Home > Findings, Press Articles, Scenarios, Uncategorized > Press Release –July 2011

Press Release –July 2011

This week’s disappointing 0.2% GDP figures have just confirmed a previous economic prediction by the Forum; an independent West Yorkshire focussed discussion group and think tank. It recently had its first meeting of 2011, and although its findings don’t make pleasant reading for both the short and medium term, it does believe we can achieve sustainable growth and prosperity again, but it will take some innovative approaches to do so.

Started back in 2007 by David Broadhead of Partners in Management, a management development company based at the Media Centre Huddersfield, it was a way for senior managers who’d undertaken their strategic leadership programmes to keep in touch and debate strategic issues affecting themselves and their organisations. It now has 15 members drawn from across a wide range of industry sectors and represents both enlightened managers and small business owners.

Since its formation, their observations and predictions have been incredibly accurate leading David to jokingly suggest;

“If we could only just improve our timing we would probably be the most accurate independent think tank in the UK at the moment! That’s why we haven’t met for over a year as we needed the UK and the world to catch up with our observations and anticipations of likely outcomes.”

Back in 2007 the Forum foresaw the recession and house-price collapse; in 2008 it anticipated the Eurozone crisis and the future private sector backlash against public sector conditions of employment along with public sector industrial unrest. In early 2009 it foresaw an ongoing round of business closures, mergers and acquisitions and identified the need for courageous, unpopular but respected political leaders given the likelihood that tax rises of 10% or public sector cuts of 20% would shortly be needed. However it’s most worrying prediction in Sep 2009 was regarding the economic knife edge we were balanced on

http://www.examiner.co.uk/news/business-news/2009/09/28/partners-in-management-forum-members-warn-economy-is-on-a-knife-edge-86081-24793708/

It is on that theme that the recent discussions were held. Afterwards David said:

“Back in 2009 we couldn’t see what was going to really drive the economy out of recession long-term and that all the indicators were that the situation could get much worse rather than better. Of course this was before the General Election and we had no influence over that result and subsequent actions.

The problem now is that we still can’t see what at the moment can really make a positive difference, and if anything the problems and issues that were there before are refusing to go away! If not careful, we really could be in for a decade of austerity as the ‘zombie economy’ becomes a reality.

In particular we believe our manufacturing base has eroded to below a critical mass and is struggling to exploit any opportunities provided by world economic growth and advantageous exchange rates. It can’t find either the finance to expand or the skilled workforce needed and can’t subcontract either within the UK as that capacity is taken up.

The finance sector is faced with its own restructuring and re-capitalising issues so can’t expand or innovate whilst the service sector in general is starting to struggle as a consequence of the ongoing public sector cutbacks.

The public sector, if anything, has not seen the cuts that we originally envisaged or felt necessary to balance the economy.  Over ambitious economic growth projections have reduced the government’s original cost saving targets whilst public sector spending has continued to rise. As growth, tax revenues and projected cost savings do not meet expectations we can see another round of increased cost cutting measures being undertaken soon, probably accounting for the 170,000 jobs reprieved from our original estimate and suggested too much later by the CIPD, at 500,000 public sector job losses.

Our education system, particularly higher, is about to undertake radical reform driven by cost, competition and the need for vocational employability outcomes which ultimately will lead to faster, more cost effective and appropriate high quality courses, but only following a period of turmoil, potential closures and job losses.

The construction industry is mothballed due to limited demand and again lack of finance and to add to this we face a likely second ‘dot.com’ bubble burst.

Economic growth is slowing down now in the emerging nations as they, like us, are facing increasing pressures from increasing inflation. The United States is becoming problematic too as the ‘money printing’ exercise there has failed to stimulate sustainable growth and they now face the reality of having to undertake serious deficit reduction whilst facing the stalemate situation of an election campaign.

Given as well the inevitable scenario of any one of Greece, Ireland, Portugal, Italy or Spain eventually facing reality and defaulting on their debt too, with the attendant financial crisis and confusion world-wide that will follow that, and you could begin to think that not getting out of bed in a morning was a serious option!”

So, all in all, not a healthy situation and one that will need inspired leadership, innovation and a great deal of counter-intuitive thinking to get us out of.

“Unfortunately our politicians still seem ‘content and detail free’ and driven by popularity and media response, which when coupled to a public sector that through target setting and other political fads, seems to have lost its sense of purpose and associated specialist skills, doesn’t bode well for the inspirational leadership and infrastructure support we need to initiate and support sustainable growth. If anything this is the decade when people will have to take personal responsibility and return to those positive Victorian values of aspiration and endeavour”

Not quite then the scenario we would like to anticipate, but a realistic one none the less.  However, all is not lost and the Forum did consider that there were still some positive opportunities amidst all the potential gloom and doom and had some suggestions as to how we might get to a turning point after which things will start to definitely improve. David goes on to say;

Strangely enough it may well be our construction industry that offers us though the greatest opportunity. At the moment it is the only one industry with the greatest potential for UK employment. Our manufacturing and service sectors have, or have been outsourced overseas and are struggling now with key skills shortages.  On the whole, the construction industry is still both UK labour intensive and sourced, so investment here can benefit the economy at large. Funding is of course a critical issue along with what to build?  In our opinion, government backed low cost or social housing seems the likely answer. There is a demand, the asset stays in the UK and can be sold later too if required. Given the political ideological issues associated with this we see benefits in ‘allowing’ not-for-profit social sector landlords to borrow and invest this way, ultimately backed by the Government.

Local infrastructure construction projects too are critically important. Collectively we saw no reason to invest £32 billion in HS2 the high speed rail link to the North. All this will do is transfer yet more wealth and enterprise to London and the South East with no tangible benefits to our local economy.  We much preferred investing in the local infrastructure and also encouraging enterprise directly into the area. Why not as well adopt low cost suggestions like renaming Robin Hood airport London (Don) and diverting 20% of long-haul Heathrow flights there instead – in effect becoming the third runway? With a new terminal and some relatively minor investment for easy access to the East Coast main line and motorway network, it could easily be the regional transport hub and attract the trade and investment the area desperately needs.

Finance for business remains a critical issue.  There’s a great opportunity here to side-step the banks and utilise business based credit unions as a mechanism for freeing up lending and stimulating growth but as yet the Government seems to be doing little to force the issue and assist commercially sound lending through alternative approaches. Small amounts distributed wisely can make a huge difference, especially to small local organisations whereas large vanity projects favour the larger organisations and in our opinion won’t generate the same degree of growth.

Our final positive thoughts were on employment conditions. Whilst employment legislation didn’t prevent any Forum members from taking on additional employees; it, and the inconsistency of legal interpretation, didn’t encourage further employment either. Back in Nov 2008 we discussed how we needed to create a new intermediate class of temporary, flexible ‘enterprise’ type worker where individuals, particularly professionals, would be able to work flexibly but with minimal additional benefits. They could then create their own portfolio careers, working for several employers without permanent commitment by either party.

The next meeting will be in October 2011. It will be interesting to see what responses we have had by then.

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  1. Bernard McNicholas
    July 28, 2011 at 4:28 pm

    Hi David

    Just a few observations you might want to throw into the mix. All the current education policies across all the sectors would indicate an abandonment of the ‘knowledge based economy’ and a return to one reliant on the emergence of manufacturing as the fundamental cornerstone for growth. The implications for this are a repositioning of the economy, this may be a deliberate government policy and one which reflects our inability to compete with the emerging economies in adding value to products and services through innovation and creativity. In the short term this would involve further wage deflation and reductions in property values which would counter/stymie any growth in the economy for the next few years.

    Your predictions for Higher Education assume a market will emerge where cost is the primary concern for both potential students and parents. This observation assumes that there will be a paradigm shift in the reasons young people choose to go to University, this appears to be the government view if not a strategic aim. I doubt that the measures put forward in the white paper will address the fundamental flaws in the fees policy which in many people’s opinion will not affect the curriculum in the way originally planned/expected and do not appear to be economically sustainable in the long term. I would expect that there will be further legislation to achieve the government’s original aims and counter the unintended consequences.

    Reagrds

    Bernard

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