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Lesson Transcript

INTRODUCTION
Kellie: Hello and welcome back to EnglishClass101.com. I’m your host Kellie.
Gina: And I’m Gina. This is Culture Class, Season 2, Lesson 17 - top five battles in British Finance.
Kellie: Yes, in this lesson we’ll talk about some of the biggest companies in British finance, plus a few other things, and how they are competing for the money of the British public.
Gina: Yeah, this part of the lesson is all about the money! So shall we get started?

Lesson focus

Kellie: I think so! Number 5 is The Bank of England vs. British banks and the British Public.
Gina: The Bank of England is the central bank of Britain. It is the second oldest central bank in the world and the only bank authorised to produce banknotes in England and Wales.
Kellie: It plays a very important role in British finance and its role is to maintain stability and support the government’s financial targets.
Gina: As for British banks and the British public, that’s pretty self explanatory, I think!
Kellie: I think so! They’re the people most affected by what the Bank of England does.
Gina: And that’s at the root of the battle. The Bank of England has to balance what is best for the people and the banks with what is best for the country.
Kellie: How do they do that?
Gina: One of the most powerful tools at their disposal is setting the interest rate. The amount of credit and loans in Britain is very high and there is an estimated trillion pounds of personal debt out there. Most, if not all of that, will need interest paying on it.
Kellie: That’s a lot of money! The interest rates right now are really low, aren’t they?
Gina: Yes, due to the banking crisis in 2007/2008.
Kellie: I feel that we will hear a lot about the banking crisis in the forthcoming lessons.
Gina: I think so too. Before the crisis happened, the interest rate was 4.5% but now it’s down to a record low of 0.5%. The interest rate will be raised when the economy recovers more and the jobless figure decreases.
Kellie: So interest payments will go up too.
Gina: Yep.
Kellie: Okay, number 4 is among the same theme I think – British Banks vs. British taxpayers.
Gina: It’s similar, I think, and we need to talk about the banking crisis for this.
Kellie: Wow, already? We really are going to hear a lot about this.
Gina: In 2007 and 2008 a lot of banks either collapsed or were on the verge of doing so. The British bank Northern Rock had to be nationalised to save it and at one point HBOS, the largest provider of mortgages in Britain, nearly went under too.
Kellie: Where do the taxpayers come in?
Gina: When the UK government realised what was happening, it stepped in with a bailout package for the banks. It made £500 billion of taxpayer’s money available in case any bank needed it.
Kellie: Did the banks take them up on it?
Gina: The figures posted for the 2012-2013 year by the National Audit Office, the most up to date available from them at the time of writing this lesson, suggests £141 billion was used.
Kellie: I suppose many banks and building societies didn’t take the cash.
Gina: They didn’t. The UK government says that all of the money will be paid back, but a lot of it was invested in shares that have since lost value and the repayment of it is dependent on mortgages being paid to recover the capital so that could take twenty years to happen. There could be a £34 billion loss.
Kellie: I hope they can recover it! Number three is HSBC vs, Barclays.
Gina: Two of the biggest banks! HSBC is a huge company and operates in 85 different countries. It was the world’s largest bank in 2012 when looking purely at the worth of assets. It’s the second largest company on the UK stock market behind Royal Shell.
Kellie: And what about Barclays?
Gina: Barclays has a long history as it was established in 1690. In 1967 it opened the world’s first ATM and has expanded by acquiring many other banks, such as the US division of Lehman Brothers and Woolwich.
Kellie: They’re both very large and popular banks in Britain. You see their branches and cash machines everywhere.
Gina: Yes, they’re two of the biggest. HSBC is larger though, especially worldwide as it has a customer base of 89 million compared to Barclays’ 48 million customers.
Kellie: Can you give me some money figures? You know that I love the money!
Gina: Sure! HSBC’s market value is a huge £130.7 billion while Barclays’ is £39.5billion. However, despite HSBC’s customer base and market value being far larger than Barclays, the value of their assets is very similar.
Kellie: How similar?
Gina: £1,677 billion for HSBC compared to Barclays with £1,620 billion.
Kellie: That is closer than I would have expected. Our number 2 is Europe vs. Britain.
Gina: We have to take a quick moment here to explain what we mean by Europe. Britain is one of the 28 member countries of the European Union, the EU, but is not a member of the Eurozone, as she has retained her own currency.
Kellie: That’s right. However, a lot of European financial decisions still affect Britain, even though there isn’t a shared currency.
Gina: Quite often the UK government doesn’t like decisions or doesn’t think that they are in the best interests of the British public and so opposes them.
Kellie: What happens when they oppose them?
Gina: Either the laws are not implemented or it can end up in court for a ruling on whether the decision of the EU is just and right. In the week prior to this lesson being written, there were two different challenges by the British government to EU financial policy.
Kellie: And our number one is The City of London vs. Canary Wharf.
Gina: Let’s quickly define what we mean by The City of London. We don’t mean the capital of England which is also called London, but a city within that city that is roughly a square mile in size. It’s the base of the British finance system and only has a population of 7,000 but 300,000 people work there.
Kellie: Canary Wharf is also a finance district, isn’t it?
Gina: Yeah. It’s located on the Isle of Dogs which is a little island on the River Thames that is connected to mainland London by a small slice of reclaimed land – only around forty metres of it! Many of the tallest buildings in Britain are in Canary Wharf and it continues to be developed.
Kellie: So there are two finance districts, quite close together, competing for businesses to move there?
Gina: Yes. The City of the London is the historic base and companies such as The Bank of England and Lloyds of London have long had their base there. Canary Wharf is home to many companies such as Barclays, Citigroup and HSBC.
Kellie: You said that Canary Wharf is still being developed?
Gina: It is and land there is at a premium. The HSBC building sold for a record breaking £1.1billion in 2007.
Kellie: I wonder if more companies will choose Canary Wharf over the City of London.
Gina: We can only wait and see!
MARKETING PIECE
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Outro

Kellie: That’s all for this lesson so see you next time!
Gina: Thanks for listening, bye!

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Friday at 06:30 PM
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Hi Listeners! Have you ever heard about any of these battles?