It was good to open my paper this morning to discover that a number of renowned economists had begun to realise what businesses had been telling us for months, a rise in interests rates at the moment would be anything but good news. Businesses who had been speaking to us had not applied any great economic academic ‘know how’ to their thinking just the highly valuable, but all too sadly rare commodity, common sense.
Who would have thought that adding to the costs of people mortgages at a time of economic uncertainty would not have an effect on already fragile growth? Who would believe that raising rates would have an impact on inflation largely caused by increased taxation, rises in the cost of oil and soaring world food prices? Well at least three members of the Bank of England Monetary Policy Committee apparently.
There are occasions when one should ‘doff one’s cap’ to the experts but when they are driven by old fashioned dogma which dictates that when prices rise too fast the only cure is adding to the cost of borrowing they deserve to be castigated. We find ourselves in a world which is very different to the one that used to respond to such a course of action. If proof of that were needed one has only to consider that on a day when Portugal is seeking to be ‘bailed out’ there are also mutterings about the credit rating of the good old USA.
I have no doubt that the world will work its way through this challenging period but it will be made more difficult if we get our strategies wrong. There will certainly be times when it will be essential to stick doggedly to old beliefs but for the time being, and as far as interest rates are concerned, now is the time to hold our nerve and be pragmatic. It might not be a comfortable experience for some members of the MPC but they should just accept that there is little they can do and that they should hold tight and go along with the ride.
Tuesday, 19 April 2011
Friday, 21 January 2011
Economy!!
It is frightening to think that we live in an age where it seems that the country is being driven by those who can shout the loudest and shout the longest providing sound bites for the press and applying pressure on politicians.
The publication this week of the inflation figures attracted just such a response from the city hoping presumably that press and politicians alike would ‘lean on’ the Bank of England. “Inflation must be brought under control, interest rates must be raised to do so”. It seems to me that many of those making such assertions are several places removed from the realities of every day business life and, in any case, are pursuing a very narrow agenda.
I cannot believe that anyone would argue against the view that inflation needs to be brought under control but I have serious concerns for anyone who suggests that interest rates should rise. Our current levels of inflation are not driven by domestic business nor do they result from consumers entering a new age of profligacy. Inflation is higher than we would like because indirect taxes and world commodity prices have risen. Quoting figures published by the BBC, if it were not for these factors, domestic inflation would be below target at 1.9%. It is difficult, therefore, to see what difference raising interest rates would have on inflation in any case.
In difficult economic times businesses and employees (except those working on London Underground) have displayed incredible levels of restraint, the former absorbing as much cost as it can and the latter resisting the urge to make impractical wage demands. Few would be able to continue to do so if the cost of borrowing rises too.
The last thing any business needs is an increase in borrowing costs (assuming of course it can get it) and an increase in the cost of mortgages, etc. hitting their employees and customers could be catastrophic.
As confidence in the economy grows I acknowledge that the Monetary Policy Committee will have to carefully manage a rise in interest rates but I cannot see that being justified in the foreseeable future. In the meantime if the powers that be are going to listen to those that shout too much I hope they listen to me.
The publication this week of the inflation figures attracted just such a response from the city hoping presumably that press and politicians alike would ‘lean on’ the Bank of England. “Inflation must be brought under control, interest rates must be raised to do so”. It seems to me that many of those making such assertions are several places removed from the realities of every day business life and, in any case, are pursuing a very narrow agenda.
I cannot believe that anyone would argue against the view that inflation needs to be brought under control but I have serious concerns for anyone who suggests that interest rates should rise. Our current levels of inflation are not driven by domestic business nor do they result from consumers entering a new age of profligacy. Inflation is higher than we would like because indirect taxes and world commodity prices have risen. Quoting figures published by the BBC, if it were not for these factors, domestic inflation would be below target at 1.9%. It is difficult, therefore, to see what difference raising interest rates would have on inflation in any case.
In difficult economic times businesses and employees (except those working on London Underground) have displayed incredible levels of restraint, the former absorbing as much cost as it can and the latter resisting the urge to make impractical wage demands. Few would be able to continue to do so if the cost of borrowing rises too.
The last thing any business needs is an increase in borrowing costs (assuming of course it can get it) and an increase in the cost of mortgages, etc. hitting their employees and customers could be catastrophic.
As confidence in the economy grows I acknowledge that the Monetary Policy Committee will have to carefully manage a rise in interest rates but I cannot see that being justified in the foreseeable future. In the meantime if the powers that be are going to listen to those that shout too much I hope they listen to me.
Wednesday, 19 January 2011
Shared Parental Leave Proposals Ignore Needs of Business
Commenting on today’s Government announcement concerning Shared Parental Leave David Frost, Director General of the British Chambers of Commerce, said,
"While Nick Clegg’s announcement may prove to be politically popular it fundamentally ignores the needs of business.
Last week, David Cameron claimed a pro-growth, pro-business, pro-jobs agenda, but now the Government expects small businesses to cope with yet more red tape".
David went on to say, "This is yet another example of rushed thinking. It suggests that the Government is out of touch with how to support business owners. This sort of red tape is like a sledgehammer hitting small businesses which should be sources of growth and jobs."
We agree with him, what do you think?
"While Nick Clegg’s announcement may prove to be politically popular it fundamentally ignores the needs of business.
Last week, David Cameron claimed a pro-growth, pro-business, pro-jobs agenda, but now the Government expects small businesses to cope with yet more red tape".
David went on to say, "This is yet another example of rushed thinking. It suggests that the Government is out of touch with how to support business owners. This sort of red tape is like a sledgehammer hitting small businesses which should be sources of growth and jobs."
We agree with him, what do you think?
Friday, 20 February 2009
ECONOMY, ECONOMY, ECONOMY...
A great deal has been said about the current economic climate, probably too much, there seems to be an ongoing competition amongst experts and the press as to who can come up with the most dire forecast. One says things are bad another says it’s worse. This may serve to burnish certain egos but it does nothing for consumer confidence and certainly doesn’t do anything for the majority of businesses that have been well run. In Hertfordshire we are fortunate to have many companies large and small that have set the standard in terms of innovation; companies that have been developed using sound business practice; companies have been run responsibly. Whilst some will need to tread cautiously they remain viable and will continue to be source of wealth generation and employment.
In any period of challenge those that have the ability to demonstrate clear thinking will come to the fore, thrashing around for one solution after the other is not the answer. The problem is within the financial system not, by and large, within the run of the mill businesses that most of us know and understand. Of course they are affected but it is not a problem of their making left to their own devices with sensible levels of financial support they will continue to succeed.
What is needed is a period of reflection enabling the myriad of initiatives to work, the seemly endless drive to fill column inches or airtime must come to an end. In the same vein the apparent need by some to provide justification has to cease. We all have a good idea what went wrong and where the blame lies. It will be the innovative non-financial businesses that will get us out of the problems that face us we are calling on politicians, regulators and the financial press to clear their heads and ensure that an environment is created that will enable them to so.
In any period of challenge those that have the ability to demonstrate clear thinking will come to the fore, thrashing around for one solution after the other is not the answer. The problem is within the financial system not, by and large, within the run of the mill businesses that most of us know and understand. Of course they are affected but it is not a problem of their making left to their own devices with sensible levels of financial support they will continue to succeed.
What is needed is a period of reflection enabling the myriad of initiatives to work, the seemly endless drive to fill column inches or airtime must come to an end. In the same vein the apparent need by some to provide justification has to cease. We all have a good idea what went wrong and where the blame lies. It will be the innovative non-financial businesses that will get us out of the problems that face us we are calling on politicians, regulators and the financial press to clear their heads and ensure that an environment is created that will enable them to so.
Thursday, 15 January 2009
Getting the message across...
My colleague David Frost at the British Chambers of Commerce has certainly stirred up a hornets nest with his description of the outcome of BCCs most recent quarterly survey. Frightening, awful were just a couple of the adjectives he used. Personally I am concerned about the seemingly endless queue of people lining up to tell us how bad things are but, nonetheless, can understand where he is coming from. Things are certainly not as we would wish them to be.
I would prefer it if we all drew breath and allowed time for some of the measures that have been put in place to work. The reality of course is that until the banks start doing business very little is likely to change but, at least, the announcement by Lord Mandelson that there will be further funding to support lending should help. Following fast on David’s words I am sure he will claim that the BCC were instrumental in speeding up this process and, in fairness, so would I. Indeed it is correct to say that the British Chambers have led the debate throughout and I wouldn’t mind a small wager that they will be the first to call the recovery too.
Balancing the requirements to encourage government action and the need to protect business interests is not always an easy trick but the BCC has generally trod the line with a high level of expertise.
Looking forward it seems to me that one of the key messages arising from the problems in the economy is to learn the lessons. The current economic conditions not only cause difficulties but also identify, and amplify, some of our existing shortcomings.
As we fall down the OECD skills tables one cannot help thinking that if we are to continue attracting high levels of inward investment we will have to raise the level, and relevance, of the skills we seek to give our workforce. Despite announcements of redundancies there are still vacancies but sadly many require skills that we are short of, skills to support the engineering, electronics and pharmaceutical industries to name but a few.
If we are looking for some good news it is that we have many innovative and creative businesses with growth potential, we simply need to find more effective means of supporting them.
I would prefer it if we all drew breath and allowed time for some of the measures that have been put in place to work. The reality of course is that until the banks start doing business very little is likely to change but, at least, the announcement by Lord Mandelson that there will be further funding to support lending should help. Following fast on David’s words I am sure he will claim that the BCC were instrumental in speeding up this process and, in fairness, so would I. Indeed it is correct to say that the British Chambers have led the debate throughout and I wouldn’t mind a small wager that they will be the first to call the recovery too.
Balancing the requirements to encourage government action and the need to protect business interests is not always an easy trick but the BCC has generally trod the line with a high level of expertise.
Looking forward it seems to me that one of the key messages arising from the problems in the economy is to learn the lessons. The current economic conditions not only cause difficulties but also identify, and amplify, some of our existing shortcomings.
As we fall down the OECD skills tables one cannot help thinking that if we are to continue attracting high levels of inward investment we will have to raise the level, and relevance, of the skills we seek to give our workforce. Despite announcements of redundancies there are still vacancies but sadly many require skills that we are short of, skills to support the engineering, electronics and pharmaceutical industries to name but a few.
If we are looking for some good news it is that we have many innovative and creative businesses with growth potential, we simply need to find more effective means of supporting them.
Thursday, 18 December 2008
2008 the year of realisation - 2009 the year of taking responsibility
Going into 2008 many of us will probably claim to have had reservations about the amount of debt but in reality few will have had any idea of just what a threat it was to global financial wellbeing. Who’d have thought that the banking system would have required Government to bail them out or that one person could have made $50 billion disappear into thin air. As Jeff Randall observed in the Daily Telegraph “anyone can lose a few million but to lose $50 billion takes real talent”.
In truth I guess we all saw something that with a little thought we would have understood to be too good to be true but to be fair we were warning of problems ahead as early as February. In April we questioned the effectiveness of the Financial Services Authority and in May we warned that interest rates were too high. If we had done that in 2007 we could claim to have been really clever but, nonetheless, we still claim to have been ahead of those that left the decisions until the autumn.
Whoever is to blame the result is that the next few months are going to be tough but, as someone said, “when the going gets tough the tough get going”. One can simply despair or one can do something about it; and there is much to be done.
The financial crisis has not only had economic impact, it has also laid bare a number of other fault lines. The pursuit of numbers rather than relevance in relation to skills has cruelly exposed skills gaps as too often easy options have been taken. The unquestioning acceptance over a number of years that manufacturing is on the decline has “removed an important club from the bag”. Our complacent attitude to the prosperity we have built up over a number of years. I could go on.
Before I am accused of delivering a gospel of total despair I should like to say that the current position, although extremely uncomfortable, provides us with an opportunity to regroup and to rethink.
2009 must become the year when we all take responsibility. The year when we begin to question our political masters more carefully. The year when we all play our part in finding solutions.
In truth I guess we all saw something that with a little thought we would have understood to be too good to be true but to be fair we were warning of problems ahead as early as February. In April we questioned the effectiveness of the Financial Services Authority and in May we warned that interest rates were too high. If we had done that in 2007 we could claim to have been really clever but, nonetheless, we still claim to have been ahead of those that left the decisions until the autumn.
Whoever is to blame the result is that the next few months are going to be tough but, as someone said, “when the going gets tough the tough get going”. One can simply despair or one can do something about it; and there is much to be done.
The financial crisis has not only had economic impact, it has also laid bare a number of other fault lines. The pursuit of numbers rather than relevance in relation to skills has cruelly exposed skills gaps as too often easy options have been taken. The unquestioning acceptance over a number of years that manufacturing is on the decline has “removed an important club from the bag”. Our complacent attitude to the prosperity we have built up over a number of years. I could go on.
Before I am accused of delivering a gospel of total despair I should like to say that the current position, although extremely uncomfortable, provides us with an opportunity to regroup and to rethink.
2009 must become the year when we all take responsibility. The year when we begin to question our political masters more carefully. The year when we all play our part in finding solutions.
Wednesday, 3 December 2008
Oh dear, yet more employment legislation! The Government that claims it wants to help business strikes again!
Let me begin by saying that in 2008 any business that is able to be and doesn’t have a flexible approach to its staff is missing a trick. Good employers, generally, have a more effective workforce and reduce costs by retaining them for longer. If being flexible helps an employee, and doesn’t have a deleterious impact on the business, surely it makes sense to be so. Good employers have long since recognised the benefits of being flexible and therefore there is no need to introduce legislation to make them be so. It leads to better performance and gives them edge over those who are not.
The problem with legislation is that it has a disproportionate impact on smaller businesses and takes away the ability to apply commonsense. It must also be said that it does not discriminate between good and bad employers. Good employers will follow it diligently but nevertheless occasionally end up facing the unfairness of Industrial Tribunals and, in any case, incur the additional costs of implementation. Frankly, bad employers will ignore it.
It seems to me that this government has got so wound up with political correctness and an apparent wish to interfere in all aspects of our day to day life it has failed to understand that reasonable people can rub along perfectly well without their constant intervention. Legislation may keep some people on the rails but at the end of the day most of us will be good (most of the time) and some people will be bad. We do not require the State to constantly tell us what is right and wrong and how to behave.
Since it came to power in 1997 this Government has stated that it wants to support business – at best it has been inconsistent. I am not sure that this legislation would be welcome at anytime but at a time when business people across the country are trying everything they know to sustain a future for their businesses the announcement of yet more legislation should be condemned. It really does appear that the only answer this government has to life’s challenges is yet more legislation.
To paraphrase Albert Einstein “Continuing to do the same thing and expecting a different outcome is a sign of madness”.
The problem with legislation is that it has a disproportionate impact on smaller businesses and takes away the ability to apply commonsense. It must also be said that it does not discriminate between good and bad employers. Good employers will follow it diligently but nevertheless occasionally end up facing the unfairness of Industrial Tribunals and, in any case, incur the additional costs of implementation. Frankly, bad employers will ignore it.
It seems to me that this government has got so wound up with political correctness and an apparent wish to interfere in all aspects of our day to day life it has failed to understand that reasonable people can rub along perfectly well without their constant intervention. Legislation may keep some people on the rails but at the end of the day most of us will be good (most of the time) and some people will be bad. We do not require the State to constantly tell us what is right and wrong and how to behave.
Since it came to power in 1997 this Government has stated that it wants to support business – at best it has been inconsistent. I am not sure that this legislation would be welcome at anytime but at a time when business people across the country are trying everything they know to sustain a future for their businesses the announcement of yet more legislation should be condemned. It really does appear that the only answer this government has to life’s challenges is yet more legislation.
To paraphrase Albert Einstein “Continuing to do the same thing and expecting a different outcome is a sign of madness”.
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