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Quest Means Business
Boris Johnson Promises To Deliver Brexit Within A Hundred Days; Businesses Worry About Johnson's Brexit Strategy; U.S. Markets Trading Higher On Strong Earnings; Boris Johnson Wins Party Vote to Become Next Prime Minister of the U.K.; Iran Congratulates Boris Johnson on Becoming Prime Minister; South Korea Fires Warning Shots at Russian Jet. Aired 3-4p ET
Aired July 23, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: We are just 60 minutes on the close of business on Wall Street and the Dow is having an
extremely strong session flirting with record closing highs.
As you can see if there, the Dow is up at 27, 358. All the other markets are up similarly. We will analyze why there is that late rally. Those are
the markets, and these are the reasons why.
Boris Johnson promises to deliver Brexit within a hundred days. We have coverage from all angles. The IMF cuts growth forecasts and the fund's
chief economist tells us why and the reports of new trade talks to cause a mid-afternoon spike. That's why the Dow is up.
We're live from outside the Houses of Parliament on Tuesday, it is July the 23rd. I'm Richard and this is a special edition of QUEST MEANS BUSINESS.
Hello and good evening to you from Westminster and what an evening, what a day it has been. Tonight the campaigning is over. Boris Johnson is
promising to do what Theresa May said would try and failed -- deliver Brexit and unite the country.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Boris Johnson is elected as the leader of the Conservative and Unionist Party.
(END VIDEO CLIP)
QUEST: That's the announcement. That's when was told that he had won, and the man patting him on the shoulder that is Jeremy Hunt who was his rival.
Boris was elected Conservative Party leader by a two to one margin. It gives him a strong mandate, 66 percent of the vote amongst rank and file
Tories.
He will take over from Theresa May as Prime Minister or Wednesday after being invited to form a government in the name of the Queen.
Despite international uncertainty, Cabinet resignations in a razor thin Parliamentary majority, which we'll talk about that is significant. The
new leader says he has confidence and he looks forward to the tasks ahead.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, INCOMING BRITISH PRIME MINISTER: No incoming leader has ever faced such a daunting set of circumstances it said. Well, I look at
you this morning and I asked myself, "Do you look daunted? Do you feel daunted?" I didn't think. I don't think you were remotely daunted to me.
And I think that we know that we can do it, and that the people of this country are trusting in us to do it. And we know that we will do it.
(END VIDEO CLIP)
QUEST: As you'd expect, a mixed reaction tonight to his victory. The opposition Labour leader, Jeremy Corbyn has tweeted, "Johnson has won the
support of his party, but not the country." Now Corbyn has said he will table emotion of no confidence at what he describes as the appropriate
time.
Arlene Foster is the leader of the DUP, the Democratic Unionist Party. Remember, they are quite literally propping up the government with their
confidence and supply agreement. Her party support to win a majority. She said, "Congratulations and look forward to discussing our shared objectives
of strengthening the union delivering Brexit and restoring the revolution." She's extremely powerful. She has basically got the government and the
leader by definition exactly where she wants them.
And Theresa May, the outgoing Prime Minister said, "You have my full support from the backbenches." Which is somewhat rich bearing in mind that
she made him Foreign Secretary and then he probably resigned a few years later. Bianca is with me. What a mess?
BIANCA NOBILO, CNN CORRESPONDENT: Yes, what a mess. And I have new information to underpin the mess because I was just walking around in the
alleys of Westminster and I spoke to two different MPs. Both of them had been at the 22 meeting early with Boris. They said that there was a
thunderous applause for him when he arrived. That Boris spoke for 10 minutes and had 20 minutes of questions.
But the key point is one of them was a Brexiteer and he said Boris gave him a personal assurance that they wouldn't leave on the 31st of October no
matter what, including a no deal scenario.
So I said to him, but doesn't that mean that if Boris makes some kind of compromise with the European Union, which for you is worse than the no
deal, but is still an improvement on Theresa May's deal, what would you do then?
[15:05:08] NOBILO: And he said, "Oh, well, we wouldn't back him because we want a no deal." So, there we have the problem in black and white.
QUEST: Essentially nothing has changed.
NOBILO: No, nothing has changed. Apart from a sense of a delusional optimism that's existing right now.
QUEST: That's the key -- delusional optimism and the truculent ones. I was going to use the phrase that John Major described when he talked about
the people who were against him, but the truculent ones are no longer really on the right in the sense of the Brexiteers, they are going to be
the remainers?
NOBILO: They are going to be the remainers and to be honest, they have been already under Theresa May and she took a much more moderate and
compromising position when it came to negotiating the exit of Britain from the European Union.
There's still the same issue of Dominic Grieve and those who would be prepared in theory to vote down the government, their own government.
QUEST: Would they -- they have been -- have a listen though --
NOBILO: But not all of them. That's the key calculus here is how many of the ardent remainers who wants to see no deal at any cost would also be
prepared to counter in spouting down their own government and a Jeremy Corbyn Premiership.
QUEST: All right, so stay with me for a moment because world leaders are sending their own messages and congratulations. President Trump has called
Boris Johnson smart and tough and sees himself in Britain's next Prime Minister.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: They call him Britain Trump and people are saying "That's a good thing." That they like me over
there. That's what they wanted. That's what they need. That's what they need. He will get it done. Boris is good. He is going to do a good job.
(END VIDEO CLIP)
QUEST: "Boris is good. He is going to get it done." But is there a danger? Boris is very, very clever and he knows that he can -- he can't
cozy up to the U.S. President, because the country here wouldn't like it. But he has to do something.
NOBILO: Boris Johnson is historically an Atlanticist. His father did warn me earlier when I spoke to him outside the venue for the announcement that
Britain shouldn't cozy up to America in this situation because it wouldn't be received well. He is going to have to strike a balance of maintaining
some kind of cordial and constructive relationship with Britain's E.U. partners.
And we see underscored why that's so important because of the inflamed tensions in the Gulf, but also needing that strong relationship with
America because let's be honest, if he can demonstrate to the E.U. that President Trump's administration is prepared to give Britain a great trade
deal then that will increase his leverage.
QUEST: All right, Bianca, tomorrow a big day. A big day. We've already got musical instruments.
NOBILO: Now, we've got some percussions, which is a new --
QUEST: And a xylophone. All right. Good to see you. Thank you.
NOBILO: Good to see you.
QUEST: Boris Johnson has promised to take Britain out of the E.U. by October 31st with or without a deal. That's a solemn promise he has made
to his party and in doing so, I would imagine, to the country a hundred days from now.
Goldman Sachs says it's still believes the U.K. is more likely to stay in the E.U. than leave without a deal. However, Goldman says the likeliest
outcome of all is a negotiated exit, probably after again pushing back Britain's departure.
With Johnson about to become Prime Minister, Goldman reckons the chance of a no deal Brexit has increased from 15 to 20 percent. Hardly a dramatic
rise.
The head of the European Parliament's Brexit steering group will meet on Wednesday with the E.U.'s chief Brexit negotiator, Michel Barnier.
Now, Barnier says the bloc is ready to work with Johnson. An orderly Brexit is what they're looking at. He is prepared to rework the
Declaration made previously regarding the future partnership. Put all this together, underlying it is Europe's firm position. The Brexit deal agreed
with Theresa May is not up for renegotiation, as the Commission's Deputy Head doubled down just minutes before Johnson's victory was announced.
(BEGIN VIDEO CLIP)
FRANS TIMMERMANS, E.U. COMMISSION FIRST VICE PRESIDENT: He took a long time deciding whether he was for or against Brexit, and now his position is
clear.
I think the position of the E.U. is also clear. The United Kingdom reached an agreement with the European Union and the European Union will stick to
that agreement.
(END VIDEO CLIP)
QUEST: Now, we want you to join the conversation. Take your device and your phone. It's a simple one tonight. Now, that he is on his way to
Number 10, can Boris Johnson deliver Brexit by October 31st? It's really simple, a yes or a no. And you'll see the results on the screen.
Can Boris Johnson deliver -- Lord Heseltine was Britain's Deputy Prime Minister under Margaret Thatcher. Now, Lord Heseltine, you believe
inflicting Brexit without a people's vote would be undemocratic. But tonight with Boris Johnson on the verge of Number 10, what do you make of
it?
MICHAEL HESELTINE, FORMER GREAT BRITAIN DEPUTY PRIME MINISTER: Well, nothing has changed. Boris Johnson has won. We all thought he was going
to win. He has repeated his policies of having his cake and eat it, which is ludicrous when you think about it. He has dug in. He has made
commitments to a section of the Conservative Party who will hold him to it, pin him to the floorboards.
[15:10:08] HESELTINE: But there's no Parliamentary majority for what he wants and there's no trust between getting a Parliamentary majority.
QUEST: Right. But there's no Parliamentary majority for a no deal, which to some extent is in exchange -- it might be the default position, but it
is an extremist. He would say he still wants to come out with a renegotiated deal.
HESELTINE: Yes, he would say that, but he has got to come out, have a renegotiated deal by October 31st or he comes out. If he can come out, if
Parliament will let him, which they almost certainly won't. The problem he has, is that behind him, there's a group of MPs in his own party, who are
absolutely resolute about the purity of the commitment.
And any temporizing that Boris does with the European Union, alienates the hard cores that put him into power.
QUEST: But they -- if that happens, then the hardcore as they discovered earlier this year, you know, they will frustrate their own goals to any
form of Brexit.
HESELTINE: That is the problem. But we've seen how determined they are, and there is no ground for thinking that Boris has changed their views at
all.
QUEST: But does it concern you that you have on the other side, the Philip Hammond's and the Gauke's of this world who will say, "We will not let you
go down the no Brexit -- the no deal Brexit route."
HESELTINE: Well, I am delighted by that. And I think you shouldn't personalize it down, too. There are some very brave Cabinet Ministers who
are are going to take a stand because they're talking for millions of conservative voters.
And the real dilemma for the new government now is how do they get anything through Parliament? And one of the options traditionally was to have a
general election. But there are no grounds for thinking of a general election anything different than the stalemate than we have now would be
the forthcoming result.
QUEST: You famously walked out of Cabinet and resigned over Westland helicopters many, many, many years ago. And when you look at the crises
that are within government, where does this one rank?
HESELTINE: This is the worst I've known in my lifetime in peacetime.
QUEST: And with that in mind, whichever avenue you take, there's no answer, I mean --
HESELTINE: In the short time --
QUEST: I mean, I am not trying to be --
HESELTINE: No, well, the only answer that is -- on the cards, but not yet certain, is a second referendum which reverses the original decision, and
we withdraw Article 50 and stay within the European Union. That is in Britain's national self-interest.
QUEST: A rather crude question, is Boris Johnson up to the job?
HESELTINE: Look, that is as you say, a crude question, and I don't get involved in the personalities. I'm interested in the issue. I'm a Member
of the Conservative Party, I believe passionately in British self-interest, and believe it inextricably interwoven with Europe. I am not going to get
involved into this gutter level of politics.
QUEST: No, but -- well, yes, fair dues. But his personality is what people are talking about as being the driving force that might just get
this done. It is the character and his larger than life that might just force this issue together -- do see any hope of that?
HESELTINE: No. The country is deeply divided. And you're seeing it now with Ministers resigning. Morgan will resign tomorrow. That's throwing
away their careers. I mean, they are deliberately expressing a view and that will be manifested by their position on the backbenches.
And the only way that Boris Johnson would be able to neuter that is two ways. One to do a deal with the Brexit Party, which would split the
conservatives and the other is to rely on Labour Members of Parliament to get his views through that also would have devastating effects on the
Conservative Party.
QUEST: I don't want to leave it completely on a down note. But can you see any way out of this besides a second referendum, which even Parliament
didn't really want when it voted on these things earlier this year, and the indicative vote, even that failed?
HESELTINE: I think Britain is facing a period of uncertainty to which there is no obvious resolution, which is very damaging to people's jobs,
the wealth of the country, heart of the country. But that is the world. That is if you talk to people in industry, we have to make the decisions.
They are sitting on their hands and they will stay there until this matter is resolved.
QUEST: Good to see you sir.
HESELTINE: Thank you.
QUEST: As always, thank you. Now, business leaders have been eyeing Boris Johnson and weighing up his Brexit strategy for many months. Some say they
are bracing for turbulence. Also, a solid day on the Dow just got better. New reports on the U.S.-China trade talk, it has the cusp of a record. The
market is desperately waiting for that deal. If it gets it, it goes up like a rocket as QUEST MEANS BUSINESS returns.
(COMMERCIAL BREAK)
QUEST: As Boris Johnson gets ready to move into Number 10 Downing Street, some analysts are saying we should all get ready for real turbulence.
Corporate chiefs have been watching his Brexit strategy for months and not all of them like what they see. Anna Stewart has this report.
(BEGIN VIDEOTAPE)
ANNA STEWART, CNN REPORTER: (voice over): It's been a bumpy journey to Number 10 for one of Britain's best known politicians. Boris Johnson has a
reputation for gasp and bluster. His Brexit stance has been clear from the start, although it hasn't always been communicated well.
(BEGIN VIDEO CLIP)
JOHNSON: I will be advocating vote leave or whatever the team has called, and certainly mainly of them.
(END VIDEO CLIP)
STEWART (voice over): Now, the world wants to know more detail.
(BEGIN VIDEO CLIP)
JOHNSON: Brexit -- we will of course be pushing our plan into action. So, we are steady and ready to come out on October --
UNIDENTIFIED MALE: Thirty-first.
JOHNSON: Thirty-first. Correct.
UNIDENTIFIED MALE: Come what may?
JOHNSON: Come what may.
UNIDENTIFIED MALE: Do or die?
JOHNSON: Do or die.
(END VIDEO CLIP)
STEWART (voice over): Making no deal the default option on October 31st has businesses worried and markets jittery.
(BEGIN VIDEO CLIP)
JANE FOLEY, SENIOR FX STRATEGIST, RABOBANK: Investors getting very worried and the pound beginning to price in a greater probability that we could
indeed see a no deal Brexit.
I think somewhere between 110 and 105 on a no deal Brexit is certainly is a very strong probability.
(END VIDEO CLIP)
STEWART (on camera): As Boris Johnson prepares to enter the doors of Number 10, warnings about a no deal Brexit are growing. A government
report says that U.K. could face a year-long recession and the pound could plunge 10 percent. The answer from the Boris team though, optimism.
(BEGIN VIDEO CLIP)
LIZ TRUSS, BRITISH CHIEF SECRETARY OF TREASURY: They want somebody who is going to go out there and make a positive case for Britain who is going to
attract business investors into our country.
(END VIDEO CLIP)
STEWART: Then there's the new Prime Minister's wider attitude to business.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Can the Secretary of State confirm and remotely justify that his response was to say, "F business."
JOHNSON: I don't think anybody could deny the passionate support of this government for business and it may be, it may be that I have from time to
time expressed skepticism about some of the views of those who profess to speak up for business.
(END VIDEO CLIP)
STEWART (voice over): Boris Johnson has announced an array of plans including tax cuts, leading many to compare his economic policies to
another maverick politician.
(BEGIN VIDEO CLIP)
[15:20:01] TRUSS: I don't necessarily agree with everything Donald Trump does or says. However, I do think some of the policies on economic growth
have been successful in the U.S. and certainly, there are lessons to be learned --
(END VIDEO CLIP)
STEWART (voice over): From cutting taxes to spending on infrastructure, broadband, police and education is not yet clear how the new government
will afford it all, especially if Boris Johnson's do or die no deal predictions blow the economy of course.
(END VIDEOTAPE)
QUEST: Anna Stewart there. Forgive me, I was just listening once again to the noise behind me with either a xylophone or it's somebody shrieking
revoke Article 50 or somebody playing a percussion instrument. What does big business want out of all of this now?
STEWART: Well, if they were being totally honest, Richard, if big business were able to voice their concerns, they would really like to not have a no
deal Brexit and to take that off the table. But I think there is an understanding here that with this new government that is on the table, so
what the big business groups are saying today is that they simply want government to act swiftly, decisively with business in mind.
Most interesting I think was that it wasn't a British business group, but a German one that had a much harsher stance on this. The BDI, a German
business group said, "Threats from London, that the United Kingdom could leave E.U. without an agreement are harmful and will come back like a
boomerang." And they added that, "The withdrawal agreement must be renegotiated that that stance has the least possible friction in trade,"
that they are possibly going to get very much echoing what we hear from the E.U.
QUEST: So with all that -- with all that, Anna, they are still having to live with the environment. I was talking to one or two very senior CEOs of
FTSE companies, and their view was a shrug of the shoulders. Yes, we can say we want certainty, but we have to prepare for whatever comes our way.
STEWART: Exactly, you can hope for the best, but you have to prepare for the worst. And so the big companies, many of them have done that.
Unfortunately, for them many times over. They have to do it of course in March last year, when we had the first big sort of Brexit deadline, they've
had to do it several times since. It's very costly. But some of these big businesses can absorb some of it. Sometimes they pass on to the consumer.
The smaller businesses often are unable to prepare for a hard Brexit. Frankly, the worst case scenario will put them out of business, which is
why if you look at Bank of England forecasts, they do forecast for the worst kind of no deal, you know, terrible Brexit as leading to double
unemployment, leading to an eight percent reduction in the economy. It's very real risk we're looking at.
QUEST: All right, Anna, thank you. Anna Stewart is in London. The markets -- the U.S. markets, now, the Dow is flirting with a record on a
busy earnings day. The spike in the Dow when you look at the numbers, it spiked after the news broke that U.S. Representatives will head to China on
Monday for trade talks.
The NASDAQ and the S&P are also rallying. Clare is with me. Clare is ion New York. We had a trough over lunch and then this boost in the afternoon.
But I mean, is this the reason -- is it trade that is pushing this higher?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: So, trade is the reason for that spike in the afternoon, Richard that came after a report from
Bloomberg that Robert Lighthizer, the U.S. Trade Representative and a delegation will apparently be heading to China for talks on Monday.
Now, we knew this was on the cards, Larry Kudlow said this morning that it looks like there will be a trip, but the confirmation really sent the
market soaring in the afternoon.
Now, we'd already seen gains in the morning that was partly due to earnings. We saw some positive earnings from Coca-Cola, United
Technologies, Lockheed Martin -- all of those beat and in a season where many analysts expected earnings to be a little bit lackluster, that
certainly boosted sentiment and of course, there's still the specter of monetary easing. The ECB this week, the Fed next week, all of that is
boosting the stock market. And so the S&P 500 also over 3,000 now.
QUEST: All right, but the capacity to hold on to these gains in this earnings environment. Now, Coca Cola as you were saying, Coca-Cola had
some very good numbers in the stock has rallied remarkably well.
SEBASTIAN: Yes. And interestingly, Richard, you know, we're at a time when a lot of people are debating what's going on in the U.S. economy.
We've got the IMF coming out today, saying that the global economy is set to grow less faster than they had expected a few months ago.
But the Coca Cola CEO in the earnings call today basically said, you know, the clouds on the horizon that they see, the storm hasn't actually arrived
yet. And that's part of the reason why their revenues were up six percent.
So, I think these earnings are not falling in line with the worst case scenarios at the moment and I think that's one of the reasons why stocks
are up today, but there are of course uncertainties even beyond what we've been talking about. There is oil. There's a situation in the in the
Persian Gulf, Richard. There's a lot of things that could you know, unseat this.
[15:25:04] QUEST: Right, but let me just jump in on that. Because the talk -- you and I -- going into this earning season was of the earnings
recession, two quarters of lower earnings. Now, this may not be a barn burner, but is the evidence there -- I think the evidence is what? Of
difficult times, but not dreadful?
SEBASTIAN: Well, I think what people are looking at and not so much the earnings that we're getting in this season, but also the forecast as well,
Richard. And I think that's why today's slate of earnings sent the markets, you know, into this kind of positive mood.
Coca Cola raised their forecast, so did Lockheed Martin. The only one that we saw that was a bit of a dampener today was Harley-Davidson, which of
course as you know, is being hit from all sides by tariffs, is trying to shift production to China and is seeing a slowdown in its market for bikes,
so overall, this was a good day.
QUEST: Clare is in New York. Clare, thank you, as always. As we continue tonight, Boris Johnson says he is willing to take the U.K. out of the E.U.
without a deal. According to an official forecast, no deal would trigger a recession. It could cause the pound to nosedive. Some say about 20
percent. It leaves investors bracing for the uncertain times ahead. All of these as the man becomes Prime Minister tomorrow.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, there's a lot more QUEST MEANS BUSINESS as we continue. Investors are bracing for turbulence. Boris Johnson is
preparing to take over as Prime Minister. He does so tomorrow. And Liverpool F.C. makes a play to reach the big financial leagues. The club
is on a U.S. tour. The CEO joins me live as we have all of that. This is CNN, on this network of facts always come fast.
Boris Johnson is to take over as British Prime Minister on Wednesday.
[15:30:00] He was elected Conservative Party leader by a two to one margin. The leader of the opposition Labor Party says he will table a
motion of no confidence in the new British government when it is appropriate to do so.
One of the first tasks Johnson will need to tackle is British and Iranian oil tankers that had been seized in the Persian Gulf. Iran has
congratulated Johnson on becoming leader and Prime Minister. And the Foreign Minister said his country is not seeking a confrontation, but
warned Iran will protect its waters.
War planes from four countries took part in a chaotic confrontation above small disputed islands off the coast of South Korea and Japan. South Korea
says it fired more than 300 warning shots after a Russian military aircraft entered its airspace. Russia denies violating South Korean airspace.
And President Trump is suing to stop congressional Democrats from getting his tax returns. New York, Mr. Trump's home state recently passed a law
that would allow it to hand over the tax returns if Congress requests them. The president's lawyers are asking for an injunction to prevent that from
happening.
And the most anticipated hearings on Capitol Hill in years, and now only hours away. The former special counsel Robert Mueller will testify about
his report on Russian election interference and President Donald Trump's efforts to curtail that investigation. The Justice Department has
instructed Mueller not to stray beyond his report, even though he's no longer a department employee.
Boris Johnson is elected leader of the Conservative Party, and as such, will take over as Prime Minister on Wednesday. The pound and the euro are
both falling against the dollar. Johnson's position that he'll take the U.K. out of the EU with or without a deal. It increases the chances for no
deal Brexit, and that puts downward pressure on the pound.
European markets though were higher, London gained half a percent, the German Dax was at 1.6 percent on domestic matters. The Paris CAC was up
nearly 1 percent. A Johnson victory was largely priced in, it was the biggest open secret that he was going to win, so investors will now want to
see the strategy over the next few days. Philip Shaw is the chief economist at Investec. What's your scenario now that you think happens?
PHILIP SHAW, CHIEF ECONOMIST, INVESTEC: All right, good evening. It's very difficult to say because there's a lot of uncertainty about it, but
initially, I think that the new Prime Minister will want to survive his first day in parliament before it breaks up for recess, that will be on
Thursday.
After that, I guess the plan is to implement the strategy to get a Brexit deal which is to begin to prepare more readily for a no deal Brexit.
QUEST: Now, Goldman Sachs today said that they still don't see a no deal Brexit as being the end game. They still believe that a negotiated exit is
the most likely outcome. Do you subscribe to that?
SHAW: That sounds correct to ourselves as well. But in preparing for a no deal Brexit and trying to convince the European Union that this is a viable
option for the U.K., it makes concessions from the European Union 27 more likely, and therefore, a deal that's acceptable to Westminster are more
feasible as well.
QUEST: Just how strong or weak is the U.K. economy at the moment?
SHAW: The economy is not doing too badly. It's been volatile since the start of the year because of stocking for Brexit and then the reversal of
that and car shut downs that happened earlier in the year as well. But really, we're on a course for about 1.5 percent growth this year, which
isn't great by pre-financial crisis standards.
QUEST: No --
SHAW: Not too bad --
QUEST: Right, but if you compare it to other European countries at the moment.
SHAW: Well, if we compare the U.K. with Germany at the moment, which is suffering because of lower world trade and because the car industry going
through a transformation, then growth in the U.K. is likely doubled, actually doubled like in Germany --
QUEST: OK, but Philip, to the Brexiteers sitting here constantly say leaving and trading on WTO terms would not be the disaster that some like
Mark Carney of the Bank of England have said. And we all keep saying, but everybody says it will be awful. But the country is weathering the storm
economically quite well.
SHAW: Well, part of the reason for that, the counter-argument would be is that we continue to have a free trade agreement effectively with the rest
of the European Union. There are no customs checks because the U.K. is part of the European Customs Union and also, we're part of the single
market so you don't need regulatory checks.
Take those things away, and it becomes a lot more difficult to try both importing and exporting.
[15:35:00] QUEST: But I'd have thought there will be a threat of taking it away. Would have had a worse effect on the economy than we are seeing
at the moment.
SHAW: Perhaps in the longer term, that is the case. What we have seen, however, over the last year and a half is that corporate companies more
reluctant to spend on major capital projects --
QUEST: Right --
SHAW: And business investment has been falling for around the last 18 months. And that is a sign about how industry is concerned about Brexit
and a potential no deal.
QUEST: And the economics of the relationship with the United States, although, Europe is the U.K.'s largest global partner. The U.S. is the
largest single country partner. So if Boris Johnson can pull off an early free trade agreement with the U.S., I'm saying "if", that will be great to
his benefit.
SHAW: It would, but the U.K. exports something like half of its goods exports to the European Union, and therefore, obviously, that's a huge
market. And you would rather not take that or proportion of this away. But certainly free trade deals with third party countries would be a very
good idea. The practical issue is that -- is that they take a very long time to strike and they could be very contentious.
QUEST: Good to see you, sir, thank you. The IMF is lowering its global forecast, it says one factor is the possibility of the disorderly Brexit.
The IMF sees global growth up 3.2 percent in 2019 and 3.5 percent thereafter. Now, each forecast is down a tenth of a percentage point
compared to the April. The Fund says growth is slower than expected in emerging markets too. The chief economist told Julia Chatterley what's
changed.
(BEGIN VIDEO CLIP)
GITA GOPINATH, CHIEF ECONOMIST, IMF: Now, these are modest revisions, but they come on top of most significant revisions that we've done in the
recent past. Now, the revisions are a reflection of downward revisions mainly in emerging and developing economies that are offsetting positive
surprises in advanced economies. And the fact is for this, a multiple -- there's trade tensions, there's escalations associated with that and may --
but also domestic factors in many of these emerging markets.
JULIA CHATTERLEY, CNN: I mean, I've seen you quoted as saying 70 percent now of the world is slowing here. To what degree do you look at the kind
of stimulus that we're seeing coming from central banks, and I can name probably around 20 or 30 of them that are making noises here to provide
greater support for the economies. Just isn't lucky enough at this stage to stop the slowing.
GOPINATH: More accommodative stance of monetary policy, like you said, that's now pretty much across all major economies is appropriate and is
important given the slowing global economy and especially the downside risks to it. However, that's not enough because the problems that need to
be fixed come on the trade front and therefore, it's very important to address those trade tensions, the technology tensions and to prevent
escalation. That is hugely important.
CHATTERLEY: What assumptions are you making about how long the trade tensions continue? We spoke to a Federal Reserve Board governor in the past
week who said as far as the Fed is concerned, even if we see a U.S.-China trade deal, they don't expect the tensions that we're seeing between the
United States and China, but also between other countries on the trade front to go away anytime soon. Do you share that view?
GOPINATH: There's certainly risk of these tensions, not just on the trade front, but also on the technology front of being prolonged, and that is
weighing on business sentiments. So, if you look at what's happening in manufacturing and industrial production and global trade, that's where you
see the negative impact over there while the services sector seems to be holding up.
So, there is certainly a risk of this being prolonged and which is why we think that there is urgency not to let that happen.
(END VIDEO CLIP)
QUEST: That's the IMF's chief economist and the forecast. Is he a metropolitan liberal or a Trumpian populist? Britain is waiting to see what
its next Prime Minister will turn out to be. He'll certainly be considerably more colorful than Theresa May. Now, the next 24 hours, we'll
reveal a great deal about the man at Number 10.
[15:40:00] (COMMERCIAL BREAK)
QUEST: Welcome back to Westminster. Welcome back. Over the next 24 hours, protocol takes over as Boris Johnson is handed the reins of power.
So, what happens? And it really is fascinating for those of us who like this sort of constitutional stuff. Theresa May holds her final PM's Qs,
Prime Minister's questions in the commons behind me. That will happen around at about noon.
Then, she goes back to Downing Street. She'll make a final statement, it's usually the tearful statement before they get in the car. And then the car
goes by Buckingham Palace and she will offer her resignation to her majesty, the queen.
Theresa May goes out of one door and within 20 minutes, Boris Johnson arrives at the palace. The queen will have been advised that Johnson can
command a majority in the House of Commons or the support of the house. So, her majesty will invite him to become her 14th Prime Minister. I think
the phrase is "to form a government in her name and to kiss hands."
Thereafter, he will receive security briefings and expected to announce his cabinet. Johnson is facing serious challenges. He spoke about his four-
part battle plan as only he can.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, PRIME MINISTER-ELECT OF THE UNITED KINGDOM: And we know the mantra of the campaign that has just gone by, in case you've forgotten it,
you probably have. So you probably -- it is deliver Brexit, unite the country and defeat Jeremy Corbyn. Deliver, unite and defeat was not the
perfect acronym for an election campaign since unfortunately it spells dud, but they forgot the final E, my friends, E for energize. And I say -- I
say to all the doubters, dude, we are going to energize the country, we're going to get Brexit done on October the 31st.
(END VIDEO CLIP)
QUEST: Dude, we're going to energize the country. Does this work in Britain? It's very American.
CAROLE WALKER, POLITICAL ANALYST: I think that you've got a Conservative Party that is just crying out for a little bit of energy, for a positive
message, and there are large numbers of Conservative MPs who may have very severe reservations about Boris Johnson, but today, and I think at least,
are really crossing their fingers and just hoping that somehow this extraordinary figure can break this deadlock that they've been stuck in for
so long and just deliver Brexit so that they can get beyond it and do something else.
QUEST: Right --
WALKER: Yes, it's unusual.
QUEST: But here, he is going -- look, we can -- we don't need to go to each individual option, but we can safely say, we've been covering this a
long time, but each option has a brick wall at the end of it unless something breaks through and that might be Europe giving him something that
they weren't prepared to give Theresa May.
WALKER: Well, look. I think Boris Johnson will, if he doesn't go himself to Europe, he will send his new Brexit secretary, perhaps even the existing
Brexit Secretary Stephen Barclay to Europe.
[15:45:00] Of course, at the moment, the signals that we're getting from the EU side are pretty uncompromising. But they also know that in Boris
Johnson, they do have somebody who is serious about leaving without a deal if he doesn't get one by October the 31st. And if I could just make one
final point --
QUEST: Yes, sure --
WALKER: It is just possible that Boris Johnson could get some kind of protocol, addendum, addition to the Withdrawal Agreement, which if it can
convince Boris Johnson and perhaps key figures like his Attorney General, perhaps Geoffrey Cox, perhaps Iain Duncan Smith, a stalwart Brexiteer who
may well be a senior figure in his team. If they can turn around and say well, this effectively kills off that Irish backstop, they may well be able
to convince Conservative MPs in the way that Theresa May simply could not.
QUEST: But that is -- that is the dream environment.
WALKER: It's just a slim chance --
QUEST: No, well, I'll put it higher than that, I'll put it higher than that --
WALKER: It's just a slim chance --
QUEST: I'll put it higher than that, Carole, because if that doesn't happen, then I don't see a way other than a no deal. Now, if there's a no
deal, parliament tries to stop it, then Boris goes to the country to ask not do you want to stay in, but will you support a no deal?
WALKER: I think Boris Johnson will try his utmost to try to keep the negotiations with the EU going. Because the other thing that he has got on
his side is the knowledge that as things stand, the legal default position is the U.K. leaves the EU on October the 31st, whether or not it has a
deal. But he also knows that as soon as he goes helter-skelter all out for a no deal Brexit, then there are figures on his own side --
QUEST: Oh, a lot of them --
WALKER: As well as -- as well as in the opposition parties who will do everything they can to stop him and that could include calling a vote of no
confidence to try to bring down the government --
QUEST: But -- and that, of course, would lead to Jeremy Corbyn maybe having an opportunity to form a minority government --
WALKER: It's an issue --
QUEST: But if he then says in that scenario, we can't move forward, parliament is frustrating the government from doing a no deal by going for
a referendum, not on membership, but on no deal. I'm going to ask the country, will you support a no-deal Brexit?
WALKER: Well, that is a possibility. I think a general election is more likely than another referendum. I think firstly, there is not a majority
in the houses of parliament for another referendum. I think the other problem which Boris Johnson and his team will be well aware of is that
another referendum is so full of pitfalls.
First of all, it would take literally months to agree --
QUEST: OK --
WALKER: To the questions --
QUEST: Right --
WALKER: To agree what's going to be put to the people. There would have to be --
QUEST: Let's --
WALKER: Some, you know, potentially by them, there would have to be some day. And the other problem is that all the polls suggest it would be a
very narrow outcome and would be very deeply divided --
QUEST: Look at the results --
WALKER: And it might not resolve anything.
QUEST: Look at the result, 81 percent say that Boris Johnson cannot deliver Brexit by October, the 31st, that's on our cnn.com-slash-join,
right, thank you, Carole.
WALKER: A few weeks ago, Liverpool Football Club won the Champions League, now they're trying to win over Americans. The club's CEO joins me to
discuss the red's rising international profile in just a moment before we go.
[15:50:00] (COMMERCIAL BREAK)
QUEST: Liverpool Football Club are missing the turbulent politics at home for a pre-season tour of the United States. There's no rest for the
Champions League winners. The reds have a huge fan base in the U.S., in the last week, they've already played in Boston and at Notre Dame
University in Indiana.
Now the club is in New York where they will play at Yankee Stadium on Wednesday. "Forbes" has published its list of the 50 most valuable sports
teams and despite their recent success, Liverpool is the least valuable football club worth just $2 billion. It's around half the value of Real
Madrid, Barcelona or Man U.
Peter Moore wants to get the club rising on that list. Liverpool CEO is in New York. Sir, my apologies that I'm not with you to be there tonight. As
you can see we're Brexiteering here in London, but I mean, why do you do these trips? Liverpool as a club is exceptionally well known globally.
What do these tours do for you?
PETER MOORE, CHIEF EXECUTIVE OFFICER, LIVERPOOL FOOTBALL CLUB: Well, they engage with the fans in a way that we can't do if we just stay in
Liverpool. It's as simple as that. We have huge following as you point out here in the United States, in fact, around the world, we have over 700
million fans who follow Liverpool Football Club.
We were in the U.S. last year, we had an incredibly successful tour, decided to come back again, and as you point out, we've just come out of
Notre Dame and we were in Boston in Fenway Park and we're at Yankee Stadium tomorrow night against Sporting Lisbon.
This is all about giving back to the fans, engaging with the fans and making sure we are the global football club that we know we are.
QUEST: Right, but do you feel that in terms of profile, in terms of value, the club is not recognized -- I mean, the name is well unknown, but you
just heard me say, you know, you're a bit down on the list of value. Do you think you're not getting enough credit?
MOORE: Well, I'm not sure whether we really worry about value as determined by "Forbes". There is an ownership group here, American-based,
as you know, out of Boston, that looks at the long-term strategic direction of this football club. And from our perspective, it really is about making
us a global entity, the global football brand we need to be.
And the revenue ultimately will follow. And if the people want to put us in a league table against all the clubs, that's fine, that's not what we
worry about.
QUEST: Right, but what does it take? I mean, you won the Champions League. You have just about won or you're very close to the top of the Premier
League. I mean, you know, I remind -- I follow -- look, I come from Liverpool.
MOORE: I know --
QUEST: It reminds me of my old Liverpool judge grandmother who used to -- who used to say to me, you know, so, what have you done for me lately? I
mean, what more do they want from you to make a global brand than you've already done?
MOORE: Well, if you talk about winning the Premier League, obviously as you know from Liverpool, that's what our Liverpool fans want, and that's
what our goals and objectives point towards. But as regards to building out the value, you look years and decades in advance, and there are -- this
is not about an exit strategy for an ownership group, this is about building out a football club that gives so much entertainment to hundreds
of millions of people --
QUEST: Right --
MOORE: Around the world, and that's what we're built upon.
QUEST: Peter, how is your war chest coming together? If you decide you want to go on a buying spree because the costs now are stratospheric, the
costs are worthy of Wall Street.
MOORE: Yes, players are expensive, and the revenues are growing, and as such when you need to go by world class defenders like Virgil van Dijk or
world-class goal keepers like Alisson Becker from Brazil, you spend a lot of money. As you know, Richard, those investments have paid off
handsomely.
Look, we look at football at a business level as a virtuous cycle. We spend money -- we spend a lot of money to buy the best players. We also
look at value of players that can for a certain amount of money fill us, but for us, deliver handsomely, and we have plenty of those players as well
--
QUEST: Right --
[15:55:00] MOORE: But ultimately, it is about winning silverware, we did that. We have a charismatic manager who brings this all together. The
Champions League victory is just the beginning for us, and that is the long-term strategy of this football club is to continue to win silverware.
QUEST: And Peter, you've got to admit honestly, hang on now, it's a lot easier to go to the owners and ask for a few quid more to buy somebody or
to renovate Anfield as I know you're planning to do when you actually got the silverware coming into the cupboard.
MOORE: You're absolutely correct, Richard.
(LAUGHTER)
QUEST: Good to see you, as always, Peter, thank you very much indeed. The last few minutes of trade on Wall Street. The Dow is hovering near a
record, stocks have spiked after news broke that U.S. representatives are going to China -- not just representatives, the USTR apparently themselves
might be going to China to resume trade talks.
Coca-Cola, it led all day, it's up 6 percent, strong earnings. And the new CEO remains optimistic about global growth -- look at that, it's 6.7 -- for
coke to be up 6 percent in the day, that's really quite extraordinary on that sort of heavyweight of a start(ph).
And at the other end, travel is down, none of them are down that much, Boeing is just about even Stevens. So you can see why the Dow is
performing so well. We will take a profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. It is a beautiful night here in London. There's the Stephens Tower with the flag flying perfect Summer
evening. How different from March when it was cold, it was wet, it was miserable, but the country is in a different position, then, it was failure
all around.
It failed to leave the European Union. Delays, uncertainty, Theresa May couldn't get anything through parliament. Tonight, there is a new energy,
that is true. Boris Johnson will become the Prime Minister tomorrow, and yes, I could be mealy-mouthed and point out that there's all the same
problems and probably a great deal worse.
Everything is entrenched, and the risk of his failure for October, the 31st is great. That will be mealy-mouthed, it will be wrong. The new Prime
Minister or Prime Minister-to be tomorrow starts with a certain amount of goodwill and good support, the country likes him. He's charismatic. He is
everything that perhaps Theresa May isn't.
But now he has to actually sure prove he can deal with the crisis, and he can actually get Brexit done. That's what the people voted for, and that's
what he says he's going to do. And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in London.
(BELL RINGING)
Whatever you're up to in the hours ahead, I hope it's profitable.
END
