones who create local jobs, they're the ones who disproportionately employ those furthest from work. So there is an inherent moral good in making sure small businesses prosper.
SPEAKER_03Craig, that's a good note to end on. Thank you very much for joining us. Thank you. And finally, Shibana Mahmood now stands an 85% chance of being named as the next chancellor of the Exchequer. That's according to Polymarket. She is a known quantity in the Home Office, uh, where she has a pretty hard line on immigration, which has drawn praise, particularly from those on the centre right. I know that Michael Gove is a particular fan. An even bigger fan of the likely next chancellor is sitting next to us, however. That is uh Sam Norman. Sam is our senior city reporter who has had an alarming attachment to Shabanaman these last few months. Sam, what do you make of Andy Burnham's likely next pick?
SPEAKER_04I'm so surprised. I think it was it's really come out of left field. I mean, the s some of the logic behind it does make sense. I think if you're wanting an effective communicator, if you're wanting a presence that can stand up to backbenches, I mean she's proved like a convincing Iron Chancellor. Exactly. Well, but this is what we've been saying all morning. All morning, as well. Rachel Reeves has been um positioning herself as this Iron Chancellor figure. Never really kind of fell flat with all the U-turns. Shabana Mahmood could potentially be this sort of figure.
SPEAKER_02Do you think she might actually tell the train drivers no more? Or the nurses no more. Gleefully.
SPEAKER_04It's so hard to like s shift shift the golf post and put put putting her in the treasury now because we've just associated with like the home office and the MOJ for so long. But I don't know, I mean, the conversations I've been having this morning, I think on the first hand, people are more excited about it not being Ed Millerband, but I think they have a big um level of respect for her. So I was speaking with a banker this morning and I asked him his view if this is the way it's looking. He told me he'd very much welcome it. He described Shabana Mahmood as one of the more sensible ones and said, of course, the one we wouldn't like is that raging lefty energy secretary. Exactly. So I mean that is a more colourful way of describing many of the conversations I've been having um this week, really, in terms of what people are considering for number 11.
SPEAKER_03I think it's potentially quite a clever pick because it it both placates the left and the right. It placates the right because you're not putting Ed Miliband in, which is self-explanatory. It also, I think, in a sideways way, sort of placates the left because you take Shabana Mahmood out of the home office. I think many would argue that's not the right thing to do. That actually she is she is actually quite a good defensive flank for the Labour Party to see off reform. They now need to be quite careful about who they put in.
SPEAKER_04Well, this is the thing now. That's an even bigger question. Who do they bring in? Yeah. Yeah.
SPEAKER_03Well, like, do you bring back Cooper? Do you put in West Streeting? It's an option.
SPEAKER_04Then there's now, I mean, there's always rumours about Edmund's going to the foreign office, which doesn't matter.
SPEAKER_03That was actually that was my prediction about a month ago.
SPEAKER_04I I've had to rewrite my cabinet prediction this morning because it's just all gone out the window.
SPEAKER_02Yeah, it's gonna be a fun weekend of that. Ian King was on the radio yesterday and said that this the people he'd been speaking to in the city, their preferred pick would be Pat McFadden of all phones.
SPEAKER_03Well, yeah, he's always but he's always been sort of there in the background for if uh Starmer needs to replace Rachel Reeves. I think he would be a good pick. He was, I think, a treasury minister under Gordon Brown in a in a more junior way. So he has experience. One thing I would say that is a drawback for Shabana Mahmood is that she was a barrister beforehand and came into parliament when she was 29. So she would be another person who comes into number 11 without a huge amount of frontline economic experience, which obviously Rachel Reeds came under fire for very soon after coming into number 11. I think a lot of that was quite probably quite misogynistic as well, because I I don't think she's got much less economic experience than other people. But we do you think we have a bit of a problem there, Sam, where we have actually not very specialist chancellors coming in?
SPEAKER_04I mean, I think it's it's a wider problem just in in general with our our governing departments, just the way our governments are set up. It's quite hard to get experts into these roles because the experts don't want to be MPs. Like you're not going to get a business secretary who's a really or very rarely who has run multiple successful business people in is like a bit of a business big week because they do not want to become MPs.
SPEAKER_02Andy Street was the closest we got. He was just a Metro, not just a Metro Metro.
SPEAKER_04He wasn't prime minister back where I'm from. He was he was a big deal. There is a bit of like weekend backlash to the Shimana Mahmood thing, and it does seem like it might be nailed on now. I I I do think I wouldn't be surprised to see Pat McFadden be refloated in there again. Uh it does seem like that that's the direction of travel with uh Shiman Mahmood, but there's not really been that backlash so far, so it feels like the markets are happy with it, so I think that does seem locked in now. But Pat McFadden, I think, was sort of seen as the the steady hand candidate. I remember um I interviewed him earlier this year when the messages came out around um uh every conversation I have is who can be taxed in order to pay benefits. And he's even just challenging him. Oh, in the in the Mandelson um, and even just um challenging him on that, he's a very calm, composed figure, and I think that's the sort of person you want leading the treasury. I would just count that with Shabana Mahmood. She's very poised, but I wouldn't put it as as far as the calm. I think she's gonna be quite ready to go on the offensive.
SPEAKER_03I would say though, in in her defence, she was one of those people who was at the very core of the Starmerie Labour renewal project, and in many cases, she was the person on Starm's behalf having extremely difficult conversations as at the head of the NEC. And I do think that if one of the big critiques of the Starmer government was there was a lack of political courage, she might rectify that. But as you alluded to earlier, the same political gravity from the Labour Party still applies and the same fiscal gravity applies, she's got very difficult decisions to make.
SPEAKER_04The thing is, a lot of the criticism in, I guess, more Westminster circles were of McSweeneyism of it all, and it's no secret Shamana Mahmoud is probably one of like the darlings of the Morgan Morgan McSweeney wing.
SPEAKER_03Oh, she was probably on his short list to be like the Starmer candidate six years ago.
SPEAKER_04Absolutely. But um, does that transfer wider across the country? Would the average voter be like, oh, Shimana Mahmood's far too connected to Morgan McSweeney? I don't think.
SPEAKER_03Unless you're reading books about it, and then that no.
SPEAKER_04So she she might, in terms of association with Starmer, I think she might be able to skirt out of that one because she won't have the taintes but that might maybe like a Reeves figure might have. Okay.
SPEAKER_02Cautious optimism. My my my pick for Chancellor is Sam Norman. Sam, you gotta go. You better go and uh throw your hat in the ring because this is all we've got time for. But uh we look forward to seeing it.
SPEAKER_04I I would give me give me 20 days. That's all I need.
SPEAKER_02Sam, thank you very much. Thank you very much, guys. Cheers. Well, that's all we have time for today. Thank you for listening to and watching Business as Usual.
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SPEAKER_02And don't forget to vote for your favourite hospitality businesses in the square mile for those toast awards. We'll be back in your podcast feeds next week on Tuesday at 6 a.m. But for now, bye bye. Goodbye and good luck, Spain.