Revolut CEO Nik Storonsky sued over superyacht, Apple sues the Home Office & OAPs boost the FTSE

This is a City AM Studios production.

Hello and welcome back to Business as Usual with me, Martin Kimber.

And me, Matt Kenyon. Coming up on the podcast today, Revolut boss Nik Storonsky is sued by a luxury yacht broker for €17.5 million.

BP blames government policy in part for ditching its North Sea oil field. Can Andy Burnham reverse Aberdeen's oil workers' fortunes? And drill, baby, drill.

Plus, Apple launches a major legal challenge against the Home Office. So it may be August, but the corporate stories are coming in thick and fast. So thank God that joining us to make sense of all of it is our capital markets connoisseur, Simon Hunt.

Good morning.

Welcome back, Simon. Simon, let's kick off with this Nick Storonsky news. Why is a yacht broker taking him to court?

So a while back, Storonsky, the founder of Revolut, bought a massive €350 million superyacht. I had a look at some of the photos earlier and it's absolutely gorgeous.

It's decadent.

It is a 102-meter superyacht called Nixie, and it features a glass-bottomed infinity pool. But he was approached by this yacht dealer who set him up with this guy who was offloading this yacht. And it transpires that, at least according to Cecil Wright, I think his name is, the guy who's the dealer behind the yacht, Storonsky then bypassed him and went straight to the yacht owner in order to swerve the commission fee that he'd have to pay if he went through the broker.

That's a very challenge-a-bank approach to a financial problem.

Yeah.

So it's sort of like when you get a cleaner via a cleaning service and then you say, I'll actually—

I should have your WhatsApp.

Yeah, yeah, yeah. Not that I've done that.

No, I suppose. I mean, I mean, that €17.5 million sounds like a lot. The €350 million price for the yacht sounds like a lot. But I suppose even a week ago we had analysts talking up Revolut as a potential trillion-dollar company at some point. Yeah. I mean, it's a drop in the ocean.

It is. It is a drop in the ocean. Very good nautical pun there. But I mean, I mean, I'm obviously not going to come to his defense because he might end up in court over this now. But if someone was selling you something and you had to pay $17 million commission fee, you might think, hmm, is there a way I can get around that?

We've been reporting a lot, particularly on our Morning Live blogs, on the wildly fluctuating oil prices of late and some of the surges they've been coming to. What has this meant for BP's profit margins?

Well, perhaps unsurprisingly, They are up.

They are through the roof. You know, energy companies have been one of the rare beneficiaries of of the sort of turmoil in Iran because shorter supplies means the price goes up, means they can charge more, means they put more dollar in the bank. So their profit is for the first half this year has pretty much doubled. But it's less of a good story for the UK because BP has said. They intend to offload their North Sea assets. The chief executive, Meg O'Neill, was interviewed by CNBC earlier, and she said, when we look, when we look at how it fits into our portfolio, it just doesn't compete for capital. So as far as she is concerned, as soon as BP can get rid of their UK assets, the better.

That's slightly unnerving because the North Sea and North Sea drilling is becoming a bit of a hot-button issue. It's being looked at as one of the ways of alleviating our incredibly high energy prices, particularly for companies. Who would they offload this to? Why does it not seem like a good deal for BP?

Well, don't forget the costs and the sort of taxes involved for drilling in the UK are much higher than it would be, you know, in, say, the Middle East or in other places like that. So just the margins involved are much thinner. And so if you're BP and you're making massive profit at the moment, you just You're not that worried about the smaller parts of your portfolio that just aren't generating the same level of income as the bigger ones.

The BP chief executive also said that it's a matter of consistency, right? They want to know what the tax situation is going to be for the foreseeable 5, 10 years. And yeah, and they just don't know.

And also, it's exhausting, the whole sort of back and forth we've seen over the past few months about North Sea oil licences. Will there be a ban on any more drilling forever? Will some new licences be granted? Will all of them be granted? And these are, you know, it is true to say that we do have resources in the North Sea, but they are relatively small compared to places in the Middle East, compared to the US and Canada. And so is it really worth the effort of having to put up with all of these squabbles, with all this uncertainty, if you're an oil major like BP?

Just finally, Simon, why are companies whose customers are mostly retired booming right now?

Yeah, so I've put together what I'm calling the OAP ETF. A collection of ten London listed stocks, and they have both outperformed the FTSE and the NASDAQ so far this year. So my OAP ETF is up 18% year to date.

Congratulations!

Whereas the NASDAQ, sorry, I didn't actually invest in it, but the NASDAQ is up 13%.

It's all the brain work.

And the FTSE 350 is up 9%. So I've got stocks in there like Saga, who do the you know old people cruises, like Smith and Nephew, who do what's called orthopedic reconstruction. In other words, hip and knee replacements.

Smith and Nephew is a brilliant name for a Victorian company.

Yes, yeah, very much so. Yeah, it almost sounds like it's a detective duo or something, doesn't it? But also got obviously the big pension and annuities firms in there like L&G, Aviva, and healthcare firms, Primary Health Properties and Target Healthcare, that do care homes. So if you bet on old people, you seem to be doing pretty well for yourself. I spoke to Russ Mould, Friend of CCM.

Great man.

And he said part of this is investor sentiment has soured a little bit on tech stocks the last few weeks. There's been concern about is there a bit of a bubble? Are they a bit overvalued? And in times of uncertainty like this, you can rely on the dependent old people because their spending is fairly consistent. They generally are wealthier. They have quite a lot of money.

And because their income is obviously coming almost like in a lot of cases exclusively from welfare benefits paid out of taxpayers' contributions.

Yeah. So, yeah. So, you know, it's well known that the boomer generation has been one of the most economically successful. So it perhaps shouldn't be a huge surprise that boomer-orientated stocks are also doing pretty well.

Simon Hunt, thank you very much for joining us. Well, it's a day that ends in a Y, which means it's time for more budget speculation. One sector which will be closely watching this year's Autumn Statement is the banking industry, an area that has so far avoided higher fees with some rare successful lobbying of the Treasury and the former Chancellor Rachel Reeves. Joining us to discuss where the new Chancellor, John Healey, might get the billions from to fund all of Andy Burnham's commitments is Evelyn Gomez-Lichty, multi-asset strategist at the Japanese bank Mizuho. Welcome to the studio.

Thank you. Thank you for having me.

Who do you think the winners and losers are going to be of this budget?

So in terms of winners and losers, I think Burnham has been very clear he wants to be much more active than Starmer, and he has already announced some of— some cost of living measures. And I wouldn't discard any sort of other measures to try to help the households with the ongoing energy price shock. But yeah, I, I don't think that we're going to get any sort of major change. And as I said, the budget is already very constrained. Headroom has probably decreased quite a lot from what I've seen, just the move on gilt yields and the borrowing figures year to date, which, I mean, they are not too off compared to the OBR forecast, but they still point to a decrease in headroom. I estimate it from the 23.6 that we had in March towards something closer to 10 potentially.

So.

I think the plan for him will be to reiterate fiscal rules and, on the other hand, stress again his long-term investment commitment. So in terms of the stability rule— and sorry, this answer is becoming a little bit too long—

No, no, no.

I think probably the winners would be more on the investment side of the mandate. Perhaps we get some sort of talk about all these housing reforms that he wants to do and how he wants to put it into the, you know, the more investment plans, capital spending. Perhaps we get some increase in defense spending, especially given the war and the conflict that we're seeing in the Middle East. But that probably is going to be most of it going to the capital spending part of the mandate. So investment should be the big winner. And I think maybe the cost of living, because it needs perhaps broader reforms, it may be a bit more conservative than what people may be expecting, or that's at least my view.

I think it's definitely true that this budget, partly because it's so early on in his tenure, will only be a few months in, probably, as you say, will be more conservative. But also, you alluded to his having a more maximalist agenda. Do you think that he's potentially just kicking quite a lot of bigger government spending down the line into, say, next year when we might see even more constraints on the public purse?

One of the things I'm worried about is Burnham is coming into a mandate where he only has around 2 years and a half left until the next elections. So I think it's difficult to encapsulate all these plans that are very long-term reforms in very little time. And this is just the nature of how these reforms are. Investment takes time, changes in the, in the country, in parts of the infrastructure of the country, and especially these changes in, in direction that he wants to deliver in a positive way, like, for example, building all his council housing plans, which I think could be a good thing. But that takes time and that needs a longer horizon in mind. So going back to the can-kicking comment, I think autumn is certainly too early to deliver something like that. Obviously, all this speculation has been slashed right now, but I wouldn't be surprised if we get some sort of early election or snap election next year if the polls remain in a good position for the Labour Party. And from what I've seen this week, actually, they have had some good polling and they've been able to poll almost above Reform.

Yeah, possibly even above Reform in a couple of polls. Yeah.

So that would secure him more time if he's able to call an early election next year and secure another 5-year mandate. That would give him probably more time.

You're absolutely right about, you know, turning around an economy is like turning around an oil tanker. Right. You know, it doesn't happen very quickly. And yet we have this electorate that seems to be craving instant change and immediate change. And I think that's probably where reformers are seeing their positive numbers from. Just finally, Rachel Reeves's Autumn Statement last year was, was kind of outdated by the time we hit sort of February, March because the war in Iran kicked off and that ate into her fiscal headroom. We've just seen the US intervene in Japan on the yen and there's a little bit of a debt crisis starting to build over there, which can have ripple effects across the world economy. Is there a risk that this budget coming in October will be quite quickly out of date if Britain continues to be buffeted by these external factors?

Yes, that's a big risk. And in fact, I think if you go to any trading floor today, you will see that oil, oil, oil is the most important thing. It's true we had this yen intervention story and that has given us a lot of opportunities to talk about our strength, which is the yen and the Japanese market, which is great for us. But it goes to show that the UK autumn budget is within a global context where there's a lot of uncertainty. And this is not only relevant for Burnham and the new government, but also for, for the Bank of England, for example, and whether they want to hike or hold, given that we really don't know what's going to happen. So Can the autumn budget be outdated very quickly if the current conditions remain? Yes, for sure. If we get some sort of resolution in the Middle East, then I think that would be a longer-lasting story.

Evelyn Gomez, Lichte Multi-Asset Strategist at Mizuho Bank, thank you very much for joining us.

And finally, Apple is going after the Home Office with a new legal challenge. This follows government efforts to force the tech giant to hand over encrypted encrypted user data. So the British state wants a backdoor into the contents of iCloud accounts, which would obviously have quite major implications for user privacy. Our professional services editor Maria Ward-Brennan is all across this. What's going on here?

Yes, there's another sort of diplomatic row about to kick off between Washington and London. So this is the second filing of this. Apple initially went to the courts, to the tribunal, last year when it first came out that the government the Home Office wanted to sort of seek under the— it's called the Snooper Charter.

Mm-hmm.

And obviously Apple's very firmly against this, wanted to seek legal action against it. But because of the diplomatic relations getting involved, London quietly went a bit quiet on it. And even though it was supposed to be in a tribunal earlier this year, never went ahead. But then lo and behold, here we go again. And they issued Apple with a second notice. And obviously Apple being Apple has issued another legal filing to the special tribunal that focuses on this. So we can imagine that obviously either diplomatic relations will get back involved or it actually might go to the tribunal this time round.

Apple have said that they've never built a skeleton key for any of their systems and they never will. If through some inexplicable way the Home Office were to get their way and to kind of force them, that they would presumably have to comply or what would happen then?

I feel like they will fight this to the Apple is— that's their whole bread and butter, is protective, encrypted data that no one can break. And as we spoke about earlier, there was a case in the US where the FBI was involved, and there's been some horrific cases along the way where people have gone missing and there's murder charges. And yet they will not break their data protection for those because, again, once you break one, you break it all for everything. And then it defeats the purpose of what they have to offer of a really encrypted sort of protection against— for their users. That's their bread and butter.

I suppose if we take this to its logical conclusion, and I suppose the main example of when Apple was forced to comply with a kind of European regulation was when they had to switch all of their iPhone chargers to USB a few years ago to comply with EU rules.

Yes.

This feels, as you've alluded to, more philosophical, more fundamental. Let's say if you were to put— looking into the crystal ball of this, and let's say they lose this legal challenge and a British court says, You have to hand over the data. What do you think the sort of extreme scenarios are? Could we just see an instance where Apple just pulls out of the UK? Is that how far it could go?

I do think that because already you have to keep in mind, because of the initial instance of this case back last year, they already suspended and disabled their advantage data protection in the UK. So they've already made moves and threatened the UK going, right, well, if you want to play ball, we can pull out. And given the fact that the UK market is obviously a very important market to them, it's not enough to jeopardize their entire branding around the world and make it open to One case, you can easily pull out one market and make it a signal to the fact that you know the backlash alone from the public will be enough that the government would have to maybe do a U-turn.

You could expect that's true because if I suppose if they make the precedent here, many other governments, particularly in Europe, but also I mean all over the world, could could demand the same thing. And suddenly they've broken that precedent and anything could happen.

It's game over. And it's again, it's their branding. It's their entire bread and butter. And once because that that's been the thing again, if they can turn around to the FBI and say, "Listen, I'm sorry about that missing person." That And once we break this key here and give it over, you could find that person because of tracking. But they can turn around and say, sorry, we can't get involved in that. It kind of shows you where they draw the line on this matter.

Just finally, it's also interesting how much more muscular the White House has become on backing its tech stocks to the absolute hilt. So that example with the FBI, I can't remember if that was a Democratic or a Republican White House.

That was a bit a while ago. But you need to keep in mind Tim Cook. I know he's sort of stepping down, but he has been sort of in the ear of Donald Trump for such a long time. So, you know, you can imagine that they've sort of obviously tipped away of putting London back into their place, if you may.

Well, we shall be watching the outcome of this with great interest, if only because I don't want to have to give back my iPhone. I don't want Apple to pull out.

No, I'm an Apple ecosystem through and through.

They have locked me in.

Loser.

Yes.

Oh, sorry, just Android.

Yeah, I'm cool. Well, Maria, thank you very much. Thank you.

Well, that's just about all we have time for today. Thank you very much for listening to or watching Business as usual.

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Goodbye.