Tuesday, 6 December 2016


Stress for lenders. Six of the largest banks and one building society have been assessed on whether they would be able to withstand an economic crisis. This process asks if they would survive oil falling to $20 a barrel, prices of houses going down by 31% and a 4.3% drop in economic output.  One failed to prove it would overcome such an unthinkable combination of financial shocks. Analysts pointed to Standard Chartered as having the most difficulty.  Barclays, HSBC, Lloyds, Nationwide, Royal Bank of Scotland were tested also. The examination is the first pressure from information made publicly available.

Back to Brexit.  One of the important factors in the debate is the way in which opinions of experts were sidelined in favour of more emotive arguments. This has caused objections from academics. Maybe there is a core fault-line which is the start of a redefinition of the future of social sciences in the UK? Not only has the Leave campaign been founded on explicit rejection of advice from sages, but it also exposed a gap between academics and the broader public. Recent surveys have suggested falling public trust in ‘academics’ as a professional group and an increasing sense that they are part of ‘the elite’.

Productivity is a constant concern for managers.  A relatively small percentage increase could add more than £200 billion to the economy.  The Confederation of British Industry (CBI) has highlighted potential gains if local businesses could match those in the best performing regions.  It says jobs would be created and living standards improved.

Second estimate.  The Office of National Statistics (ONS) published recently its new reckoning of growth in the economy (GDP) for the third quarter. This was confirmed at 2.3%. Services moved upwards by 3%, driven by a rise of 5% in expenditure on leisure and 4% expansion of transport and telecommunications. Manufacturing and construction continued to disappoint. Household spending increased by 2.6%. Investment went up by a modest 1.2%. The Government’s outgoings rose by less than 1%. Exports appear to have climbed by 4% and imports remained subdued at just 2.6%. There is no reason for a major slowdown in 2017. The negotiations on Brexit will take some years. We all assume that the starting gun (Article 50) will be fired in March.

Theodore Roosevelt celebrated America’s new commercial power during a speech in Osawatomie, Kansas.  Also, he warned that America’s industrial economy had been taken over by a handful of corporate giants.  They were generating unparalleled wealth for a small number of people and exercising growing control in American politics.  The Economist (17 September) points to Roosevelt’s caution that a country founded on the principle of equal opportunity was in danger of becoming a land of corporate privilege. This was on 31 August 1910. Does it have a familiar ring?

On Trump.  MoneyWeek says most observers find it hard to disagree with the view that Donald Trump spends little time in self-examination.  In the Sunday Telegraph, Bruce Anderson quotes a banker who knows Mr Trump well:  ‘It is impossible to know what he thinks or what he is going to say.  How could it be otherwise?  He has no idea what he will say - until he opens his mouth.’

Just think.  ‘You can tell the ideals of a nation by its advertisements.’  Norman Douglas, quoted on Forbes.com and in TheWeek.

The vanishing act.  ‘Public money is like holy water; everyone helps himself.’  Italian proverb.

Making things work.  Bad administration, to be sure, can destroy good policy; but good administration can never save bad policy.’ Adlai Stevenson (1900-68).  American politician and statesman.

Monday, 21 November 2016


Vision.  At the launch of her campaign to become Leader of the Conservative Party, Theresa May emphasised ’a bold new, positive vision .... a vision of a country that works not for a privileged few, but for every one of us.’ This theme has become a frequent assertion in her speeches as Prime Minister. On the day she became leader, Mrs May said her plans were ‘a different kind of Conservatism’ that ‘marks a break with the past’. However, she might find it easier said than done. Electors know she was home secretary throughout the Cameron/Clegg coalition and the Cameron government. Recent research suggests that 45% of people put themselves on the centre ground of political choices. Only 30% advocate the right-of-centre ground occupied by Thatcherism. With a parliamentary majority of only twelve and both cabinet ministers and rebellious backbenchers showing signs of noisy impatience over delays on Brexit, there are temptations.  More radical domestic reforms would please the parliamentary party and many local branches. Whether Theresa May decides to be in the common ground at right-of-centre or steer her government towards the middle, will be one of the defining stances of her premiership.

Post-Brexit predictions.  The Chartered Management Institute has completed a survey of its members’ predictions for the United Kingdom’s economy after departure from the European Union (EU). The conclusion was that managers expect Brexit will have a negative impact, lead to a shortage of talent and threaten the security of their jobs. 79% of respondents predict this country is set for no economic growth over the next twelve to eighteen months. 48% of managers are not confident their leaders have the ability to manage effectively their organisations with Britain outside the EU.

Pessimism of the big bank.  Ben Broadbent is Deputy Governor of the Bank of England. In a speech at the Wall Street Journal’s offices in London,  he said ‘There’s little doubt that the economy has performed better than surveys suggested immediately after the referendum .... somewhat more strongly than our near-term forecasts as well ....  The central projection in the August inflation report didn’t involve a recession, simply a slowing down in the economy’s rate of growth. But that slowing looks so far to have been more moderate than we feared.’ Mr Broadbent then advised against reading too much into particular pieces of data and predicted that consumers’ spending would be ‘relatively unperturbed’.  The bigger risk would hit investment to businesses, as companies hold off on big spending commitments because of heightened uncertainty. A lack of clarity about the UK’s future trading relationships needn’t result in visible grabbing of productive capacity.  He argued that the effect is likely to be more insidious: decisions to expand might otherwise be delayed.

A glimpse.  Vladimir Putin’s genius as a politician was derived from his ability to understand his electorate and to give it – or more importantly to tell it – what it wanted. To Russia’s men, he has been a tough guy, able to chat with workers and soldiers in their own language. To women he has seemed organised and sober in a country plagued by alcoholism. Internationally, he has been taken seriously, even if not admired universally.

That’s it.  ‘Fiction is the lie through which we tell the truth.’  Albert Camus (1913-60). Algerian philosopher, author and journalist. On the Harvard Business Review online and in TheWeek.

Self-awareness.  What you say about somebody else, anybody else, reveals you.’ James Baldwin (1924-87), in the Paris Review.  American novelist, essayist, playwright, poet and social critic.

Wednesday, 9 November 2016


We know.  What will happen? The European Court of Auditors (ECA) says governance at the European Commission is functional but lags behind international good practice and is in need of an update. Lazaros S Lazarou, a senior member of ECA, likened the Commission’s governance to a car manufactured in 2000. It’s in good working condition. It takes you from A to B, but hasn’t got the technology and the features of a modern vehicle. The ECA found, for example, that the Commission’s own audit service is constrained when compared with those in international bodies because it has limited access to information on spending. There is also too much interest on internal audit, rather than risk management and internal control.

The pound and inflation.  There are good reasons to assert that the Bank of England (BoE) wants a weaker pound. Most people know the Bank has a target for inflation which it has not been able to reach for many years. How do central banks achieve inflation? They used to believe printing money (quantitative easing) would bring inflation, but discovered that this alone does not do it. As well as printing the bank notes, people must spend them. And did not. The money sat undeposited at the BoE as excess reserves. So, the Bank has to find another method – cheapen the pound. As Jim Rickards points out, this means every time you buy imported goods, or you travel abroad, take a vacation in Switzerland, enjoy French wine, obtain Chinese technology .... it’s more expensive. In summary, whatever you buy will be at increased cost, if your currency is worth less. This is uncomfortable, but does stimulate inflation. That’s what Mr Mark Carney and the BoE want.

Productivity and poor management.  The Institute for Employment Studies says research reveals a clear link between low productivity and bad practice. There have been rumblings for some time that the UK’s managers and leaders are not as good as they ought to be.  This suspicion, combined with a deep rooted belief that management and leadership are important for organisational performance, have caused successive governments to worry about what it can do to obtain improvements.  The work of Nick Bloom (Stanford University) and John Van Reenan (Massachusetts Institute of Technology) has shown that regardless of country and size of organisation or sector, the quality of managerial behaviour correlates positively with corporate performance. The UK is behind the top results – Canada, Germany, Japan, Sweden and the USA. Other research indicates that management and leadership are essential factors in workplace innovation.
Big questions.  The major questions for large, nontech companies are: 1) What are the core competencies of my organisation when size no longer matters? 2) How much of my organisation’s managerial expertise is entirely dedicated to market co-ordination? 3) If new competitors replicate these capabilities by replacing human experts with machine algorithms, what is my cost structure compared to theirs? 4) Going forward, what new offering can I extend if product distribution is broadened? 5) Can I partner with new players and recombine my current capabilities to enter new markets?

Sounds right.  We are what we repeatedly do. Excellence, then, is not an act, but a habit.’ Aristotle, (384-322 BC).  Greek philosopher and scientist.

Monday, 24 October 2016


Running the national business.  The International Monetary Fund (IMF) has published its latest review on the future prospects for the world’s economies. It is a subdued picture, predicting global Gross Domestic Product (GDP) to rise by 3.1% this year and 3.4% in 2017. These figures compare with an annual average growth rate at 3.8% in the six years to 2015. Recent growth has been driven largely by emergent economies. For example, over the same six years, PR China’s economy grew at an average rate of 8.4% per annum. But by 2021, the IMF expects China’s rate to be below 6%. The Fund reckons the UK will be the fastest (1.7%/1.8%) rise in the G7 leading economies this year. The prediction falls to 1.1% for 2017.

Fiscal and monetary policy.  Some international economists have been saying for a long time that the world’s governments have transferred too much responsibility to central banks, which are in charge of monetary policy. They adjust interest rates in attempts to make the economy go slower or faster. Individual governments manage fiscal policy, which is full of political decisions and decides who gets what. The related processes take money from specified groups or priorities and moves it towards others : tax cuts, expenditure on infrastructure, higher social benefits and so on. We are supposed to find these actions acceptable. This is why they are in the hands of elected representatives. The two policies are not wholly distinct. Monetary policy is distributional as well. If interest rates are cut, then people with mortgages benefit at the expense of savers. Things start getting tricky and noisy when the central bank (Bank of England hereabouts) installs something like quantitative easing (QE). There are radical effects. Experts do not fully agree on exactly what QE does, but it seems to boost the price of assets. So, QE gives money to the wealthy and prices those assets out of the reach of others. Check the global housing market for an example. That is fiscal policy. A regressive one by anybody’s standards. Central bankers are aware of this issue and are properly reluctant to stretch their mandates much further.

Why is Momentum so controversial?  It is a grassroots and left-wing campaign group in the Labour Party. The origins were in plans to elect Jeremy Corbyn MP as leader in 2015. There have been accusations of trying to ‘purge’ moderate MPs, and of abusing and intimidating Mr Corbyn’s critics. The Times has alleged that these activities are ‘undermining British values and democracy’. The (Trotskyist?) Alliance for Workers’ Liberty (AWL) has called on its members to ‘flood’ the Labour Party. There have been efforts to unseat MPs who do not back Jeremy Corbyn. Momentum insists its campaigns are conducted ethically and criticisms are ‘inaccurate’. AWL is a tiny minority. But a determined one. These are uncomfortable times in some constituency Labour Parties. Your scribe was around in the early ‘80s. The need to win elections will prevail.

The plastic ‘no’.  The French government has banned plastic plates, cups and cutlery. This decision might be the start of a major shift away from plastic. The new law comes into effect during 2020. Pack2Go Europe is based in Brussels. It lobbies for packaging manufacturers in Europe and says it will fight the legislation. Implementation will break the European Union’s rules on trade barriers.

A danger.  A lecture is a process by which the notes of the lecturer are passed into the notebook of the student without passing through the brains of either.’ Adage, quoted in a letter to The Times.

Tuesday, 11 October 2016


A sudden interest?  The Financial Reporting Council (FRC) has opened a debate on whether companies and their auditors should provide investors with more information about culture within organisations. In July, the FRC published its report, ‘Corporate Culture and the Role of Boards’. But what is ‘culture’?  The FRC says:  ‘Culture in a corporate context can be defined as a combination of the values, attitudes and behaviours manifested by a company in its operations and relations with its stakeholders. These stakeholders include shareholders, employees, customers, suppliers and the wider community and environment which are affected by a company’s conduct.This is a starting point.  So where do FRC and the rest of us go from here?

Are we cheap?  Anders Holch Povisen is a billionaire from Denmark. He buys land in the United Kingdom and now owns more land in Scotland than HM Queen. The Copenhagen Post says Mr Povisen is the principal shareholder of Bestseller, a clothing company, and now has a total of 200,000 acres.  He lags behind only the Duke of Buccleuch.

The European Union (EU) grows.  The EU has accepted Bosnia’s application to join it. The country will now be assessed on whether it meets certain criteria on human rights and the rule of law.

Jeremy Corbyn, MP for Islington North was re-elected with a larger majority as leader of the Labour Party.  The Economist says the bulk of his support came from members who joined after 2015’s general election. The unexpected result at 61.8% of votes will not overcome the Party’s divisions. John McDonnell, MP for Hayes and Harlington and Shadow Chancellor, promised to bring socialism back into the mainstream. This is unlikely to be popular with the electorate.

An addiction gone.  BlackBerry has announced that it will cease to design and produce smartphones. Instead, development will be outsourced to other companies. This will allow BlackBerry to focus on software and services. It shaped the emergent industry of fifteen years ago, but quickly fell behind rivals. BlackBerry now has less than 1% of global sales.

Sting in the Tale.  This is a story about four people named Everybody, Somebody, Anybody and Nobody. There was an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it but Nobody did.

Somebody got angry about that, because it was Everybody’s job.  Everybody thought Anybody would do it, but Nobody realised that Everybody wouldn’t do it. So, Everybody blamed Somebody when Nobody did what Anybody could have done!

Graffiti.  ‘Egotists do not talk about other people.’

Monday, 26 September 2016


Forecasts.  The Organisation for Economic Co-operation and Development (OECD) is the rich countries’ talking shop.  It has just published forecasts for the UK.  The major feature is that weak growth in trade and financial distortions are worsening slow global economic growth.  John Ashcroft points out that unusually low – and sometimes negative – interest rates are distorting financial markets and increasing risk across the financial systems.

‘Brexit means Brexit’ our new Prime Minister declares. But non-one is brave enough to give us a definition, other than it is the UK’s withdrawal from the European Union.  Propaganda is trying to convince us that there has been no damage to the economy since the Government’s announcement of its decision. Figures on the economy challenge the claim. Living standards have fallen. The international purchasing power of the UK fell immediately as the pound depreciated in the wake of the referendum’s result. The Bank of England’s measure of the value of the currency has fallen by 15% or so since the poll. Such a fall will lead to higher prices.

The unexpected result.  The Office of National Statistics has reported that 29% of graduates last year are earning less per hour than a non-graduate who had taken an apprenticeship.  This figure is up from 25% in 2014.

Footall in England.  Mark Halsey is a respected and admired referee of matches in the Premier League.  This is the most watched league in the world, a product that generates substantial revenue and profits. The intense competition creates significant pressure on clubs, managers and players to get positive results. Mr Halsey has claimed he was told to state he had not seen in incident in a game he was officiating in 2011 between Stoke City and Blackburn Rovers, in order to make sure that the offending player was punished after the fixture. This admission prompted immediate denials, confirmations and debate. There are now good reasons to reconsider the management, networks and protocols relating to referees in England.

Confirms our suspicions?  ‘Alcohol enables Parliament to do things at 11 at night that no sane person would do at 11 in the morning.’ George Bernard Shaw (1850-1950), Irish dramatist and critic.

The battle.  ‘Class distinctions do not die; they merely learn new ways of expressing themselves.’ Richard Hoggart (1918-2014), British academic in sociology, English literature and cultural studies.