>> osborne's balancing act. the chancellor prepares to deliver his last autumn statement before britain goes to the polls. we will bring it to you live. >> going big on small business. osborne extends the funding lending scheme for another year. >> getting off the ground. a permanent delay holds up norwegian transatlantic expansion. is the u.s. deliberately keeping this carrier in a holding pattern? we will talk about that with the company's ceo.

good morning. you are watching "the pulse." i'm guy johnson. >> i'm francine lacqua. 14 years after inheriting the biggest budget deficit since 1945, the u.k. chancellor will give his last autumn statement before the general election. ispite the recovery, osborne less than halfway toward his goal of returning public finances to surplus. so what can we expect from the statement? we will bring you coverage of all those issues that matter of ahead of the statement this morning. >> we are bringing full coverage of the statement. we will take that live at 12:30 london time. first, we got two hours of analysis right here on "the pulse." some key guests. a game of numbers is a good way of looking at this. george osborne delivering his auto statement and the forecast are all about the deficit. around 100 billion pounds for

much of this year. much higher than previously anticipated. cut or spend, we will do the math with the institute of fiscal studies program director. she is going to be working through the figures. make theborne investment case for britain? will the statement give the markets the signal they are looking for? himill discuss it with the portfolio manager. >> finally, we are going to focus on airports and roads. among other things, we will be asking the ceo of norwegian air shuttles. he has just got off a plane at gatwick airport. he is going to be talking to us later this hour. the chancellorh extending the funding for lending scheme for another year. the program will be aimed at giving incentives to lend to small and medium-sized businesses. with more on that, we cross over

to westminster. mark. >> thank you very much indeed. i'm joined by the british chambers of commerce director general. john, it is all preannounced, most of it. one of the big ones was the extension of the funding for lending scheme which will be focused on small businesses. is there a big cheer from the small business community? >> the chancellor is focusing on small and medium-sized enterprises. he is very constrained by deficit and debt. i think he is taking a targeted approach as far as we can see. it all depends on the execution. the thing that has defeated him in the past were things like funding for lending is the execution.

will that money actually get to small businesses or go into the mortgage is again? instrument on the enterprise finance guarantee scheme. in the past, they have used it as double indemnity. they asked for personal guarantees from business people which defeats the object. it has got to work in practice if it is going to work at all. >> what you want is more of a focus on infrastructure development. we had the rose revolution announced, 15 billion pounds to be spent over five years. what more to you one? >> the roads revolution itself is a big question mark. labour and conservative governments over the years have done these things and it has never happened. we have to see execution. why thesee the reasons big infrastructure schemes don't go through, it is the influence of the people affected by it.

we want to see extra compensation for individuals. it is amazing how the problems go away when people feel like they are being treated generously. have for fracking, to conversations for people who are being fracked. the chancellor has said he is going into consultation. that is the information we are getting out. what we are following in the autumn statement. >> another thing the economy needs, which businesses and consumers have been crying for, is a revolution of the air force -- airports issue. the airports commission has narrow down the choices. how close are we to some sort of solution here? how much does business need a resolution? >> we absolutely need a resolution.

it is critically important to businesses around the world that they can get to the markets. ining a proper hub airport england is crucially important. the government is not going to announce this until after the election. but we need a decision after the election. of this the outcome report is, everybody needs to get behind the outcome and back it. >> another interesting aspect which you are focusing on is export finance. we need support for our exporters. in the latest gdp report, exports declined. the economy is being propped up by consumer spending. businesses didn't invest last quarter. what more can the chancellor do to help exporters when it comes to finance? >> clearly, we have not done very well. the prime minister announced in 2010 that he wants to double

exports by 2020. so far, we have dismally failed. they haven't moved the dial at all. by contrast, a developed economy like the united states, strong currency, doesn't need to export , has increasedo exports by 60% more than we have in the same period. if we carry on doing the same things and expecting different results, that is the definition of madness. better way toe a help exporters. out,are really reaching which wasn't the case a couple of years ago, but we need the banks to provide working capital so businesses have the confidence to take that plunge into exporting and have a cushion. >> where does the bpc stand on the u.k. within the european union? where do your members stand on our position within the eu?

actually asked the membership of 100,000 businesses in the network what they think. what they tell is overwhelmingly is, we want to remain part of the european market. it is good for business. they also say, they do not want to have any further integration. they don't want to join the eurozone and they say they want a referendum. it is much more nuanced. >> if businesses don't get some sort of reformation of the system, they are happy to exit , as thepean union conservatives are threatening. >> it is too early to tell. people can't make that decision until they understand the facts. that ourno question business community wants reform of the european union. there are lots of things that hold back business.

additionalors put burdens on businesses and make them uncompetitive. there are guarantees around decision-making. good if we end up like norway. >> what do your members think about david cameron's re cent speech on immigration? the quota push has been dropped. do businesses support of that idea? >> we said the prime minister was right to take a balanced view. businesses need workers from overseas. it is very important for the u.k. economy. it creates wealth and helps growth. we need skills, we need soft skills. again, it is a complex picture. at the same time, we need to help our large number of young

unemployed to get work, and the education system has failed those young people. we need to make them capable competing in an international market for work. fixing the education system is part of the answer. we also need a strict point system. in the short-term, we need workers from overseas. >> we started on public finances, let's finish on it. he doesn't have much room to maneuver. >> not much room at all. he is constrained by the debt and the deficit. he can only do certain things. he seems to be targeting quite well but it is clear to me that the autumn statement is not going to be the place for big announcements that might influence the electorate. he is going to leave that for the spring. >> thank you very much for joining us today. the director general of the british chambers of commerce. the big announcements will come closer to the election. probably not today.

back to you in the studio. >> thank you so much, mark barton on the green. areng up, the british taking wagers ahead of the chancellor's autumn statement. the color of from his tie to how well his speech is received is on the table. how the brits are gambling on osborne. our twitter question of the day -- >> will you watch osborne's autumn statement? let us know. we are back in just a couple minutes. ♪

." welcome back to "the pulse we are live on bloomberg tv on radio. >> in a few hours, george osborne delivers his autumn statement. the latest forecast has the deficit closer to 100 billion pounds, much higher than anticipated. so, walk-through the reduction plan into a lower gear. crunch the numbers is the program director of the institute for fiscal studies. is there anything announced today that is going to move the dial when it comes to the deficit? >> i think the big picture is that today won't really change anything. we are halfway through a nine

fiscal tightening plan. there is a large hole that needs to be filled. today's numbers perhaps are slightly higher than forecast. that is not going to change the big picture, really. >> just staying the course is something that we could applaud given what the rest of europe is doing. 2010,we look back to george osborne thought there was a hole in public finances. thethe last few years, economic news hasn't been great for the chancellor. delivered ontually the tax increases and spending cuts that he said he was going to. that is good news. >> why isn't the deficit falling faster? growth is up. they should be fixing the problem. growth is up. it is not up as it was expected. , we have seen a few things that suggest the hits

to the u.k. economy were larger than we expected. >> from what you are suggesting, if they stayed the course, this is something that we should welcome. why not take a little bit more time and actually -- since we are seeing actions, why should they not promise a little bit more to the people? osborne and the next out -- next election need to do is reduce borrowing. at the last election, there was disagreement about how quickly that should happen. they could cut borrowing more slowly but it is worth remembering that pain is going to come eventually. >> in terms of the structure of the way the deficit has been tackled, we have seen tax rises thus far. is the fiscal story done and now

we face the cuts? deficit.lk about the what does the next few years bring in terms of how the economics work? >> the overall deficit reduction plan was heavily weighted towards spending cuts. we have seen essentially all the tax rises him in. in.ome the borrowing cuts are coming off of further cuts to public spending. it is relatively easy as a alitician the pencil in reduction without telling us where it is coming. >> that is the key question. where does it now come from? >> exactly. seem a lot less happy about telling us where those cuts come from. >> they are starting their campaign. this is to be expected.

you are not expecting any spending cuts to be announced today. >> the election is looming over us. one would hope that between now and the elections, the parties start giving us more details on where the elections are coming from. no politicians were talking about those cuts and yet postelection, we did see further tax increases and spending cuts. >> where does the risk lie over the course of the next parliament? the chancellor is going to may be announced legislation today to lock in a balanced a jet. -- balanced budget. where does the risk lie if that legislation isn't passed? story, is itwth the inability to force through the cuts? where does the risk lie in terms of the next parliament? >> i think the legislation is probably neither here nor there. is aext parliament, there number of potential risks. one is that if they keep trying

to find deeper cuts to public services, this parliament we have seen a lot of political but in delivering those, perhaps that becomes harder as the cuts become a permanent -- become a parent. we have also seen a series of tax cuts announced, for example personal allowance on income tax, paid for by some temporary takeaways. the risk to public finances has been increased going forward. that is a little bit concerning. hopefully we won't see a similar repeat. >> where would you cut spending? it is a difficult question, but we areu look at -- looking at a referendum, you have to make sure businesses are happy to invest in this country, you have to deal with that, spending cuts and other social goods, where do you cut? >> it depends what your priorities are.

thinking about the supply potential for the u.k. economy, you might want to make spending investment in things like skills and training for the workforce. you might want to continue to make sure that people are in good health and able to be productive. >> should we exclude infrastructure spending? >> infrastructure spending is different. and liberalbour democrats have said they are happy to borrow. certain things that contribute to the future economy, future generations will benefit from a new hospital, new school, new road. there are reasons to expect them to pay a bit for that. >> the history of this, though, is fairly patchy. >> the difficulty is, some elements of investment are long-term benefits. you could look back to the millennium dome.

it is difficult to know what the economic -- but in terms of monitoring the government's performance, there is an advantage to taking a ,easure of investment spending allowing politicians to define what they think is growth. >> fairpoint. thank you so much for all of that, gemma tetlow. >> coming up, we will ask the ceo of norwegian air shuttle what impact the u.k. government's plans for airport hubs will have on his company and his transatlantic expansion plans. ♪

>> welcome back. let's get you some company news. north korea may have had a hand in the digital attack against sony pictures. that is according to people with knowledge of the investigation which found that some of the malware contained korean language code. the hack released unreleased titles. annie" hasrted " been on some filesharing websites. an announcement following a surprise exit is of stephen murphy who has been at the helm of the company since 2010. the change comes just weeks after the loss of rival 70's and

of his resignation as well. mexico fund the pilots are set to strike tomorrow -- pilots -- lufthansa pilots are sent to strike tomorrow. >> the $20 million victoria's secret fashion show came to london last night. victoria's secret turned over $6.6 billion last year. it operates over 1000 stores. bloomberg caught up with its ceo. >> it is very exciting for us. , weg an international brand opened our store over three years ago, it is such a wonderful feeling to be here. it is one of the fashion capitals too, london. last night, they had the london fashion awards.

we were there. $75,000them raise about to bring new kids into the fashion world. very exciting to be in london. >> with christmas just around the corner, it is the most important time of the year for retailers across the world. after an underwhelming black friday, we asked the victoria's secret ceo if she is still optimistic for the holiday season? >> we are cautiously optimistic. we are excited about what is going on. we are very well-prepared. all in all, i think we are going to stay optimistic for this holiday season. >> up next, paying it forward. yesterday was giving tuesday. today, i cap holds its second annual charity day. prince harry will lead a star-studded guest list. >> you can follow us on twitter.

michael spencer, icap coming up next. ♪

>> welcome back to "the pulse." i'm francine lacqua. >> i'm guy johnson. let's talk about what is happening in the aviation sector. the eu says a u.s. delay on transatlantic licenses for norwegian air could reach the aviation deal that was struck with washington. that is according to the wall street journal. for more, we are joined by the ceo of norwegian, bjoern kjos. he joins us on the phone. good morning, thanks for taking

the time to join us today. we've been hearing reports that brussels will object to how washington is treating you. are you hearing confirmation of that as well? , good morning to everybody. we have just read that in the newspaper. source.is also our but we expect, actually, eu to stand up and do something about it. to us, it is a clear breach of the open sky agreement. >> wendy you think that is going to happen? this sideg to happen of christmas or do we expect it to happen at the beginning of next year? should actually execute this as soon as possible. overdue.ong time

they should have acted actually yesterday. it to happen very soon. >> very soon. there will be some watching this program who haven't followed the norwegian story and your attempts to set up a low-cost transatlantic airline. why aon't understand norwegian carrier is looking to the eu to fight its battles. how would you answer that question? that, simple thing is anday is not part of the eu we need access to be able to serve passengers in and out of gatwick. u license. e if we are going to fly east or south, not west because we have open sky there. airportsgo to other that we need the eu license. >> how much is it affecting your business? you have -- you are in the process of acquiring a large number of airplanes. how much is this costing you?

have to, because we have these aircraft because we can't fly into u.s. we have to have a substitute for that. it has cost us a lot this year. wouldn't actually state the cost of it, but you are talking about several million dollars, lots of million dollars. >> there are those in washington and those who lobby for the u.s. aviation sector that say that you are bending the rules to the point at which they are breaking and that is why there has been resistance from washington. what response do you give those lobbyists? what do you say to those that say you are not playing by the rules? >> it is a slanderous allegation. crew, weth new york

are setting up a base here in london. out of fort lauderdale miami, we fly with miami crew. we are serving flights with the american crew. so this allegation is totally slanderous. >> let's just change tact if i might. at gatwick. there you have a significant base down there in gatwick. london is trying to figure out what it should do about this airport capacity. do you support another runway at gatwick? >> yes, definitely. i think that is exactly the right place to build a second runway. it has probably the world's .ighest utilization definitely, we can fly in and out a lot more passengers,

from south america, south africa, a lot more flights from u.s. we can fly in a lot more passengers. can workatwick, we along with them. this is the ideal place for us to be. >> what do you say to those that say london needs a hub airport? >> if you look at what is theyning in the market, are practically gone with short-haul. i wouldn't say that will happen to the long haul. you will always have heathrow as the big attachment area. the large growth in the future will be this market.

they will fly mainly from the large cities in asia first of all. >> one final question. if you were to walk out of gatwick this morning and try and get into a car and drive into central london, how problematic is that? is there a case to be made that gatwick is in the long -- the wrong place? >> [indiscernible] you should definitely go with railway. gatwick express is ideal. that is the way you should commute between airports and city center. >> always a pleasure to speak with you. thank you very much indeed, bjoern kjos, the ceo of norwegian air. >> britain's bookmakers are gearing up for events -- four

bets on george osborne. you can take a bet on everything. britain's economic plan is working. [rabble] but the job is not done. >> this year, length of speech, always a good one. 20/12, 46 minutes. last year, he was 50 minutes. tie color is one of the old favorites. gorgeous george usually goes with his favorite blue. we have gone with navy as the favorite today. last year he bucked the trend, he came out with green. order -- i apologize. calm yourself, man!

your barricading is detectable several miles off. mr. bercow loves the sound of his voice and they are a pretty rowdy bunch in the back benches. we have set this one pretty low. two/five, one priority last. six/five say none. i'm not sure about that. i like three or more. >> are you a betting man? >> i'm not, but some of those could be quite attractive. let's move on. a star-studded audience flocks to the first victory is secret london fashion show. another bloomberg exclusive. we went behind the scenes. plus, we will talk to michael spencer. both of those coming up here on "the pulse."

♪

>> welcome back to "the pulse." now, bloomberg went behind the scenes at the victoria's secret catwalk show. we have the rare opportunity to speak with the man behind the $20 million lingerie extravaganza.

>> i am the executive producer of the show and the chief creative officer for victoria's secret. for thetive process show is literally all year long. i'm thinking about next year today. the main challenge for any business is to do it better next year. we don't sit down at the beginning of the year and say, we just need to do it a little bit worse than last year. what do we do next? what is better? this show is dramatically better than last year. it cost $20 million to produce the show this year. i always get the question, is it worth it to spend so much money on a fashion show? in 192orth it to be seen countries for an hour in december? i think so. this show has made us well known

worldwide. i want people to get off their privileged butts because this is a hard to get to get. $20 million. he has a good point, one hour -- >> the rate of return. that video is everywhere for quite a long time. anyway, the creative director of victoria's secret running us through why next year is going to be better. we speak up, exclusively with turkey's finance minister. guy had that great conversation. find out why he thinks the plunge in oil prices is a good thing. ♪

>> welcome back. you are watching "the pulse." we are live on bloomberg tv, on the radio and streaming on your phone and bloomberg.com. hopefully not all at the same time but we have the option. pricesent slump in oil has been bad news for many oil producers. happy to see the price continuing to fall. turkey imports 90% of its oil and is benefiting from the lower

prices. last night i spoke exclusively to turkeys finance minister, mehmet simsek, and asked him about how the oil drop was affecting his country. decline to narrow our by $5t account deficit billion, that is quite a sizable improvement. make ourelp current-account deficit more manageable, reduce headline inflation, and help force growth. >> you talk about the impact on inflation. should we assume lower into straits -- lower interest rates? >> that would depend on a lot of factors. decline inustained headline inflation ultimately would facilitate lower rates, but that is not something i would like to comment on, monetary policy.

all i can say is that our fiscal position is very strong. of 0.5% of deficit gdp next year. debt to gdp ratio is very low. clearly, we have a very strong fiscal position. if current account deficit continues to narrow, which is quite likely, i think that would make the turkish story a lot more compelling in terms of growth and rate outlook. turkeys finance minister speaking to me last night. the country runs a huge carbon a count deficit. you start to see the impact of lower oil prices being felt on that economy. three to six months from now, could change the investment case. >> if you look on the website, some of our reporters have been digging through the numbers to see the unexpected benefit of oil slumping. the european economy, one of the big concerns. tomorrow we have the ecb.

the plunging oil price is getting a lift to europe. spain, the fourth-largest economy in europe, could add as much as 1% to gdp. boost gdp byto 0.3% for every $10 drop. it is an interesting thing. we have been talking about energy security, the fact that u.k. companies are so much more productive because their oil price is so much cheaper than we had in europe for a whole range of reasons. >> one of the effects we are , isng in the market today that italian ptp yields are below 2% for the first time. look at that smile. the italian is very happy about this. >> it is amazing when you look at it. you sometimes wonder whether the

markets are in a blind spot that we have had in the past. you talk about oil, you talk about russia. you talk about russia, you talk about the rose bowl. >> and we talk about ryan. andhen we look at russia they have been starting to deal today with the falling ruble. >> this has been an ongoing issue. you talk about western europe countries benefiting from lower theprices, we talk about transfer of wealth into oil-producing nations. russia is on the wrong side of that. there is a joke now in the kremlin that next year putin price goes tooil 63 and the ruble goes to 63. basically, six months ago, the ruble was at 34 to the dollar. we are getting closer to 55. anything is possible. >> do you think vladimir is

aware of this joke? >> knock on his door. we have a great joke. >> maybe a week or ruble is not such a bad news for vladimir putin. if you think about it, we did see the bank of russia intervene in the market yesterday, spending $700 million. generally, they've refrained. it didn't really stop the trend of the weakening of the ruble. a lot of people say they seem to be comfortable with the weakening ruble because it does allow them to get closer to balancing their budget. now, they are only going to need according to current estimates $10 million in the warchest to prop up their budget next year. at 34, they was

would be in a world of hurt on that front. >> how does that work politically? you talk to people in russia. are they starting to see the inability to buy things they previously did? are they starting to think about that as a long-term reality? are they as comfortable with the current leadership's direction of travel? >> no sign of real disappointment with the direction of leadership in terms of the polls. first off, obviously the big issue is, if you have a week or ruble, that will feed into inflation because russia imports so much stuff. not just iphones, but food and stuff like that. the russians are betting that , itsenerally speaking collapse will be deflationary. inflation isn't so much of a problem, perhaps. takehat doesn't of course

into account all those people that do like to buy those iphones and do like to travel. >> for russians, it is becoming so much more expensive to travel. of russia's most successful entrepreneurs was pointing out that a tiny fraction of russians actually travel. 143 million russians, 15 million of them have foreign passports. those 15 million are in a world of hurt. 128 -- maybe this isn't huge if they don't see a huge increase in their living cost. what this allows bruton to do is balance the budget and keep all of those social guarantees that he promised in the run-up to his last reelection. he can keep those promises. he can pay the military, pay the police, hopefully as much as he

said he was going to. should we talk about the autumn statement? >> before i throw that in, adidas, various companies being affected by this. barclays saying that adidas is going to see its earnings hurt by the ruble devaluation. i think we are going to have to watch more carefully. they get about 8% of their revenue from russia. we profit margin last time reported on that portion of the revenue. that is getting eroded by this depreciation of the ruble. they would also be concerned about russia's ability going forward because of rising prices to purchase these adidas. that is something that is obviously something we have to watch. that is going to cycle into

earnings. >> so that is adidas. let's move to the autumn statement. the chancellor is -- >> we are all over. >> we are all over the two biggest stories. tomorrow will be the ecb. on the u.k., this is more of a political statement. >> it is in the sense that this is the last time we are going to get the chancellor speaking from the position of a coalition government. budget,y do their things are already acrimonious within the coalition. be two monthsill away from that may election. they will really be going at it. like an't look much coalition, will they? this is their last chance to really shine. that has a lot of people thinking maybe he is going to pull some cookies out of the cookie jar. >> or not. onmay be some improvements

the end of things for first-time buyers. that is something to watch for. stamp duty is a bit confusing. it is a one-off tax on the purchase of homes. they call it the slab system. forou buy a house right now , you are going to pay 1% interest on it. if it costs 250,000 pounds, you pay 3%. they want to change that number. the last time they set up that scale was 14 years ago. house prices were significantly lower nationwide. 250,000 pounds, those people need to be paying less tax so they can have more for their deposit. >> ryan, thank you so much. ryan chilcote all over russia and the autumn statement. >> i like the winter statements. mark barton will probably call it the winter statement as well. focusing on bloomberg radio, the first word is up next. for our viewers it is a second

hour of "the pulse." later on today, the autumn statement. the chancellor george osborne. ♪

>> george osborne's balancing act. the u.k. prepares to give his last autumn statement before britain goes to the polls. >> ahead of the autumn extends thesborne funding for funding scheme for another year. $20ictoria's secret, why million for a catwalk show is good value. >> good morning to our viewers in europe, good evening those in asia, and a very warm welcome to those just waking up in the u.s. i am guy johnson. >> i am francine lacqua.

this is "the pulse." live from london. >> 4 years after inheriting the biggest budget deficit since 1945, george also aren't will will giveorge osborne his last autumn statement before next year's general election. halfway towards his goal of returning public finances to surplus. >> what can we expect? what will it mean for britain? we bring you coverage. >> that happens at 12:30. . we will take that live. we look forward to that. we need to analyze what we can expect. theser hour, will statement get the market signals? the ones we are looking for. what will we find out that we do not already know? pimco's mike amey will be joining us. thelso, lucy oh carol,

chief economist from aberdeen asset management. chancellor gets his last chance to shape the economic agenda. we talked about a range of issues. one of which is how business will be affected. we've seen funding for lending expected. are we going to see a discussion .bout reforming business rates we will do that with john mills later. mark barton is at westminster to talk us through. the economics are next, what room for giveaways are we going to see. >> i spoke to the director

chamber, onhe longworth. he said expect the political giveaways to happen in the budget just before the election. the budget deficit this fiscal year is 6.1% higher than it was a year earlier. his target, to reduce the deficit to 84 billion pounds this year is looking ambitious. 97.5 billion pounds was the deficit last fiscal year. maybe we will have a small decline on that. he will want to endeavor that we do. osborne has a history of missing his targets. he said the coalition would eliminate the current budget deficit. that is the deficit that does not include deficit, by this election in 2015.

it is not going to happen between 2017 -- it is not going to happen before 2017. why? it has to do with lower tax receipts. have come into employment since march are in a low-paying, part-time, or self-employed jobs. money is not flowing into the treasury coffers. if that persists, we might have to have further spending cuts. expect austerity to persist in the next couple years. it could be even harsher from the levels of austerity we've seen in the last five years. it is a tricky balancing act. he will sing the praises of the u.k. economy, which is set to grow more than any other g7 economy this year. facing pay excluding bonuses is outstripping inflation.

unemployment is below 2 million since 2008. -- for the first time since 2008. the economy is growing but the tax coffers are not growing with it. >> what do u.k. businesses want from the autumn statement? >> i spoke to the british chamber of commerce. i've spoken to the institute of directors. the message from the confederation of british industry is give us a budget. give us an autumn statement that promotes growth. everybody is calling for an overhaul of the business rate system. the cbi calls it outdated. overhaul it. rates,are going to raise link it to consumer prices rather than retail prices. raise the threshold for small properties, too. that is the first thing cbi is

calling for. &d credit here that will be a benefit to companies trying to compete on the global stage. as we move towards the probability of more devolution on a national and regional calling forbi is low-cost competition and promoting local growth. at the same time, sustaining the integrity of the internal market . that means a comment regime for business taxes, employment law, the labor market, and the financial markets as well. the bank of england and the government have announced the extension of this funding for lending scheme. that means they're going to try and pinpoint landing to small and medium-sized businesses. this schema longer applies to big businesses.

it is going to be channeled to small and medium-sized businesses. they need it. year on year, lending to small businesses is continuing to decline. george osborne has unlocked one billion pounds of support for small business. lots of measures to try to boost small businesses. the exporters need help. exports are falling. george osborne had a plan to boost exports by 2015. that means tinkering with export finance and access to finance. no bake giveaways but he needs to get something to business. business needs something as we head to the election. the finances are not in such good shape. so much.you mark barton reporting from westminster. >> we are waiting for the autumn statement from the chancellor of the exchequer.

we will take that life. how our markets and investments positioned in advance of the statement? we talked to pimco's mike amey. ♪

>> welcome to "the pulse." live from bloomberg's european headquarters in london. in a few hours, george

osborne unveils his autumn statement on d the state of u.k. spending and economy. how will u.k. investors and the economy react? >> let's ring in pimco portfolio management mike amey. key message, he's going to revise up the deficit. he's going to bind himself and electionins the next into a round of tight fiscal policy for the next 2-3 years. >> we know that already. >> there is the business angle and supply-side reforms that he must continue. and a lot of it is the box, boxing the labour party in. so whoever wins the next election has very little wiggle room. >> what does it mean for -- >> type fiscal policy -- tight

fiscal policy is here to stay. adeyou look at where rates tr as if theres to us is very little pressure on raising interest rates. growths that if wage comes through some point that solves his problem. part of the problem is revenues rather than spending. >> in what way does today move the dial? market, what kind of a magnitude would it take to move gilt. >> is this year's forecast is a higher output than last year. the deficit is higher than it was last year on a rolling basis. everyone expects the numbers to improve.

if you get to a point at which the 2014-2015 deficit is going in the wrong direction, that would be an market mover. assuming it comes down a little bit and the story is consistent, i think the markets will be sanguine. >> you are expecting marconi to raise interest rates? -- you are expecting mark connie to raise interest rates? >> no, no. mark carney has made it clear he is staying put. i think the most important thing about what carney has said is not so much when the u.k. goes but who goes first. a lot of what he has said has been to push back on you kate rate hikes relative to the fed. six months ago, it was u.k. economy is all that matters. now, let's see what the fed does. >> he thinks we will get dragged

from the eurozone. gilt this morning at the same level. is that a fair reaction of reality? >> it is not a fair reflection of reality in any world other than the one where interest rates will stay. bond yields in general are cheap. it is part of the game of financial repression, which we have been in four years and does not look like it's going to end anytime soon. >>gilt this morning at the same level. what do you do to your portfolio? enthusiastic.ess if you look at the short-term power for inflation, the cpi looks likely to go below one. that is pretty much a done deal. if you take five year breakeven rates, rpi is currently 2.3 and will probably go below 2. on a net net basis they look a little expensive.

when we look at what is priced market looks expensive but you need a catalyst for the market to sell off. the first thing that is going to happen is mark carney writing a letter about inflation below target. >> i spoke to a lot of people who would like an answer to this. btp'sorld where you have 0.7, do younds at want govvies i your portfolion? >> if you are investing for the long-term, no. depends what you defined by govvies. core govvies, then no. you can make a case for a 10 bpt att at -- a 10 year 2%. the only reason people own

high-quality bonds as it is a stabilizer against their risk assets. that will remain the case but nobody will argue bonds are cheap at this level. >> are you a betting man? >> i guess professionally, i am. [laughter] >> we are trying to figure out what will happen. what color tight will george osborne wear? are we going to hear the words white and van? >> britton's economic plan is working. eers] >> this year's speech is a good one. 2012, the chancellor rattled on

for 46 minutes. anymore than that, people might start nodding off. borge usually goes with lue. navy 2-1. trendear, he bucked the and cannot with green. calmyourself, man! exchequer.lor of the loves the sound of his voice. they are pretty rowdy, the autumn statement. the chances are pretty low. that.i'm not sure about

>> it is fun. >> do you fancy any of those odds? >> i would take under 40 minutes. in and out pretty quick. >> this is starting his campaign. >> of course. with thempaign started scottish referendum, i think. all he wants to do is he wants a supply-side message, pro-business, as you mentioned. that has been the message for a while. a lot of the cuts to corporation tax is all part of the same deal. i cannot do that much on the macro because i am constrained by the size of the deficit. all i can try to do is put some supply-side measures and and hope that keeps the economy going. >> that is to counterbalance the risk of the referendum?

>> he wants to raise potential gdp. >> how hard is that? >> very hard. >you have serious headwinds. the reason you have rates where 2%, are, 10 year gilt at the economies are sensitive to interest rate rises. you saw that in the u.s. you got to be confident the economy can take it. >> will he get more going? -- more heckling. >> the number of mentions of white vans. white vans are going to be a feature after the register and strewed problem the labour party experienced. autumn statement today. forrrow is another big day the fixed income markets.

the ecb, there has been an increasing market belief that the ecb is going to take some sort of qe action. are we ever betting that at the moment? do you think we are ahead of ourselves? oil prices are coming down. inflation expectations are getting buried. mario draghi has got to do something. the question is what. >> i'm not sure the markets are that psyched up for qe tomorrow. the deal is done, if you read what mario draghi has been if.ng, when rather than >> what, sovereign bonds? >> you cannot get the balance sheet to three chilean unless you buy government bonds. trillion unless you buy

government bonds. they have got to get assets or lending through.. >> do you want to own what mario draghi buys? or do you want to buy the other asset classes? >> you might as well own what he is going to buy. if you take sovereign bonds, then you want to own sovereign bonds -- cover, abs. there is a scarcity value on these things, by definition. the ecb cannot seem to buy them in first place. the question of how far you go is interesting. if you go to the other extremes, equities are supported by low long-term bond yields. that is what the game is. supporting equity evaluations and lowering the average cost of capital. that is what qe is about.

four riskier portfolios you can buy riskier assets. pimco. amey of >> more indications north korea could be>> responsible for a hack at sony pictures. it is apparently due to the upcoming james franco film mocking the country's leader. "annie" sounds like hit the web before its release date. ♪

>> welcome back to "the pulse." live on bloomberg tv and streaming on bloomberg.com. >> north korea may have had a hand in a digital attack against sony pictures that crippled computer systems. according to people familiar with knowledge of the thattigation, which found some of the malware involved contained korean code. also involved in the theft of new releases including the movie "annie." the movie has been removed from some websites. itsristie's has named first woman ceo. following the departure of stephen murphy. weeks after sotheby's' boss announced his resignation.

>>. pilots set toansa strike. it will affect long-haul flights but not median distance. the airline hopes to maintain 50% of traffic. been talk about what's happening in the currency markets and show you what has been going on. i want to show you dollar-ruble. yesterday we had the central bank in the markets. that came as little surprise. what you are looking at here, i draw your attention to the right-hand side. but we have seen in the last 40 minutes. a significant drop in the value of the dollar versus the ruble. we've popped back up since. derek been various gaps in the value of this pair. drawing attention to the fact that may the authorities are monitoring the situation and

potentially taking action to deal with the appreciation of the dollar. 54.055. >> getting back to the u.k. economy statement. we speak to the chief economist at aberdeen management about what she is expecting. ♪

>> welcome back to "the pulse." live from bloomberg's year. headquarters in london. i am francine lacqua. benjamin netanyahu has fired 2 cabinet ministers, dissolved his coalition government and called for an early election. l fired yair lapid and tzipi ivni. elections expected in march. expected toama

nominate ashton carter as the new secretary of defense. he served under obama's previous three defense chiefs. australian cricket stars pay tribute to hughes, who died last week when his helmet was hit by a cricket ball. funeral was broadcast on television. >> from a sad story to what we focus on the autumn statement. what is going on with the markets. >> the play on equity markets for mainland europe. gains of over .5% for spain. guess where the good data came from? the u.k. ftse 100 down by .1%. services data from the u.k. solid beat. the bond market is where the excitement has been happening.

in italy, they joined the club south of 2%. italy are record lows as it yields briefly chat below 2%. stunning news in the bond market. what happens in italy and elsewhere is we get qe from the qe from the get ecb. drag down euros could bund yields. bundapanification of the market. the europe at a low. end.ooking for $1.15 year revised from $1.20. buried in the news about the autumn statement is a little

thing happening tomorrow called the ecb meeting. qe.o qe or not to tom keene in new york. >> we're looking at russia. we will talk to one of our most popular gaguests. he's been talking about economic slowdown in the u.s. a better than good american economy. nert will join us. rt aboutd to mr. trenne my chart of the year. we will give him a victory lap. oflook at mary childs bloomberg news, hurt reporting on the blowout in pimco. read on the global wall street.

in that story at pimco. tensions between mr. gross and mr. balls. >> a great story and people should read it. tom keene with "surveillance," 25 minutes from now. >> the autumn statement in the u k, what can we expect in terms of further devolution of power from scotland and elsewhere? the chiefned by economist from scotland's largest fund manager, aberdeen asset management. lucy o'carroll, what is the view from edinburgh? what are you paying attention to from a scottish perspective? >> the same things everybody else in the rest of the u.k. is. given that we are a global business. scotland is in our looking nation -- and outward looking nation.

mainly on the fiscal side. there have been rabbits and hats on the fiscal side and so forth. what about the fiscal position? that's going to be a trickier call for the chancellor today. give us a sense of what oil prices are doing to scotland's mood about devolution? >> the oil price is good for the economy overall, taking a u.k. perspective. it will provide a boost to growth. it will take time to come through but it will eventually. course, as with all asset prices comment these things can go down and bounce back quickly. it hasot to see how much sustained since june this year. it is good for the economy overall.

it provides, essentially, a tax break to consumers. it helps with the cost base for the business sector. >> does it show that scotland was right to stay in the u.k.? go down, they go up, what has happened since june a surprise to most oil specialists and economists like myself. it is not really something that you can tie directly to a political issue. it.is a market-based issue . we are looking forward into 2015 . oil is one factor in terms of how a global business performs but there are a range of other factors, too. are going tonk we end up in a position where we end up with tax competition between edinburgh and london?

>> taxation is part of what is being discussed in the autumn statement today. ,hat is part of the equation taxing and spending as up to a surplus or deficit. side is something that analysts are going to be looking at to see what kinds of questions the chancellor is answering on that. if you look e.on to the 2015 election, that is when -- if you look beyond the 2015 election, that is when we are going to get answers. it is more about the electoral situation. until we get through that, there are going to be few specifics on tax. >> thank you so much, lucy o'carroll at aberdeen asset management. >> we will be back on the ground at westminster ahead of the autumn statement. the perspective of a major manufacturing ceo who is a donor opposition.r

what will he make of george osborne's speech? all of that is coming up on "the pulse." ♪

>> welcome back. you are watching "the pulse." let's get back to the autumn statement. another group who will be hoping for help from the chancellor r britton's manufacturers.

what do they want to hear? let's go back down to westminster and rejoin mark barton. he is joined by aiming fracturing ceo who is also a contributor to the labour party. over to you. >> thank you. if you had the ear of the said you cand he have one thing, what would you have? >> i would ask for a lower value for the pound. we have a huge problem in this costs arehe sterling at a high level. this is inhibiting the economy from growing. it is making investment difficult and ensuring we have less and less manufacturing and more difficulty paying our way in the world.

>> what could the government do about the pound? how can the government push the pound lower? >> there's a number of things.. the reason the pound is so high is because of the enormous amount of capital pouring into the country. to buy properties in london, billions of pounds. every year. this is pushing the pound up. you could constrain that. >> are you suggesting the mansion tax is a good thing? >> it is not the best thing. there are other ways of doing it. taxing properties that are anti-a lot of the time would help. lot ofhat are empty a the time would help. >> the u.k. is set to be the top perform in the g7, isn't that a good thing? >> it is good in the short term.

capital has made people feel bullish. underminesime it performance and leaves us in a weaker position. this has been the history of this country for decades. >> we are not balanced yet. if you look at the gdp report company .7% gain was due to consumer spending. when will this economy balance out. business investment deadfall but year or so. for a >> business investment is up about 10%, but from a very low base. we invest on the figures that % but our revised, 14 gdp every year. the world average is 24%. china is 46%. >> why aren't they investing more? > they need more profitable

opportunities. one problem in manufacturing is it is difficult to make money out of import substitution or exporting. the value of investment that is going into the industry is low, damaging the low. party donor.our when it comes to economic management of the economy, in the polls osborne and cameron are ahead of th miliband and balls.. do you really think miliband and balls are that are placed? >> i think they are at least as well placed. the perception about what went wrong in 2008 is a historical. at the time there may have been too little regulation but that was not the message the conservative party was given.

there were mistakes made by the labour party and all the government. the thrust of the procedures the labour party was pursuing at the time was a general consensus. >> the conservative party seems to be more vigilant in wanting to reduce the deficit. the labour party says we will reduce the current deficit. in the next parliament, the conservatives are more v vigilant. we want to do it by 2017, 2018, 2019. are you, as a business owner and aret labour party donor, you happy for the deficit to continue rising? possibly for the 2020's, which is looking likely if there was a labour government. about thelicies

deficit are misconceived. the problem is it is largely a mirror of the balance of payments deficit we have got. until you have got the balance of payments under control, you will never get the government deficit under control. all borrowing and all lending 20.to sum if you have a deficit on foreign payment has got to be made up somewhere. >> are you worried about the amount of spending cuts that are going to be needed, our tax hikes, depending which party comes to power? some say there will be more austerity in the next two years than in the last five years. >> unaware of the fact that that is what -- i am aware of the fact that that is what people are saying. i think it is more likely to make the economy contract, leaving us with the same level of deficit as we had before. this is the danger. we had all this austerity.

at the end of the day it does not produce what everybody once. >> where are you within the european union? are you pro-referendum? are you pro renegotiation of our position within europe before the referendum? >> i think what we need to do is ensure we have a referendum that is a process. and go through renegotiation. >> and if we do not get renegotiation, should we leave the eu? >> it depends what the outcome is>>. if you go into great negotiations saying whatever the terms are you will accept them, you are not going to get changes. the british people would like to stay in the eu but only on terms that are different from what we have got at the moment. businesses have adopted this approach, which is the right one. what does a business person say about the recent measures

unveiled or spoken about by david cameron on immigration? immigrant workers cannot take on welfare benefits. he has moved back from the quota system. do you support that? >> i think he's trying to engineer changes that will not require treaty changes. these are going to be easier to negotiate through with the members of the eu. whether it is going to be possible to get any changes to the immigration that we have, which are acceptable to the , withoutn as a whole treaty change is something we're going to find out about. >> immigrant workers contribute to your business. >> we had a substantial proportion of people working at my company, jml, who come from abroad. they work very well and are welcome. i do not think this country could move to a situation where there is no immigration.

it is a question of how many people and what sort of people come in. >> john mills, chairman of john mills limited. it is all about the balance of payment. that is the underlying reason for the budget deficit. the words of john mills, founder and chairman of john mills limited. back to you. that areills limited, known as jml. if you turn on a british television you go see jml. consumer goods, tv sales, etc. a star-studded audience flocked to the first victoria's secret fashion show in london. we went behind the scenes. we bring you that, next. ♪

>> welcome back to "the pulse." live on bloomberg tv and streaming on bloomberg.com. bloomberg went behind the scenes at the victoria's secret catalog shop. -- catwalk show. we had the opportunity to speak with the man behind the $20 million extravaganza. >> i'm the executive producer of the show and decreased -- in the chief creative officer.

the process is all year long. i'm thinking about next year today. the challenge is to do it better next year. we do not sit down and say this year we are going to do it a little worse than last year. what do we do next? the show is a dramatically that are than last year. it cost $20 million to produce the show. it is astounding, right? is itys get the question worth it to spend so much on a fashion show? well, is it worth it to be seen in 192 countries for an hour in december. this show has made us well known worldwide. i want people to get off their privileged butts, this is a hard ticket to get, enjoy themselves. >> ok. let's move on from that. some breaking news for you.

,ithin the last few minutes yatsenuk says there appears to be an accident at a ukrainian nuclear plant. we do not have many details but they will speak about later on. on the news we are getting. there has been an accident at the ukrainian nuclear pat -- nuclear plant. let's bring in ryan chilcote. >> chernobyl is what people are thinking about. we have not heard that it is the primeof scale minister said there has been an accident at the nuclear plant we are going to get more details from the energy minister in a .hort while

they just got a new government .ast night there is a lot to deal with. >> we do not know when this happened? than do not know anymore what the ukrainian prime minister has just set within the last five minutes or so. >> we do not know when this briefing from the energy minister will take place. we hope it is in the next couple hours. >> he indicated it would be very soon. our ryan chilcote will stay on top of this. this is a government that is in transition. they just took office. that is going to make it that much more difficult to deal with in terms of the right people to speak to. >> we will follow that story. the other story is the buildup to the autumn statement from the chancellor of the exchequer in the u.k. mark barton, what do we know and what do we need to know? billion.gure, 97.5

that was the budget deficit last fiscal year. the big question is will george osborne, the chancellor, forecast a narrower budget deficit this year. in march it was supposed to shrink by 12 billion to 84 billion. what is the outlook for the finances? will he reaches budget deficit target for 2018 and 2019. the funding for lending scheme has been extended. he has unlocked one billion pounds of support for small business. expect business on stamp duty and inheritance tax. maybe northern ireland will be given flexibility on its tax as well. a busy day for the chancellor of the exchequer. that is it from me. >> thank you so much, mark barton from the green. you can follow all of us on twitter. @guyjohnsontv, i am @flacqua.

mark barton will bring you the autumn statement live and in full. have that if you are watching in the u.k.. have a great afternoon. ♪

>> stocks in the dollar drive ever higher. russia faces currency devaluation as america stands alone with good economic growth. new reporting on less days -- on

the last days of bill gross at pimco. and the decline of magazines, it continues to survive. you need to go upscale, go narrow. this is bloomberg surveillance. we are live from our headquarters in new york. i am tom keene. joining me, scarlet fu and brendan greeley. arco a standoff between safety regulators in the u.s. and japanese makers of airbags. takata is sticking to recalls only in states with high humidity, which has been blamed on the airbags' non-function. theirtors are considering next move. a congressional subcommittee will question a takata executive later this morning. another sign russia may be headed into recession. the service