Reeves Divides £600bn, US-China Deal Reached, AI Lifeline for Publishers
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This is the Bloomberg Daybreak Q at Podcast, available every morning on Apple, Spotify or wherever you listen. It's Wednesday the 11th of June here in London. I'm Caroline Hepker. And I'm Stephen Carroll. Coming up today, the UK's Chancellor, Rachel Reeves, prepares to unveil her plan for hundreds of billions of pounds of government spending and investment. The US and China agree moves to ease trade tensions between the world's two biggest economies. Plus, more than an academic exercise, publishers scramble for AI partnerships

Partnerships as funding dries up. Let's start with a roundup of our top stories. The UK's Chancellor, Rachel Reeves, will unveil plans for trillions of pounds in public spending in a speech later today. The Spending Review will decide the three-year budgets for all government departments and see the Chancellor potentially allocate an extra £113 billion she has available for investment. She says the government is going to actively invest to create growth.

This government is going for growth because that is the best way to create jobs, boost wages, lift people out of poverty and sustainably fund our schools and our hospitals and all the public services we rely on. And we're doing things differently. Because unlike the Tories, I don't think that the only good thing that a government can do is get out of the way. I believe in an active government.

But Reeves' plans are also likely to include real-terms cuts to some departments outside of protected spending on health, education and defence. Since taking power, Reeves' popularity ratings have fallen to the same levels as those of former Tory Chancellor Kwasi Kwarteng after his disastrous mini-budget in 2022, according to surveys from Ipsos.

Now let's talk about Blackstone, which plans to invest as much as $500 billion in Europe over the next decade. The world's largest alternative asset manager is already the largest fund manager in European real estate. Chairman Steve Schwarzman has told Bloomberg the continent is becoming attractive to investors. They're starting to

change their approach here, which we think could result in higher growth rates. So this has worked out amazingly well for us. Schwartzman also said that the UK government has been really helpful and really focused on enabling investment. The firm has about $100 billion invested in Britain, already making it one of the largest foreign investors in the country.

The United States and China have agreed on a preliminary plan to ease trade tensions. American and Chinese negotiators in London said both sides agreed on a framework for how to implement the consensus they reached in the prior round of talks. Here's US Commerce Secretary Howard Lutnick speaking to reporters after the negotiations ended.

The two largest economies in the world have reached a handshake, right, for a framework. We're going to start to implement that framework upon the approval of President Trump, and the Chinese will get their President Xi's approval. And that's the process. So once the presidents approve it, we will then seek to implement it.

Howard Lutnick speaking there. While full details of the agreement haven't yet been made available, US negotiators said they absolutely expected that issues around shipments of rare earth minerals and magnets would be resolved. The Chinese Foreign Ministry and Ministry for Commerce didn't immediately respond to requests for comment on the nature of the agreement.

Meanwhile, a U.S. federal appeals court has ruled that President Trump can continue to enforce his global tariffs. The order extends an earlier short-term reprieve and delivers a win for one of the administration's signature economic policies. Tuesday's order comes a month before Trump's own 90-day pause on most of his tariffs is set to expire. On the 9th of July, U.S. tariff rates will increase drastically for many nations with the

EU facing a 50% levy if a deal can't be struck and no extension is offered. Meanwhile, the European Central Bank President Christine Lagarde is warning against the use of what she calls coercive trade policies. She was speaking at an event in China as global uncertainty around trade remains at an all-time high. Bloomberg's Tima Adebayo has more.

Christine Lagarde didn't mention Donald Trump by name, but his tariffs loomed over her speech. The ECB president told an audience at China's central bank that there's no longer-term advantage to being a bully on trade. She warned against mutually damaging protectionist policies, instead urging countries to work together.

Her comments come as a chorus of European central bankers have been highlighting the opportunity to boost the international role of the euro amid the upheaval in US policy. In London, Tiwa Adebayo, Bloomberg Radio.

The US Secretary of State has criticised the UK, Canada, Norway, New Zealand and Australia for imposing sanctions on two Israeli cabinet members. In a statement, Marco Rubio said that the move doesn't advance US-led efforts to achieve a ceasefire. The comments come after the countries chose to sanction Israeli National Security Minister Ismail Ben-Gvir and the Finance Minister Bezalel Shmurtevich in their

personal capacity for inciting violence against Palestinian communities. Last year, Smutrich suggested it may be justified and moral to starve Gazans, while Ben Gvir earlier praised violent settlers suspected of murdering a teenager in the West Bank as, quote, heroes.

The Mayor of Los Angeles has imposed a night-time curfew as officials attempt to stop vandalism and looting following protests over immigration raids. Almost 380 people have been arrested in the area since the weekend amid clashes between police and demonstrators. Mayor Karen Bass says the restrictions will be enforced in the downtown area of the city and will be repeated in the coming days.

So my message to you is, if you do not live or work in downtown L.A., avoid the area. Law enforcement will arrest individuals who break the curfew, and you will be prosecuted.

The move by L.A. Mayor Karen Bass comes after Marines deployed by President Trump arrived in the Los Angeles area with orders to protect federal property and officers. California's Governor Gavin Newsom has accused Trump of misusing his power by mobilizing the troops and warned other states to prepare for similar unrest.

Those are our top stories for you this morning. Let's think about the markets then after a couple of days of US-China trade talks. They seem to have diffused some tensions, although few details actually about what the agreement is really going to mean practically. Stock futures for the US are in the red. On the S&P 500, E-mini is down three-tenths of 1%. US stocks, 50 futures also down four-tenths of 1% this morning. The dollar is strengthening against most currencies.

A number of ECB officials making a play for the euro, including the Greek central bank governor, Yanis Tsournaras. Also today, you've got the U.S. inflation data, two U.S. rate cuts now expected for this year. Ten-year Treasury yields right now trading flat at 447. Those are the markets, Stephen.

In a moment, we'll tell you what to expect from today's UK government spending review, plus the deals with AI companies that are providing a new way for publishing firms to make money. But another story that caught our eye this morning, counting down to the start of Wimbledon, 19 days away by my rough calculation. Yes, it's always the last week in June, first week in July. So tennis, present. Strawberries and cream, present, but not present.

or, well, line judges. Yeah, linemen and line women will not be there in their traditional garb. It's very unusual, but it has been something that has been coming for a number of years. This is the fact that Sony's...

is going to be used now exclusively to decide whether the ball is in or out. So they're going to use 12 on-court cameras for this. It's already in use in the Australian Open, the US Open, and it has been at Wimbledon for a long time. But now, actually, the human element is going to disappear, which, yeah, it's sort of the end of a tradition, but

perhaps more accuracy maybe. Yeah, and actually there's some benefits being yielded also for a long investment by Sony in this area of technology as well. So interesting to see how people will feel about that notable absence from the sidelines at Wimbledon this year.

Well, let's turn to our top story now. And the Chancellor, Rachel Reeves, will deliver the government spending review this afternoon with detailed plans for public spending until the end of the decade. For more details, our UK politics reporter, James Wilcock, is here. James, good morning. The government has already announced a lot of infrastructure and investment spending. What do we know so far about what we'll hear today? Well, yes, so they've announced £113 billion is going to be announced here in terms of capital spending of that £39 billion in housing, £15 billion in rail.

That's what they want to talk about. That's the fun stuff. That's the new goodies. The other side of this, though, is that this is where we hear more than £6 billion a year is going to come in annual spending in all the government departments. I mean, that's roughly a fifth of the UK economy, just to put it in perspective. Now, we know some of those figures already. We know the NHS is going to get £200 billion per year, Education £94 billion, Defence £39 billion.

But all of this is to say that in some ways, this is casting a political die. Because for the next general election, the economics of what the public sector looks like, we find that out today. Yeah, because as you say, education, health and defence are the ring fence departments, the ones that get the money, whereas everybody else is facing a massive squeeze. And the government's finances are very, very tough.

So in terms of the real-time spending cuts, it's going to be difficult. Yeah, and education and health are two of Keir Starmer's sort of big missions for government in Labour. But there are other ones, crime, migration, and it would be very interesting to see. They've said roughly that 1.2% is the amount departments have got to work with increases. If health, which is by far the biggest department, colossal spend, is getting that much of an increase, you are going to see potentially even double-digit percentage cuts increase.

in other departments and we'll be watching to see where those come. Another side of this, Caroline, just in terms of where this money is going is a lot of it's going to be spent outside London in terms of the infrastructure investment. Rachel Reeves is pushing rail investment in the north. And the other side as well, the FT reporting one in 10 civil servants' jobs could be on the line as they seek to make things more efficient.

It's not a small review. The last one happened during COVID. This is kind of where we see how the shape of the UK state evolves for the next sort of three to five years.

Yeah, indeed. Alvarese has been reporting, our colleague, on how London, essentially the London Mayor, isn't happy about how the spending is going to go in his direction anyway. Let's talk about, though, what this means for the Chancellor, Rachel Reeves, of course, who's been at the forefront of some of the most difficult decisions this Labour government has had to make. Completely. And if you...

To put it in perspective, Ipsos had polled this week that the Chancellor is now as unpopular as former Chancellor Kwasi Kwarteng after he delivered the mini-budget. That is an impressive low. And the party are aware that it's very rare for a political party to become so unpopular so quickly. So this moment for the Chancellor, Rachel Reeves, is the party's pinned its hopes on growth.

And unlike the Conservatives, Labour see the government taking an active role in driving growth forward. I think today we find out what the comeback plan is, what the government actually sees as its priorities when it's forced to put its money where its mouth is. And if they are big spenders, many economists would say today may make tax rises in the autumn start to look inevitable. Hmm.

Yeah, that's certainly thinking about the next few months. James, thank you so much for being with us this morning. Our UK politics reporter James Wilcock then on what to expect 12.30 lunchtime today. The Chancellor Rachel Reeves with the Spending Review.

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Now, in the face of artificial intelligence, publishers are both fighting against and joining forces with AI companies. A number of academic publishers have signed or are looking at licensing deals to provide access to their libraries and generate new revenue. Joining us now for details of this story is Bloomberg's EMEA Earnings Specialist, Chloe Mele. Chloe, good morning. Great to see you. So where do licensing deals between publishers and AI companies coincide?

come from and what exactly do these partnerships entail? So what we've seen over the last few months is academic publishers making and as you say also exploring those deals with AI companies. Those are licensing deals so what that means is that the academic publisher is essentially giving access to their library so that AI companies can train their AI chatbots on that content. We've seen Taylor & Francis which is part of Informa, a UK listed company making $75 million last year from those licensing deals

Over in the US, Wiley has made about $15 million to date. And Bloomsbury also recently said in its latest set of results that they were exploring those deals.

So it seems to be happening kind of across the board for academic publishers. A key thing to note is that, as you say, these agreements are part of a broader trend of a really hot and cold relationship between AI companies and publishers. If we go beyond academic publishing, for instance, and we look at a news publisher like the New York Times, it recently reached a deal to license its editorial content to Amazon, while also having spent years fighting open AI in court.

copyright infringement. So we've seen those deals happen as the publishers across the board are really trying to prevent AI companies from scraping the web without providing that fair compensation. The idea here is that licensing is a kind of a way out of litigation and making everyone or at least, you know, more than one party happy. AI companies get the content that they need and the publishers get the money.

Yeah, although what I found striking about this story is actually that when we're talking about the billions going into AI, that these deals don't sound enormous in terms of millions of dollars. In terms of also the other angle to this,

President Trump's war effectively on academia, how is that kind of maybe fueling some of these decisions also maybe to pursue the AI deals amongst these academic publishers? Yeah, absolutely. So the research funding cuts that the Trump administration is pushing for really adds another layer. Obviously, the cut to that research budget is something that will affect academic publishers. But

those AI deals could provide an offset. So William Larwood, who's an analyst at Barenberg, calculated that about a 40% cut to the budget for the National Institutes of Health

which is the cut that the administration is pushing for, would result in a $45 million revenue headwind for Taylor and Francis, which is obviously not negligible. But he said that those AIGs could provide that offset. If we look at the numbers, the underlying revenue growth for Taylor and Francis was 15% in 2024-2025.

And that's up way up from 3% the year prior. And he said that without those AI deals, it would have been closer to 3.5. So this points to perhaps more academic publishers seeing this and rushing to carve out this kind of new and quite lucrative revenue stream to counteract the impact of the funding cuts.

I mean, when we're thinking about these deals with AI companies as well, is it a bit of a deal with the devil for these publishing companies as well? How are they kind of addressing some of the challenges around these? Yeah, so the problem here is that obviously not everyone is delighted. The AI deals have received a lot of backlash from academic authors in particular on two key points, consent and compensation. So authors have said that they were not asked for permission and that...

They were not given fair payments in some cases. So we know what authors have gotten from certain deals. So Microsoft offered HarperCollins $5,000 per title, half of which went to the author. But I spoke to Mary Rasenberger, who's the CEO of the Authors Guild, and she said that there's kind of no ballpark in terms of what authors can expect.

and an author was paid just $97, for example, for their book recently by Terence Francis. The problem is the more existential problem of academic publishers kind of accelerating their own placement by AI.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

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