Monday, 1 February 2016


Osborne’s army.  Do you recall the Chancellor of the Exchequer’s ‘march of the makers’ in 2011?  Onwards to a ‘more balanced economy’.

But the manufacturing marchers have had a bad time.  The sector’s share of GDP has gone down from a disappointing 13% to 10%. Of course, factors such as a stronger pound, slowdown in PR China and emergent markets, crisis in the eurozone and general volatility are not George Osborne’s fault.  Nonetheless, he has some responsibility for the Government’s fuelling of uncertainty and causing doubts on investment because of the imminent referendum relating to the European Union.  Other major obstacles for manufacturing remain. These include skill shortages, access to finance and comparatively high costs of energy.  Our political masters must get off their hands. Last November, industrial production (manufacturing, mining and energy supply) in the UK had its worst monthly fall (0.7% for two years.

Politics, policies and imagination.  Markets and their forces attract analysts and commentators. Managers ought to take part in the arguments and defend the need for their contributions. Not so long ago, the New Yorker, hardly a manual for the Left, chose Karl Marx as major thinker of the next decade. A market’s morality has two pivotal components. The first is an obligation to deliver measureable outcomes, founded upon the premise that pursuit if enlightened self-interest leads to the betterment of society. There will be a backlash if the market is seen to fail on either results or restraint.

Anyway, what is the job of government? After all, there are not dynamic markets without a government to define rules and context. The state must accept the disciplines of markets and understand the impact of control and intervention. This leaves our politicians with a daunting challenge. They have to devise ways for reducing and redirecting intrusion whilst fulfilling their responsibilities and preserving the electorate’s trust. It means redesigning the welfare state and securing the competences to cope with global competition. Public policies and politics are one thing. But imagination will be tested to breaking point and is in short supply.

Big questions for businesses in 2016:

1   Will PR China continue to cause economic ructions throughout the
2  Are prices and margins across commodity markets likely to still feel the squeeze? Oil fell 35% to an 11-year low of below $40 a barrel in 2015.
3   What is the outlook for emerging countries?  Growth has halved since a peak in 2011.
4   Is it possible an ‘out’ vote in the forthcoming referendum on UK and the European Union would derail investment projects? In any event, will there be an urgent need to rebuild economic and trading bridges?    
5  Can we find greater clarity for the outlook between America and Europe?  Will elections in the US ‘cast a gloomy shadow'?, asks Allister Heath.
6   Will the Bank of England raise interest rates? Also, it is keen to use new powers to limit risky mortgages.

Too big to fail.  The Financial Stability Board advises the G20 group of countries and is chaired by Mark Carney, governor of the Bank of England. The Board says the world’s thirty biggest banks should raise up to $1.2 trillion in loss-bearing debt, in addition to their equity capital.  The purpose is to make creditors liable for a bank’s failure, rather than taxpayers.  Mr Carney said that the plan would ‘support the removal of the implicit public subsidy’ enjoyed by banks that are ‘too big to fail’.

Emails and pitfalls.  There are complaints of inefficient use of email. It is simple to send copies to many people who do not need them. Also, it is easy to forget that email is a permanent record, even if a document is in the electronic waste bin. Senders often say more flippant and incriminating things than they would in a letter. What about libel? Reconsider guidelines and disclaimers in conjunction with internal controls.

Use of power. ‘A government big enough to give us everything we want would be big enough to take from us everything we have.’ Gerald Ford, President of the Union States, 1974-76.

Through which end of the telescope.  ‘It’s more than magnificent – it’s mediocre.’  Sam Goldwyn, American film producer.

1 February 2016

Monday, 18 January 2016


European Union (EU). The prime minister promised a referendum on this country’s membership of the EU before the end-2017. He knows now this was a mistake. The EU is neither a capitalist conspiracy nor a socialist utopia. Over the next year (or two?) we will be bombarded by ‘facts’, half-truths and lies from both sides of the debate. It has prevented wars on the continent. Soon after its foundation, the EU changed into an economic area and later moved towards political co-operation. The reason for greater politicisation is that the members wished to create a common market to eliminate all barriers to trade. This means there is a need for every company in many countries plays by the same regulations. Politicians set the rules. The Maastricht Treaty was signed in 1992 and created the EU in its present form. Margaret Thatcher led negotiations for the UK. Like all other democratic states there is an executive body (the commission), a legislature (the council and parliament), a judiciary (European Court of Justice) and a central bank (ECB).  Complaints that the EU has a ‘democratic deficit’ have some validity. The European parliament is elected every five years and the council consists of ministers from nationally elected governments. Commissioners are appointed to the only body that can draft legislation for the EU. The Commission has a strong influence on EU’s policies. This has caused critics to say the EU is run by unelected bureaucrats. ‘Brussels made us do it’ is a common explanation of politicians and public servants at home. In reality, the EU hardly ever makes member states do anything. This is not to say the EU would not benefit from reforms. The present procedures were designed for an organisation of 15 states. There are now 28, with an inefficient way of doing politics. The many layers of decision-making bring high costs and complications and avoid clarity on who’s accountable for what. Pieter Cranenbroek reckons our political leaders like things that way.  The EU is top-down, at a time when the world we live in is social and bottom-up.

Pay in 2016.  The Resolution Foundation has concluded that real-time pay will be just 1% higher by December 2016.  This figure is a consequence of the UK’s continuing productivity problem and low inflation for twelve months.  ‘Pay growth in 2016 will ultimately be determined by whether the recent upturn in productivity is enough to offset rising inflation.’ Research by Korn Ferry Hay Group suggests ‘employer optimism’ will permit an increase in wages at 2.3%. Watch the trends. Both ‘experts’ cannot be right.

Controversial contracts. Zero hours contracts (ZHC) often receive a bad press. However, research by the Chartered Institute of Personnel and Development (CIPD) shows they are more popular with employees than many expectations. The results indicate that 65% of people on ZHCs are either very satisfied or satisfied with their jobs, compared to 63% for all employees. Also, those on ZHCs are more likely to say they have the correct work-life balance and less inclined to feel under excessive pressure at work. The majority of workers on these contracts told the CIPD’s survey that it is their choice to work part-time. Nonetheless, 22% wish to work more hours. The findings will surprise some managers. ZHCs have been linked to work-related stress. Indeed, the government banned exclusivity clauses which had prevented employment with more than one organisation. The CIPD estimates that the number of people on ZHCs will rise to 1.3 million in 2016.

Automation by numbers. Grant Thornton, Deloitte, BBC and HR Magazine have gathered information about the impact of automation on jobs. 35% of workforces in the UK are at risk over the next twenty years. This figure includes: 99% of telephone salespeople, 98.5% of typists or keyboard-related workers and 97.6% of routine inspectors and testers. Those tasks which will change in content but remain in place are: telecommunications engineer (2.5% fewer), midwife (0.8%), nurse (0.9%), publican or manager of licensed premises (0.4%). Occupations paying less than £30,000 a year are five times more likely to be replaced than those at over £100,000. 3.5 million low risk jobs have been created since 2001. 800,000 of those in danger have been lost.  Reason for all this change in forthcoming years?  More accuracy and efficiency (56%), lower long-term costs (53%); greater flexibility in use of resources (49%).

Failure. ‘There is no formula for success.  But there is a formula for failure, and that is trying to please everybody.’ Nicholas Ray, American film director.

Be careful.  ‘Integrity without knowledge is weak and useless, and knowledge without integrity is dangerous and dreadful.’  Samuel Johnson (1709-84). English lexicographer, essayist and poet.

Monday, 4 January 2016

NOW IN 2016

‘Alarm bells are ringing in the engine room of the British economy’, says Ed Conway in The Times. People have been depleting their savings since 2013. Houses and land in London are less affordable than they have ever been. Britain’s current account has been in deficit since 1998 – that is, we have been importing and borrowing more than we export and earn. Last year, the shortfall hit a record 6%of Gross Domestic Product – the equivalent of every British household borrowing of £3,500 from overseas. We do not live within our means and the pound could be heading for a fall. This might be fine for underperforming exporters. For those who trade in sterling, the outcome will be ‘being squeezed all over again’.

A growing concern? Momentum was established recently inside The Labour Party by supporters of Jeremy Corbyn, the new leader. Caroline Flint, a senior MP, suggested it is being used by ‘far left’ groups seeking to penetrate the Party. Is the history of the 1980s and Militant repeating itself? We do not know much about Momentum’s organisation, membership, priorities and leadership.  The media has not helped. There has not been much analysis, just glib descriptions of ‘Corbynistas’. Momentum has said blandly it aims to encourage those inspired by Jeremy’s Corbyn’s campaign to get involved with The Labour Party and ‘to assist the creation of a mass movement for change’. Contemporary sects do not pose a threat comparable to the dedicated, energetic and disciplined Trotskyist Militant in the 80s. Events rarely replicate themselves. Of course, a lot depends on effectiveness of new leadership in managing the party’s internal affairs. Will it opt for conciliation and inclusivity? Indecision and uncertainty, leaving the party rudderless appear to be the present choice. 2015 was a strange period for politics in the UK. But the general election in May gave the Conservatives an unexpected majority as a starting point. Later, Her Majesty’s Loyal Opposition stopped turning up for work. Labour’s humiliating defeat, destruction of the Liberal Democrats, The Scottish National Party’s (SNP) astonishing success and UKIP’s breakthrough that came to nothing, delivered a new, though difficult to define, political ‘mix’. The impact is substantial. The Conservatives will gain most benefit. Disappearance of opposition. The Liberal Democrats are now so small they will have little influence and the SNP is too localised to have a national (UK) impact. Any real opposition has come from the Government’s own backbenches. Prime Minister, David Cameron, and Chancellor, George Osborne are trying to fill the vacuum.  They claim to champion ‘blue collar workers’ and have added the word ‘progressive’ to all kinds of proposals.  They even announced the creation of a national living wage – a straight grab from Labour’s offering. In December’s spending review, George Osborne revealed that funding for opposition parties will be cut by 19% and then frozen until 2020.  Then there is the forthcoming review of boundaries of constituencies, that will reduce the number of MPs from 650 to 600. Labour is expected to be the big loser.

Unions are professionals.  A member of a trades union is as likely to be a lawyer as a factory worker. Figures from the Trades Union Congress showed that professionals such as doctors, managers and teachers now account for over four in ten of unions’ members. The percentage has climbed in recent years. 13% are plant and machine operatives. Salespeople are 3% only. The north-south divide is here too.  40% of employees in the north of England and Wales are in unions, compared with 23% in the south (excluding greater London).  Maybe a higher proportion in public services?

Crash.  ‘The crisis happened partly because the economic mainstream rendered that outcome ostensibly so unlikely in theory that they ended up making it far more likely in practice.’ Martin Wolf in The Shifts and the Shocks (Allen Lane).

More care. We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act.’ Henry George (1838-97).  American economist.

Tuesday, 22 December 2015


Pass the stress.  Britain’s seven biggest banks have passed the second round of annual stress tests.  This new procedure is to establish their resilience in a sharp economic downturn.  It was based on the possibility of a crisis in emergent markets.  A fall in China’s growth to 1.7% rattled the cages of investors, sent oil below $40 a barrel and undermined developing countries over Europe.  Mark Carney, the Bank of England’s Governor said the clearing banks were not more resilient than in 2008/09 and within sight of what the Bank’s Financial Policy Committee regard as adequate capital for the long-term.  Running a bank used to be a job without pressure.  Times have changed and will remain so.

Into 2016.  Morgan Housel of says professional market forecasts are often called dart-throwing chimps.  He adds, ‘This might be an insult to chimps.’  But your scribe cannot resist the temptation.  So here we go with two for 2016:

The peace dividend has gone.  The attacks in Paris on 13 November brought the so-called peace dividend to an end.  Twenty-five years after an end to the cold war.  Western governments became complacent. 

The pay rise is on its way back.  After a longish period of stagnation, increases in wages and salaries in the UK are on their way back.  Earnings have been declining for thirty years.  It would be wise to expect rises to be faster than inflation.

Pensions.  Keep a watchful eye.  Merryn Somerset Webb has opened an important box.  Defined benefit pensions are usually those schemes that pay a percentage of final salary, and are linked to inflation.  The Pensions Institute has indicated that many such schemes are ‘highly unlikely’ to meet fully their obligations.  There are huge total deficits.  The Institute says there is a need for radical action and wants pension schemes in trouble to be able to restrict benefits, even if the pensions are already in payment.  Things have been going wrong for several years.  For example, government removed the tax credit on dividends from investments.  Employers took holidays from paying into funds when stock markets were buoyant.  Life expectancy has increased much faster than forecasts.  In desperate efforts to reduce risks, pension funds have switched from equities into bonds, where yield has collapsed and is now a major issue.  There is not much we can do about this dilemma.  Nonetheless, we can blame the unelected officials, mostly in central banks, running monetary policies.

Job creators. The Confederation of British Industry (CBI) has started to unpack the figures on employment in the UK.  The overall figures look good.  The number of unemployed people declined by 110,000 in the three months to October.  The rate fell to 5.2% and has now returned to the pre-2008 situation.  Employment for 16 to 24 year olds went up to 73.9%, the highest since records began.  The impacts were inconsistent.  The three sectors creating jobs were: administrative and support services; agriculture, forestry and fishing; and construction.

Tell-tale signs of a downward spin:
The sales director starts entertaining customers at McDonald’s.
This year’s advertising campaign is on the back of bus tickets.
The water cooler has algae in it.
The Red Cross takes over the staff canteen.
The photocopier works.
The finance director spends all day under the desk sucking his thumb.
You find the managing director steaming stamps off envelopes.
There is a whip-round whenever the paperclips run out.
The drinks vending machine dispenses only hot water.
Company cars are replaced by bus passes.

Dad and Mam.  ‘Saving is a fine thing.  Especially when your parents have done it for you.’  Winston Churchill, (1874 – 1965).  British statesman and Nobel Prize winner.

About right.  ‘All Governments like to interfere; it elevates their position to make out that they can cure the evils of mankind.’  Walter Bagehot, (1826 – 77).  English economist and journalist.

Monday, 7 December 2015


Can governments deliver economic stability?  Continuous technological change make fluctuations inevitable. There is a tension between the promise of steadiness and certain turbulence.  Evidence suggests that stability has an inverse relationship with expansion.  The UK was steadier than many other economies in the 1960s, but had slower growth.  It is possible that deep cycles and macroeconomic shocks flush out inhibitors, anti-competitive interests and the inefficient. The same factors which give ordinary firms the confidence to invest may well offer workers the courage to push for more pay and resist pressures for higher productivity.  There are suspicions that the so-called golden age of the 50s and 60s was destined to end in an inflationary surge just because of this connection.

Words from recruiters.  Follow the language.

Hands-on managerial style

interfering by another name
Opportunity to acquire new skills

you’ll be thrown in at the deep end
Work under pressure

you’ll have inadequate resources
to deliver the impossible

Experience of cultural change

we want to see blood on your hands


Collapsed BRICs. Goldman Sachs has closed its ‘BRIC’ fund after years of poor performances. This is the end of an era.  Jim (now Baron) O’Neill was Goldman Sachs’ chief economist and in 2001 noted the growth of Brazil, Russia, India and China (South Africa was added in 2012 and provided the big ‘S’. A formal group was created in 2006, but things have gone wrong.  First, there are substantial conflicts of interest and what America’s Centre for Strategic and International Studies described as, ‘indisputable political, social and cultural differences’. There are newer setbacks.  Brazil is caught up in a corruption scandal involving its president. Vladimir Putin has been hit by dramatic falls in oil prices and sanctions. India is struggling with an agenda for reform. China is suffering from an intransigent slowdown of economic activity. Maybe the primary lesson to be learned from BRICs is the danger of sacrificing good investment sense for the sake of a snappy acronym (The Week)?

Impressions from an office.

The family picture is on HIS desk.
Ah, a solid, responsible family man.

The family picture is on HER desk.
Umm, her family will come before
her career.

HIS desk is cluttered.
He’s obviously a hard worker and a busy man.
HER desk is cluttered.
She’s obviously a disorganised

HE is talking with his co-workers.
He must be discussing the latest deal.
SHE is talking with her co-workers.
She must be gossiping.

HE’S not in the office.
He’s meeting customers.
SHE’S not in the office.
She must be out shopping.

HE’S getting married.
He’ll get more settled.
SHE’S getting married.
She’ll get pregnant and leave.

HE’S leaving for a better job.
He knows how to recognise a good opportunity.
SHE’S leaving for a better job.
Women are not dependable.

Decisions.  ‘We know what happens to people who stay in the middle of the road. They get run over’.  Aneurin Bevan, (1897-1960). British senior politician and statesman.

Pay-up.  ‘Mankind is not a tribe of animals to which we owe compassion. Mankind is a club to which we owe our subscription.’ G K Chesterton, (1974-1926).  English essayist, novelist, poet and critic.