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Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to http://pennystockpaycheck.com for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

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Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

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Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

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Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

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UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

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Tourists splurge £4.5bn in UK shops

Category : Business

Average foreign visitor on shopping trip spends £680 – with Britain ranked above France and Italy as a retail destination

The high street may be shrouded in recession-related gloom, yet Britain remains one of the world’s most sought-after destinations for overseas shoppers seeking to splash their cash.

Research released by the national tourism agency, VisitBritain, shows that 18 million foreign visitors spent a till-busting £4.5bn in Britain’s shops in 2011 – of a total spend of £17.9bn. That means they shelled out, on average, a quarter of their total spending on high streets, department stores and shopping centres across the UK.

Over half of the shopping splurge was on clothes, with an estimated £2.3bn generated by fashion-conscious foreign tourists. Many visitors also snapped up souvenirs, gifts and household goods, on which they spent £1.6bn.

Further analysis of the research found that a ‘shopping’ tourist spends more – an average of £680 per trip – than an ‘ordinary’ overseas tourist who typically spends £580. And shopping in Britain was rated above France and the same as Italy in terms of value for money.

The findings, based on data from the Office for National Statistics’ International Passenger Survey, show that London’s world-class shops, stores and markets are a major attraction for foreign visitors. Around 81% of holiday visitors to London hit the shops. The regional benefits are also clear, with between two-thirds and three-quarters of holiday visitors shopping outside the capital.

Ethical goods sales increase despite recession

Category : Business

Co-operative Bank puts sales of ethical goods and services in 2011 at more than £47bn, up from £35.5bn five years ago

Sales of ethical goods and services have increased despite the recession, growing to more than £47bn last year.

Since the onset of the economic downturn five years ago, the value of ethical markets from Fairtrade products and green energy to free-range and sustainable food has grown from £35.5bn to £47.2bn, according to a report produced by the Co-operative Bank.

The annual ethical consumer markets report shows that sales in the sector have grown from £13.5bn in 1999.

Barry Clavin, sustainability reporting manager at the Co-operative, said: “This report shows that intervention by enlightened businesses, together with regulatory intervention, is driving ethical sales growth.

“During the downturn we’ve seen some of the biggest-ever Fairtrade conversions, be it in chocolate or sugar, and business is beginning to respond to the challenge to provide consumers with more sustainable products and services such as fish, palm oil and soya.

“Ethical consumers are still a vitally important agent of change. However, the actions of progressive business are now a significant contributor to sales growth.”

Sustainable fish has become increasingly popular, with sales up to £292m last year from £69m five years ago, while Fairtrade sales more than doubled to £1,262m in 2011 and free range eggs sales rose from £444m to £792m.

Sales of organic produce, however, fell from a high of £1.9bn in 2008 to around £1.5bn last year.

Small-scale green energy increased last year, with people benefiting from the feed-in tariff subsidies for solar panels, and overall markets for green home products increased by more than 10% on the previous year to be worth £8.4bn.

The Co-operative put the growth in ethical markets down to consumers, increasing action by business and more regulatory intervention.

But Clavin said that ethical markets remain a small proportion of total sales, and solutions that ensure environmental sustainability, good animal welfare and a fair deal for producers required a government committed to long-term intervention.

Christmas price cuts boost hopes of record sales

Category : Business

Three-quarters of shops have sales or advertising promotions – but pre-Christmas discounts not as big as in 2011, says PwC

Widespread price promotions are being offered to last-minute Christmas shoppers by retailers hoping to ring up record sales this weekend.

Three-quarters of shops have sales or advertising promotions in their windows, but discounts are not as big as in 2011, according to PricewaterhouseCoopers. Shoppers are being offered discounts averaging 44%, compared with 48% this time last year.

Visa expects to process 31.9m transactions on Saturday , or £15,000 every second, as consumers take advantage of late-night and early-morning shopping to purchase presents. Retailers including John Lewis and HMV will keep some branches open until 10pm on what is expected to be the busiest shopping day of the year.

“Despite a cautious start to consumer spending in the build-up to Christmas, we are now expecting the high street to see its busiest day of the year on Saturday as shoppers hunt for last-minute gifts for family and friends,” said Steve Perry, commercial director at Visa Europe.

Gap has up to 60% off; Marks & Spencer has 20% off promotions in several departments. John Lewis has held back from heavy price cuts, although it has offered discounts through its “never knowingly undersold” promise.

Alex Hamilton, an analyst at Planet Retail, said this weekend would be vital for some retailers. “This holiday season is going to make or break some retailers’ years, so I think they will be trying harder than ever to get people through the doors before Christmas.”

Christine Cross, chief retail adviser to PwC, said food retailers face a tougher time as Sunday trading laws mean in effect they lose 17 hours of shopping in the days immediately before 25 December. Cross said: “I’m a little bit worried about what retail margins are going to look like in January.”

Motorbike sellers roar into town as Indonesians earn money to burn

Category : Business

Steady growth fuelled by domestic consumption means the country may surpass Britain and Germany within 20 years

The heavy throttle of a 1967 Chevy Impala echoes through the conference hall as crowds of men and women sporting 1950s hairdos, skinny jeans and tattoos gather round to ooh. It is day one of Indonesia’s first Kustomfest and thousands are milling about along rows of hot rods, vintage Beetles, slicked-up Triumphs and pared-down Harley-Davidsons – some of which boast price tags of $20,000 (£12,000) and higher.

On the margins, buyers wander among stalls displaying coffin-shaped upright basses and punk baby clothes, a tattoo parlour and a stage for a metal band called Death Vomit.

Ten years ago such an event would have been impossible. But as Indonesia’s economy arcs into becoming what some analysts believe could be the world’s seventh largest by 2030, a growing number of consumers are looking to spend their cash in ways they might not previously have imagined.

“A few years ago there were custom bikes and choppers, but there were just a few in every town,” says the Kustomfest organiser, Lulut Wahyudi, a tattooed Yogyakartan who runs one of Indonesia’s most popular custom-bike shops. “But this culture is growing. Now everyone wants to be part of it.”

Vincent Lutiarso bought his first bike at 18 and has accumulated many more. “This is an expensive hobby for us, but it’s an escape from our daily lives,” said the 35-year-old as he and members of his local motorcycle club took a break from touring under the hot sun. “Back in the day, it was so cheap – now the demand is so high. I bought my first bike for $450 and now it’s $4,500.”

Demand is so high, in fact, Lutiarso left his 18-year career in hospitality to start his own import business. “My sales have increased about 500% in just the last two years. The market is going crazy. Next week I’ve got five bikes coming from the US [retailing for] $75,000 each.”

Unlike many of its neighbouring Asian tiger economies, Indonesia has been growing steadily over the past decade, thanks mostly to increases in domestic consumption rather than to exports or manufacturing – both of which are prone to global fluctuations. Its GDP per capita has almost doubled in the past 10 years, with few signs of the boom and bust that have plagued richer countries, according to analysts at McKinsey, the research and consulting firm, which has forecast that Indonesia’s economy will surpass Germany and the UK by 2030.

“The key thing is the growth [here] has been stable,” said Raoul Oberman, from McKinsey. “If you grow too fast you get overheating, you get delivery problems, you get even more inequality or people going overboard … In the last 10 years [in Indonesia], it’s been 5% every year and the volatility around that [growth] has been the lowest of all the Brics [Brazil, Russia, India and China] and even of the OECD countries.”

Increases in labour productivity may have driven the bulk of Indonesia’s economic growth in the past 20 years (GDP is expected to rise by 6% this year), but low inflation rates, strong investment and rising purchasing power have helped maintain it. Labour groups have become vocal, demanding better job protection, higher wages, more benefits.

Jakarta’s governor, Joko Widodo, has responded by increasing the capital’s minimum monthly pay by 40% to 2.2m rupiah (£143), a move expected to trickle across the nation as local authorities set wages for their own regions.

While it may yet have issues to iron out Indonesia’s development is remarkable because it can be seen everywhere and at every social level – from the new villas sprouting up in Jakarta’s suburbs to the number of farmers in the vast archipelago now able to buy electronic goods such as mobile phones, washing machines and motorbikes.

Yet it is in Indonesia’s second- and third-tier cities where the growth is highest, says McKinsey: places such as Yogyakarta, Surabaya and Medan, where there are, perhaps surprisingly, a growing number of “biker brotherhoods”.

Lutiarso says his “bros” work mostly as waiters, cafe supervisors and four-star hotel managers. Most average salaries of about 4-5m rupiah a month (£260 to £325). But their low earnings do not stop them from saving and buying big. “My own bike cost me $35,000 [£22,000] so far and it’s not even done yet – it still has to be gold-plated.”

This consumption phenomenon has not been lost on local and international businesses – whether they’re Yogyakartan bike shops or global corporations – each regarding this 240

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Fifteen-minute meals and breakdancing mice: the gifts of Christmas future | Charlie Brooker

Category : Business

The most popular gifts this festive season speak volumes about us as a species

Christmas wouldn’t be Christmas without a perfunctory series of interpersonal product exchanges, and 2012 is no exception. Money itself may be having a nervous breakdown but the shops are still heaving with delighted customers, most of them experiencing a surge of capitalist euphoria so intense their faces simply can’t interpret it properly, and instead have to make do with broadcasting a frozen, bewildered expression; the face of someone quietly praying for a stun gun to the temple or some Dignitas vouchers for Christmas.

What are these people buying, what does it say about us as a species, and which of these gifts has the potential to destroy humankind? A glance at the top 10 gift lists offers a few pointers. For instance, right now, the No1 title on Amazon is Jamie’s 15-Minute Meals, which implies we have half as much leisure time as we did two years ago when his previous bestseller, 30-Minute Meals, topped the charts. Presumably he’ll continue slicing that preparation length in half until he arrives at Jamie’s 12-Attosecond Meals, the smallest possible measurement of time. You won’t have to actually cook the dishes in 12-Attosecond Meals because it’ll be printed with a new form of e-ink consisting of edible atoms of light. Simply look at the pictures and your brain instantly absorbs the meal through your eyeholes, like a sponge soaking up coloured water. That’s just dandy when you’re gazing at a lamb chop with mint sauce, but the downside to this technology is that each time you glance at the image of Jamie on the front cover you’ll absorb some of him, too. The smell of his skin. His salivating maw. Microscopic flecks of unrinsed shampoo. His earwax. You’ll unwillingly savour it all, and the aftertaste will linger on your mind’s tongue for several hours afterwards. Merry Christmas.

Many of this year’s most popular toys are too advanced for anyone over the age of 13 to process without experiencing some sort of existential vertigo. Take the Wonderbook. Have you seen the Wonderbook? Unlike the Jamie Oliver thing I just invented, it’s real, yet somehow harder to explain. It’s a hi-tech augmented reality pop-up book. Hold it in your hands and it resembles a book full of giant barcodes. However, place it on the floor and let your PlayStation peer at it (and you) through a camera, and everything springs to life on-screen, so instead of a loser with a wordless book of barcodes, you look like a magic wizard reading a magic book with all tentacles and pumpkins and lightning bolts flying out of it. Your life hasn’t really changed. You still have to go to the toilet and everything, like a basic animal. But for a few moments at least, fantasy life and real life merged into one.

It’s not fair. When I was a kid, the most advanced toy was Mouse Trap, the anti-climactic boardgame that never worked the way the advert promised it did, and was apparently designed to teach kids to distrust machinery. Plastic boots and the occasional ball bearing was as cutting edge as rodent culture got in the 70s. Today there’s Master Moves Mickey.

I recently saw Master Moves Mickey advertised on television and screamed like Donald Sutherland at the end of Invasion of the Body Snatchers. This kind of thing has no place in our world. It’s a battery-operated breakdancing Mickey Mouse robot. I repeat: a battery-operated breakdancing Mickey Mouse robot. It talks. It dances. It does handstands while spinning its legs through 360 degrees, like a motorised whisk. If it topples over it asks nearby children for help. And it’s absolute bullshit. For one thing, Mickey Mouse has always been the least cool Disney character, the Michael Gove of anthropomorphic animals, so seeing him dressed in hip-hop gear (complete with sideways baseball cap) is disgusting on some primal level.

Furthermore, his limbs look horribly stiff, as though rigor mortis is setting in, so rather than dancing, he teeters and shudders, like an ageing b-boy practising his moves several months after undergoing a full skeleton transplant. If this is anything to go by, robots are still 1,000 years away from conquering humankind. Microwave ovens’ll get there first.

Or will they? Because another top seller is the relaunched, reinvented Furby, which has returned, smarter and more likely to claim a year-long role at the forefront of your child’s nightmares than ever. It now has animated displays for eyes and develops hilarious emotional disorders when mistreated. Leave it on a shelf where it can overhear your conversation, and it’ll gradually learn to annoy you in English. It also makes fart sounds and yells like Tarzan. It’s a wanker, basically, but an advanced one; one you “feed” using a smartphone app that lets you design custom-built sandwiches according to its whims.

You have to wonder who’s the master and who’s the slave in this relationship. And the inclusion of increasingly sophisticated personality traits is worrying, as traits can easily mutate into flaws. What happens when they create an army of future Furbies which, thanks to some hideous psychological bug, demand to be kept fully sexually satisfied at all times? Because sadly, that’s inevitable. And when it happens, it’s really going to knacker the festive mood.

Manufacturers warn economy too weak for more austerity

Category : Business

EEF warns the economy has shown no growth in the past year and investment remains 15% below its pre-recession peak

Britain’s economy is not strong enough to cope with further austerity, the manufacturers’ trade body has warned, adding to the pressure on the chancellor to reject bigger spending cuts in his autumn statement next month.

The EEF said George Osborne should focus on restoring growth by increasing competition in the small business banking market and making purchases of new plant and machinery fully tax deductible.

After a month of weak economic data that culminated last week in a higher than expected public sector deficit, the EEF’s call for a series of measures to increase lending and investment will resonate with most business leaders.

Bank of England governor Mervyn King unnerved the business community recently when he said Britain could suffer a triple dip recession after a brief recovery in the third quarter of the year. King warned that the recovery will take long and may include periods of contraction.

EEF chief executive, Terry Scuoler, said that despite a better third quarter, the economy has shown no growth in the past year and business investment remains 15% below its pre-recession peak. “There’s little that the government can do about the world economy but there’s a lot it can do at home,” he said.

“In recent months, the government has been more vocal about the need for growth and importance of speeding up delivery. The autumn statement now needs to match these good intentions by providing some clarity on how this will happen.

“It should start by being clear on its ambitions for the economy in a way that will drive action across Whitehall and send a clear signal to business about its intentions. We have seen how the £1tn export target is stimulating action across government but we now must see the same urgency and clarity of purpose on all the issues that matter to growth.”

His message was reinforced by figures from Lloyds Bank that showed consumers had the same amount of money left over at the end of the month to spend on discretionary items in October as they did a year earlier.

“Despite inflation receding throughout much of this year, consumers are yet to see this fully translate by way of more pounds in their pockets once essential spending has been accounted for.”

Consumer sentiment improved slightly from September, according to the survey, but remained subdued.

Osborne is understood to be considering a series of cost saving measures to boost the government’s finances, including ending tax relief for pension savers who pay tax at the higher rate. He has also identified several areas for further spending cuts, which he could unveil on 5 December.

He is under pressure after a two year period of zero growth that has depressed tax receipts and pushed up welfare spending.

The Institute for Fiscal Studies said in a report that the deterioration in the government’s finances would lead to a £13bn shortfall and could force the Treasury to extend spending cuts for a further year. The government has extended its original five year programme by two years. The IFS said the poor performance of the economy could force Osborne to extend the austerity programme, which began in 2010 when the coalition came to power, to 2018 A series of spending cuts are scheduled to hit the unemployed and disabled next year as a cap on housing benefit and reductions in disability living allowance take effect.

Some Tory backbench MPs have called for further austerity measures to put the public finances back on track, but the EEF said it would be folly to inflict further pain on the economy when the result would be slower growth and lower tax receipts.

Scuoler said: “Our economy is not strong enough to withstand any more austerity. The government’s first budget saw big cuts in capital investment spending and they need to be reversed.

“Temporary tax cuts are also needed because even though there have been cuts in corporation tax, the effective tax rate paid by businesses is still high. The UK is still outside the top 10 OECD countries that provide the best tax environment for business,” he said.

Retail sales climb 1.5% in September

Category : Business

Consumers are cautiously returning to shops as squeeze on disposable income eases, says British Retail Consortium

UK consumers are getting used to tougher times and have started shopping again, albeit cautiously.

In a week where the chancellor warned that austerity could continue until 2018, data shows Britons are adapting to the grim economic climate and have stopped putting off purchases indefinitely. The British Retail Consortium said like-for-like sales climbed 1.5% in September compared with the same period last year.

Stephen Robertson, director general of the BRC, said: “Difficult has become the new norm. Customers are still cautious but less fearful than they were. The squeeze on disposable incomes has eased for some and, along with lots of discounts, left them feeling it’s time to stop postponing spending.”

September’s sales growth was a significant improvement on August, when sales dipped 0.4% year-on-year, as the Olympics feelgood factor failed to translate into a boost for retailers.

Victoria Clarke at Investec said: “We’ve seen a weak summer with the weather, jubilee and the Olympics. But there was a question of how much was genuine weakness and how much was due to these factors.”

The BRC data suggests consumers have started spending again, which should bolster official retail sales figures out later this month.

Sales of children’s clothes rose in September as parents did the back-to-school shopping they had put off in August. The sudden onset of wintry weather in mid-September also helped drive sales of jumpers and coats.

Clarke said: “There is a disconnect between how fearful [people] are about the economic backdrop, their personal circumstances and their appetite to spend. When it’s cold enough and you need a coat, if possible, you get out and buy one.”

The Royal Institution of Chartered Surveyors also struck a cautiously optimistic note on Tuesday, saying sales of homes were picking up and the housing market should see “a slightly stronger end to the year”.

House prices are still falling but at a slower pace in recent months, leading economists to suggest prices could be bottoming out. Clarke said: “We are getting there. On these figures and recent house price surveys, it suggests there is some stabilisation in house prices, which we would expect to turn into modest growth in 2013.”

London remained the only region where more surveyors are reporting price rises rather than falls, but the Rics survey pointed to house prices remaining flat this year.

The organisation said chartered surveyors’ expectations for sales had picked up, buoyed by hopes that government initiatives, such as the Funding for Lending scheme, would make it easier for prospective buyers.

Expectations of sales picked up, with 26% more respondents expecting the number of transactions to increase during the final three months of the year than decrease.

Bank of England survey shows rise in mortgage lending

Category : Business

Treasury seizes on signs of life in the mortgage market as evidence that its radical funding for lending (FLS) scheme is working

The Treasury has seized on signs of life in the mortgage market as evidence that its radical funding for lending scheme (FLS) is working.

The Bank of England’s latest quarterly credit conditions survey, conducted in August and early September, showed a “significant” increase in the availability of secured lending, including mortgages.

“The Bank’s figures today show that the number of mortgages out there for people looking to buy a home has increased significantly over the last three months, and that the Funding for Lending Scheme will help ensure that this continues in the coming months,” said a Treasury spokesman.

The balance of lenders reporting an increase in mortgage availability was the highest since the survey began in 2007.

The rise was strongest among buyers with a deposit of less than 25% of the value of their home – those who have often struggled to borrow in recent months.

However, shadow business secretary Chuka Umunna pointed out that the bank said there was no evidence that more credit is flowing to businesses — the borrowers George Osborne is keenest to help.

“Firms across the country have been crying out for finance for many months and we hope the scheme does not go the way of ministers’ Project Merlin and credit easing schemes, that failed to increase access to finance for businesses in the way hoped,” he said.

Malcolm Barr, UK economist at JP Morgan, said: “The sharp move up in actual and expected mortgage availability will cheer the monetary policy committee, though [they] will wonder why the impact of the scheme should appear to be so asymmetric across sectors,”.

September sales boost

A separate survey released by the CBI shows that retailers saw a modest increase in sales in September after a dismal August when sales were affected by the Olympics, as consumers stayed at home to watch the Games.

The CBI’s latest distributive trades survey showed that 33% of retailers recorded rising sales rising in September, while 27% saw a fall.

The positive balance of +6% was stronger than the -3% of August. The CBI added that retailers were also expecting stronger demand in the month ahead, boosting hopes that the economy could bounce back to growth in the third quarter of the year.

Howard Archer, of the consultancy IHS Global Insight, said: “Given the importance of consumer spending to the economy, this supports hopes that GDP growth in the third quarter will more than offset the 0.5% quarter-on-quarter contraction suffered in the second quarter when it was hit by special factors (the extra day public holiday and wet weather that hit construction and retail sales).

“The CBI survey also lifts hopes that the economy is seeing modest underlying growth.”

Chris Williamson, of the data provider Markit, said: “Ongoing retail sales growth should help to drive economic growth and raises the likelihood that the UK has risen from its double-dip recession in the third quarter and, from a consumer angle at least, will start the fourth quarter on a reasonably sound footing.”

Official figures due to be released on Thursday are expected to show that the economy contracted less sharply in the second quarter of the year than the Office for National Statistics’ previous 0.5% estimate.

Analysts are also keenly awaiting the first signal of whether the economy expanded in the third quarter of the year, bringing the double-dip recession to an end. The first estimate of third-quarter GDP will be published late October.

British wine snobs learning to love screw tops and boxes

Category : Business

Four in 10 wine drinkers now agree the quality of wine in a box or a pouch is as good as the bottled option

British wine buffs have ditched their snooty attitude towards screw tops, boxes and pouches, according to research which shows that alternatives to the traditional cork and glass bottle are increasingly popular options for consumers.

As many as four in 10 (39%) wine drinkers now agree that wine in a box or a pouch is as good quality as bottled wine, while just 26% think that boxed is inferior, according to the study by the research company Mintel. Meanwhile, screw tops are seen as even less of an issue for wine lovers, with just 17% claiming not to trust screw-cap quality wine.

Chris Wisson, senior drinks analyst at Mintel, said: “Recent years have seen many wine drinkers reappraising their perceptions and use of wine in differing formats and packaging styles. Boxed wine has the added advantage of the wine keeping for a longer period of time than in a bottle, facilitating more flexible usage and encouraging moderate drinking. Reducing wastage, boxed wine provides an ideal solution in a market which is both environmentally and cost conscious.”

Globally, an estimated 10% of still wines are sold in cartons but wine producers have recognised growing consumer enthusiasm for wines packaged in more convenient, lightweight formats. Red and white wines in 75cl Tetra Pak cartons (from reputed South African producers Namaqua Wines and Du Toitskloof) have this month been launched in three UK supermarkets.

Guy Woodward, editor of Decanter magazine, said: “We’ve long been supporters of screw cap wines, which are undoubtedly the most reliable – and practical – closures for wines that are intended to be drunk young. Some very fine wines are now being bottled under screw cap, and it should in no way be taken as an indicator of lesser quality. I’m still a little sceptical about boxed or bagged wine though, and I’m yet to encounter a truly serious wine presented in this format.”

The UK wine market was valued at £10.4bn last year with a predicted sales rise of 2.4% set to boost it to £10.4bn this year, the report reveals. But the recession has had a clear impact, with sales by volume falling from 1.26bn litres in 2007 to 1.14bn litres last year. And with pressure on household budgets, two in five (39%) wine buyers are now rethinking their regular purchases.

The Olympics should have taught us the benefits of picking winners

Category : Business

The sickly British economy needs both a radical short-term boost to spending and an unashamedly active industrial policy

Despite the Olympic euphoria, there is growing pessimism about the short-term prospects of the British economy. The new orthodoxy is that Britain is too sickly to be cured by a short-term fix; policy should concentrate on bringing about sustainable long-term growth.

This rules out an immediate boost to public spending and swings the debate to the more familiar territory of the causes of Britain’s relative economic decline, with the right pressing for freer markets and a reduction in the size of the state, and the left rediscovering the virtues of industrial policy.

But there is no need to place the short run and the long run in such dramatic opposition. Britain faces both a short-run problem of deficient demand and a long-term problem of unbalanced supply. Government needs to develop policies to deal with both simultaneously.

The British economy is still reeling from the economic collapse of 2008. It is 2%, or £27bn, smaller than it was four years ago and 12%, or £165bn, smaller than it would have been had growth continued at its postwar trend of 2.5% a year (today’s prices). These are big numbers. People take comfort from the fact that the percentage of unemployment has risen less than the percentage of output has fallen. But this is because productivity has dropped: as the Guardian put it last week, “it now requires many more of us to labour away to churn out the reduced volume of stuff”. That still leaves about 2.2 million extra idle and partly idle workers, many of them young, who could produce more “stuff” if the market for it was there.

This market for output should be supplied by government initiative in two ways. First, the government should rescind its cuts in capital spending. According to the Treasury, departmental capital budgets are set to fall from £50bn to £40bn a year in cash terms from 2010-11 to 2014-15 – that is, by £50bn altogether, with the heaviest cuts to school building, universities and social housing. “Shovel-ready” schemes, abandoned by the coalition, should be reactivated. The advantage of this is that it combines short-run demand expansion with long-run improvements in infrastructure.

Secondly, the government should issue all households with time-limited spending vouchers, in sufficient annual amounts to provide a net stimulus to consumer spending. Ideally, these vouchers should be spent only on UK-produced goods. This could be encouraged by a “Buy British” campaign. Their spending would be far more effective in reviving the animal spirits of entrepreneurs than quantitative easing practised by the Bank of England.

The two short-run programmes combined could add about £100bn to GDP over five years – almost enough to completely offset the contractionary effect of George Osborne’s cuts to public spending.

So much for the short run. By contrast, long-term policy should be addressed to correct the consequences of the failed Thatcherite gamble on financial services and the housing market. Without a strong manufacturing base there can be no export-led recovery, however low the pound sinks in international currency markets. The old smokestack industries are gone, but new industries can be developed. How?

Nothing is more upsetting to the conventional wisdom than the thought of government “picking winners”. Yet governments have been picking winners all over the world, notably in east Asia. What industrial policy does need, though, is clear focus and sustained commitment – such as was shown in plotting the success of Team GB. Previous attempts at industrial policy in this country have failed because of endless chops and changes.

To spearhead a new-style industrial policy, the government should set up a national investment bank with capital of £10bn, the right to borrow immediately, and a mandate to secure Britain a significant presence in cutting-edge technologies like mechatronics, optics, new materials and nanotechnology, and to invest in such green energy sources as wind power, solar power, hydropower and biomass. These may be too risky for private investors looking for quick returns, but may well attract institutional investors such as sovereign wealth and pension funds, and insurers looking for long-term income streams.

As a further element in the rebalancing of supply we need to reduce the speculative role of finance, restoring it to its proper role as the conduit of savings to investment. Two measures would help: a government-sponsored revival of local banking, on the model of the old Scottish country banks and borrowing from the current example of the German Landesbanken; and a transactions tax on financial operations to cut down on what Adair Turner has called “social waste”.

These are the twin pillars of a policy that could bring about the short-term recovery of the UK economy and set it on the path to a prosperous future.

Lord Skidelsky is emeritus professor of political economy at Warwick University and the author of an award-winning biography of John Maynard Keynes. Heather Stewart is away