Part of the planned recovery of the UK economy from the recession, credit crunch and over extended public sector is forecast to come from an export boom. Yesterday’s figures for March were disappointing, but they are just one month’s figures. They show a fall in exports of goods from January to February, a rise of £1 billion in the overall deficit, with exports of services still yielding a very handy £5.4 billion surplus.
Within the goods export figures, the weakeness was greater with the rest of the world than with the rest of the EU, despite the gathering economic weakness on the continent. What more should be done to improve the position?
The Prime Minister and other leading Ministers are well aware of the need to improve the UK’s export performance to the faster growing parts of the world. They realise that the EU market is going to be stagnant at best for some time to come, given the obvious stresses in the Euro and the policies of mutual deflation being pursued there. They are hopping on to planes to take senior business people off to Asian, Middle Eastern and Latin American destinations, and doing their bit as super salesmen where government can make a difference or is expected to be in support.
Meanwhile, back home, it is taking time to create the extra factory output needed when the UK does have a success on its hands. Consider the case of Jaguar/Land Rover. Last year they launched an attractive new vehicle, the Range Rover Evoque. It was clear from the pre launch expressions of interest, and from the early reviews and orders, that this was going to be a big hit. Now there are frustrated UK buyers, told to wait six months for delivery, now facing a minimum of nine months wait for their vehicle. It is taking time to crank up production to the levels needed to satisfy buoyant home and export demand. Home demand may in part be import saving, as the prospective purchasers may otherwise opt for a foreign made vehicle.
UK manufacturing is restricted in output when it has popular products. It takes time to get planning permission, to recruit and train a good workforce, to negotiate all the regulatory hurdles, if you can obtain the capital needed to establish the larger plant. Meanwhile energy intensive business is under pressure from the high energy costs that a UK and EU base entail compared to US and emerging market competititors. The government is trying to abate the high prices for the largest users of energy through subsidy, but energy cost remains an obstacle to successful competitive manufacturing in the UK. it needs instead to trigger more energy developments, and to pursue a policy of cheaper energy instead of interfering with the market in a way designed to raise prices.
April 13, 2012
‘The government is trying to abate the high prices for the largest users of energy through subsidy’
I don’t know whether to laugh or cry.
April 13, 2012
Agreed.
Reminds of a puppy chasing its own tail – and just as productive!!
April 13, 2012
Cry, definitely. They go about ensuring the most inefficient, expensive energy supplies in world to avoid something that does not exist, then they give special deals to the biggest companies, pensioners, unemployed and the sick, lame and lazy. So middle England pays, like everything else.
I am not going to say Liebour were better, but they were certainly no worse!
April 13, 2012
Agreed.
Expensive energy, poor bank lending, OTT planning regulation & restrictions, high energy prices, water prices, council and other taxes all over the places with absurd complexity and a government that forces no retirement laws and drunk on holiday pay laws and “equality” laws to handicap them further.
April 13, 2012
JR there seems to be the suggestion, from the government, that some overseas charities are basically dodgy and being used as a tax scam or tax evasion. So the charity problem seems to be another EU problem as usual.
Surely the solution is to make the tax relief dependent on them showing to HMRC that they are not dodgy and are doing useful charitable work? Osborne really does not seem to be on top of the job as usual.
Personally I would get income tax down to sensible levels of about 20% and just get rid of tax relief on charitable giving as being more trouble than it is worth at 20% and most other tax reliefs too.
Reply: I agree – if the problem is dodgy charities let’s hear which they are and sort them out.
April 13, 2012
Indeed, charities should not be dependent on government support and should rely on private donations. Lowering the basic rate of tax and getting rid of exemptions which need to be assessed should shake out any supposed charitable giving undertaken for tax relief purposes.
zorro
April 13, 2012
Osborne thinking seems to be that dodgy charities should still get tax relief but limited to £50K or 25% of donors tax bill. If they are dodgy they surely should get non and be dealt with.
April 14, 2012
Well all the public schools that have charitable status yet only educated children if their parents pay £30,000 per year don’t have enough public benefit to be considered charities.
April 14, 2012
Dear uanime5
One of the main principles and requirements of a charity is to provide EDUCATION, that is a definition of a charity. Those private schools that are not for profit charities fully comply. By the way just so you know, having charitable status isn’t as useful as you think it is, for a start you can’t claim back VAT, so if all the private schools lost charitable status as well as flooding the education sector with 700,000 extra pupils the government would also lose many millions of pounds in tax.
Nowhere does it say that a charity has to provide a public benefit. My local owl charity has no public benefit at all do you want to shut that down too.
By the way every private school that I know of also provides bursaries, scholarships and assisted places as well as offering use of sporting facilities to the public and other schools
April 16, 2012
How about setting up a charity for people who cannot afford expensive cars and restaurants with a 100k a year membership fee. Probably exists.
April 13, 2012
No better, no worse. That is because its a continuity socialist civil service run government, with just new PR frontmen and women. The evidence is irrefutable. There are just minor differences and tinkerings of policy. Continue to vote Lib-Lab-Con for more of the same.
April 13, 2012
Of course more attention should be paid by government to facilitating production and sales. What is also noticeable from Cameron’s present jaunt to Asia is the absence to my knowledge of any announcement of further bumbling bribery (otherwise known as “overseas aid”). For this we should be grateful. Perhaps some of the aid money we are apparently thus saving, may be applied to reducing energy costs and other inhibitors to UK manufacture!
April 13, 2012
The deficit rising to £1,000,000,000,000 (http://www.pagetutor.com/trillion/index.html) is serious and needs to be looked at now.
But the rest is, surely, good news.
In all this the government is actually doing its best as salespeople which is a job surprisingly like the role of the politician, surely?
Otherwise, it is throwing obstacles in the way which need to be removed. Too many little people with clipboards perhaps, too little return on the hard work and risk taking perhaps? Too many permissions to be asked from people who have never actually been in any form of business? To many preconceived ideas? (Feminism, Eilitism, Fairness, Egalitarianism, Health and Safety, anti Racism, inclusivity)? Too much use of very long invented nouns used as verbs?
April 13, 2012
Who can but applaud your closing sentence “The government is trying to abate the high prices for the largest users of energy through subsidy, but energy cost remains an obstacle to successful competitive manufacturing in the UK. it needs instead to trigger more energy developments, and to pursue a policy of cheaper energy instead of interfering with the market in a way designed to raise prices.”
Cruciallyour energy industries, other than in internationally priced oil products, remain under the control of foreign state controlled monopoly suppliers, mostly French and German, whose priority quite clearly is through energy pricing, to render UK exports uncompetitive with their own in world markets.
The French and German governments, as for all others on the Continent, see the protection and advancement of their deomestic industry as their first priority, taking care of which requires close attention at home, not whizzing around the world on a combined domestic political PR come champagne sales drive jolly, with docile UK industrialists in tow.
Recovering price control over our own power utilities is now probably a priority even ahead of removing ourselves from the crippled EU itself!
April 13, 2012
Martin ,
Ofgem approved Centrica’s pricing structures on the basis of gas futures prices .
Centrica then went and bought gas at spot rates which offered a huge discount . Ofgem did not have a problem with them gouging the consumer like this .
This illustrates a number of things :-
– The Govt , DECC and Ofgem believe energy prices will always rise and Govt policy is completely based on this assumption .
– The establishment want to prop up energy prices to make renewables look viable .
– Ofgem , Decc and existing suppliers are too closely connected leading to inneffectual regulation and poor policy .
The big suppliers are investing on importing LNG from the US from 2015 .
Looks like the Govt is doing their best to protect their investment rather than let any home grown competition show promise .
April 13, 2012
So most of the problems faced by exporting companies are created by government regulation. Not much of a surprise to anyone running a business.
April 13, 2012
Quite.
Notice how all roads lead to government.
Government – the problem not the solution.
e.g. We will raise prices to kill energy usage to meet 80% carbon reduction targets.
Ah, that’s killing jobs. Lets create so more jobs handing out subsidies to keep the jobs we were killing.
Ah, that means we haven’t the money to pay our 7 trillion debt. Er we’d better start taxing more, because we’re not going to make ourselves redundant.
Ah, and whilst we are at it, lets create some more jobs for politicians on big salaries.
April 13, 2012
Careful you don’t get Blacklisted!
I Believe; There are 1500 British citizens who can’t get work or anything else because they are on this list! All defined by this Government to be a threat [to it].
Can anyone verify this?
April 15, 2012
http://www.independent.co.uk/news/uk/home-news/database-blacklist-saw-thousands-denied-jobs-1691544.html
No but governments historically do seem to have prior’s.
1) Eastern Europe USSR
2) I understand some Irish soldiers returning after a world war serving in British armed forces.
But mostly the jobs market is just pants.
April 17, 2012
Well, it’s been this way for the last four years?
Business Investment dropped in 2007/8, and it’s been dead ever since!
With all this De-leveraging; I find it difficult too see why I should bother?
For me; the answer is to break open, and give the British people access to the British Banking system.
April 13, 2012
Indeed. The are not only “not business friendly” they are in the main the direct enemy of business at every turn.
April 13, 2012
Yes it is good that the government supports businesses abroad, where it can help smooth the political way where needed, but is this really the best way to do things.
Would it not be better to reduce the burden of regulation, tax, energy costs and a whole host of other things to our industry here first, so that they can be more competitive in the first place, and perhaps not be so reliant on political/outside help from the government.
It would seem to me that when businesses win some of these contracts abroad it is very often only after our government has come up with an overseas aid package to that Country to help fund it, or some other project in that Country. Although this has appeared not to work in India so far with the latest Aircraft deal where the French seem to have out manouvered us so far.
April 13, 2012
In years past manufacturing companies used to operate shift work and overtime as a way of maximising output when a boost was needed for more product.
Yes aware a little more difficult in the car manufacturing industry, as this already tends to operate on a 24 hour production basis, but for many other types of business this was a very often used proceedure.
Workers were given the opportunity to increase their earnings with overtime at increased rates, or/and additional workers were recruited if a long term boost was required.
But and here is now an additional problem.
Unless you recruit agency staff for only 12 weeks and then dismiss them, and then re employ them on this 12 week cycle ,you are stuck with our inflexible employment laws.
If you offer overtime, then you are limited to a total of 48 hours a week.
Clearly it is perhaps not good for workers to be asked to flog themselves to death with overtime if they do not want it and prefer a work life balance, but many would jump at the idea of additional wages, perhaps until they got to the 40% tax rate, and therein lies another problem.
April 13, 2012
For a Company using overtime as a way to produce additional product for the short to medium term, is usually cheaper than any other form of expansion, because all of the fixed overheads of the business do not increase, only variable overheads rise during these extra hours of production.
When a company finds it seems it has to always offer/require staff to work overtime in order to meet its product demand, it would then and only then, normally be confident enough to take on additional workers.
The problem with increasing production is now the suitability and availablity of a skilled/semi skilled workforce, with these people being undervalued in the past, with high volume manufacturing having already gone abroad, or gone bust because of outside competition, There are perhaps too few people left to train them, as those experienced tradesmen are either now retired, or are doing something else in another industry.
Yes we have lots of people who learn the theory at university, but they have never actually done it, and that is a very, very important difference.
A very skilled and experienced engineer can look at a part/component that has been newly designed, and can give a good outline as to its potential failure points, before it is even put to use or goes through any testing, and you do not learn those skills in a classroom.
April 13, 2012
I’m glad I read down the comments first as you have made the same point I was about to.
I would also be interested to know the attendance record at these large companies and how much they are affected by extended maternity, paternity leave of skilled people and flexible working time requests in getting their products out in time for their customer’s requirements.
I wonder if they’ve considered offering weekend production work to their younger retirees that may enjoy a short burst of productive working to boost their pension on a short-term project.
It is a mistake to offer products you can’t produce in time, especially when you can choose other manufacturers that can meet their sales promises.
Too much management time is now required on personnel issues rather than selling products and growing the business.
April 13, 2012
Also the tax and tax credit/benefit system often mean the overtime pay (especially for families) is nearly all taken back by the state as tax and benefit loss – so staff would often rather not bother.
April 13, 2012
“Too much management time is now required on personnel issues rather than selling products and growing the business”
In a nutshell.
April 14, 2012
Most younger retirees could not keep up the pace on a production line. You seem to be under the impression that factories are like middle class offices full of ‘chaps’. Laughable. Most are full of Eastern Europeans lorded over by capos telling you to do more work no matter how much work is done and getting personal, but don’t take it personally. A top down command and control management system with even the lowest ranks looking for buffers. This coupled together with a revolving door recruitment policy. I have seen many new starts just walk off the site and many not return the next day. Can’t complain to much though as this is what paid for my house, but I did not really get involved, kept them away and unlike many, kept my health. Doing this for six quid an hour though? In your dreams chaps. Ram it is the correct attitude.
Reply: I think your knowledge of factories is out of date.
April 13, 2012
While this is a cry for more apprenticeships for skilled engineers the 40% tax rate is becoming an inceasing barrier. We have reached the stage where most highly skilled workers are now in that tax band. This combined with the fact that most companies now pay overtime rates that are little better basic rates means overtime is no longer seen as attractive by many skilled worker.
April 13, 2012
It would be far better to hire and train more workers than make the existing ones work longer, mainly because it would reduce unemployment. It might also reduce the skill shortages you mentioned.
Ultimately if companies want workers with specific qualifications they have to be prepared to spend money training these employees and give them a good job. Companies can’t expect people to learn a specific skill set without the guarantee of a job.
The UK is going to face a major problem when existing employees start to retire and companies realise there’s no one left to replace them.
April 13, 2012
unanime5
I think you miss the point completely.
Yes of course companies should train staff if they are of a sufficient size and can afford to.
No one can guarantee a job to anyone after completion of extensive training, but most employers try to retain those they have trained as it is commonsense to try and retain your investment, as that is what it is.
I served a fully indentured apprenticeship nearly 50 years ago, no one promised me a job before I started 5 years of training, indeed it was accepted that in order to move on and up, you had to move out into the big wide World..
I did a number of times until I was in control of a factory producing 1,000,000 parts per week.
You only look to employ more people, when and if you are asking your existing staff to work a considedrable amount of overtime on a regular basis, because to employ additional staff is an expensive overhead to carry if work runs short.
Over staffed businesses are simply not competitive any more.
You only have to look at the public sector to realise what an over staffed business costs to run.
April 14, 2012
@uanime5
For most businesses the payroll is their biggest expense, and you may be surprised to learn that not all businesses have bank accounts bursting with cash, on the contrary they are often running on overdrafts and rely on the mercy of their creditors.
You should start your own business, and see how many people you can afford to employ. I think we’d soon see a change in the tone of your comments.
April 15, 2012
uanime5
You remind me on someone with no children telling you in great detail how you should bring up your children.
If you train workers there is no guarantee they will stay anyway so you make loose out and just help a competitor. If you train 5 how many will stay and how much work will you have for them after training. If you take on and train new staff and demand decreases you can be stuck with them, with not enough work for them and absurd employment laws.
Overtime is flexible, just a shame nearly all the extra money you pay gets stolen by the state and wasted.
Please uanime5 perhaps try running a business and think all the practicalities through in the real world.
April 16, 2012
You could always just poach staff or employ low cost workers on a revolving door recruitment policy. Competition for job, but no competition between employers it seems would go some way to explain the skills shortage, then blame the government. A strategy often used no matter how great the profits. The reality is many leave to go abroad or just stay put in low paid jobs. The rest tell the employers to ram it and move around the country for the right money if their personal circumstances allow this or they like the life of a wandering minstrel.
April 13, 2012
48hrs for the same company. Many recent migrants will do several jobs.
April 16, 2012
Why do they do this Winston? Have a guess.
April 14, 2012
More fantasy. I have worked with temps who have worked on the same job next to the permanent staff for up to three years. This is just blatant exploitation of the agency laws using a cheap workforce of Eastern Europeans. The 40% tax rate would take overtime of epic proportions too reach for the average worker, even engineer and if they did reach this rate tells you that the company needs to take on more staff. I worked for a number of years with the pressure to do overtime and have say it is better to have to much work than not enough, but you have to learn to say no.
Why would you work in a dirty factory working unsociable hours when these factories often only pay minimum wage these days? This is a problem that will not be solved by abolishing the minimum wage. I have worked in a factory and if anyone thinks I am going back to that for six quid an hour, they can ram it. There lies your problem.
April 14, 2012
Bazman
No not fantasy, I absolutely agree with you that the temp employment 12 week scenario is a joke, far better if you are going to be a temp, to work for as long a period as you can at one place, then you have a chance of becoming perminent if they do want more staff.
The Government have stuffed temp workers with this new rule.
April 15, 2012
They do not want permanent workers. How do you explain some temps being temporary after three years? Abuse of the temporary workers by default. They avoid the 12 week rule by using agency workers the employee works for the agency who are in the business of making money by doing the legal minimum. Legally they should provide safety equipment. None do and leave this the the company employing the temporary worker. The real employer, some deal is cut over the cost. Your fantasy of the 12 week rule is like saying if pregnant woman had no rights more would be employed. Silly right wing dream. Was it better before that had any rights? No. This is why the law exists.
Often these workers put in silly amounts of work in the vain hope they would get taken on. I on the other hand did as little as possible in my temporary work with the same result. The sack. Ironically these vulnerable workers think any sort of union representation would loose them the job. The reality is that if they know you would laugh at the sack, you get to work for longer.
April 13, 2012
This is what happens when you try and boost exports by debasing the currency. You mask industrial inefficiency and sloth. For while. Inflation is a terrible policy. There are no upsides, except to those who own the printing machines. It is ruinous.
April 13, 2012
It doesn’t solve the debt problem either, since most of the debts are linked to inflation. Particularly the hidden debts that are off the books for the same reason as Bernie Maddoff.
April 13, 2012
Precisely. The Maddoffs of this world are only exposed when the tide goes out ie. when the inflation drops. Pyramid schemes require inflation to sustain themselves. Inflation is a cancer that leads to mis-allocation of investment by masking commodity supply and demand pricing, discourages industrial innovation and efficiency, encourages ponzi gambling, steals from the prudent, rewards the profligate , and enriches the owners of the money presses. People who push this policy cannot love their country.
It is a fraudulent policy. Literally.
April 13, 2012
Instead of focusing on exporting to europe which as you state is a stagnant market, the UK has an old friend the markets of the commonwealth, we have built in friendships with these contries. Why don’t we focus more on the commonwealth then the EU? I always felt that when we joined the dreadful EU we were letting our old friends in the commonwealth down, I still feel bad about it now. Many countries in the commonwealth are booming couldn’t the future of the UK’s prosperity return to trading more with our old friends rather than the EUSSR?
One final point on energy subsidies on the subject of shale gas and shale oil. Under Blackpool there is a huge amout of shale gas waiting to be fracked-of course the whole project is on standby because of the green movement’s ridiculous notion that it is dangerous to extract shale gas from under the ground. the sooner the extraction starts the better this will definitely cut the UK’s energy bills.
April 13, 2012
The only winning export strategy is to sell what we can where we can when we can. Exporting to potential rivals that are prone to the theft of intellectual property is a difficult one – delay exporting by a year or two if you can get away with it.
The relationship with Japan is one that we might develop and exploit. Like us, they are an island race, have a high tech economy and an aging population. I’m glad that Mr Cameron is doing his bit.
The problem with rapidly growing economies like the BRIC nations is that their average per capita incomes are still low. Most of their populations can not afford to buy British financial services or manufactures. Do what the Germans do – sell to the top end of the market.
April 14, 2012
Lindsay ,
What is high-tech about money laundering , nail salons , coffee shops and property speculation ?
Whenever I come back from site visits overseas , particularly from Israel or Asia , it I strikes me how complacent and technology and industry averse the UK is .
The likes of Germany and China have engineers and scientists at the highest levels of Govt whilst we persist with discredited 20th century paradigm of being lead by lawyers and groomed oxbridge ppe graduates annointed in their mid-teens .
April 15, 2012
Certainly too many lawyers, PPE, lefty economists and arts graduates in general with no real knowledge of how to run anything much beyond certain over protected professions.
April 16, 2012
Please don’t lump Oxford and Cambridge together. They are very different universities. Cambridge has made a point of being in the vanguard of science and technology research. Oxford used to generate many left leaning PPE graduates but I am not up to date on this one.
If John Redwood has the time, it might benefit us all to know what Oxford University is up to and where it is headed.
April 13, 2012
I wouldn’t describe the Commonwealth as booming. It’s mostly made up of mature markets which are similar to EU countries and developing countries which can’t afford our products. Only India can be described as rapidly growing but at present most Indians can’t afford anything the UK can make.
Fracking is dangerous because it causes earthquakes and contaminate water supplies. This is why fracking has been stopped in the UK.
April 14, 2012
Oh for goodness sake, I know you’re a socialist but how many times do you have to be told to check before you post nonsense?
India is the world’s 9th largest economy . India’s Per Capita Income has tripled from Rs.19,040 in 2002–03 to Rs.53,331 in 2010–11, averaging 13.7% growth over these eight years.
There are 1.8 billion people in the Commonwealth countries, that’s 30% of the ENTIRE world population.
Fracking isn’t dangerous, http://thegwpf.org/uk-news/4731-british-geologists-dismiss-shale-gas-pollution-fears.html
April 14, 2012
@libertarian
I think it is you that needs to check, old boy.
1. Uanime5 stated India was “rapidly growing”, which you seem to have endorsed by citing a figure of 13.7%.
2. India’s GDP per capita is about a tenth of the UK’s, which arguably supports his claim that most (of the 1.2 billion) Indians can’t afford UK goods & services that can be imported in India
3. I think his use of the word “booming” refers to the state of Commonwealth economies rather than their population.
4. There are dangers with the practices associated with fracking; for example, “The draft report indicates that ground water in the aquifer contains compounds likely associated with gas production practices, including hydraulic fracturing.”US Environmental Protection Agency Press Release of 8 December 2011
Remember the UK is more densely populated than the US so contaminating a water table could lead to large numbers of residents having to be relocated with the expense probably being met out of public funds.
April 15, 2012
No sjb
I think you will find that uanime5’s arguement was that the commonwealth countries had insufficient income to buy goods from the UK.
http://www.slideshare.net/ProfessorMathur/purchasing-power-in-consumer-india
I guess you don’t deal with the real world too well, even 10% of Indians who are wealthy enough to buy luxury /expensive goods is a massively large market (105 million people in 2006).
On tracking the report actually states that there is a very very small chance that this will happen, for sure care needs to be taken with fracking as with any other form of drilling ( see the Gulf of Mexico for example)
April 15, 2012
@libertarian (April 15, 2012 at 8:27 pm)
Uanime5 wrote that “[…] most Indians can’t afford anything the UK can make.”
Slide 10 (of your link) shows 71.9% of the Indian population belong to the deprived income class, i.e. annual income under 90,000 rupees (about £1,100)
April 13, 2012
Oh dear. I am beginning to believe that this coalition government is economically incompetent and a public relations disaster. I will have to re-read UKIP’s manifesto, I never thought I would do that. Frankly, Allister sums it up for me today: http://www.cityam.com/latest-news/allister-heath/government-wrong-demonise-generous-philanthropists .
Oh dear. Not that I ever believe the OECD but they are forecasting again http://www.cityam.com/latest-news/oecd-predicts-decades-austerity-lie-ahead-uk .
April 13, 2012
I have concluded that we have chumps in charge. There have been far too many mistakes, fumbles and cock-ups to reach any other conclusion.
April 13, 2012
Milliband’s climate change act costs this country 18Bpounds/year for the next 40years which line from Dads Army – were all doomed!! On top of that all our young brainy kids are emigrating to the anglosphere, then we are forced to comply with the civil servants gold plated Eussr regs. Come on Eaton Mess do something for our hard pressed exporters in the next 36 months before the electorate kick you out.
April 13, 2012
Sometimes supply issues can lead to increased demand.
April 13, 2012
Very true Rebecca .
In the US the surplus of natural gas (Winter has just finished and they have run out of storage) .
They have no choice except to create new demand or the shale industry will become a victim of it’s own success .
This has stimulated these new demands :-
– Fleet operators looking to switch their truck fleets to natural gas . T Boone Pickens is promoting this .
– Chemical industry jobs returning to the US because the feedstock , natural gas , is one sixth the price it is in Europe , China and India . Particularly plastics .
– Switching liquid natural gas terminals which were designed for import but never used to become export terminals which will be operational in 2015
Every job created in the oil and gas industry has lead to creation of 4 in the wider economy . Contrast creation of subsidised green jobs which destroys multiple jobs in the wider economy .
Cheap energy is THE stimulus package the UK needs .
April 13, 2012
Surely it would be more profitable for the chemical industry to import natural gas from the USA then move their factory to the USA.
Also the new truck fleets won’t become profitable unless they deliver mileage comparable to normal trucks and it’s as easy to refuel them.
April 14, 2012
The US’s natural gas terminals will not become operational for export until 2015 and there is a shortage of LNG vessels .
The US will ensure that exporting of gas does not erode the price advantage that the domestic market has over the rest of the world .
Marginally cheaper labour costs elsewhere could not close the gap .
One scenario would be for Europe to tap it’s own enormous shale resources forcing Russia to pipe gas cheaply to China in price war with US , Australian and Quatari exporters .
Any efficiency advantage compression ignition Diesel engines have over lng gas engines for road transport will be overwhelmed by the massive price difference between gas and oil . Opec Oil is just too expensive .
An application where it will be interesting is seeing whether shipping lines convert to LNG or stay with heavy fuel oil .
April 13, 2012
Did you know our energy costs are now about half what they are in Germany A Different Simon?
April 14, 2012
No ,
I’ll have to check that out .
Thanks for telling me .
April 13, 2012
UK Manufacturing isn’t helped by some strange Government
rules. e.g. Importing compenents attracts an import tax,
yet importing a complete product doesn’t.
UK
Where is the logic here? Potential UK jobs lost because of asinine rules.
April 13, 2012
Asinine rules like that are absolutely everywhere.
April 13, 2012
There is an e-petition on this subject specifically aimed at the problem as it relates to electronic components.
http://epetitions.direct.gov.uk/petitions/27158
April 13, 2012
John, one point – JLR is a great success story, but the Mini has been a major export success for several years now. They are struggling to meet demand, so guess what the workers in Oxford are doing now?? Going on strike. Offered 4% pay raises, but it is not enough.
When BMW moves Mini manufacturing to Eastern Europe we will be the first to complain, but right now we know the Tories need to sort out the Unions before they destroy the manufacturing sector again.
April 13, 2012
Sorting out the unions will make the problem much worse. If employees feel that they’re being exploited, such as long hours for low pay, but don’t have any recourse they’ll either do shoddy work or leave after a few years; both of which are very bad for BMW. It’s nothing more than a right wing wet dream to believe that you can have high quality manufacture on slave wages.
Given that this is the first strike in 30 years from people who have been happy to work 11 hour shifts it seems that BMW is partially at fault for this strike. Attacking the Unions won’t change this.
Also BMW is moving manufacturing to Eastern Europe because the lower standards of living make it much cheaper to manufacture cars. Unless you want people in the UK to work for free there’s very little the UK can do to compete with these lower costs.
April 14, 2012
Manufacturing in the UK is a mugs game. That’s why the government have to offer tax incentives and subsidies to entice foreign companies to operate factories here.
April 14, 2012
If they could move the production lines to Eastern Europe they would have already done it. I have worked on a production line that made Mini subframes. A high quality product built by semi skilled workers. Difficult to drive down the costs further and if anyone wants to compete with Eastern European wages. Good luck.
April 13, 2012
The UKs major product is regulation.
Unfortunately whilst it generates a lot of employment, it is not a product that anyone wants to buy-certainly not other countries and their peoples. In fact, we ourselves do not want to buy it-we are forced to through our high taxes.
No-one in their right mind would start a new business in the UK; the sane become part of the regulatory industry, whether directly by being part of the regulator, or indirectly by providing “training and compliance advice”.
When New Labour won in 1997, Patricia Hewitt said they would make the UK the world leader in regulation-and they have succeeded.
Bluelabour has, despite the promises, done nothing to roll back the tide of rules and regulations.
Even if a start was made today to correct the situation, it would take twenty years for any benefit to flow through. Unfortunately, short of another North Sea Oil type windfall, (which would probably be wasted again) the UK is finished.
April 13, 2012
You say:- “The UKs major product is regulation.
Unfortunately whilst it generates a lot of employment”.
Well yes but just like green jobs every job in regulation cost perhaps ten in real unsubsidised jobs. You tax the real jobs with taxes and regulation and create artificial ones.
April 13, 2012
On exporting: energy is only part of the story, especially given that Britain exports a lot of know-how. Ministers are so convinced that salvation lies in the “big ticket” projects that they treat small enterprise with contempt. By way of example, I run a small specialised firm that exports knowledge to USA/LatAm and contacted your “Rt Hon” coalition Lib colleague “Minister of State responsible for, etc.” and, when he eventually responded, I was given short shrift, “not in a position to have a meeting soon” were his precise words, notwithstanding that I am also a resident of his parliamentary constituency. I could have pressed the matter, but his response revealed enough about the measure of his character. We won’t be around to vote against him in the next election—we’re voting instead with our feet and making arrangements to relocate the enterprise abroad. NB: Your previous article, http://johnredwoodsdiary.com/2007/11/16/why-are-so-many-people-leaving-the-uk/ appears still current, despite a change of administration since it was posted.
April 13, 2012
Good find.
Everything there is still valid except
-no id card scheme now
-we don’t have a majority of Scots ministers
Other than that 5 YEARS on it could have been written today
If anything shouts for a change from this Lab Con duopoly, this does!
April 13, 2012
Cheaper electricity, easy, stop all subsidy to wind farms if they that good let them stand on there own,got to have a dash for Gas,best get Fracking.
April 13, 2012
Fortyunately all the politicos of all parties who have defended getting us into recession by blaming it on “the world recession” are wholly dishonest. There is not and has not been a world recession and the world outside the EU/US continues to grow at 7%. Thus pulling ourselves out of recession by selling to this fast growing market would be easy.
Were it not for the aforementioned liars who caused the UK recession in the first place.
April 13, 2012
All credit is due to the management of Jaguar Land Rover for the success of the Evoque. At the recent New York show they announced that the order book is full for the next year. This new product was a risk on two significant counts: almost uniquely in the automotive industry it was a daring design concept that actually appeared later as a production vehicle; it expanded the Range Rover brand into a lower priced sector without certain features available in the traditional version (transfer box and adjustable suspension height). They surmounted both these risks with great aplomb and, indeed, with flair.
April 13, 2012
I think its a choice between continued worship at the church of global warming and a competitive export sector. We can’t have both. We already have much more restrictive labour markets and higher taxes than most of the rest of the World, excluding a few sclerotic European economies. If we now lumber ourselves with much higher energy costs as well we can forget a strong revival in exports. Flying around with executives doesn’t do any harm, but if Mr Cameron wants to make a difference in this area he needs a radical reassessment of energy policy.
April 13, 2012
The only thing this and other governments are good at exporting is jobs.
April 13, 2012
I wonder if John Redwood might turn his fine mind to the accuracy of the claimed large surplus in UK external trade in services. The problems in measuring trade in services are described in great detail by the US BEA. Scepticism about UK data are increased by the way the monthly surplus jumped abruptly in 2006 from £1billion to £4billion. The surplus also seems remarkably consistent from month to month, except for abrupt changes every couple of years. I have tried reconciling the UK data with reported imports of services by other countries (since each export has to be someone’s import), but frankly life is too short to pursue this thoroughly.
Reply: It’s a good question which I cannot answer today. When I was a private sector service provider undertaking exports I did have to fill in a form regularly askign what we had been doing to help the UK stats, so there is a system. If anything I think there is a danger of missing exports in a fast changing marketplace, as new services do not always fit in obviously to existing categories.
April 13, 2012
A major area of exports is the provision of financial services by the City of London. There are huge inflows to the UK from the provision of services on international transactions to international clients. You wouldn’t know it from the way ministers talk – such as Vince Cable & even occasionally, unfortunately, even Messrs Cameron & Osborne
April 13, 2012
As prime minister, what would JR do? Sadly, all this fuss about bonuses and knighthoods is sending the world the message that Britain is a socialist country which punishes business. The tax-take is rising, as are government debt and spending – hardly an enterprise-culture.
April 13, 2012
In addition to specific actions to support exports to particular countries and to persuade more companies to export we need a tax regime that is more favourable to exporters and discourages importers. This in particular needs to discourage companies from moving activities offshore.
An opportunity was missed in the recent budget when a reduction in employers NI contributions would have been much more effective in this area than reductions in corporation tax.
We also need to make sure that the timescale on which the UK implements new EU rules, for example in animal welfare, does not give an advantage to EU producers who are slower in their implementation.
The government also needs to look at reducing the number of foreign companies that have to down size treating the UK as an easy place to target. This could be achieved by looking at not just the redundancy money paid to those made unemployed but also the ongoing costs of any unemployment. How many of the companies that withdraw have previously been given grants to expand? Why aren’t such grants repayable in some circumstances?
April 13, 2012
Foreign countries target the UK when they want to downsize because we have very lax employment laws, making it much easier to fire someone in the UK than France or Germany. Increasing the redundancy money paid to people who are made redundant won’t change this because it will almost always be cheaper to dismiss someone than keep them in employment.
April 14, 2012
I agree that increasing redundancy money alone would have little affect on stopping jobs being exported. What is needed is a series of measures that reduce the advantage of moving a company abroad. I listed just a few but we need to see a major government push aimed at leveling this playing field.
April 14, 2012
uanime5
How many people do you employ?
April 15, 2012
It must clearly be none surely.
April 13, 2012
“It takes time …to recruit and train a good workforce”
If we are serious about competing with Germany, then we need to adopt their education and training system at every level. Furthermore, we cannot afford to offer places on economically significant university courses to foreigners before all the demand from the English has been satisfied.
The major problem we have in this country is that many are striving to improve this country and make it strong whilst others both here and in Brussels and elsewhere are going largely undetected and unpunished in deliberating undermining it culturally, economically and racially: this undermining is always disguised as something noble for the betterment of ourselves and our planet.
Here is a film about a new Volkswagen factory in Dresden:
http://www.youtube.com/watch?feature=player_embedded&v=nd5WGLWNllA#!
Reply: Yes, it is an impressive sight – and site. We do have highly automated clean factories in the UK as well. Modern manufacturing is about right first time, high quality high technology highly automated delivery. This is best undertaken in clean modern spaces, with good conditions for the relatively few assembly workers needed. I would expect future VW lines to be even more automated than this. I first realised the full importance of computer control, active audit, clean and highly automated spaces when I saw how they made F1 cars in the UK some years ago. This is now being applied to mass production.
April 13, 2012
If we want to compete with Germany we need to fix our manufacturing industry. In Germany their managers are engineers, here they’re accountants; in Germany they value engineers and scientists, here they are poorly paid; in Germany the employees’ rights are protected, here you can easily be fired.
In summary good engineers require well paid and secure jobs. If they can’t find any in the UK they will go abroad.
April 13, 2012
uanime5
At last I can agree with a paragraph of yours, the last one.
“Good engineers require well paid and secure jobs …..”
They have been underpaid and undervalued for decades, that is why so many have left the industry.
April 14, 2012
“”In 1940 I could at least fly as far as Glasgow in most of my aircraft, but not now! It makes me furious when I see the Mosquito. I turn green and yellow with envy. The British, who can afford aluminium better than we can, knock together a beautiful wooden aircraft that every piano factory over there is building, and they give it a speed which they have now increased yet again. What do you make of that? There is nothing the British do not have. They have the geniuses and we have the nincompoops. After the war is over I’m going to buy a British radio set – then at least I’ll own something that has always worked.””
— Hermann Göring, 1943
http://news.bbc.co.uk/1/hi/uk/3748848.stm
April 13, 2012
From Wikepedia:
Jaguar Land Rover is owned by Tata Motors of India.
In March 2012 Jaguar Land Rover announced the creation of 1000 new jobs at its Halewood plant and a shift to 24 hour production.
In the same month Jaguar Land Rover and the China based car maker Chery agreed to invest an initial US$ 2.78 billion in a new joint venture the activities of which will include the manufacture of Jaguar Land Rover vehicles and engines, the establishment of a research and development facility, the creation of a new automobile marque, and sales of vehicles produced by the company.
To complete the picture, there are plenty of ex-UK production people working in China for good money.
As Bob Dylan used to sing, you don’t need a weatherman to know which way the wind blows.
April 13, 2012
John, when you continually laud this supposed low-tax zone called the US, why don’t you comment on the fact they have the highest rate of corporation tax in the world?
reply: I do not recall praising the US as a low tax zone.
April 13, 2012
“John, when you continually laud this supposed low-tax zone called the US, why don’t you comment on the fact they have the highest rate of corporation tax in the world?”
As a professional economist, I would have expected you to read past the headlines.
From the NYT: The Paradox of Corporate Taxes
http://www.nytimes.com/2011/02/02/business/economy/02leonhardt.html
We used to have 98% income tax which nobody paid because at the same time bank loans, corporate entertaining and much else besides was tax deductible. We now have vociferous arguments about the ‘right’ rate of higher rate income tax to only discover that those who can afford expensive lawyers and accountants consider that higher rate entirely voluntary. High tax rates are at best window dressing and at worst economically damaging.
April 13, 2012
There are so many tax breaks for companies in the US the rate of corporation tax is meaningless. Look at the actual tax suffered. Tax/GDP in the US is 27%, vs 38% in the UK.
April 13, 2012
Can’t we just export our houses again? You know, issue lots of self-cert 100% mortgages, package them up into various bonds and flog them to Johnny Foreigner in exchange for his oil and manufactured goods?
What’s that? Johnny Foreigner doesn’t want to buy any more 100% self-cert mortgages ‘made in Britain’? How about some lovely Gilts? Yes, let’s export some Gilts, come on, roll up and form an orderley queue. Nothing to worry about, our man down the BofE will buy them back off you for a couple of pence more in a few months.
That ought to keep the oil, BMW’s and Chinese tat flowing for a couple more lyears at least. What then? Umm, what else could we export? How about our motorway network? That’ll fund the fiscal deficit for another year.
Then what? Hmmm, our Universities are pretty good. Now the students are resigned to paying, maybe the Qatari SWF will put a bid in? We could even start charging commercial rates on student loans and package that in?
April 13, 2012
Comment of the year, Steven !
That made I larf.
April 14, 2012
Gallows humour. It is so near the truth.
April 14, 2012
It is the truth!
April 13, 2012
Whom is meant to buy our exports exactly when the biggest economic contraction in 3 generations is underway around the globe?
Want England’s manufacturing base to be rebuilt?
Put 20% tariffs on Chinese imported goods.
April 13, 2012
Whatever it does the government must not try to correct the imbalance by increasing the money supply so as to deflate the exchange rate. (as discussed on the Today programme.)
April 13, 2012
I wonder how the traditionally minded Conservative voting shire counties will take to fracking for shale gas in their back yards?
April 13, 2012
They haven’t complained about hydraulic fracturing over the last 5 decades it’s been happening onshore UK because they haven’t been aware of it .
With the publicity brought to it by shale and tight gas , they will react in pretty much the same way as they would react to proposals to build a factory – by opposing it .
I hope they don’t have the final say but am worried as our Govt seems more concerned about image than taking hard decisions or providing leadership by saying “we are going to do this and do it safely” .
Try finding an article in the media with a sentence containing the words “hydraulic fracturing” which does not also contain the word “controversial” .
One cannot help but be impressed by the approach being taken in Poland which is leading Europe in shale exploitation . They haven’t chosen the easiest formations to start with either .
The Polish Govt is behind it and have given assurance that the fiscal terms will be fair . The majority of their population support it too .
What a contrast with our own Govt’s approach of wishing we didn’t have any prospective shale and hoping the issue would go away .
April 13, 2012
John – At best I would guess about 50 Conservative MPs understand about the points you raise and have a good grasp of economic reality. However none of them are in the cabinet and the rest of the Tories are Cameron “moderniser” weak pathetic wet lackeys.
Here lies the problem.
April 13, 2012
There is a windfall available: its called shale gas (and oil).
If we were among the first in Europe to exploit it, we could sell it at very high prices. If we are among the last, it will be sold at very low prices (see the price trajectory in the US).
Now let me see, what would a Government focussed on the needs of the people choose to do??
April 13, 2012
Shale gas is natural gas produced from shale. It’s as valuable as natural gas so we can’t sell it for a high price, unless there’s a shortage of natural gas because every other nation has already harvested all their natural gas.
April 13, 2012
I’ll try to be clearer then: Natural Gas in the UK and Europe is now several times more expensive than in the US. They used to be the same, but the price in the US dropped dramatically with the new US shale supply. The same will happen in Europe. Poland for example is well ahead of us. The point stands.
April 14, 2012
However if we produce more of our own natural gas we have less need to import as much as we do. Reducing imports is as good as increasing exports. It has the additional advantage of increasing employment which balances any extra costs. This however depends on the government acting to reduce the costs of employment by for example in areas like this reducing employers NI contributions.
April 13, 2012
The problems with an export lead strategy is that there’s no easy way for the UK to increase their exports and every other country is trying to increase there exports.
As I see it there are 3 main ways to increase exports:
1) Increase exports to markets that haven’t been saturated, such as selling more cars in developing countries. This can ensure reasonable profits as long as enough people in these markets can afford the product but the UK will be competing against companies from other countries.
2) Take some of the market share from other countries in markets that have been saturated, for example by making new video games or cars. Can produce good profits if successful but competition is even more intense and a high level of innovation is required to stay ahead of the competition.
3) Identify a new opportunity. This can prove profitable in the short term but once other countries enter this market profits will rapidly fall. It’s also difficult to predict how long it will take for the market to become saturated.
Of course all three methods involve the difficult task of trying to make your product appealing to the country you’re trying to sell it to and find an appropriate way to market it.
Also trying to expand manufacturing capability without knowing how popular a new product will be or for how long it will sell can prove disastrous.
April 14, 2012
An export led strategy needs to be accompanied by an import replacement strategy.
April 13, 2012
The issue of stealth taxes has to come to a head!
If a 20 a day smoker pays £2300 net a year in tax then thats £2300 a year they are not spending in all the other private industry firms that would welcome their custom.
The people in this country with the need to buy new cars and the means to travel to centers to spend have their money taken up by fuel taxes.
We need a return to income tax.
April 14, 2012
Whether the £2300 taken in tax is from cigarettes or income tax makes no difference it is not available to be spent.
In fact because there is no choice with regard to income tax while smoking is a choice the argument falls down largely in favour of indirect taxes.
April 14, 2012
Smoking is a choice and if people do not want to pay this tax should give up smoking? Easy as that huh? I’ll take it this rational thinking comes from people who have never smoked? Fat? Stop eating. Poor? Get a job. Any other problems just ask Bazman.
April 15, 2012
We will be needing answers. Right wing fantasies about freedom of choice cannot be continued further without this. Toodle pip nitwits. I should add. Have never had a job, but many of you do not know what a job is.
April 14, 2012
That £2,300 per year is being put towards the medial treatment a smoker will need when they get lung or throat cancer. If smokers don’t want to pay this tax they should give up smoking.
April 14, 2012
All this talk about exporting makes me think we are getting ahead of ourselves ; trying to run before we’ve relearned how to walk .
John , might you cover substitution of imports with home produced products in a future article please ?
April 14, 2012
Half of our major businesses have been sold off to foreign buyers under laws enacted during a Tory administration.
This offers great short term profit for bankers and directors but does serious damage to UK employment, technology and revenues.
It certainly hasn’t helped with exporting.