250. Business Secretary Peter Kyle: being let down by Mandelson & the UK-China relationship

Summary

The Rest Is Money – Episode 250 Business Secretary Peter Kyle: Being Let Down by Mandelson & the UK-China Relationship
Date: February 9, 2026
Hosts: Robert Peston & Steph McGovern
Guest: Peter Kyle, Business Secretary

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Episode Overview

This episode dives deep into two main themes: the fallout from Peter Mandelson’s ties to the Epstein scandal and the UK’s evolving business and trade relationship with China. Business Secretary Peter Kyle joins Robert Peston and Steph McGovern for a far-reaching conversation covering political ethics, UK trade strategy, investment in domestic business, and the challenges facing traditional high street businesses. A fire alarm mid-recording cuts the conversation in half, adding a memorable twist to an episode that tackles heavy issues with frank, insightful discussion.

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Key Discussion Points & Insights

1. The Mandelson/Epstein Scandal and Political Ethics

[04:08–09:54]

• Victims First: Peter Kyle underscores the importance of centering victims, not just high-profile men, in discussions about the Epstein scandal.
  • “We always end up talking about the man and not the women who suffered this.” — Peter Kyle [04:13]
• Kyle describes feeling “bitter, disappointed, and extremely... difficult to comprehend” the extent of Mandelson’s flaws now under criminal investigation, acknowledging that many who worked with Mandelson feel let down.
• Peston and McGovern press Kyle on what made Mandelson continually employable despite recurring scandals and public knowledge of his links with Epstein.
• Kyle notes that Mandelson’s “brilliance” lay in his analytical abilities and political acumen, but reflects that such intellect failed to inform Mandelson's own ethical decisions:
  • “I'm angry as well that you would have those skills and ... not have the analytical skills to apply to your own personal character and the relationships that you have.” — Peter Kyle [08:27]
• McGovern challenges whether Mandelson’s so-called brilliance was just information brokering, not genuine statesmanship [08:46].
• Kyle stresses the need for criminal process to determine the facts and, crucially, to learn lessons not just for politics, but for justice for victims.

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2. The UK–China Relationship: Policy, Security, and Opportunity

[09:54–24:25; 26:38–33:44]

A New Era for UK-China Relations

• Kyle describes his mission as fostering a relationship with China “fit for the moment”—one balancing national security with economic partnership [10:17].
• The UK is taking a preemptive approach: identifying sectors where Chinese involvement will be barred, while courting collaboration in mutually beneficial areas.

National Security: Drawing the Line

• Peston raises fears of “kill switches” embedded in Chinese-made solar panels at the heart of UK energy infrastructure [12:02–14:07].
• Kyle reassures that UK intelligence and security agencies actively monitor and have powers to block suspect imports:
  • “Intelligence agencies have full access to monitor anything that is brought so they could stop it.” — Peter Kyle [14:12]
• Kyle explains the dilemma of global supply chains: even with import bans, components often find their way into the UK via third-party products [15:07].
• Emphasizes shift toward “localized production”—incentivizing Chinese firms to manufacture in the UK under British law, creating jobs and ensuring oversight:
  • “China is looking at Britain in order to do the manufacturing here. ... If you do so, you obey British law and you are then accessible to all enforcement agencies.” — Peter Kyle [15:48]

Trade Balance and Sector Growth

• McGovern points out the UK’s £52bn goods deficit with China, but a surplus in services [18:34]. Kyle details efforts to open Chinese markets to UK brands like Brompton Bikes and highlights access to China’s booming middle class.
• Half-tariff on whisky—an example of leveraging changing Chinese consumer tastes for British producers [19:00].
• Peston and Kyle debate the limits of manufacturing expansion from such deals, with Kyle underscoring the resilience and potential of even small exporters.

Services Sector: The Next Big Opportunity

• The UK and China have agreed to a “feasibility study” on expanding market access for UK services—finance, architecture, law, education, and accounting [22:37].
• Kyle is “cautious but ambitious” about the vast potential and acknowledges the need to carefully vet security ramifications [23:03].

The Soft Power of British Culture

• Cultural exports are a key part of the UK-China relationship. The delegation included arts and sports groups (e.g., the Royal Shakespeare Company, Premier League, snooker).
• President Xi’s personal story about reading Shakespeare during the Cultural Revolution highlights the enduring appeal and soft power of British culture [27:41–29:17].

AstraZeneca’s £11bn China Investment

• Discussion about AstraZeneca’s expansion in China—why it’s valuable for UK innovation and collaboration, not simply job exports [30:14].
• “The IP remains with a British company...this is complementary to [UK R&D], not instead of.” — Peter Kyle [31:57]

The Trump Factor

• Kyle acknowledges Trump’s hostile stance to China, but sees only “opportunity” in navigating complex global partnerships:
  • “All I see is opportunity. ... Where there are challenges or ... potential conflict, you just deal with it.” — Peter Kyle [33:02]
• The UK deals with the US, China, India, and the EU simultaneously, adapting to global disruption through “mature, grown-up, frank conversations.”

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3. Domestic Investment and “Picking Winners” Debate

[35:18–40:40]

• On government investing in high-growth companies (“picking winners”), Kyle clarifies that while he personally doesn’t pick firms, he has relaxed risk boundaries at institutions like the British Business Bank and UK Export Finance to speed up investment in scale-ups.
• Example: £25 million invested in Kraken, an Octopus Energy spin-out; the government’s investment aims to “crowd in” private investment, not to fund companies single-handedly.
• The bottleneck for British scale-ups, according to Kyle, is mid-to-late round funding (Series B/C/D), not early-stage capital. Government intervention at these stages is crucial to creating the UK’s first trillion-dollar company.
  • “We do not have a trillion dollar company in our economy, we've never produced one. ... I do [think we’ll get one].” — Peter Kyle [39:24]

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4. High Street Businesses, Rising Costs & the VAT Dilemma

[40:40–49:08]

• McGovern highlights the challenges faced by bricks-and-mortar businesses—especially rising employment costs and the impact of business rates.
• Kyle admits the government has prioritized investing in R&D and public services during difficult economic times, and raises are necessary to drive future growth.
• He acknowledges the churn and closures on the high street, but stresses the need for “fundamentals”—customers with more money in their pockets, and tax/regulatory frameworks that support innovation and retail [44:04–45:43].
• On the “chair rental” VAT workaround for salons: Kyle is aware of the issue, discusses it with Chancellor Rachel Reeves, and stresses his focus on being attuned to grassroots business challenges.

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Notable Quotes & Memorable Moments

• “We always end up talking about the man and not the women who suffered this.” — Peter Kyle (on Epstein scandal) [04:13]
• “Of course I feel, you know, very hurt... I'm angry as well that you would have those skills and ... not have the analytic skills to apply to your own personal character.” — Peter Kyle (on Mandelson) [08:27]
• “If we just said, okay, no cars, no solar panels coming into our country, the nature of supply chains around the world means... components would still come into our country in different products in different forms.” — Peter Kyle [14:31]
• “China is looking at Britain in order to do the manufacturing here. ... If you do so, you obey British law and you are then accessible to all enforcement agencies.” — Peter Kyle [15:48]
• “I am confident in this government. I am confident in our country and the businesses that drive our country. Therefore, why should I be cowed when I see global disruption? I should be getting right out into the middle of it...” — Peter Kyle [34:04]
• “We do not have a trillion dollar company in our country... I do [think we're going to get one].” — Peter Kyle [39:24]
• “It's not just sitting on planes heading off to foreign countries to do trade deals. I take very seriously the need to be as embedded in the deep frontline economy as I can.” — Peter Kyle [48:00]

Memorable Moment: The Fire Alarm

• [24:25] A real fire alarm interrupts recording, forcing all present (including political and media luminaries) to evacuate: "It was quite a, you know, an eclectic mix of people, if I'm honest..." — Steph McGovern [26:40]

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Timestamps for Important Segments

• [04:08] Discussion of Epstein scandal and Peter Mandelson’s repeated comebacks
• [05:06] Peter Kyle expresses being “let down”
• [09:54] Pivot to China and the Chinese business delegation trip
• [12:02] Peston presses about security risks in Chinese imports, particularly solar panels
• [15:07] Kyle details manufacturing shift and partnership strategy
• [18:34] Trade balance, services surplus questions
• [22:37] Services market access and feasibility study
• [24:25] Fire alarm interruption
• [26:38] Resumption; soft power, British cultural exports, and President Xi anecdote
• [30:14] AstraZeneca’s Chinese expansion
• [33:02] Handling Trump’s rhetoric on UK-China relations
• [35:18] State intervention in high-growth firms; “picking winners” debate
• [40:40] High street challenges and government’s balancing act
• [46:30] VAT and business model issues in the hairdressing sector
• [49:08] Wrap-up and thanks

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Conclusion

This episode delivers candid commentary on two urgent fronts: political fallout from high-profile scandal and the nuanced opportunities/challenges presented by UK–China relations. An unusual recording interruption adds a light moment to an otherwise rigorous dive into the state of British business. Peter Kyle’s openness about government strategy, risk, and shortcomings—alongside the show’s willingness to explore these issues in depth—make for an engaging and edifying listen for anyone interested in business, finance, and the intersection of politics and economics.

Transcript

[Steph McGovern]

Epstein particularly Peter Mandelson's connection to it all. He is a man who has had various important positions in politics. He's also a man who's had to resign quite a few times. There's a lot of scandal. What is it that keeps getting him re employed? Why did Starmer bring him back to be U.S. ambassador knowing that there's this dark past?

[Robert Peston]

We do regard China as a threat to our security. Security experts, they say there are security risks. So with solar panels, they're at the heart of our energy infrastruct. It is absolutely conceivable that China can put a kill switch into solar panels.

[Steph McGovern]

This episode is brought to you by Octopus Energy. Now, you know we love talking to entrepreneurs on this show. So with us is the founder of Octopus Energy, Greg Jackson. Right, I'm going to start with this. If you could change one thing to help Britain's economy grow, what would it be?

[Peter Kyle]

I'd love to see pension funds putting more money into British businesses. Over the last 25 years, they've fallen from 40% of their investments going to British businesses to 4%. That's bad for business here. It's bad for our stock market, but it's also bad for pensioners. In fact, a Canadian pensioner will get almost double the pension from the same amount invested as a British pensioner. We need to sort that.

[Steph McGovern]

Nice one, Greg. Well, thanks to Octopus Energy for powering this episode of the Rest Is Money. Close your eyes. Exhale. Feel your body relax and let go of whatever you're carrying today. Well, I'm letting go of the worry that I wouldn't get my new contacts in time for this class. I got them delivered free from 1-800-contacts. Oh, my gosh, they're so fast.

[Peter Kyle]

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[Steph McGovern]

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[Peter Kyle]

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[Steph McGovern]

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[Peter Kyle]

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[Steph McGovern]

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[Peter Kyle]

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[Steph McGovern]

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[Robert Peston]

No problem.

[Peter Kyle]

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[Steph McGovern]

Hello and welcome to the Rest Is Money with Robert peston and Steph McGovern. And also with us today, Peter Kyle, the business secretary. Now, this episode is a bit of an unusual one. You will hear in the middle of it, an alarm go off and then all of us having to evacuate the room. So we have had to record this episode over two days. But it's a really interesting one because we're covering lots of topics around China and the deals that were done there and how important it is for business. And of course, we start with Peter Mandelson. So here's our interview with Peter Kyle. Peter, thanks for joining us. Good to have you back on the show. There's loads to talk to you about, obviously, to do you know, what's happening with the deals from China, you know, your big thoughts on investing and everything else. But we've got to talk about what's in the news at the moment, what's dominating everything, Epstein, and particularly Peter Mandelson's connection to it all. Robert and I have spent time on this podcast talking about it, of talking about the ramifications for, you know, finance, for business, for everything else. And obviously the women at the centre of this who were abused, the young girls, the children. The thing that. The question, the big question I guess I have about Peter Mandelson is he is a man who has had various important positions in politics. He's also a man who's had to resign quite a few times. There's a lot of scandal, there's a lot of murk in the background. What is it that keeps getting him re employed? You know, why did, why did Starmer bring him back to be U.S. ambassador knowing that there's this dark past?

[Peter Kyle]

I have to start by recognizing the people who suffer in this story and the victims. And of course, one person we know has lost a life to this and they are always at the forefront of my mind, as they are yours and I know your listeners too. It's important to say that because we always end up talking about the man and not the women who suffered this. So, but to answer your question directly, because I won't avoid these questions, Peter Mandelson was brilliant and flawed and we are only now really discovering the full extent of his flaws, which has led to a criminal investigation. And we'll have to see where that goes. And for those of us who have worked with Peter in the past, for those of us who have known him for a long time, this is bitter, it is disappointing and it is just extremely sort of Difficult to comprehend just the full extent of the relationship that he had.

[Steph McGovern]

Do you feel let down?

[Peter Kyle]

Yes, of course I do, yeah, very much so, because it is sort of

[Robert Peston]

something that most people won't get right. You know, he improperly takes a loan, you know, back in the 90s to buy a property from an MP minister. Colleague Geoffrey Robinson has to resign. There's all that dodgy relationship with the Hindujas, immensely wealthy business people. Mandelson resigns. In the end, he's actually cleared by the investigation, but he still resigns and there's still a really bad smell around all of that. It was public knowledge at the time that Starmer appoints him to be ambassador in Washington, that he had a close relationship with the sex criminal pedophile billionaire Jeffrey Epstein. Given that history, explain his brilliance to us. What was he so brilliant at? That meant that whether it was Starmer or Blair or Gordon Brown, that they always gave him another chance.

[Peter Kyle]

I'm reluctant to engage too deeply in this because you're asking me to be a commentator because I wasn't involved in any of the reappointments.

[Robert Peston]

No, no, but you said he's brilliant and I just like to know why. Because you've witnessed what you thought was his brilliant. So tell us what it was.

[Peter Kyle]

So I wasn't involved in any of his reappointments, but I wasn't suggesting. Yeah, any of those things, but. And then back then I wasn't involved in the governments that made those reappointments, but so, you know, I can only comment. Well, Robert, you've interviewed him many, many times. You have interviewed him since he left office. I imagine lots of your viewers and listeners would have been interested and intrigued by the commentary that he provided when he was out of office, as well as looking at him as a fascinating character because of his political skills in office. The fact that just in recent, you know, weeks he's been doing, you know, mainstream Sunday interviews on the BBC and on other stations as well. So there is. It's not just sort of me and the politic. It's not just me and people.

[Robert Peston]

We interview lots of people who are not criminals. And I'm not saying he's a criminal, but we interview lots of people who haven't crossed lines, as it were. So I don't think the fact that he's, you know, being interviewed on either my show or Laura Kuenssberg's show tells you why he was so valuable to governments. I'm just trying to work out what it was. I'm not asking you to get into Keir Starmer's mind. I'm just trying to. If you're a practitioner of politics, what is it, or indeed somebody in government, what is it that Peter Mandelson was so good at?

[Peter Kyle]

The reason why I mentioned him doing such medium and such demand for him on media is that his. The reason why he was on these interviews and why you wanted to interview him was because as an analyst, as somebody who could understand the world and describe it and then place current events within it and take decisions, he was brilliant. Which is, you know, he was on these TV shows in recent weeks because of his analytic abilities. And those analytic abilities were also put to very good use for the governments that he worked in. Now, you know, you asked earlier if I how I felt. Of course I feel, you know, very hurt by. But I'm angry as well that you would have those skills and that you would also not have the analytic skills to understand these big things going on in the world, but not have the analytical skills to apply to your own personal character and the relationships that you have.

[Steph McGovern]

I mean, the only thing I would say now, though, is in hindsight, now we know what we know in terms of the emails and things, and obviously there is a criminal investigation, so there's only so much we can say. His brilliance now just looks like it was just a man who bought and sold information. And it wasn't brilliance at all. It was actually somebody who was trading on highly valuable information. And that's where his connections came from. And his analysis came from these relationships he had, what he was getting, sending information and getting information from people.

[Peter Kyle]

And that's what we'll have to understand as the full extent of it comes out. It is not just analyzed by commentators, but it's analyzed by a criminal process, where in this country, that is how we get to a definitive truth. I will be watching very closely for that as well and learning any lessons from it. But again, all the way through it, we are seeking this justice for justice for the people who are victims of Jeffrey Epstein, even though whatever Peter's role within it, it now seems to have moved on from some of those crimes to a different kind of crime. But those are things that we have to learn the lessons of, and that's why criminal process is so important.

[Steph McGovern]

So there is a ton of other stuff we want to talk to you about. Should we start with China? Because obviously there's been a lot going on. We were talking about it on the podcast. What do you think was the main benefit of that Chinese trip? I mean, tons of people went from all walks of life in the uk. What was the aim? What's the main thing you've come back with and think is the biggest success from it?

[Peter Kyle]

Well, the main aim was also the main sort of delivery out of it, which was to kind of. Well, it's not a restart, but it was to start a relationship with China that is fit for the moment that we're living in. And by that I mean one that takes national security and the challenges that we have with security in the modern world with countries, including China, not just exclusively China, but because of China's scale and economy, also find ways that we can have an economic relationship and also form a diplomatic relationship where we can express the concerns that we have with some aspects of Chinese operations and life and human rights, whilst also focusing on a trading environment simultaneously. A lot of work went into this trip in advance and this is going to lay the foundations for the rest of the conversation that we have. But rather than doing what the previous lot did, which was just firstly to throw open the doors and then try to unpick dangers when they had, or the challenges or national security issues when they arose, we tried to preemptively identify those areas where we needed to keep Chinese businesses and government operations out of our economy and society, and then also identify areas where we can have a more fulsome relationship, a trading relationship, and focus on those. I was over there in September, just a couple of days after being appointed into this job, and we started the process there face to face, explaining bits of our economy where they simply will not be allowed to have any access and relationship. But these are the areas where we believe that we can. And focusing on those very free, very frank exchange, very mature exchange. So the benefit of this, this was we could take over a whole bunch of different businesses and we could start that process. Just a quick.

[Robert Peston]

Can I ask you on this because, you know, we do regard China as a threat to our security. That is official policy. But as you say it's, or as you imply, it's the world's second biggest economy, it's by far the world's biggest exporter of manufactured goods. But where do you draw the national security line? That seems to be. And this is your job, you're the business secretary. So, you know, this is absolutely the heart of the kind of decisions you got to make. So let's just take an example of a product that. Or a couple of products that we are happy to import, right? Electric vehicles. They are now the world's biggest manufacturer of electric vehicles. We're happy to import them solar panels. They're the world's biggest manufacturer of solar panels. Now when I talk to security experts, they say actually in both cases there are security risks. Right. So with solar panels, right, they're at the heart of our energy infrastructure. You know, security experts say to me it is absolutely conceivable that China can put a kill switch into solar panels. How can we make sure that if we're becoming more dependent on solar that at a moment that our relationship with China becomes more hostile than it is at the moment, they don't simply switch off our power?

[Peter Kyle]

Firstly, let me just say we have outstanding intelligence and national security agencies in this country. They are world leading and they do a great job. They have the powers to intervene and to monitor all economic activity. And people focus on, when we do terror legislation and national security legislation, they focus on the obvious sort of physical threats to our shores and our peoples. But actually, you know, half of all the terror legislation is aimed at economic terror as well and economic damage to our country. So firstly, people should rest assured that as we move forward, let's just decide,

[Robert Peston]

let's just take a solar panel. Do they look at the solar panel and say actually there is no kill switch in it if we're importing.

[Peter Kyle]

What I'm not going to do is give is give details on every single bit of activity because of course that then there are lots of people who listen to this show and it's freely downloadable right around the world. So what I can say is that intelligence agencies have full access to monitor anything that is brought so they could stop it.

[Steph McGovern]

So not.

[Peter Kyle]

I have to explain this, I have to just put it in these terms. The world as it is now is that China is the world's largest exporter. As you said, they have a trillion dollar export surplus, trading surplus with the rest of the world. Now lots of the components in things like cars and others, you're talking about the electronic aspects that coming in with cars, if we just said, okay, no cars, no solar panels coming into our country, the nature of supply chains around the world means that lots of those individual components would still come into our country in different products in different forms.

[Steph McGovern]

So they'd be here anywhere.

[Peter Kyle]

Yep. So what we're trying to do and look at what we've did during this trip, in the lead up to this trip, we are pursuing a policy where we can have localized production. So when it comes to things like climate technology, when it comes to things like motor manufacturing and other forms of manufacturing, at the moment we are just importing from China. But lots of the deals that we're doing now are leading towards having localized manufacturing. So manufacturing in this country by Chinese firms, that means more of the wealth that is created by this. It stays here. And of course it means that we can have lots of the oversight that you would expect in lots of these things.

[Steph McGovern]

So we'll be doing the manufacturing that.

[Peter Kyle]

So this is something that we're trying to be doing the manufacturing. So you're looking at people. There are lots of. There are lots of partnership opportunities. There are lots of opportunities because we have such. If you take BMW's plant where they make the Mini, that's one of the most productive plants of any motor manufacturing anywhere. They make a million. They make a million six hours from start to finish. So we have real things and we need to just puff our chests up a bit about how brilliant we are. So China is looking at Britain in order to do the manufacturing here. And these are the things that, as a government to government, if we are engaging, if we're in the room and we have respectful, frank conversations that we can incentivize. So Cherry, for example, as a result of this trip, is now headquartering its European headquarters in, in Liverpool. These are the sorts of first steps that we're seeing towards investing in Britain, but also building out in Britain. Which means that of course, if you do so, you obey to British law and you are then accessible to all enforcement agencies.

[Steph McGovern]

So can I ask on that point about manufacturing then? Because that's where I started. So I used to work for Black and Decker up in Durham and all of that manufacturing capability got moved to China. So all of the parts of the Black and Decker products are made there. There's still a product design team in the Northeast because we're brilliant at that. So are you saying that to do more manufacturing here then are we going to grow that sector? Is that because the reason it moved is because it was cheaper to do it there?

[Peter Kyle]

That is my. That, that is my mission. Yes. That is what I'm trying to see out of this. And this is what I started laying the pathway for when I first visited in September. And that is the nature of some of the agreements that you saw from the visit with the Prime Minister. There'll be more to say coming up on this with these, but this is the direction of travel that I am working towards. It doesn't mean that China is going to stop manufacturing. But look, they've got a big decision to make in China and they're aware of this, they've got a trillion dollar surplus, trading surplus. Now that means that the rest of the world is going to balance that by either putting tariffs up or importing into China. Yeah, so I also took over with U.S. prime Minister myself, 56 businesses from Brompton bikes to AstraZeneca, you know, so all these massive to smaller businesses, all of them have now got much, much bigger export opportunities into China than they had before. Sporting groups coming over, the Premier League and snooker, both of which are now got deals that have been signed over there. So we can balance this by having better access to the Chinese market, but also trying to incentivize Chinese activity here in the UK in those areas that we identify are safe and they are sort of areas where we are comfortable with. But the more that we build and construct and have the jobs and lots of the wealth circulating within Britain rather than cheaply importing the final product, it's a win for us and it's a good step forward.

[Steph McGovern]

And because at the moment we have a trade deficit in terms of goods, don't we? £52 billion. But we have a trade surplus in terms of services. Is that where you see it? You know, you mentioned the snooker, the Premier League and things like that. Is it, is it the services side of things that we're delivering to them? Is that where we're going to see the.

[Peter Kyle]

Not necessarily. We do do some great things. I mean, Brompton Bikes for example, now has got a great deal and they're going to be able to import into China. And people might think, well, that's small beer. But your listeners know full well that China at the moment has 400 million people in its middle classes. That will grow by 2035 to 800 million. It's going to double. And even though the GDP per capita is about a third of ours in the uk, that will rise too, and we'll get to just under a half of ours by 2035. So increased wealth and an enormous expansion of the middle classes. So those are the kinds of products that we make here in the UK really successfully and will have access to an enormously growing market. So just take the deal that we did on this visit to halve the tariff on whiskey. Imagine getting into the Chinese market at the early stage when you have a growing middle class that is moving away from traditional spirits that you drink locally to globally prestigious drinks such as whiskey. Now we have the opportunity that we're in there with a tiny tariff on it and a world beating one that, that can now that has the potential to have access to a massive market, the biggest middle class in the world, but that's going to double.

[Robert Peston]

No, but hang on, Peter. Sorry. I mean, you know, Steph hit on, you know, an incredibly important point. We are a service economy, manufacturing, you know, for better or worse. Many of us wish that successive government had a rather more effective industrial policy. But we, you know, our manufacturing is what, at best around 10% of the British economy. You know, as it happens, I'm a Brompton Bikes owner user. I rode on one here today. Great fan of them. But with best one in the world, you know. You know, you could quintuple Quantum Bikes exports as a result of the China deal. And we're still going to have a massive trade deficit, not just with China, but with the rest of the world. Steph's point is the correct one, that unless we can get greater access for our services in China, you know, it's not going to be a particularly valuable market for us.

[Peter Kyle]

Well, firstly, I'm not going to do down small manufacturers and small producers. I know you do. I mean, listener. I mean, listen, let me finish my points. Every community has got a business which has the potential to export. Companies that export when they're small and medium organizations, they are more resilient during times of economic challenge than they are if they just rely on the domestic market. And they are more likely to have a sustainable business and a growing business into the future. So every community should have businesses which are small. In my case, I've got a tiny business called Brighton Gin. I took over a bottle of Brighton Gin to give my the Commerce Secretary for China as a gift. You know, these are the small businesses that actually will enable our whole country to flourish from these opportunities. Secondly, one of the biggest deals that we did in China was on services. Now what we are not doing, and this is illustrative of our approach to it and my approach to this, it would be huge for British services to have access to China. China, because it's an enormously fast expanding market and the scale of the market is hard to understand unless you're there and you see it and you meet the people driving it. So our services, whether it's architecture, whether it's financial services, you know, education, what was the deal of the board? So the deal that we did was to do a feasibility study into what a deal could look like. So this might sound like it's being cautious, but I am being cautious. But right now, we have now started this feasibility study between the two countries. China really desires our service sector in there we need to make sure that we do it and we do it in a way.

[Robert Peston]

What services are we talking about?

[Peter Kyle]

Finance, architecture, law, education and accounting. Right across the board.

[Robert Peston]

It's everything.

[Peter Kyle]

It's everything. But we're doing a feasibility study into what that looks like.

[Robert Peston]

And when will we see the results of that?

[Peter Kyle]

Well, as I said, this is a feasibility study which we need to get right, so we'll see how it goes. I will give oversight to it and when I believe that the study is able to give us a clear direction of what is possible and what is appropriate in terms of for us.

[Robert Peston]

What's what, what are the. What are the downsides for Britain? There are no security issues here, are there?

[Peter Kyle]

Well, that's what we have to check out. And of course people want to. What would they be? What will the security issues be? I'm not going to discuss what they could.

[Steph McGovern]

Is it not just a case of going there and saying, do you want any of this stuff? We've got an mc,

[Peter Kyle]

we're talking about lots of issues, from data to expertise to infrastructure and, and so forth. Now we have to make sure we get it right. So I am undertaking a feasibility study. This is a deal that I signed when I was in China and it could lead to us doing a full deal. But rather than just jumping into the weeds of the deal, I want to make sure that we are explicit between the two countries about what we can and can't do. I want to be explicit about what the possibilities are. I need to understand where China is thinking in terms of allowing access to the market for services. And then we will move, once we've done it, towards actually what the writing on the page looks like. Look, when we move to a country, people talk about the idea with America, with India, with Korea, with the eu. These are countries that we have got very, very long standing trading relationships with and we can go straight into layering new deals on top of it because the economies move forward. With China, this is the first step and I want to make sure, because the potential is so vast, but also the challenges that exist, that we get it right. Oh, fuck's sake.

[Steph McGovern]

Are you joking?

[Peter Kyle]

We'll make sure they've got everything.

[Steph McGovern]

Yeah. And that was when the fire alarm went off in the middle of the recording. It wasn't a drill, it was a real alarm. So we all had to go and stand outside the Spotify building. It was quite a, you know, an eclectic mix of people, if I'm honest, because there was me, Peter, Carl, Robert Peston, also with us Alistair and Rory. Ian Wright was there and the former German Chancellor Olaf Scholz. After the break, we will come back with the rest of the episode for you. This episode is brought to you by ig. Now let's talk about commission fees because some investment platforms charge between £6 and £12 per trade. Pretty standard, right? Wrong. With IG you pay 0% commission on all stocks and shares. Yep, you heard that right. IG is a commission free investing platform that has been supporting UK investors for over 50 years. They have over 15,000 markets to trade or invest in and they've won a ton of awards for their service. While many investment platforms take a cut, IG allows more money to go where it belongs in your portfolio. No commission, no brainer. Millions of UK investors are paying unnecessary fees which can add up to hundreds and maybe even thousands of pounds annually. Could switching to IG as your long term investment platform save you money this year? Check them [e-mail] your capital is at risk. Other fees may apply. This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed sponsored jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate. C. According to Indeed Indeed data, sponsored jobs have four times more applicants than non sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsored job credit@ Indeed.com podcast. Terms and conditions apply. I'm back with Peter Cowell but unfortunately Robert cannot be here because he is with the Prime Minister. You get me Peter.

[Peter Kyle]

It's nice to be here again. What next? An earthquake?

[Steph McGovern]

I know, it was really surreal stood outside, wasn't it? Because I was just looking round at everyone. Oh, there's all afshal. There's Ian Wright.

[Peter Kyle]

It's quite interesting to see who comes out of the studio fast and who just sits there as the Campbell was like last to leave.

[Steph McGovern]

He was.

[Peter Kyle]

He came out on the throne as far as I could see. Being carried by his team.

[Steph McGovern]

Yeah, I think he was. But thanks for coming back though because I know you are very busy at the minute. So we were talking about China when we were interrupted and we, you know, you talked to us about the importance of the deals there and what they mean. One of the things I wanted to ask you about was the last time Robert and I met and we were chatting about the Chinese trip. We were talking about the fact it was quite interesting how many people from the cultural world went from the V and A museum you've mentioned Snooka. There were lots of other people there and we got a lot of feedback from people. Yeah, Just saying. Actually, it's really important. We do a lot of business with them. What is it we do in terms of culture? How important is China to that side of our world and our economy?

[Peter Kyle]

Well, your listeners and your viewers get it then. That's really good. I wondered if they'd be sort of, I don't know, taking a mickey or something. No, no, look, it's really important. So the Royal Shakespeare Company is doing a lot of productions in China. There is huge interest, of course, in British literature, in British film, in British culture, the English language music. You know, we are, you know, we have the second largest creative arts sector in the whole world. So somewhere like. China has always been quite fascinated by our culture. I think China has been, in the conversations I've had sometimes with Chinese representatives, quite frustrated that they are so populous and they are so important and yet everybody's singing British tunes and they're interested in British culture and watching British stuff. So very important that when we go over on these delegations, we don't just take the big businesses, although that's important than we did. We also took medium sized and small businesses, but also creative sector and sports. So we took Premier League, we had snooker and we had table tennis and so. And these things were. Were hugely important and real interest being spoken about by my, my counterpart, the Commerce Secretary for China, talking about all these sorts of things. Yeah, I don't think it's inappropriate to say, but when Keir had the conversation with President, President Xi, the first formal bilateral exchange, President Xi started by talking about his childhood and talking about growing up in the Cultural Revolution. And he spoke about having to walk 10 miles to get books that were banned because he lived in the countryside. And one of the books he got was Shakespeare.

[Steph McGovern]

Oh, wow.

[Peter Kyle]

And he read it as a young person and is always stayed with him and he spoke about that. So people might not realize this, but it's a very important thing. Good economically as well, but really important, of course, for the soft power that Britain has, extending our reach in what is the fastest growing market and a hugely significant, complex but consequential country like China.

[Steph McGovern]

Yeah, yeah, that's really fascinating. Thanks for explaining that. One of the deals as well to come out of the trip was with AstraZeneca, obviously the big pharmaceutical company. You know, this is a company that's been supported for decades by the NHS and lots of know how from UK universities. And essentially this deal is where they're investing £11 billion, isn't it, into China to expand the manufacturing and research and development there. Why is that a good thing for us, for us to be creating jobs in China for a British company?

[Peter Kyle]

Really good, really good question and I'm pleased you raised it because I think most people just think about what do we get out of it, what do we get from Chinese investment into the uk? We have world class companies. We have world class companies that are able to trade abroad, but also to innovate abroad. Now, somewhere like AstraZeneca, which is obviously life sciences, pharmaceuticals, people have to understand just how advanced China is getting in its ability to innovate and do scientific work. The education system in China is very high quality in certain circumstances, not in all, but in certain. And one of those areas is in science. So their ability to partner and do life sciences development work is actually really good and very complementary to the work that we do here. We have four of the world's top 10 universities, we have a culture of scientific endeavor. We have great partnerships between the private sector, capital investment and higher education, university, public research. We've got the Crick Institute, for example. These are all world leading. But China also has areas of expertise and this is one area where we see two way collaboration. There's also Chinese life sciences which are commissioning research and doing research in partnership here.

[Steph McGovern]

Giving them IP though, are they not there? No, on the ip. And are we not giving them lots of jobs we could have created here, particularly in manufacturing?

[Peter Kyle]

Well, we could only have created those jobs if we could have created the IP in the first place here and got been first to market. What AstraZeneca has decided is, yes, they are a British company, they are doing loads of research here, but they could also do additional innovation if they did it in China as well.

[Steph McGovern]

So it's not instead of, it's not

[Peter Kyle]

instead of, it is complementary to. And of course this is the thing the IP remains with, you know, with a British company and the IP will remain with that British company where they manufacture it. Any innovations that are done well, these are things that are open to negotiation going forward. But we are a country which is producing global companies and we need to produce more of them because ultimately the shareholder value will be generated here because AstraZeneca is listed in the London Stock Exchange. A lot of the other research will come back to the uk. Some of it will remain in China, but, you know, Britain will benefit from it.

[Steph McGovern]

Yeah, and, and obviously, you know, you've explained why doing deals with China is important. Trump, however, is less happy about us doing that. What do you make of him saying that it is very dangerous for us to have closer business ties with China?

[Peter Kyle]

I'm really grateful that you asked us that question so far into this interview, because most of my experience with doing media interviews in China and since is asking this question at the top.

[Steph McGovern]

We might move it to the top. No, I'm only joking.

[Peter Kyle]

I keep looking over at Robert. Of course, this is an empty chair. And a lot of people look in the way that Britain is trading around the world, and the first thing that they're asking us is about conflict. How does the work you're doing with America conflict with your work with the eu? Is it possible to do these two deals? Well, we proved it was conflict with China. Is China in conflict with your deal with India? When you look at the world through my eyes, as the person that leads on these trade negotiations on behalf of our country, all I see is opportunity. Where there are challenges or where there are areas where there is potential conflict, you just deal with it. We have very mature, grown up, frank conversations with all of our partners, including the US And China. Very, very different.

[Steph McGovern]

Even though it looks really irrational as a person watching this, what Trump's doing,

[Peter Kyle]

well, what he's doing is very disruptive and very unpredictable, and he's using that.

[Steph McGovern]

Must be hard, though, to try and walk that line, as you say, of balancing all these different interests. When you've got someone who can just come out and say something you weren't predicting.

[Peter Kyle]

It is, but it's also, I didn't get into this job for the easy days, and it is a very steep learning curve, but I am loving the learning curve, which is why I love my job so much. But I meet businesses every day in this job and they are dealing with adversity. JLR didn't go into business to make cars so they can get cyber attacked and shut down. They had to suddenly adjust to that. And when you look at how businesses like that, large and small, adapt to adversity, but also seek opportunity in adversity, we need to bring that kind of entrepreneurialism and confidence into government. I am confident in this government. I am confident in our country and the businesses that drive our country. Therefore, why should I be cowed when I see global disruption? I should be getting right out into the middle of it, engaging with it, puffing my chest out on behalf of our country and seeing how we can strike more deals. Just to say, on the U.S. you know, even after the Greenland situation and a bunch of other things, that were highly disruptive. I was there in Davos and because of the relationships that I've got, I was speaking directly to Jameson Greer, the lead trade negotiator, Ambassador for America, and Howard Lutnick, the Commerce Secretary. And because of the relationships that we've got, we can have these frank conversations with them. And of course, we did find a way through it.

[Steph McGovern]

And one of the things, given you've mentioned Davos as well, is that you talked about that was about investment in the UK and this idea of picking winners and that we should be investing in, you know, businesses and helping them. It's something Robert and I talk about all the time, is how do we get greater investment into. Into business? And, you know, are we very good as a country of assessing risk? And do we need to accept that sometimes we're going to put money into things that are going to fail? But that's important. It was something we talked to Patrick Vallance about on the show as well. In terms of life sciences and tech and AI and everything there is. However, if you are trying to pick winners, there are going to be people who will come at you about the failures. Luke Johnson's had a lot to say on it. Serial Entrepreneur and who's saying that you're playing at venture capitalism and that you're doing that with taxpayer money. What's your argument? Back to that criticism.

[Peter Kyle]

Firstly, it's not me personally. I don't make investment decisions. What I've done is change the risk threshold for British Business bank and also for UK Export Finance as well. UK Export Finance just announced an 11 billion pound facility for high street banks to lend to SMEs to get them exporting. Not all of them are going to succeed, but we are sharing the risk with banks in that case, but we are certainly standing behind them. What I've done is change the risk threshold and also the speed and the agility with which the British Business bank is able to make these decisions. So, for example, in the last year, the year leading up to September, we spent a billion pounds on investing in scale ups and supporting scale ups. In the first three months of me being Secretary of State, we spent a billion pounds and we're going to keep that pace up. We've taken the largest equity investments into companies. Kraken was the first one. We announced £25 million.

[Steph McGovern]

This is obviously a biochemist, Octopus Energy, who sponsor this show.

[Peter Kyle]

Oh, is that right?

[Steph McGovern]

Yeah.

[Peter Kyle]

Well, it all comes full circle and the spin out from Octopus. Now they have huge potential. It wasn't me that made the decision. But what I've done is changed the risk threshold and incentivized making sure that we can get that money out the doors quicker so that we can be there at a point where we can influence the market. I'm not there because I want us to fully fund these companies and their expansion. 25 million out of the billion that has been privately raised investment for Octopus and Kraken and those group of companies is very small. But being there at the beginning shows confidence. It shows the British government is putting its weight behind a company, a British company. And that gives a lot of confidence and expedites the investment they can get from the private sector both domestically and internationally. And that is exactly what happened with Kraken.

[Steph McGovern]

With Kraken though, I mean we've talked about it a lot on the show because we've had Greg Jackson on quite a few times and obviously as I've mentioned, he's now sponsoring us. I mean you say it's at the start of Kraken, it's been around for a while and some people would say like 25 million, they don't need that money from us.

[Peter Kyle]

Well, ask them about that and they'll tell you a different story. You're right, they've been around for a while. But this is the problem that we have. I'm not using this money. When I was in my previous role at the Department for Science, Innovation and Technology did an enormous amount of work for funding, for collaborations, private, public and also for spin outs. We are now the spin out capital of Europe. The problem we've got is actually growth and people get. You can get the seed, the pre seed financing really, you know, successfully here easily here in the uk. Series A, you can do a pretty good job of it if you're showing momentum. But as soon as you start to get to series B it starts to slow down. Series C and D is really, really challenging and that is where we can step in and show this is the

[Steph McGovern]

scale up of business and this is

[Peter Kyle]

the scale up, scale up. Companies in the British economy only account for less than 1% of businesses but they account for about 25% of the employment in our country. And even more when it comes to the potential to create wealth into the future. We have to get better at it because we do not have a trillion dollar company in our country. In our economy we've never produced one.

[Steph McGovern]

Do you really think we're going to get one then?

[Peter Kyle]

I do, I do.

[Steph McGovern]

When? How soon?

[Peter Kyle]

Oh God, you know, look, I'm in a rush I mean, does anybody think that I'm sitting on my laurels here? But we've got to get tracksuit.

[Steph McGovern]

So you're ready?

[Peter Kyle]

Yes, I'm going to campaign off on this in a by election. But, you know, as you know, I

[Steph McGovern]

don't like it, the different looks.

[Peter Kyle]

Yeah, so. So no, I'm. And this morning I was speaking at a conference for UK export finance for businesses who are looking to export. I've been around the world, but crucially, crucially, it is about showing that if the British government steps in at this moment, it really opens the doors for other investors as well. Don't underestimate the power the government has to give confidence to. So those people who say, you know, I shouldn't be picking winners, well, look where not picking winners has got us to. It's got us to all these companies who are fleeing Britain to find money. So Luke Johnson has done some great business work. He invests in the city that I represent. But what I'm talking about is widespread support for scale up. The sector is getting better at it. We've had £79 billion of inward investment into our economy in the last quarter based on the industrial strategy, eight sectors. But what I'm talking about now is finding those businesses that have the potential to really grow fast and back them.

[Steph McGovern]

Yes. And you know, it's something we talk about all the time is how important that is. So that's the businesses who we are excited about in terms of growth and where they're going to take things. Looking at another part of the business world, the kind of classic high street bricks and mortar businesses that have been there for decades supporting jobs. You know, often we're talking about businesses in the retail, leisure, hospitality, fitness areas who are first jobs quite a lot for young people. A lot of those businesses are struggling. The pressure of business rates, the pressure of how expensive it is now to employ particularly young people because of how much the percentage rise of minimum wage has gone up for people under 21. You've got the increase in the national insurance contributions. It's really tough to be a traditional business at the moment. You know, I've got retail businesses, I've seen our costs go up dramatically and we're questioning, do we still carry on with some of those businesses? And we're seeing like lots of talk in the media about the pubs getting a bit of help, but where does that leave everyone else and how do you balance everyone's needs? Because there is everyone struggling with the fact that they've been hit from every angle.

[Peter Kyle]

We came into government 17 months ago and I'm not going to go through it all. People don't like it when we start pointing out what we had, but I think everyone acknowledges how tough it was. We had historic low growth, historic high taxation, and yet we had to invest in two areas in particular, as far as I'm concerned, firstly into public services, but secondly into something that nobody is talked about and that's we've increased our R and D spending as a government by 11% again, getting that pipeline of innovation to commercialization to spin out, to grow and hopefully stay in scale here in the uk but in order to do so, we had to raise money as a government in a period where we had no growth in the economy. So we have to go through this period and we have had to make difficult choices to raise money. I want to make sure that we can get growth into our economy as quickly as we can. I am urgent, I am in a rush and I accept that even though we are now making progress and our economy is due to grow by 1.5% this year, it's not enough to do what we want to do as a country, as a government. So those, those businesses that I recognize have, have had to endure that period that I've just described. And in addition, you know, have seen sort of layer upon layer of different challenges. Hospitality, retail and, you know, hotels and so forth. They are in the front line of the economy. They are literally embedded in people's communities. And I understand that they are therefore in the front line of the challenges when they see it.

[Steph McGovern]

So are you all right with some of them having to close in order for, as you say, more money to go into research and development and things? Because that's what's happening. Businesses around, you know, where I live in the Northeast are regularly closing and they're people who are part of a community. Some of them are frontline mental health workers in a, in a sense, because it's where people go to have a chat and it's small business people. It's not big. The big retailers got small shops or whatever else.

[Peter Kyle]

I represent the community I've lived in for a long time and I love, I adore, and I am very well integrated into that community.

[Steph McGovern]

Just a few weeks, just a few weeks, you can adore them.

[Peter Kyle]

Well, hang on a sec, hang on a sec. So we can shovel money from government to support sectors.

[Steph McGovern]

We're not shoveling money though. Right, Because.

[Peter Kyle]

Let me finish my point because I don't want people to think that I'm being derogatory about government spending. We can shovel money into supporting sectors when in time of need. But what we need to do is create the circumstances where businesses can thrive because there is the economic circumstances where people have more money in their pockets to go and spend in the high streets. In addition to that, we need to make sure we have a tax system and a regulatory system which supports innovation and supports the work that people do in small businesses on high streets up and down the country. In a very changing landscape when it comes to retail and the move to online, in a very changing landscape when it comes to people's personal consumer habits. So there will always be churn.

[Steph McGovern]

So this is just a blip of where it's going to be tough, is that what you're saying?

[Peter Kyle]

No, what I'm saying is we inherited a very difficult set of circumstances. And I am urgent, I am in a rush. I am doing everything I can to get the fundamentals right. Because if you can get customers in there in a growing economy where people have more money in their pocket through organic growth in wages and in the economy, that is the way you have a thriving, sustainable landscape for hospitality and retail. And in addition to that, you have a government that's attuned to it, and I am attuned to it. Which is why when we saw the negative impact that came from the very complex situation that we tried to adapt the budget on business rates, we did leap into action after that. But we can talk about specific issues. Fundamentally, we need to make sure that we're getting, you know, money in people's pockets and spent spending, and therefore those good businesses will thrive.

[Steph McGovern]

I've got one more question before I let you go, because I know you need to run. We were. I spent a bit of time recently with those in the hairdressing sector running salons. They're finding it particularly tough, not just because of the business rates and employment costs going up, but also there's a kind of specific issue for them in terms of VAT. So for salon hair salons, 60% of their costs are labor costs or, you know, when taxation goes up on employment, it really hits them hard. And then what you've also got is this issue around the VAT threshold and how much VAT is charged on, you know, 20% on, on the, the price of, of hair treatment and everything else. And what we're finding is salon owners are ditching the usual model of employing staff and instead setting up essentially a micro business structure where it is, the salon is owned by someone, but instead of employing people, they Basically rent out chairs in order for each of those hairdressers to stay under the VAT threshold and therefore not pay a vat. And then that means that they can bring down their prices, which means some salons are, you know, essentially making the same money and have the same number of people working in them, but are paying more tax than others. Is there a way of leveling this playing field? Like reduce the VAT threshold and you know, bring down the VAT costs for those labor intensive sectors like hairdressing? Because what the CBI are predicting is apprenticeships in salons will disappear by 2030 because people will not afford, be able to afford salon owners to take them on.

[Peter Kyle]

So I've heard you mention this, I do listen to the podcast and I have heard you talk about this before. So I went to a salon in, in Hove, actually in Port Slade in my constituency recently to try and understand their, their business and their business model. So I understand these, these issues. When I said a minute ago that I'll tell time, my community, the weekend before last, I just, I was walking my dog and I went into pretty much every business along the, the high street so I could speak to people and I. So I am very aware of the specific different challenges that are faced. I'm not the chancellor and I can't. And I'm not at a budget as Chancellor, so I can't.

[Steph McGovern]

Is it the type of thing you'd say to her though, like, God, it's really tough for hairdressing sector at the

[Peter Kyle]

minute because we have. Rachel and I speak very often and then when we hear insights, good, challenging, we share them. We do share them and we discuss them. And very often if I hear something very pointed and particular which is embedded deep down into the economy, we will then sometimes go and do pieces of work on it. Now, what I can't do, and you understand why I can't say that I'm commissioning something or I'm doing something, but I have heard this and my job as Business Secretary is to try and understand where there are bits of the economy where there are pinch points and to make sure that their voices are heard and respected. You'll know that as soon. Straight after the last budget when we saw that there were some negative challenges coming out of the, of hospitality, you know, straight away I was sitting down with members of IT and Tom Kerridge, I think was, was one of the first to come in with me and we went through his accounts in that kind of detail. So I could really understand it. So these are things I do care about these things. It's not just sitting on planes heading off to foreign countries to do trade deals. I take very seriously the need to be as embedded in the deep frontline economy as I can.

[Steph McGovern]

Yeah. Peter, thank you very much for coming in to talk to us spread over two days.

[Peter Kyle]

Will you have me back another time?

[Steph McGovern]

Yes, we definitely will. But thank you very much. I really appreciate that.

[Peter Kyle]

Thanks.

[Steph McGovern]

And thank you from Robert. I'll empty chair him. Yeah, thanks. And that's it from us. And the rest is money. Bye.