It was good to see the Prime Minister talking the economy up, and some evidence of briefing in the press to point out that UK manufacturing is growing again. There is a recovery underway, and that is most welcome.
Worldwide the news is considerably better than it is in the West. In Asia and parts of Latin America they are already having to put up interest rates to try to slow things down to control inflation, so fast has the growth and recovery been. Indeed, the Credit Crunch slump was largely a phenomenon of the EU and the USA. Monetary and budgetary policies were better conducted in much of the emerging world than it was in the advanced world, with better results. The factories of the East still rule the roost in many export markets.
The world exconomy as a whole expanded at more than 4% last year and may do so again this year. The digital revolution continues apace, bringing many more people into the world of the web, social networking and rapid communication. The internet allows enterprising people in China, India and similar countries to start up a business with relatively little capital, and to gain immediate access to the worldwide market. Millions are being lifted out of poverty by enterprise capitalism operating ever more widely throughout the developing world. The web itself is something of leveller for business as well as for governments. It can help bring the prices of services down, and strengthens worldwide competition in many markets.
The success of the private sector, of individual and family enterprise and access to the global market in providing opportunity to the jobless and higher living standards to the badly off is obvious to anyone who visits cities like Mumbai and Shanghai. It is all happening so quickly. The global market also means that countries which penalise enterprise, saving and effort too much can be shunned equally quickly in the rush to locate and grow in the more tolerant jurisdictions.
We have three worlds. The advanced world, in danger of resting on past laurels; the emerging world, growing quickly and agressively; and the opt out countries like North Korea who choose autocratic economic systems to match their stifling political systems, and who confine their people to loss of liberty and an absence of prosperity.
The West needs to understand the dynamics of this rapdily changing world. The Prime Minister was wise to highlight enterprise and opportunity, the chance to set up a business and to swap work for enforced lesiure yesterday. Ministers need to ensure the tax and regulatory regimes they set reinforces the fine words. The EU needs to switch from bail out to work out to sort out its problems, and needs to roll back some of the big government that gets in the way of prosperity.
January 6, 2011
Why manufacture in the UK? You would have to be mad outside a few select areas. I have not even heard many of these fine words from this government let alone any real action. Employment laws are farcical, over regulation all around and the state far too large a load for business to carry and still very little bank lending around. If the Tories want to do anything positive before the next election they will need to move now. What are they waiting for?
January 6, 2011
Quite. before you even open the doors on a factory you know that you are carrying a 80% to 100% state overhead (taxation is roughly 40% to 50% of ‘earnings’, QED it is 80% to100%). Is it any wonder that we cannot compete? Slash taxes to say, 10%, and just see how much wealth well be able to create.
January 6, 2011
It seems to me likely that we will have four more years of Cameron’s socialism light – holding on until forced into an election and to be followed by real socialism all subsumed in a socialist and undemocratic EU. Nothing to look forward to at all.
Where was the good news exactly just that Cameron made a slightly pro business speech?
It could all be so different if they just did the sensible thing and halved that state sector and cut regulation now. Soon it will be too late anyway to have any effect before the election. What is the matter with these people they must know what is actually needed.
Just do it now.
January 6, 2011
I see on the news channel Cameron says “Government is actively behind business” maybe but only so that they can tax, fine, regulate, inconvenience or close them down.
Meanwhile HMRC are happily winding up many struggling businesses despite the claimed government payment help service and still no banks lending sensibly to business either.
January 6, 2011
In Asia and parts of Latin America they are already having to put up interest rates to try to slow things down to control inflation, so fast has the growth and recovery been
Unfortunately it’s also possible to have high inflation without over-rapid growth. That’s what we have because of over-taxation and over-regulation. We seem to have all of the disadvantages without any of the benefits. Increasing VAT and fuel duty in the last few days have added to inflation that is already higher than official figures claim, and it’s not because of a vibrant economy!
JR is right that Mr Cameron (and those around him) need to understand a multi-stranded global economy. However, as I’m not convinced that they have an adequate grasp of the UKs economy, I’m not optimistic.
January 6, 2011
The EU is rapidly looking like an opt-out country.
January 6, 2011
Indeed it is. There is such a disconnect between the existing Westminster/EU politicians and the people, that in truth, they have no real interest in serious economic growth, because just like North Korea’s ruling elite, they are well rewarded anyway, regardless of success or failure.
So no hope for any change from the main parties as they simply don’t have the incentive, or indeed the idea.
January 6, 2011
That is exactly what I thought when I read the article. We (as part of the EU) are following the North Korean economic model! Politics and utopianism instead of pragmatic wealth creation.
It would have those men who started the idustrial revolution in this country agog in wonder at what had happened!
January 6, 2011
In total despair, I am off to a free, low tax country as soon as finances allow. Truly I see no hope in the UK in this decade.
January 6, 2011
Some bad news: As reported in the Daily Mail, at least some if not all Whitehall mandarins are still spending up budget cash they see as surplus to this year’s requirements. More evidence of the total failure of the coalition to get to grips with government wastage. We have to pay higher taxes to allow this nonsense to continue. What is to be done about this? How about reducing next year’s budget for those behaving in this way? Better still a few sackings might not come amiss – oh I forgot you don’t seem to be allowed to sack these civil servants.
January 6, 2011
That’s not fair, the head of the NI water service had to resign yesterday and now only has his £500k pay off to live off until he lines up another civil service job (or until his platinum plated pension kicks in).
January 6, 2011
They are almost never sacked nor do they resign they are just bought off due to the absurd employment laws. Often the worse they are the more they get.
January 6, 2011
Absurd employment laws that only seem to apply to them it seems.
January 6, 2011
The message still seems to be that big government will solve the problem. If the government is right and low interest rates, QE and devaluation, and even more government spending will solve the problem, maybe the government should go into the exporting business to round the square, so to speak.
I am without doubt that Lord Sugar would be more than happy to show them how
January 6, 2011
As I’ve said before, on this site, there is a danger coming out of recession just as there is going into it. The danger being rising interest rates catching out those who have borrowed more than they can afford.
Was it Greenspan (?) who said when the tide goes out we can see who’s not wearing shorts – but I’d add when the tide goes in we can see who can swim !
January 6, 2011
I’d just like to add that we are in a parallel to 91/92 when interest rates went up as part of the ERM crisis.
I see the economic cycle of the dot com crash in 2000 paralleling the stock market crash of 1987. That is to say a crash in investment. Those crashes were followed by crashes in the retail world and rising interest rates. We have seen those crashes in the US housing market and credit problems and now we are seeing rises in interest rates – same as 1991-2.
I see these ‘deep’ cycles being embedded in the economy and it’s the economic environment that produces the specific problems or surprises that make each cycle unique. In 1987 it was the stick market privatisation bubble and in 2000 it was the stock market dot com. In in 1991/92 it was interest rates breaking the ERM snake, and 2007 it was the subprime loans.
In the 2000-2010 cycle the key economic environment has been low interest rates. The reason the 2000 bubble took 2 years to deflate (and not crash) was the low interest rates offered a low returns as an alternative, so investors slowly got out the markets. Today there are still low interest rates – so when returns improve in the market investors will be quicker to move their money into equities and away from bonds. This will have the effect of pushing the price of money up and interest rates up much faster than people expect. The UK is in a very poor place to handle steep rises in interest rates and I still believe the UK housing market will fall very quickly when rates rise – as they must.
January 6, 2011
You have just given all the reasons for the UK to leave the EU, slash spending and deregulate. Why is Mr Cameron just talking about it and not actually doing it?
January 6, 2011
Mr Cameron is talking about it?
January 6, 2011
You conclude:
“Ministers need to ensure the tax and regulatory regimes they set reinforces the fine words.”
When can we expect them to make a really serious start on such a programme? I think you pointed out, the other day, that government spending in the UK is about double the level of China, as a % of GDP. Add to that the costs of the Climate Change Act and it becomes clear that the UK is still a million miles away in cost and tax competitiveness.
Soundbites are not enough.
January 6, 2011
I chose to “swap work for enforced leisure” after running out of patience with two years of unemployment, despite my M.Sc. in Computer Science. Now I make jams, marmalades and chutneys, and sell them in farmers markets. Not a great income — certainly much less than I anticipated when I enrolled for my M.Sc. course — but I find it immensely satisfying. My one regret is that I didn’t do this years ago.
But although starting my own business had occurred to me, I’d always rejected the idea, assuming that I’d need at least thousands of pounds and, preferably, skills in high demand (my total capital investment was actually about £500, and I think I could probably have controlled that better). It was only when a sympathetic friend had a word and lent me one of Duncan Bannatyne’s books that my eyes were opened.
All the times I entered those soul-destroying JobCentres (which do nothing so well as scream “You’re a failure”), never once did I see so much as a leaflet about self employment. All the pointless seminars and advice sessions (a complete waste of time, all of them) I was forced to attend, never once was it suggested.
New small businesses are what will get us out of this recession, but one of the biggest inhibitors to self-employment must be the myths surrounding it — that it costs a fortune, that 90 percent go bankrupt, that you’ll have to work a hundred hours a week, etc. None of these are true, and the government needs to work hard a some serious myth busting.
January 6, 2011
Good luck with your new venture.
As, no doubt, you have already discovered cash flow is king. Lord Sugar had a useful article about this in the Telegraph the other day. A pity that most of the political class seem to think otherwise.
January 6, 2011
Andrew, I do hope you see this in the reply box. One of my ‘retired’ roles is as a new business mentor for The Princes Trust. 30 months ago we backed a lady making her own honey, jams etc. and today she is turning over £3m + and in late 2010 got her first order from Waitrose the only supermarket she wanted to deal with. She is the wrong side of 60, a farmers wife bored to death but now run off her feet with the success of it. Remember Richard Branson left school with no qualifications let alone an MSc, he hasnt done too badly has he. I wish you every success. Believe in yourself and learn from the mistakes of others, you wont live long enough to make them all yourself!!
January 6, 2011
Good luck with your business, Andrew.
> the government needs to work hard a some serious myth busting.
Actually, as someone who has run my own small business for 15 years, I would prefer it if the government worked a lot less hard, in fact, in the infamous words of Kevin Keegan, I would ‘love it’ if the government did absolutely nothing and took nothing from us into the bargain, for this privilege. Every penny they take from business is either wasted on pointless Whitehall bureaucracy, or worse, used to fund intrusive regulators who spend their days working hard to find businesses to victimise, fine, and harass, to justify their own salaries taken directly from these businesses via the taxes and the fines that they impose for the breaking of nonsensical regulations made up to justify the employment of yet more regulators, so that they can build little empires and ‘big up’ their salaries even more.
And the tax eaters in the Department of Business, Innovation, and Skills wonder why most global investors are placing their savings into Asia?
One wonders how much it cost to come up with the acronym ‘BIS’ for this new monster tax eating department, to make themselves sound snazzy and ‘relevant’? Perhaps the money would have been better spent on paying the redundancy fees for everyone in BIS, and sacking them all, so that the rest of us could then get on with our businesses in peace, and with Hong Kong style tax and regulation, and a lot more profit to re-invest and employ more people, rather than handing it over to the government in taxes to be wasted on yet more incompetent anti-business government projects, populated by otherwise unemployable deadbeats in government offices everywhere.
Welcome to the world of self-employment, Andrew. Once you start paying employer’s national insurance tax, employee’s national insurance tax, income tax, value added tax, and corporation tax, and then have to fill out fifty HMRC forms every year and pay an accountant several thousand pounds a year just to keep these tax eaters off your back, plus tax insurance against malicious HMRC tax investigations, designed to scrape your pockets even deeper, then you may come to the conclusion that we never want the government working hard on anything, ever again.
We just want these incompetent vindictive envious greedy useless tax eating idiots off our backs.
January 6, 2011
Pretty good summary of the position of the small business owner in the UK.
January 6, 2011
I must say you have made a very valid point about the lack of information on starting one’s own venture. I am sure there are thousands upon thousands of people out there who would love to have a stab at their own enterprise, whether it be aimed high or low in terms of size. But how to get started? It is never really explained, other than with a few throwaway words such as ” you need drive and ambition”; presumably designed to put most people off.
There is a knack to starting up one’s own “thing” and sometimes people do it for the wrong reasons; some real genuine guidance would probably work wonders.
January 6, 2011
‘from bail out to work out’ what a good phrase that is. It encapsulates the EU stance and why it should change very neatly. I suggest using it more widely.
January 6, 2011
“Prime Minister David Cameron is promoting his economic growth plans on a visit to the North-West of England.
He is being accompanied by Lord Heseltine, recently appointed chair of a new regional growth task force.”
So regional assemblies are gone but there is still a regional growth task force.
Hmmm, interesting. Do i detect yet more deception. Well as it involves the EU, inevitably i do.
January 6, 2011
Should we be worried about the European Commission issuing bonds in order to bail out Ireland and presumably any other country that finds accessing the capital markets too expensive ? Yesterday, the European Commission placed a €5 billion 4 year maturity bond issue on behalf of the European Union under the European Financial Stability Mechanism (EFSM) to finance the first tranche of the EU/IMF financial support agreed for Ireland last December. So are we liable under the terms of these bonds? The other odd thing to me is that the cost to the European Commission is 2.59%, but the funds are being lent on to Ireland at 5.5%. It seems as though the European commission has become an investment bank.
January 6, 2011
I don’t understand why we need 600+ MPs when all decision making is done by the EU. Can’t our civil service simply enact the EU regulations. (One example is the 6,000 prisoners who can now vote, thanks to the EU).
Local decisions can be made by councils. MPs are effectivley redundant.
Bob
January 6, 2011
> Some good news
I won’t get too excited myself about these ‘positive’ index figures, John, measured in the debased numéraires of global fiat currencies, and also published by the banking industry which has a major set of motivations to encourage investments in stocks and corporate bonds. In the post-WWI environment, there was only one country in Europe that exhibited positive economic growth, at least by looking at ‘the figures’, and that was Weimar Germany. And we all know what happened to them a couple of years later.
Given that we still haven’t truly experienced a really painful economic correction yet, with money withdrawal symptoms masked over by large injections of Bank of England money printing, I would be more worried about continuing malinvestment, making future problems even worse when the correction can no longer be avoided, than I would be encouraged by successful investment.
The real crash, the one the Bank of England has been putting off for three years, has yet to come. That will happen when David Cameron’s ‘borrow-and-spend’ government finally runs out of other people’s money and the bond markets collapse.
When the UK government actually cuts its spending and lets the free market keep more of its profits to re-invest in growth and employment, and also sacks a few legions of business-hampering regulators, to free them up for productive work rather than destructive work, then I may get excited.
Until then, I won’t be holding my breath.
January 6, 2011
It is indeed much easier to dip one’s toe into entrepreneural life thanks to the internet. Once the entrepreneur thinks of expanding and, in aprticular, employing people, the risk begin to rise so that the benefits of expansion need to be demonstrably much greater than the cost. It has never been truer that profit is sanity and turnover vanity.
On the macro level the need to compete with the emerging world must be the biggest unacknowledged question in the world. This need is not news; it has just been thrown into sharp relief in the past two years, yet policy has not changed one jot either here or in the EU. I think there needs to be a serious debate on how to compete without sending working people back to 1840’s Manchester. I think some contributors would approve that, but really there is a very difficult problem in addressing the problem with a solution peole can accept, albeit grudgingly.
January 6, 2011
JR writes: “The internet allows enterprising people in China, India and similar countries to start up a business with relatively little capital, and to gain immediate access to the worldwide market. ”
And in England, too.
“He [Malcolm Bradbury] said: ‘I was caught out one evening by the closure of Camden Town station near where I worked and I realised I was not able to find out this information using my phone. I went straight home and started working on it.’
The result was Tube Status, which has been in the top 20 travel apps for the past two years.”
Read more: http://www.thisismoney.co.uk/work/small-business/article.html?in_article_id=520684&in_page_id=10#ixzz1AHOWWYqh
I think there are about 300,000 graduates on the dole. So instead of drip feeding them £60 or so a week why not give those that wish to try self-employment £1,000 upfront and see how they get on?
January 6, 2011
So let me get this right, sjb? You want to give 300,000 unemployed ex-students a £1,000 pounds each, and with this £300 million of money stolen from other people via the government, with the government keeping a large slice of this pelf, to see how these poor loves get on?
(With this money being drained from successful businesses, who otherwise would have used the money they generated to invest in their own ventures and employ other people.)
If I was being uncharitable sjb, I might suspect that you own a large off-licence in a student area in a large northern town, with slack sales. Because let’s face it, that’s where most of the stolen money is going to go, or into nightclub entrance fees, or other ‘night-time’ products.
Private enterprise is only achieved when entrepreneurs risk either their own PRIVATE capital, acquired either through the foregoing of consumption, or via the persuasion of other people to lend them their PRIVATE money. That’s why it’s called private enterprise. You need to have your own skin in the game, or your cojones in a vice, to really get the motivation required to run your own business.
And that’s why I can relax when others try their business ideas, because I won’t have been forced to subsidise these ideas via HMRC and other government bureaucrats.
And if you can pinpoint a time when any government bureaucrat ever took a sensible investment decision, unclouded by their own personal corrupt interest, such as who to give other people’s money to, then I’m all ears.
The use of the state to extract money from others, with menaces, via HMRC, always leads to only two things; corruption and waste. Let’s just use Concorde as perhaps the clearest example. A colossal waste of other people’s money, which ended in a few rusting relics scattered around the world’s museums, and nothing else to show for it, except dreadful documentaries starring Jackie Stewart and David Frost saying how much the whole (unprofitable-ed) venture profited them personally.
And if you want to get all ‘romantic’ about that, let’s just think about those thousands of businesses and success stories which Concorde killed, because the tax money consumed and wasted in Concorde was unavailable for them to invest in their dreams and ideas, because Harold Wilson’s dream and Tony Benn’s dream of taking on Boeing crushed theirs, as the tax was extracted from them in bucketfuls by the Inland Revenue.
Let’s just look at that Frederic Bastiat quote again:
“Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.”
If I was an unemployed student, with a degree in media studies, and looking for a job, I wouldn’t sit back on my derriere existing on a welfare dole taken from others, but I would go somewhere, where my talents might be appreciated, such as teaching English in China, or working for manufacturer in Singapore, or finding some kind of opening in Hong Kong, or emigrating to a commodity-rich country to seek some opportunity there.
That they just sit on their sofas waiting for ‘Uncle Government’ to come along and make their lives better, is perhaps the greatest indictment of the state education and state welfare system that we could possibly have.
January 7, 2011
Let me take your points in order, Andy.
1. If they are still unemployed in four months £300 million will have been spent anyway – and for what benefit? Each trip to the Jobcentre representing another dent in their self-confidence. Accelerated receipt of their benefit, however, provides an opportunity for those that want to try self-employment (btw, I doubt that all will wish to take that route). Most of the graduates will have IT skills so will be better placed than other Jobcentre ‘customers’ to take advantage of opportunities such as the example I provided.
2. Bearing in mind how much the UK has borrowed, a substantial portion of the “stolen money” is not from this generation of taxpayers but will fall to future generations (i.e. today’s youngsters) to repay in the decades ahead.
3. The “skin” the unemployed graduates would contribute is their labour. I see a chance of a return from the money spent on these youngsters (cf. the billions of pounds funding military action in Afghanistan & Iraq).
4. Aren’t we all paying for the 2008 fallout from the application of some banks’ business ideas? I don’t feel relaxed about the subsequent debts incurred.
5. In the early 1920s the UK’s electricity supply was apparently “inefficient and fragmented” but The Electricity (Supply) Act 1926 laid the foundations for the National Grid. I wish a similar bold move had been made years ago to construct a superfast broadband network because many of our competitors now have speeds of 100Mbps or more.
http://news.bbc.co.uk/1/hi/technology/8408919.stm
My internet connection is “up to” 8Mbps.
6. I think the days of paying £10 to go and work in Australia are well and truly over. For instance, the various fees for work visas alone can be expensive. Plus, there will be upfront travelling, accommodation, and subsistence costs to be met.
January 6, 2011
I recently met an American recently (socially) and as far as he was concerned the EU and the Euro were the “best thing since sliced bread”!
He said his business is becoming far more competitive in other parts of the world and over the last year has secured new business in countries where European countries had always dominated. He was all for the EU, which was constantly producing more rules and regulations thus increasing EU business costs to his advantage.
January 6, 2011
At the end of your article you imply that regulations from the EU are hampering recovery. I note a lack of detail here just a tabloid style swipe.
Who is responsible for the NIMBY planning regulations?
Who dreamed up the infamous Statutory Sick Pay regulations? Perhaps the Conservatives can undo this legacy from the 1980s (and save a few trees!).
Perhaps making regulation simpler is a direction to go.
January 6, 2011
My part time job has become a little to part time so the one day a week I work is now taken from my dole cheque pound for pound leaving me a fiver better off then the dole. Do I continue working or do I take the dole? Bearing in mind I have paid for it in the form of national insurance, or do the work for this successful and wealthy company? The job is dead end and I have other interests I would like to pursue, such as the middle class dream of becoming an antique dealer or opening a wine shop, failing that any shop selling overpriced tat and relying on the middle class social security system. Failing this should I return to my trade that often pays only the same as non skilled work and has harsher working conditions? I might just go to the gym and catch up on daytime TV and Hey! we have got the internet this time under Tory rule. Hurray for progress!
January 7, 2011
Things are improving but, at the risk of being a killjoy, I know of some UK factories we deal with that suddenly became busy from October onwards as buyers, who had held back awaiting the outcome of the election and then the budget, realised that lead times were too long for overseas production and delivery. However the lower £pound helped a little as well.
As such I am not sure if they were green shoots in UK manufacturing or some backed-up, last minute demand
In any case it seems that inflation could be the big enemy this year.
January 7, 2011
Here in the UK we could do so much more than just watch the growing economies we could partner them in so many ways if we looked outside of the box.