Archive

Archive for the ‘Scenarios’ Category

Press Release –July 2011

July 28, 2011 1 comment

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.

Outline Scenario – Nov 2008 onwards

January 11, 2009 5 comments

The current financial incentives proposed by the government fail to work as hoped.

 

The VAT reduction is totally ineffective and the part-nationalisation funding arrangements fail to support the banks adequately as they require yet more financial support to stay solvent. Full nationalisation of yet more banks is likely. This is caused by massive write-offs due to commercial loan defaults, the unwinding of complex banking arrangements and fraud.

Supposed capital investment initiatives struggle to get off the ground and fail to generate long term sustainable jobs.

Tax revenues collapse and as a consequence public sector borrowing soars leading to continued pressure on the pound – parity with the euro likely although the dollar will hold at $1.25 due to its own decline.  (The IMF could be forced to intervene as per 1976!)

Great chance of a split euro zone between North and South leading to two types of euro.

Oil prices will stabilise @$75 per barrel but inflation will be 2 to 3 % due to the pounds collapse.

The recession is severe leading to nearly 4M unemployed at its peak before recovery starts in 2011.

A private sector backlash against Public Sector conditions of employment gains momentum but lack of appropriate reforms whilst Labour is in power due to their financial support by the Unions.

Public Sector effectiveness will decline due to “Death by 1000 cuts” mentality produced by Government so-called efficiency savings – ‘Slash & Burn’ massive re-engineering is needed to introduce private sector productivity. Industrial disputes similar to the 70’s & 80’s will begin but from middle classes this time.

Nation states will adopt more protectionist measures, particularly in the USA.

The BRIC economies will see social unrest and increased political/religious terrorism.

As a result globalisation will reverse as organisations look to implement shorter, local, more stable and environmentally friendly supply chains.

This will mean organisations “in-sourcing” more, requiring re-learning lost skills and re-investing or sub-contracting to local, possibly start-up organisations that can compete.

Organisations that succeed will be niche organisations that are special and offer good customer service with a perceived identity.  Only they will prosper – no more ‘me2 – copy other’ type organisations – customers will demand value and service, not just price in the future.

The middle classes will challenge restrictive legislation particularly over stealth taxes, political correctness, health and safety and employment conditions.  Employers will press too for relaxation in employment conditions and remove restrictive legislation – too much red tape! At its extreme a move to leave EU grows

A growing breed of “independent enterprise” worker emerges wanting flexible employment terms with few benefits but more importantly restrictions.  This will need inspired changes to current IR35 legislation.

Environmental issues will remain prominent as people become increasingly aware of “waste/excess”.  There will be a move away from re-cycling to prevention in the first place – less packaging and transportation for example. The old adage: reject, reuse, repair, reuse, recycle has real meaning.

Environmental, energy costs/uncertainty and the economic necessity of manufacturing will make ‘technology’ attractive once more and seen as a solution to problems rather than the cause.  However, critical skill shortages, finance and capability limit the
UK’s ability to react and benefit. New scientists, engineers and skills which need ability are required hence back to basics with harder exams etc.

‘Clean’ energy schemes could be the key driver to recovery through investment in new nuclear and clean-coal power stations.

A distinctive lack of creative ability and decision making skills in society and managers inhibits growth.  People have been told what to do for too long, particularly in the Public Sector by Central Government.

Increasing polarisation between savers and spenders forces a rethink of values and economic principles.

Victorian values of thrift, enterprise, self-support, technology and innovation begin to return – economic growth comes from ‘entrepreneurs’, in many cases forced upon individuals as traditional employment disappears.

Creativity / Enterprise / Dunkirk spirit become emergent themes for UK society.

Demand for moral values, moral leaders and role models rise and increased growth in church attendance/spirituality/cults is seen.

Social responsibility by the media is demanded – the BBC could lead on this and find a new purpose and role for the 21st century?  The founding principles might be re-interpreted as ‘inform, educate then entertain’.

Categories: Scenarios