Shaping Tomorrow: Economic Tactics and Tech Trends

This episode investigates how current economic policies, trade tariffs, and technological advancements are shaping the future of supply chains. It examines the Chancellor's speech on economic stability and the challenges from rising costs, declining business optimism, and the emergence of AI technologies, while discussing their implications for industries worldwide. 
• Analyzing the Chancellor’s speech on economic stability and growth plans 
• AI's transformative role in optimizing supply chains and enhancing sustainability 
• Discussions on Trump’s tariffs and their substantial impact on trade relations 
• Retail sector struggles and regulatory challenges affecting businesses 
• The emergence of data centers and the complexities of energy consumption 
• Boeing and Shell’s recent financial woes as indicators of market trends 
• Concerns about labor market data reliability and its implications for future forecasts

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Chapters

• 0:06 Diverse Topics in Current Affairs
• 18:16 Government Reforms and Infrastructure Investment

Transcript

Tony Hines: 0:06

Hello, tony Hines. Here You're listening to the Chain Reaction Podcast. All about supply chain advantage. Great episode coming your way in just a few moments.

Tony Hines: 0:14

Lots of things happening in the news this week. In the news this week the Chancellor's plans in the United Kingdom. She highlighted three key pillars Economic stability, increased investment and crucial reforms. Long-standing retailers trying to sell up, costs going too high and the failure of some of those regulators. And, of course, trump's proposed tariff on Colombia, which very quickly got a change of mind. Some of the other stories coming up this week.

Tony Hines: 0:55

The World Economic Forum highlights how artificial intelligence and generative AI are revolutionising supply chains by optimising logistics, enhancing safety and boosting sustainability. The Global Risk Report 2025 by the World Economic Forum identifies state-based armed conflict, disinformation and environmental issues as the top risk for supply chains in 2025. These risks pose significant challenges to global stability and supply chain resilience. Forbes discusses the challenges and opportunities for supply chain executives in 2025, emphasising the need to balance mitigating risk and minimising cost, while focusing on sustainability and operational resilience. Rising geopolitical tensions, such as conflicts between Russia and Ukraine and China and Taiwan, are prompting companies to diversify their supply chain base and adopting strategies like reshoring to mitigate risk. Companies are increasingly investing in technologies that facilitate sustainable practices throughout their supply chains, from ethical sourcing to reducing carbon footprints, to meet environmental, social and governance goals.

Tony Hines: 2:16

Now I mentioned a few weeks ago that stagflation was a possibility, and I noticed this week many other people are coming around to the same conclusion the UK could face a period of stagflation. Economists have warned this is a period where prices are rising but growth and employment remain stagnant. The Standard Poor's Global Flash UK Composite Purchasing Managers Index, pmi, reported a reading of 50.9 for this month, compared with December's figure of 50.4, and this indicates a slight expansion of private sector output cuts. And this could really come home to roost as April approaches, when the new taxes for employment in the form of national insurance in the UK come into force, and that will be an acid test moment. Business are cutting jobs at the highest rate since 2008-9, and rising costs are fuelling inflation since the tax rise. As announced in the recent budget, this will put pressure on the Bank of England, ahead of its interest rate decision, to keep rates where they are. But growth doesn't look near at present, and that's the government's main aim to achieve growth.

Tony Hines: 3:40

Business optimism is probably at an all-time low presently and many think that the punitive taxes applied to inheritance, tax on family farms and some of the mean things that the government did when they came in, like cut the pensioner allowances on winter fuel, are problematic, problematic. Wh Smith, a long-standing centuries-old retailer in the United Kingdom, is in talks to sell its high street stores. It has about 200 post office branches in these stores and they're at risk too if this retailer sells. They said they're exploring opportunities for this profitable and cash-generative part of the group, and it includes a possible sale, adding that the High Street stores only account for about 15% of its annual trading profit. Over the past decade it's focused its attention on travel retail businesses based in airports, train stations and hospitals, and that's a growing proportion of its business. This does ask questions of the current government's approach to ignore the many retailers who are finding it difficult with the raise in the national insurance contribution from 13.8% to 15% coming in April and the 6.7% raise in the minimum wage, because a lot of casual workers are employed in retail and hospitality, of course, and they're sectors that are suffering badly. It's also hit by the failure of rate reform, too, on retail properties, because that causes a massive cost to many retail organisations on high streets and they've been going on for some time. How unfair that is against the online businesses who pay no contribution whatsoever.

Tony Hines: 5:43

It struck me this week that the United Kingdom is probably going to have to have a continued war against regulators in the UK who are failing to do their job. If you look at energy markets, they don't work properly. They're inefficient. If you look at the water authorities, they're not working properly. We've got polluted rivers, we've got underinvestment and we've got underinvestment and we've got water authorities claiming they're going to give higher dividends and they're going to charge customers in some cases nearly 50% more over the next five or six years. Well, it's outrageous. To make customers pay for inefficiency is just wrong. I doubt the UK economy will grow if it fails to address the failure of organisations that are supposed to control prices in energy markets, water and elsewhere. Surely the government will not stand by and allow these failures to exist and the costs to rise. If they do, you can say bye-bye to growth.

Tony Hines: 6:53

I read an article this week by Ian Birrell in the iNewspaper and it said that science is shamed by COVID blindness. The CIA joins growing support for the China lab leak theory. He quotes Confucius, the Chinese philosopher, there are some things you just can't hide the sun, the moon and the truth. And he blames the cover-up and many people not wanting to point a finger, many people not wanting to point a finger. But since then it turns out that various authorities haven't really cooperated to get to the source of the problem and the COVID SARS virus, which might have emerged in a lap. We still don't know.

Tony Hines: 7:43

Well, this week, donald Trump's presidency started deporting foreign nationals, and the big news story of the week was the deportation of people back to Colombia. At the start of the week, the Colombian president said he wouldn't allow two American military planes to land with deportees on board. American military planes to land with deportees on board. A day later, well, guess what? Trump decided to hit him with tariffs of 50%. And what happened next? Well, the planes were allowed to land.

Tony Hines: 8:20

Well, the continuing growth of AI and its possible contributions to society is leading the drive for more space for big data centers, and it was announced by the UK government this week that they want to have data centers in the UK too. And that's probably right. They probably need them. But these data centers are large sites, take up a lot of land and they consume a lot of energy, so they're not really green in the sense of green and clean energy driving the data centers. This is the physical side of artificial intelligence and the cost side, and those costs are going to be big. At the start of 2025, there are approximately 8,441 data centres across the globe. The United States leads the way with the most data centres it has around 5,383. And that's followed by Germany with 522 and the United Kingdom with 512.

Tony Hines: 9:22

Data centres come in various sizes, depending on their purpose and capacity. Small data centres might be just 10 to 100 square feet, mid-sized data centres 1,000 to 5,000 square feet, and large data centres 10,000 to 50,000 square feet, and then the hyperscale data centres are 50,000 to 500,000 square feet or more. The number of people employed at a data center varies based on size and its complexity. On average, a mid-sized data center might employ about 50 to 100 people, while a larger facility can employ several hundred staff. Data centers are known for their high energy consumption due to the need to power and cool thousands of servers. Average power consumption is around 1.5 to 2 watts per square foot. Hyperscale data centers can consume over a thousand megawatts of peak power, and that's equivalent to the electricity usage of a small city. Energy costs vary significantly based on location and energy prices, but it's not uncommon for a large data center to spend millions of dollars annually on electricity. So there you have it.

Tony Hines: 10:40

Weaker oil prices has meant that Shell is expected to post lower annual profits. Analysts forecast that it will post earnings of about £24.1 billion for the year, which is down from £28.3 billion in 2023. It comes in a year in which oil prices have been fairly steady and demand for oil has fallen, partly as a result of growing popularity of electric vehicles around the globe and the falling margins on lower prices. The Office for National Statistics in the United Kingdom said net migration is forecast to increase by 2032 to 62 million, and this has the following implications. It's an increase of 4.9 million, exactly 7.3% on the 2022 figure, from 67.6 million in mid-2022 to 72.5 million in 2032, and it's primarily driven by net migration, with an estimated 340,000 net migrants per year from mid-28 onwards.

Tony Hines: 11:52

The forecast indicates that the number of births and deaths will almost be identical about 6.8 million births and 6.8 million deaths. However, deaths are projected to rise due to the large number of people born in the post-World War II period reaching older ages, economic and social implications. The population growth will have significant impacts on various sectors, including healthcare, education, housing and pensions. Planning for these changes is essential to ensure that services and infrastructure can accommodate the growing population. There are regional differences that have been noted. England's population projections show that 7.8%, compared to 5.9% for Wales, 4.4% for Scotland and 2.1% for Northern Ireland, while England is 7.8%. The forecast helps policymakers and planners make informed decisions, but you have to say the best thing would be to reduce that figure of net migration, to lower it.

Tony Hines: 12:54

Resources can't get spread thinly continuously, and that's why the general public is so concerned. Well, this week the tech world witnessed a seismic shift with the emergence of DeepSeek, a Chinese AI startup. It was founded by Liang Wenfeng in 2023, and DeepSeek has developed advanced AI models DeepSeek V3 and R1, which have sent shockwaves through the global market. The disruption caused by these models has significant implications for US tech companies and global markets. Deepseek's AI models are built using fewer and less advanced computer chips, making them highly cost-efficient compared to their American counterparts. The V3 model, in particular, has demonstrated advanced reasoning skills and robust performance, rivaling models like OpenAI GPT-4, at a fraction of the cost.

Tony Hines: 13:54

The announcement of DeepSeq's AI models had an immediate and profound effect on global markets. Ai models had an immediate and profound effect on global markets. Nvidia's stock price dropped by 16.86% to $118.57. This led to a market value loss of $589 billion, the largest one-day loss in US stock market history. The tech-heavy Nasdaq index dropped by 3.08%, reflecting investor concerns about the future competitiveness of US tech companies, and the Standard Poor's 500 declined, signalling a wider impact on the market.

Tony Hines: 14:30

Deepsig's cost-effective AI models have raised concerns among US tech giants like NVIDIA, microsoft, meta and Google's parent Alphabet. The sudden drop in their stock prices has led to a revaluation of strategies and increased pressure to innovate efficiently. The dominance of the US AI is now being challenged, highlighting the need for more competitive approaches. Us President Donald Trump described DeepSeek's emergence as a wake-up call for US AI firms. In response, discussions about potential trade tariffs on foreign-produced semiconductors have gained traction, aiming to protect US interests and stimulate domestic innovation. The rise of DeepSeek underscores the evolving landscape of the AI industry. As cost-effective and advanced models enter the market, the traditional power dynamics are being reshaped. For American tech companies, this disruption serves as a catalyst for innovation, pushing them to explore new avenues and efficiencies. Deepseek's impact is a reminder of the ever-changing nature of technology and the importance of adaptability. The AI race will continue and the world will be watching how US tech giants respond to the new challenges they face.

Tony Hines: 15:54

Stability, investment and reform were the three key messages in the Chancellor's speech in Oxford this week. And this speech is an attempt to overcome the recent criticisms made of the Chancellor for putting up national insurance tax and minimum wage, placing substantial cost on business. And it seems to be an attempt to try and reclaim the narrative for growth and saying it's all about growth and these are the three pillars. But one could be forgiven for interpreting a lot of this as what we mainly already know about projects in train. They're just pulled together into this speech to try and make it sound like there's a plan for growth. Is it a plan for growth? Well, yes, it could be, but critics might say it's more rhetoric than substance.

Tony Hines: 16:47

Let's take a look at some of the key statements in the speech made by the UK Chancellor of the Exchequer and see if we can unravel exactly what the plan is. Well, the government aims to deliver economic stability, to foster growth and keep taxes, inflation and mortgages low. But taxes are at their highest, inflation isn't yet under control and mortgages are still relatively high. There's no time scale for this, so we don't know when this is likely to happen. There's also a commitment in the stability statement that says not to increase national insurance, income tax or VAT, but of course we know national insurance has already gone up for employers, but not working people. According to the rhetoric, the government has emphasised the independence of the Bank of England and the office for budget responsibility, and so that's part of their claim their keeping to fiscal rules and specific costs and timeframes, as I've said, for achieving any of these goals. Not detailed, so not really a plan, is it? If you haven't got the costs and details to hand, it's an aim. On investment, the plan includes a new national wealth fund to stimulate private sector investment in growing industries. A task force has provided recommendations on the fund and the next steps will be announced shortly the specific amount invested and expected returns, and the time frame for funds implementation not provided.

Tony Hines: 18:16

And with regard to reform, the government will undertake significant reforms, especially in the planning system. So to cut to reform. The government will undertake significant reforms, especially in the planning system. So to cut red tape. This could very well be a speech from a previous prime minister called Margaret Thatcher. You might remember it was one of her aims to cut red tape.

Tony Hines: 18:34

This includes reforming the national planning policy framework, consulting on new growth focused approaches, restoring mandatory housing targets, removing the ban on new onshore wind projects, energy projects to be prioritised, a taskforce to accelerate stalled housing sites, support to local authorities with 300 additional planning officers sounds like more bureaucracy, doesn't it than less. A new approach to direct ministerial intervention in planning, local authorities expected to achieve universal coverage of local plans, prioritising brownfield and grey belt land for development and housing targets. And a review of green belt boundaries. The government aims to deliver 1.5 million homes. That is a target and it's been set. In the next five years, the Secretary of State for Transport and Energy Security and Net Zero will be asked to prioritise decisions on long unresolved infrastructure projects and the speech did note that reforms may have trade-offs but the government will make tough decisions to achieve the goals. Again, timescales in many of these cases not specified and costs and benefits not really highlighted in the speech. The speech did emphasise immediate action, a commitment to making tough choices, but the numbers aren't there to see exactly what's involved. It's not very transparent. The government does plan to present an assessment of the state of the UK's spending inheritance to Parliament before the summer recess. Well, that's the history, but we really want to know what the plan for the future is. So is this an assurance of growth? No, it's a commitment and a name for growth, but the policies might fall short of the rhetoric might fall short of the rhetoric.

Tony Hines: 20:23

Let's take a look at some of the big announcements made in the speech. The Oxford-Cambridge Growth Corridor the project expected to cost about £78 billion by 2035. So that's a 10-year plan. The benefits the corridor aims to boost the economy in the UK by creating a high-tech megacity, improving transport links and fostering innovation in life sciences and manufacturing and AI. It's expected to generate significant economic growth and job opportunities. It's interesting that they've put the Oxford-Cambridge growth corridor in place. Manchester, of course, is a big centre for the digital economy and they did make some mention of Manchester, but I'm not sure exactly what kind of money Manchester's going to get.

Tony Hines: 21:11

The second thing was the Heathrow expansion. This has been on the cards for some considerable time and many think it's problematic. That's mainly because a motorway has to be rerouted to make the third runway and that's going to be significant cost. The expansion of Heathrow Airport, including a third runway, is estimated to cost 19 million pounds, and the benefits? The expansion project is expected to create 14,000 new jobs and generate 1 billion pounds of economic benefits annually. A bit vague, isn't it really? We don't know what those benefits are and who's going to get them. It will also increase capacity, improve connectivity and support business growth.

Tony Hines: 21:51

According to the speech by the Chancellor, there'll be many that are going to be very unhappy about that expansion. The London Mayor, sadiq Khan, is opposed to a third runway at Heathrow and it will cause more air pollution in the City of London. And although there are claims that planes in the future will be greener, that's really an ambition and there's no proof that that will actually be the case. Electric planes in service on long-haul routes are probably many years away, so the benefits are not going to come from that. It's likely that the extra carbon will be greater, although people say that planes circling around London to land at Heathrow could land sooner if there was a third runway, reducing carbon emissions. But it's a bit spurious, isn't it? The whole thing? It's uh, it may be, it's not, it will be.

Tony Hines: 22:47

What about regulatory reform? We've touched on it a little bit. The costs of regulatory reform depend on the specific changes being made, but they can streamline processes, reduce red tape, a more business-friendly environment. But, as I say, a lot of rhetoric but not necessarily a lot of detail. The infrastructure investment includes £7.9 billion worth of investment in reservoirs and a new railway station in Thamesford, and also reservoirs and rail services between Oxford, cambridge and Milton Keynes linking up the West Coast line to those cities in the growth corridor, the Oxford-Cambridge growth corridor planned by the government.

Tony Hines: 23:37

Well, it's a bit embarrassing that the investment of £450 million in a new vaccine manufacturing plant in Speak, liverpool, will not go ahead in a week that the government has talked about growth and investment in the UK economy. Apparently, astrazeneca has pulled out of that particular deal because the government funding has been significantly reduced compared to the last government's proposal. The new plant was intended to produce the next generation of flu vaccines and enhance the UK's pandemic preparedness. Despite the reversal, the existing facility in Speak will continue to operate and supply flu vaccines. But it's definitely a setback for the UK life sciences sector. The previous government had offered £90 million worth of funding to develop the site at Speke and the current government has offered just £40 million, so that's a reduction from 20% of the funding put in by government down to under 10% by the present government, and that's why AstraZeneca have put things on hold.

Tony Hines: 24:47

Boeing has reported significant financial losses 11.8 billion is the figure for the full year reported this week. It's the largest loss since 2020. It was primarily due to ongoing issues with its commercial and defence units and a crippling strike by the US factory workers. In the fourth quarter alone, boeing posted 3.8 billion losses, much higher than analysts' expectations. The company's revenue for the quarter was 15.2 billion, a significant decline on the previous year. The new CEO, kelly Orberg, has acknowledged that the company is on a multi-year journey to stabilise its operations and restore trust with customers and regulators.

Tony Hines: 25:39

We all know how much data are so important for us to understand our businesses, and it's the same for government, and I noticed that Sir Ian Diamond, the National Statistician and Chief Executive of the UK Statistics Authority, is to appear before the Treasury Committee next week to address concerns about the labour force survey. The ONS has faced significant challenges with declining response rates and the quality of data collection, which have impacted the reliability of labour market statistics. In a recent letter to the Treasury Committee, sarian outlined the ONS's efforts to improve the LFS, including increasing face-to-face interviews and enhancing data collection methods. However, the transition to the new transformed LFS has been delayed and there are ongoing concerns about the accuracy and timeliness of the data. So that should make an interesting discussion in the coming week.

Tony Hines: 26:37

Well, donald Trump's tariffs have come into effect against Canada, Mexico, and China on the 1st of February, and you can listen to my special episode discussing the impact of those trade policies right here on Chain Reaction. And don't forget to subscribe to Chain Reaction and be first to know when new episodes are out. I'm Tony Hines, I'm signing off and I'll see you next time in the Chain Reaction podcast. Bye, for now. You've been listening to the Chain Reaction Podcast, written, presented and produced by Tony Hines.