Good morning from the Financial Times.
Today is Monday, July 20th, and this is your FT News briefing.
Andy Burnham goes to Downing Street as tensions in the Middle East continue to ratchet higher.
Plus, Germany is pitching itself as a bedrock of stability.
What we've got our hands on here is a presentation that's been kind of secretly presented to investors that really makes the pitch why, as a foreign investor, you should choose Germany.
I'm Victoria Craig, and here's the news you need to start your day.
Number 10's newest resident moves in today, which means the UK will officially have a new prime minister.
Andy Burnham, who just weeks ago was mayor of Greater Manchester, will give his first speech to the nation this afternoon.
We're expecting to learn more about his immediate priorities and who will be joining his cabinet.
So to get a sense of what we can expect in the days and weeks ahead, I've called up Lucy Fisher, our Whitehall editor and Political Fix podcast host.
Hi, Lucy.
Hi, Victoria.
All right.
So one of the dominant themes in UK politics has been how the government navigates public spending.
Do we have a sense of what Burnham's plans are and who he's picking next?
To lead that charge as chancellor.
Well, Andy Burnham has been very much at pains to stress that he will stick to the fiscal rules that Rachel Reeves, the current outgoing potentially chancellor, set for this Labour administration.
They place quite heavy constraints on the government's finances.
And therefore, that has really fueled a lot of speculation that tax rises could be in order this autumn in Andy Burnham's first budget.
In terms of who he's going to pick for his chancellor, all the thinking is that it will be Shabana Mahmood, who is the current Home Secretary.
Now, she's shown herself to be bold and radical in the Home Affairs and Justice briefs that she's held since coming to government.
But with regards to the question of what are her economic leanings, it's very difficult to say.
Very little has been said by her in recent years on tax.
Spend growth policies.
And therefore, I think part of the reason Burnham is looking likely to plump for her is that she doesn't have a very set ideology and therefore will be something of a cipher for him to sort of fulfill his economic platform.
So economics is clearly a big focus.
What are the top priorities then for Burnham and his cabinet more widely in these crucial first 100 days?
Well, he's been left a bit of a bear trap by Keir Starmer in terms of a big spending uplift for the British military.
Starmer has just announced £15 billion extra for the UK's Ministry of Defence over the next four years, of which a third of it is completely unfunded.
So Burnham will need to find the money for that.
Beyond that, Burnham has made clear that he believes that the British public need to feel a little bit of help now regarding the cost of living squeeze.
So that would really speak to some kind of splashy retail policy potentially.
And in turn, I think, you know, what his overarching intention will be to really get the polls moving in his favour, to prove to his party that he can lead Labour to a better future, he can take on reform.
And win the next election.
Because don't forget, he is coming in from outside the Commons straight to Downing Street.
He's been the mayor of Greater Manchester for almost a decade.
There will be many people across Britain who aren't that familiar with him, even though he was a junior cabinet minister in the last new Labour government.
Domestic issues, then, obviously a huge priority for the new prime minister.
But, Lucy, do we have a sense of where he stands on his views about things like cooperation with the U.S. and its ongoing war with Iran or support for funding for Ukraine, any of these big foreign issues?
Well, it's certainly the case that international affairs, geopolitics has not been a longstanding focus of his.
As I mentioned, he was a regional mayor.
When it comes to the world stage...
A lot of his views aren't terribly well known, but he sought to reassure colleagues in the past two weeks by publishing an opinion editorial piece that said that he would view defence and national security as the first priority of his government.
He made clear that in terms of support for Ukraine, that would be very much a continuation of the current policy that Keir Starmer has upheld.
I think when it comes to the U.S., it's a bit unclear.
And a lot of people have been raising their eyebrows considering how he will deal with Donald Trump, who said that he's heard that he's extremely liberal.
I think because Andy Burnham is more at ease with his left-leaning credentials, there could be a bit more of a clash between Burnham and Trump.
But ultimately, the UK, like much of the rest of Europe,
Relies on the U.S. so heavily for its security umbrella that, you know, trying to track a middle course and get on as best as possible with the U.S. president is the lightliest course of action ahead here.
Lucy Fisher, our Political Fix podcast host and Whitehall editor.
Thanks so much for your time.
Thanks for having me.
Hostilities between the U.S. and Iran intensified over the weekend as the U.S. State Department warned Americans about, quote, the potential for unforeseen escalation in the region.
Tehran on Sunday launched attacks on U.S. allies across the Gulf after Washington conducted another night of strikes in response to the deaths of two of its soldiers in Jordan.
The U.S. said its forces hit Iranian military facilities as well as missile and drone storage sites.
While Tehran said a nuclear power plant under construction was also targeted.
The escalation comes as global oil prices have surged more than 20 percent so far this month, and as the industry warns oil stockpiles are reaching critically low levels.
That is because the breakdown of the ceasefire between the U.S. and Iran has again largely closed the vital Strait of Hormuz, where nearly a fifth of the world's oil supplies transited before the war.
Germany is the only G7 nation with a sterling AAA credit rating by the three major ratings agencies.
And that is a badge of honor the country's government is planning to use to woo international investment later this year to help reboot its struggling economy.
In October, the country will hold its first ever investment summit, and the FT has gotten a first look at how exactly Europe's biggest economy plans to pitch itself.
Aaron Kirchfeld, the FT's chief European business correspondent, has the scoop on this one.
Hi, Aaron.
Hi there.
So just walk us through this plan that the German officials are cooking up there.
So the new chancellor, Friedrich Merz, has been really focused on growth and turning around the German economy.
So what we've got our hands on here is the German equity story, a presentation that's been kind of secretly presented to investors, but we've seen for the first time
That really makes the pitch why, as a foreign investor, you should choose Germany.
Which they are calling Europe's bedrock of stability, to lure private capital to Berlin, to Germany, as they try to reboot the economy.
So this investment is one possible solution to the economic problems.
Just remind us of the economic challenges that Germany is facing at the moment.
Yeah, so Germany has had a pretty much stagnant economy since COVID.
Some people are even talking about a risk of the lost decade where the economy is just struggling to grow.
And that's because kind of the heart of Germany and the economy is its industrial companies, whether that's automotive, chemical makers, and they're really facing a multitude of headwinds.
That's Chinese competition.
High energy costs, Trump tariffs.
And so whereas that used to drive economic growth, Germany's really scrambling to find new areas, whether that's AI, software, med tech, et cetera.
And the problem is we're seeing a lot of those investments, especially in AI, centered in the U.S.,
Centered in China, or even France has done a better job of attracting data centers.
So I think what this is, is it's Meritz and Martin Blessing, who we appointed as the investment star, trying to really make the pitch about we can do tech here as well.
So come invest in Germany as we try to turn the economy around.
So are those some areas, tech, AI, where we could see some of these big investments after this conference?
I think Mertz and Blessing and the German government will definitely make that pitch.
We have seen some data center investments, but the truth is what's holding Germany back is the fact that it has high energy costs because it has phased out nuclear power and it was reliant on Russian gas until Putin invaded Ukraine.
And so what they need to do is they need to bring down energy costs and then approval times.
Any investor you speak to says, we like the German economy, but approval, bureaucracy, red tape, it makes things just move too slowly.
However, I think
Two areas that Germany has definitely identified as places where they need to invest tens if not hundreds of billions is really infrastructure, climate, and defense.
Given the developments we've seen in Ukraine,
With them needing to rearm in Europe.
That's really being led by Germany that's committed to spend something like 600 billion euros over the next several years to also satisfy the demands of US President Donald Trump for NATO members to spend more.
Are there other concerns from investors aside from those you just mentioned about the regulatory hurdles?
Because you spoke to a few for this story who have seen the plans, but maybe weren't totally persuaded by what they've seen so far.
Yeah, so I think generally investors have welcomed some of the recent steps in June and July.
Those were pension reforms, which will finally move Germany more towards a Swedish-style economy where you have to put some of your pension money into capital markets.
Germans are risk averse traditionally so that is a huge step that could bring tens of billions of dollars into capital markets
However i think the challenges remain
You know germany needs to become less reliant on china
And less reliant on exports.
And those are both areas that are quite challenged in the global economy.
So I think there are still some proof points that investors are waiting for to show that,
Yes, we see you are trying to take steps to reform, whether that's tax cuts, labor reforms, but are those enough to turn around the economy?
That's really the billion dollar question.
We'll see what happens in October.
Aaron Kirchfeld, the FT's chief European business correspondent.
Thanks so much for your time.
Thanks for having me.
Well, Aaron was talking there about splurging on data centers.
Speaking of which, we have an excellent story today about how Morgan Stanley has become Wall Street's chief architect for new financing models that funnel billions of dollars into the AI boom.
We will, of course, pop a link to that and all of the other stories in today's podcast in our show notes.
This has been your daily FT News briefing.
Check back tomorrow for the latest business news.
