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One-way trade

Stephanie Flanders | 18:59 UK time, Wednesday, 9 February 2011

Project Merlin and the banks have drowned out both Wednesday's trade figures, and the business secretary's White Paper on boosting UK exports. That is probably just as well. The figures underline how difficult it will be for that White Paper to deliver.

The new data show the trade deficit for 2010 was a record £46.2bn, up from £30.0bn in 2009. As a share of the economy, the goods deficit - at around 6.7% of national income - was also higher than it has ever been.

Worringly for the Bank of England, this was partly due to rising import prices - which seem, if anything, to be picking up pace. Import prices rose by 1.5% between November and December, and are more than 7% higher than a year ago.

Exports fell in December, but we can at least say that goods exports were 11% higher in the last three months of 2010 than they were in the same period of 2009. Unfortunately, as the deficit figures suggest, imports have been rising even faster.

There has been decent growth in the volume of exports going to the European Union - a reminder that a large part of Europe (including key export destinations such as Germany) are doing much better than the grim talk of a 'continent in crisis' might suggest.

But, there's no getting around the fact that we ought to be selling more to countries further afield - particularly the Brics.

Chart showing where UK exports to

This chart illustrates the problem in a particularly graphic way. It takes some explaining, but it's worth it. It shows all of the countries that Britain exports to, listed in order of their average growth between 2000 and 2008. The further a country is to the left, the faster it grew; the higher the bar, the more we exported to it.


The quick-witted among you will have noticed immediately that the high bars are mostly on the far right hand side. In other words, the countries we export most to are the ones that have been growing the slowest. Oops. Our top 4 export markets were all in the bottom 12 by growth. The only fast-growing country we exported a significant amount to was the Republic of Ireland: I'm not sure we can count on it growing as fast in the future.

It is heartening to see how our exports to China have grown since 2000 - albeit from a very low base. However, the new trade numbers show us that UK imports from China are growing even faster. The bilateral deficit with China was £22.8bn in the year to December, by far the largest trade gap with any single country.

Optimists like to say that the UK is well placed for the next stage of growth in the Brics: "Of course, German exporters cleaned up when these countries needed German engineers to build their large scale infrastructure," these people say, "but now they've built all their bridges, they're going to need pensions, insurance, high quality education and the like - all areas which play to Britain's strengths."

I hope so. But as Vince Cable would be the first to admit, we have a very long way to go. And so far, the biggest contribution that a weak pound has made to that process has been to make life even harder for the MPC.

Comments

  • Comment number 1.

    See you have an hereditary sense of humour Stephanie, 'we specialise in pensions, insurance and high education', who is kidding who?

  • Comment number 2.

    Perhaps the reason that Germany has been much more successful than the UK in exploiting expansion in the Brics, is that they did not allow their manufacturing base to collapse as the Thatcher government did in the UK in the 1980's.

    It is worrying that we now have a government whose policies, in many respects, are similar to those of Mrs Thatcher's.

  • Comment number 3.

    You've compiled your report - instead of continuos repeats of the same news with very little added, or informative comment i.e Osborne and the banks - why isn't the BBC reporting your item.The beeb is supposed to be independant and provide the voting public with matters that affect their lives and that of the UK

  • Comment number 4.

    It would have been nice to see the chart! However, from your commentry it would appear that the supposed rise of manuafacturing (much heralded by the government) is really so much hot air!

    Can we blame industry? Yes to a great degree. It seems certain that the vast majority of exporters chose to use the benefit of the 25% reduction in the value of sterling to protect margins rather than increase export volumes - particularly in the growing markets.

    Can we blame government? Most certainly. We have not had any real coherent industry or export plan. There has been little or no central investment in promoting exports by either direct investment or increased support services. Conversely, we have seen both political parties glorying in the activities of importers.

    Are these new figures any surprise? No.

    Where do we go from here? Well nowehere very fast if we stick with our present policies of staying out of the activities of private firms and merely offering paltry support to our exporters. We need a national strategic plan. We need it fast and we have numpties in both the government and the civil service so there is little chance of it happening.

  • Comment number 5.

    With significant cost-push inflation across most of the world, then a new approach is required.

    If the UK wishes to grow fast enough to get unemployment down to reasonable levels, then the only way to do this is to either target a higher CPI (say, 3% or even 3.5%) and allow wages to increase in step, or, to not target inflation and learn how to manage it. This is what countries like China, and various South American countries do - which is why (in part) they are growing quickly.

    If we try to keep the CPI at 2% we will only grow poorer, faster.

  • Comment number 6.

    There's no point thinking that manufacturing exports will produce significant UK growth - the sector isn't large enough to do it anymore. it'll be nasty old financial services that might just do it.

    Trouble is, the financial services sector has a bit of an image problem of late. Like it or not, the UK has to play to what export strengths it has left so, ironically, that means putting the banks at the forefront of any real recovery. Hurts to say it but it's true.

    One way of rebuilding the banks' image a bit would be for us all to know just how much income (tax aside) the part nationalised banks are now contributing to the treasury. Which makes the imminent reporting figures from the banks key to how this sector could - and should - be perceived in the future.

    It's unpalatable, but the banks' future export performance is crucial to any UK recovery. Shoot me now for being the messenger.

  • Comment number 7.

    Where's the chart?

  • Comment number 8.

    I remember Cameron recently said at the time of the Irish Bail out that we export more to Ireland (population aprox 4 million) than we do to China + India + Brazil and the US COMBINED (population aprox 2.75 Billion)....I was staggered by this and if true it just underlines the pathaetic state of UK trade balance

  • Comment number 9.

    Optimists like to say that the UK is well placed for the next stage of growth in the Brics: "Of course, German exporters cleaned up when these countries needed German engineers to build their large scale infrastructure," these people say, "but now they've built all their bridges, they're going to need pensions, insurance, high quality education and the like - all areas which play to Britain's strengths."

    THESE optimists, THESE people talk and dream monkey business!

    We gave up the manufacturing base and are cutting deep into r&d and eduction and now hope for the crumbs of bread; there is only one nation that follows an intelligent, global strategy! and that is not run by the likes of a Mr. Neo or a Mrs. Lib!

    caw

  • Comment number 10.

    These figures should not come as a surprise to anyone. If they do then you have been taken in by the 'positive spin' and propaganda that is routinely put on selected statistics.

    I won't bother to dig up the links, but how many times have we been told about the recovery in manufacturing - while no-one has mentioned that manufacturing is now such a small part of our economy that it could grow like topsy for years and still not drag us out of the mire. How many time have we been told about the growth in exports (helped by the weak pound) - while no-one has mentioned that imports have grown faster (not helped by the weak pound).

    All the talk of an export led recovery is revealed as no more than hot air. It could only become a reality if, all of a sudden, there was a huge rush to invest in new manufacturing capacity (making innovative products) in the UK: are there any signs of that?

    Maybe CiderwithDozy is right #6 when he says that we are now totally dependent on the financial services sector to generate growth. (They, who could invest in the UK but don't, because the returns are better elsewhere.) If so, its a sad end to years of misdirection: gaze on their works you mighty and despair.

  • Comment number 11.

    if I were the Chinese government I would not import "pension expertise " from UK . the German & Dutch systems produce 50% more pension for the same contributions .

  • Comment number 12.

    re #10
    "All the talk of an export led recovery is revealed as no more than hot air. It could only become a reality if, all of a sudden, there was a huge rush to invest in new manufacturing capacity (making innovative products) in the UK: are there any signs of that?"
    --------------------------------------------------------------------------
    And here, so pithily, is expressed the core of the problem. Successive governments have tied businesses in knotted red-tape (perhaps to please Brussels?) and now we are seeing the end result. It could be argued that exports anywhere are "good", but to overly focus on known areas is self defeating.
    No, we are NOT exporting to the wrong markets, merely not exporting to a sufficient number of potential markets.

  • Comment number 13.

    Britain is a bad place to do business.

    Below par education, crumbling infrastructure, high taxes, excessive regulation (not talking about banks here) of everything. Anti innovation and success mindse, and excessive house prices which drag us down. Clueless bickering politicians and self-important business leaders - who are good at making money for themselves but not enriching the wider economy.

    We do attarct investment but most overseas investors are here just to get a piece of the captive domestic market, and then repatriate profits.

  • Comment number 14.

    Ah... the Trade Figures are worrying the Bank of England, poor dears.... NONE OF THEIR BUSINESS (until they start doing their own job)

    First the 'Fools' must manage those inflation figures. OK the NSO/Treasury fiddle the figures, but nevertheless the Bank has only one option to carry out its duty and that is to put up interest rates to curb inflation - anything else is dereliction of their primary duty.

    The BoE is chiefly responsible for the debt junkies that we have become and they must, must, wean us off of the addiction if we are ever again to become competitive.

  • Comment number 15.

    "2. At 00:00am on 10 Feb 2011, stanblogger wrote:
    Perhaps the reason that Germany has been much more successful than the UK in exploiting expansion in the Brics, is that they did not allow their manufacturing base to collapse as the Thatcher government did in the UK in the 1980's.

    It is worrying that we now have a government whose policies, in many respects, are similar to those of Mrs Thatcher's."

    Really isn't it time to move on from this? British manufacturing has been in decline since 1900 in relation to the rest of the world. Yes, Thatcher played her part but so did Blair/Brown and those before them all - you just need to look at our auto industry from 1946-the collap[se of Rover. A tale of mistake following mistake - failures of product, of labour of management and of government. A tale of snatching defeat from the jaws of victory.

    Perhaps Germany did so well is that their manufacturing is relatively new - rebuilt with credit from the ashes - a nation pulling together for the common good out of nothing following total deafeat and humiliation? As opposed to a divided nation at war with itself - both self satisfied and self loathing.

  • Comment number 16.

    What also matters is the prospects for growth and the potential for new business and the picture does not look so dire especially if USA growth continues and the pound does not significantly appreciate. As for new business you have to ask what this laissez faire government is doing about - not much.
    Have we come very far from the Balance of Payments crisis of H Wilson and the '64 election? Well the figures are different but the weakness of our export industries have not and for which shamefully the last government must take the lion share of responsibility.

  • Comment number 17.

    I agree with startagain to a point. The UK has been in historical decline n industry and manufacturing for 40 years. I think the idea that the coalition can turn around manufacturing and restructure our economy is highly unlikely. As soon as they are able to they will realise that the only way we can make money is to allow the financial services sector off the leash again. Hence the weak proposals of the Merlin project.

    The only reason manufacturing is doing so well at the moment is the competitive advantage due to the devaluation of the pound. But that will soon evaporate.

    http://extranea.wordpress.com/

  • Comment number 18.

    The reason that our goods exports do so poorly compared to Germany has liitle to do with price and a great deal to do with quality.It is a sad fact that I have to go out of my way to avoid to avoid British products.
    Apart from a Dyson vacuum, virtually everything else in this house is German. Why? because unlike British goods, they go wromg once in a blue moon. It's been like this since WW2 and shows no sign of changing.

  • Comment number 19.

    Stephanie Wrote
    It takes some explaining, but it's worth it. It shows all of the countries that Britain exports to, listed in order of their average growth between 2000 and 2008. The further a country is to the left, the faster it grew; the higher the bar, the more we exported to it.
    ~~~~~~~~~~~~~~~~~~~~~
    Interesting chart...which like all such can be very misleading.

    When a country with a GDP of $5 grows by 100% there is a $5 net increase in the available market opportunities.

    When a country worth $5b grows by 1% there is a $50 net increase in the available market opportunities.

    It would be much fairer to have a debate about export to growing economies if the chart were plotted as net $value growth rate versus UK exports, rather than as % growth in GDP.

    China might well still be over there on the left, but some of the others (Nigeria, for instance) would occupy a very different place.
    ##################
    PS. UK/US traditional markets are often dominated by UK/US english-speaking peoples. It is a lot harder for the west to export to people who use cursive or ideographic scripts than to people who use the Roman alphabet in which this blog is published. e.g. Do you know how they do predictive texting on a chinese mobile phone? (4000 characters and only 10 keys!) Its a tough nut to crack, but the chinese have it sorted. To get there, you have to be thoroughly conversant with the language, culture and patterns of thought of your potential market.
    (What HSBC famously advertise that they are good at.)

    In a funny sort of way, the fading dominance of "the english language" probably maps quite well onto the fading economic dominance of "the west".

  • Comment number 20.

    @7. At 05:32am on 10 Feb 2011, brackley1 wrote:
    Where's the chart?

    There's a link:

    www.bbc.co.uk/blogs/thereporters/stephanieflanders/HSBC.doc

  • Comment number 21.

    I can't honestly what we might export to the US, Spain, France, Germany etc, other than booze or food.

    There is nothing left, surely, other than expertise in how to dismantle manufacturing industry, how to destroy pension funds and how to pamper to the climate hysteria and eventually turn this "green and pleasant land" into a "leisure park for the rich", with our cities as "ghettoes for the unemployed"!

    Finance and pension skills are 'exportable commodities'?

    Give us a break - the only thing UK PLC seems to excel at in that field is in incompetence!

    Surely the BRIC countries aren't that daft?

    After all, their strategic policies show that they have TOTAL CONTROL over our ENERGY policy - they have market dominance over

    a) copper supply for - motors, generators, cable, WIND TURBINES etc

    b) steel supply for - cars, ships, construction heavy industry and WIND TURBINES, nuclear installations etc

    c) oil/plastics/electronics - for all of the above and our 'fad' for i-gadgets, energy, security and infrastructure needs

    SO we POLITICALLY make the decision to cover the UK in WIND TURBINES and say we will get our FUTURE ENERGY NEEDS from 'butterfly power', whilst China, Japan and India SWITCH RAPIDLY to a NEW NUCLEAR FUELS TECHNOLOGY, that would be acceptable to GreenPeace etc (no nasty long term waste by products) and LEAVE us HIGH and DRY in the process!

    So just what do we have left to EXPORT?

    Only our hard earned SHEKKELS?

    Why don't we give - SORRY, EXPORT all our TAXES away too - after all, we gave them to the financial institutions, politicians, councillors, foreign dictators and the list goes on...

  • Comment number 22.

    All very well except that the graph is clearly wrong!

    Export growth bars fell or are flat for Kuwait, Indonesia, Malaysia and Israel. Yet all of these are to the left of Saudi Arabia, Czech Republic, Brazil and USA which all grew!

    Have you got access to the raw data? As the graph needs to be redrawn.

  • Comment number 23.

    I'm surprised not more people talk about Government debt as a major cause of the Balance of Payments problems. When a Government spends an extra £150bn p/a, then that money finds its way to us and we spend it, often on imported products. Ironically, we are now increasingly borrowing from abroad, which means interest flows out too.

    To anyone blaming Thatcher for this, I should point out that industry may have declined in the 80s, but was it profitable? Germany's industry was still relatively new (post WW2) and had few union disputes. Plus they are, frankly, much better than us at manufacturing. We should admit that at least. I disagree completely with people saying that the Government should somehow get involved in industry planning. That will just cost us loads of cash, make the budget deficit worse, waste the time of industry and make zero difference. Why do people blame the Government for so much, but also seem to want more of it?

    Third point - the £'s value is a reflection of our balance of payments problems not a lever of change - ie it is an effect, not a cause. So anyone hoping exports will recover because the £ has fallen is looking at things the wrong way round.

  • Comment number 24.

    Ah yes....a trade deficit. Growth elsewhere with rising interest rates and strong currencies. Not much growth here with low interest rates and weak currency. So.....raise rates? Bit of an unaffordable luxury not at the moment. But they will have to rise eventually. Inflation seems to be the ‘strategy’. Input costs, labour costs, credit costs and everything else are rising in the BRICS (and their suppliers e.g. Australia) so life isn’t getting any cheaper there or here. In fact, it’s quite expensive. And demand is set to be squeezed further. There is already a squeeze in govt revenues and expenditure and retail profits going on almost everywhere. If I were in the business of offering advice I’d be saying 'try growing food'. Now.....back to my deckchair.....

  • Comment number 25.

    2. At 00:00am on 10 Feb 2011, stanblogger wrote:
    Perhaps the reason that Germany has been much more successful than the UK in exploiting expansion in the Brics, is that they did not allow their manufacturing base to collapse as the Thatcher government did in the UK in the 1980's.

    It is worrying that we now have a government whose policies, in many respects, are similar to those of Mrs Thatcher's.
    ------------------------------------------------------------------------
    Er, Stan! These figures refer to the past. You know, when N.Labour were in government ...

    That said, I share your concern. Not that the Coalition are like the Thatcher administration but that, through the general maelstrom of day to day national and international events, they will determinedly trudge on.

    Then three and a half, four, four and a half years on there will be a measure of recovery but we find that, despite the cuts, no money has been saved. No significant problems, such as property market, pensions, fiscal balance and strategy, have been solved. That the debt+deficit are not significantly better. That the demand for public spend is as large as ever due to the need for benefits support. And all this without a boon - like North Sea oil & Gas - turning up to save us.

    In other words, lots of pain but for only a little gain.

    Unless, of course, RBS shares go from 50p to £50 in that time ...

  • Comment number 26.

    re # 22
    Someone mentioned the stat yesterday (BBC?) that we (UK) are the biggest investor in Russia.

    Doesn't seem to be paying off at the present time ...

  • Comment number 27.

    On the day the government announces the deal with banks to lend more to small businesses, they also talk about promoting foreign trade. From the experience of my small translation company, Lingo24, this is ironic: why?

    Well - more than 50% of our business comes from outside the UK (and by definition, as a translation company, all of our UK clients have significant export business). The vast majority of banks we talk to won't take into account our overseas revenue when assessing our ability to service any credit, which severely hampers our ability a) to grow overseas ourselves and b) crucially to help our customers do the same.

    So something doesn't quite add up in the "on-the ground" reality of these initiatives.

  • Comment number 28.

    Good post @ #19.

    My little Mushroom, you asked me, a day or four back, what I thought might happen through this adminstration and beyond. I have been periodically pondering this ever since, pausing every now and then to poor cooling water over one of my two feeble brain cells.

    My response to stanblogger's #2, hopefully turning up at #25, is but one possibility. More to follow ...

  • Comment number 29.

    Glass half-full, glass half-empty.

    It's not just China - if you squint you can see rapid export growth for all five of the fastest growing economies. Conversely, you can see exports to six of the least rapidly growing economies fell during this period.

    Put another way, the height of the bars reflects our historical relationships with the developed economies, rather than the story's "angle" that, from a standing start, we're exporting to globalisation losers, and the changes between 1900 and 2000 show that we are, indeed, rebalancing the destinations of our exports. To be fair, although these days it's a slam-dunk, anyone considering rapid expansion in their business with China in the 1990's was taking a punt....

    Whether we were (and are), doing the rebalancing fast enough is another question.

  • Comment number 30.

    Some of my previous posts:
    On the Feds QE2 policy
    • 11. At 10:57am on 03 Nov 2010, you wrote:
    The money that will be printed will end up in the banks and flood out of the country and into areas with better returns. The net result?, bankers gain, joe public struggles along.
    QE will not work unless this money filters down to the man on the streets. Those Governments who dabble with this policy should invest directly into projects that were previously not economical i.e renewable energy projects, waste minimisation, recycling, transportation etc. They should also look at minimisation of food imports and seek to become self sufficient i.e glasshouses, hydroponics etc. This way the money will be invested in a better future rather than filling the pockets of more failed bankers.
    • 92. At 1:05pm on 04 Nov 2010, you wrote:
    To jjoshi2008
    You forget to mention that cost of commodities including rice, grain, LPG and kerosene will also increase as the educated and the well off invest their gains from the US QE. This will lead to inflation of staple foods and fuel that many of the poor depend on. These people can barely afford the clothes on their back, nevermind investments in stock markets and currency speculation.
    Not everyone is as fortunate as Ambani, Mittal and yourself.

    On interest rates
    • 131. At 1:12pm on 21 Dec 2010, you wrote:
    Keep Interest rates low and encourage investment in food production to keep food inflation low. The UK population will not riot on the streets if the price of a 3DTV is £3K, but they will if a loaf of bread if £5!

    If this government can encourage investments in renewable energy, green technology, food production etc then this will eventually lead to technologies that can be exported and benefit the UK treasury.
    If nothing is done then I will wait until the loaf of bread is £5 and say "I told you so"

  • Comment number 31.

    4. At 00:23am on 10 Feb 2011, foredeckdave wrote:

    We need it fast and we have numpties in both the government and the civil service so there is little chance of it happening.


    Numpties ?

    If only it was that simple. We are run by a clique very good at maintaining the status quo.

    Golly gosh don't want to be like the Germans don'y ya know. Private schools, jobs for the boys, cricket, warm beer and village greens.

    We just go round in circles.

    Europe is slowly taking shape as a German Sun surrounded by satellites. Bit like USA and Latin America.

  • Comment number 32.

    Madam Stephanie U r a STAR!!!,u r above the best..
    your articles mostly provide indepth analysis of the subject.

    Dont you think that the services that britain provides wont be exported from britain. For eg if AVIVA plans to insur millions of chinese or indians then they would do that In china or India only.British company will be involved but How will the british labour will be involved. On the other side if BMW or Mercedes sells cars in China or India then many parts of the cars are produced in germany which involves german labour.
    The competitve advantage of britain is in services but dont u think that britain has focused too much on services and ignored manufacturing sector??How can british provide services to consumers in China and brazil while sitting in Britain???

    My question is simple that how will british companies, which provide services to other countries will involve british labour to deliver the services??
    british companies will gain by investing and providing services but will a common british person gain something??

  • Comment number 33.

    @ 6

    I agree with you, the UK's problem is that we still think manufacturing is our strength, it's not. Financial services is what we do well and we need to plug everything into the back of that.

    I think you can see that chart as either a problem or opportunity. Firstly growth does not equal size. Nigeria might be the 2nd fastest growing economy but the physical size of its economy is tiny so I'm not going to get too upset about that. And even though China is top of the list let's not forget that the US economy is still 4-5 times bigger.

    I see a wonderful opportunity to focus on the countries on the left, they are growing so fast there will be plenty of time to jump in. It's the countries on the right that are more difficult (when growth slows gaining market share gets harder) and we seem to already be doing well in those countries.

  • Comment number 34.

    Stephanie, are you going to try and use this information to try and educate the masses through one of your BBC bulletins?

    We have become so deluded in this country, many still think we are a rich power house, and that it is their right to milk the state for all its worth.

    It is quite easy to work out the future for this country. Within a generation the whole of the North, Scotland, Wales, N.I., and much of the Midlands, will have prosperity levels the same as Poland.

    Although this does mean that within a generation businesses will be happy to build a factory in these areas of the UK, rather than off shore in Poland, it also means that vast sections of the UK will be living as if it were the 1960s.

  • Comment number 35.

    #18 AK
    You are so right, it's the same in our household. Pity because I would prefer to support my country of birth.
    However I cannot waste my time, effort and money on kitch quality and until the situation changes, will carry on as I am now.

  • Comment number 36.

    Its easy to blame Thatcher et al, but the main reason for our shrinking manufacturing base was and is because of our (relatively) high wage costs. Germany saw this coming and has been more succesful than us in controlling costs, focusing on higher value goods (machine tools, robotics etc) and with better global market penetration (e.g. China, Brazil etc.). The Uk will now have to play catch-up.

  • Comment number 37.

    History will prove that post-war Britain has been terribly managed and that our manufacturing and heavy industry has been (and remains) massively under supported by all of the governments we have had.

    Our diminishing involvement in the process of making things and selling them abroad has handed our global competitors huge chunks of opportunity and we're now playing the most dreadful game of catch-up - which will simply not succeed unless we embark on a radical change in thinking and direction.

    I will give you one example: In the area of nuclear power and power production we should be THE world leader and yet just across the channel we have the French, who - with no gas and/or oil supplies to work with - knew they would have to deal with the long term issue of powering their nation. The UK does all the hard work, shows innovation, drive and commitment in building the world’s first working nuclear power plant back in the 50's and yet here we are just 60 years later with a small, crumbling nuclear infrastructure neglected by successive short-sighted governments, while our French neighbours have 70 or 80 working nuclear power plants producing about the same percentage of their power requirements. The French will be responsible for rebuilding our nuclear stock - how shockingly embarrassing is that?

    The upshot of this single example is:

    1. The French will will be able to employ nationals at home and abroad.
    2. The French will gain skills and experience from the project.
    3. The French will get the global kudos and potentially more business.
    4. The French will get the lion’s share (if not all) of the profits.
    5. The French will be able to add project income to their national GDP.

    Global business is like a massive see-saw; what one country gains another has to lose. This nuclear thing is great for the French - but almost all of their business acumen, foresight and fortune comes at a heavy long-term price for the UK and its people. I'm only talking about one small slice of industry, just one sector, and in far less than 60 years we have gone from potential world-leader and producer of wealth, to a customer nation barely able to afford the upkeep.

    As Geoff Berry at #1 writes:

    "See you have an hereditary sense of humour Stephanie, 'we specialise in pensions, insurance and high education', who is kidding who?"

    Let’s hope the French don't take a shine to the pensions, insurance and high education markets, because if they mimic the nuclear story, we'll quickly lose these last few pieces of family silverware too.

    All of our governments have been spineless short-termists. Who is indeed kidding who?

  • Comment number 38.

    Surprise, surprise. The government's twin policies of money printing and negative real interest rates are not reviving the domestic economy, rather sucking in imports and widening the structural balance of payments deficit. Further sterling devaluation and higher domestic inflation will surely follow. Do we really believe that the financial services "industry" is going to dig us out of this hole? UK consumers' experiences are that the products are normally over-priced, over-hyped and ultimately wealth destroying.

  • Comment number 39.

    "38. At 11:12am on 10 Feb 2011, Eboracum wrote:

    UK consumers' experiences are that the products are normally over-priced, over-hyped and ultimately wealth destroying."

    Sounds like the nation's footballers too.................


  • Comment number 40.

    32. At 10:29am on 10 Feb 2011, prateek wrote:

    How can british provide services to consumers in China and brazil while sitting in Britain???

    ----------

    Indian call centres and IT outsourcers seem to be able to provide services to Britain from India (whether or not British consumers desire this state of affairs) so why can't the reverse be true. Globalization is here to stay so it's about time the government developed a strategy for ensuring British workers benefit from it rather than continually being the victims. Of course, it will take a government that is actually concerned with the interests of the British worker, rather than that of banks or multi-nationals, for this to happen.

  • Comment number 41.

    #12 Perapatetic_scribe

    The graph above illustrates, where the UK's main trading partners are: in the EU. This is a result of the Single European Market, where no tariffs operate and there is freedom of movement of goods, people and capital. Without the shared standards of a Common Market, under the Single European Act, it would have been difficult for UK exporters to capture such exports.

    Stephanie

    The point about the concerns about the UK failure to secure exports in the BRIC economies and in particular the trade imbalance with China must be a continuing cause for concern.

    #6 ciderwithdozy & #33 Cameron

    The last few days have illustrated the esteem, within which the UK financial services industry is held domestically. Just read a few of the blog comments on this website under Robinson and Peston to see for yourself. Do you think that perceptions about the UK FS industry will not have been affected globally by what went on in the run up to the credit crunch? Will the Chinese buy your message?

    Both Merlin and the trade figures illustrate perfectly the extent of the problems the UK economy faces and the apparent impotence of the government to do anything substantive about it.

  • Comment number 42.

    "37. At 11:08am on 10 Feb 2011, Catpain_Slackbladder wrote:
    History will prove that post-war Britain has been terribly managed and that our manufacturing and heavy industry has been (and remains) massively under supported by all of the governments we have had."

    Very well put - and an excellent example too. How embarassing indeed!

  • Comment number 43.

    2. At 00:00am on 10 Feb 2011, stanblogger wrote:
    "Perhaps the reason that Germany has been much more successful than the UK in exploiting expansion in the Brics, is that they did not allow their manufacturing base to collapse as the Thatcher government did in the UK in the 1980's."


    I don't believe in racial stereotypes but the main difference to me is that the German people are polite, educated, respectful, intelligent, concerned about attention to detail and have a work ethic.

    Apart from that we are very similar.
    This may or may not explain our lack of a manufacturing base today

  • Comment number 44.

    To everyone who is using this article as evidence of the failure of the current government's trade and economic policies. Look at the time period over which these figures have moved. Don't forget also, that manufacturing fell as a percentage of GDP under Labour.

  • Comment number 45.

    >>But, there's no getting around the fact that we ought to be selling more to countries further afield - particularly the Brics.

    An interesting statement !! After flogging Corus and Jaguar Land Rover to the Indians, what else are we going to flog ??

  • Comment number 46.

    Adam Smith wrote "There is an awful lot of ruin in a Nation". Since the War this country has expected to pay tomorrow for prosperity today. There is precious little left to ruin. It can't be long before the diabolical magic of compound interest finally does for this country what it almost did for Greece. An IMF loan? We don't deserve one!

  • Comment number 47.

    #6 >>One way of rebuilding the banks' image a bit would be for us all to know just how much income (tax aside) the part nationalised banks are now contributing to the treasury. Which makes the imminent reporting figures from the banks key to how this sector could - and should - be perceived in the future.

    The banking sector will not recover from its fall in trust so long as this and any other government insist on uneven playing fields !! The major, still independent, banks are making plans to "re-locate" elsewhere where the playing field is a tad more level !! Until Britain sells off those bits of the politically, bailed-out banks, Britain, as a nation, willl remain a rather lame duck in this arena !!

  • Comment number 48.

    "45. At 11:42am on 10 Feb 2011, ishkandar wrote:
    >>But, there's no getting around the fact that we ought to be selling more to countries further afield - particularly the Brics.

    An interesting statement !! After flogging Corus and Jaguar Land Rover to the Indians, what else are we going to flog ??"

    Lots left just need to use our imagination here's a few:

    1)UK Road Network to foreign investors who can then charge us tolls
    2)Same goes for bridges and tunnels
    3)White cilffs of Dover
    4)Crown Jewels

    Unless we can attarct lots of tourists to join us in our love of binge drinking and fighting in any town/city centre near you...



  • Comment number 49.

    #43 EconomicsStudent
    "I don't believe in racial stereotypes but the main difference to me is that the German people are polite, educated, respectful, intelligent, concerned about attention to detail and have a work ethic."

    #12 Peripatetic Srcribe
    "Successive governments have tied businesses in knotted red-tape (perhaps to please Brussels?)"

    Germany has a two-tier model of corporate governance, with the unions represented on the higher strategic board overseeing the lower, executive board. This was suggested in the sixties (I forget who wrote the report) but was rejected due to the vested interests in the City. By promoting stakeholder involvement their companies are forced to take a much longer view than in the UK.

    How come the Germans do so much better when subjected to the same EU rules? There is less red tape in the UK than anywhere else in the EU. EU firms invest in their workforce because they are seen as a long-term productive asset, they are much harder to sack than in the UK. There is no incentive to invest in training in the UK as workers are expendable. Management is so much better too: without the ability to bully and sack workforces, German managers have to manage, so they are much better at it.
    We have the low-skill, flexible, hire-and-fire labour market the bosses wanted, and our economy is going down the tubes. Coincidence?

    And it is not just in Germany try Spain:

    http://en.wikipedia.org/wiki/Mondragon_Corporation

    My personal export gripe is that there has been no support for our beer and whisky industries, two products which almost define Britishness. We have allowed the multi-national brewers to almost destroy dark-beer brewing in this country while doing nothing to sell an almost unique product overseas.

    It is not just s recent phenomenon though: our industries onlyever grewup in the protected markets of the empire. Countries such as the US, Japan and Germany, without this "advantage" had to win customers through price and quality from day one.

    Our modern advantages are few: we speak American, the leading language of commerce, and we are very good at allowing rich people to launder money. Apart from that we only have the skills and ingenuity of ordinary working people: we need to liberate them from their current constraints.

  • Comment number 50.

    An excellent blog post by Stephanie. Strange, isn't it, that nobody was focussing on export development during the sunshine years of 2003 to 2006, but as I recall, the media and the public were too absorbed in the Government of the Day's commitment to military involvement in Iraq and Afghanistan.

    Exporting more, Importing Less. And of course the Bank of England just set their interest rate once again at the sub-inflationary 0.5%. Clearly that doesn't by itself inspire export development.

    Why doesn't anybody consider Import reductions? We are not living in the age of Adam Smith, and even if he were still alive, he would probably agree it's the obvious course to impose import restrictions, either by customs duties or otherwise.

    Let's consider that we have a conflict going on in our towns and councils.

    On the one hand, the masses are told to recycle, cut down their waste, and send less to landfill because it costs so much money to dump things.

    On the other hand, we have a legacy consumer economy where the masses were shown a retail credit universe where they were supposed to shop for imported goods regardless of how they should eventually be disposed of.

    Clearly even the most stubbornly dense person claiming to be an economist out there would see that it's time to set an import tax relevant to the cost of the disposal of goods.

    Meanwhile, the enlightened will be dusting off and refreshing their brains with the Island Economy model, because being on an island, you eventually always have moments where you have to fall back entirely on your own resources.

  • Comment number 51.

    It would appear that we have had a sustained balance of payments problem but a lot of care is required with analysis of these figures. As I wrote on my blog yesterday.
    "Because they turn out to be usually very inaccurate I am not a fan of analysing monthly trade figures. However the figures for 2010 as a whole for the UK do not show much of a sign of improvement as might have been hoped from the 2007/08 devaluation of sterling. We seem to have returned to our old pattern of a persistent large trade deficit although even annual figures are unreliable. Younger readers may be shocked to learn that markets used to move substantially on trade figures as today they are mostly ignored! For example the UK’s 1967 devaluation of the pound was finally decided to have been unnecessary a decade or two later…"http://t.co/DN8YLg4

    Of all the economic figures we receive it is the trade figures which have proved the most unreliable so they need to be taken with at least a pinch of salt!

  • Comment number 52.

    The UK has been a net importer for the majority of the post-war period, with only occasional blips into net export mode, and a few years in the 70's when we discovered oil. This is more indicative of the UK's behaviour and culture over a long period of time. Viewing the UK as a black box, GDP has been the main driver of economic policy but ignoring it's overall efficiency, reflected by it's Proft & Loss account or balance of trade or Input / Output relationship. As any business knows, you can operate in loss-mode for so long before the baliffs arrive (or you have to keep borrowing money to keep the streets cleaned, people educated etc. etc.)
    Germany realised this a long time back, (and in part protected it's businesses accordingly). The UK has prided itself on how active it is and how many jobs can be created doing this stuff, whilst bit-by-bit selling off captial, control, IP, skills and competence etc. (a kind of one-off export route)
    The terms is "busy fools".

    I'd like to think we have realised the errors of our ways and are going to do something about it... ?

  • Comment number 53.


    Ms Flanders ! Ma'am ! You wrote :

    'The quick-witted among you will have noticed immediately that the high bars are mostly on the far right hand side. In other words, the countries we export most to are the ones that have been growing the slowest. Oops.'

    PLEASE PLEASE PLEASE can we have more such wit in future blogs.

    I know it's difficult for Economics 'Journalists' to be funny, say as Mr Peston nearly always is, but today, I hope, marks the introduction of more exquisite and amusing subtleties in your columns.

  • Comment number 54.

    Our Western mind set is completely built on "the future is better", giving the confidence to borrow from our future to improve our today. And of course this isn't just consumption, we also borrow from the future to actually make the future happen (i.e. investment).

    The problem in the UK is our ignorance of the impossibility of this better future, unless we crack fundamental issues such as finding new sources of cheap abundant energy.

    So for the last 15 years or so we have continued in the dream by taking advantage of "one off" cost reduction exercises, such as outsourcing, importing from cheap labour sources.

    We have largely used the "one off" north sea oil. We have largely privatized anything of substance. We are now selling off central London (look at the stats for the percentage of all London property now bought by foreigners).

    Unless there are several massive breakthroughs in technology which we are able to exploit, there is only one long term future for the UK.

    As with all societies, the rich will always keep rich, even if it means they have to live in gated estates with 24/7 security. It is very easy to have the ultra rich live next door to the ultra poor, just look at third world cities.

    So what strategy can we ordinary folk follow? At the moment I am orienting my business to sell to the richer folks, as that is where the money is. But as for a UK wide strategy, I have seen nothing from the Government that gives me any confidence.

  • Comment number 55.

    #47 ishkandar

    The calculation on the financial services industry's tax contribution has been undertaken by a range of experts, including from a leading international management consultancy and auditing firm, as well as the BBC's "More or Less" Radio 4 programme, with Tim Harford.

    The estimate currently is between 11 and 12% of the UK total tax contribution. This is substantially less than some vocal advocates for the sector had attempted to have us believe in contributions to the national media. They had erroneously suggested that it was double the higher of those two figures.



    Listen to the BBC iplayer 14th January edition, for further details, if my memory serves me correctly.

  • Comment number 56.

    33. At 10:33am on 10 Feb 2011, Cameron wrote:

    @ 6

    I agree with you, the UK's problem is that we still think manufacturing is our strength, it's not. Financial services is what we do well and we need to plug everything into the back of that.


    Hmmm.

    Not too well over the past decade by all accounts (bailed out by the taxpayer).

    Financial services need a virile manufacturing base to service. The 'human animal' loves his artefacts (iPods, Mercedes, etc) and that won't change for millions of years. Precisely why communism failed, it ignored this simple point.

    Our financial services sector is too big and needs trimming. We had an opportunity to let market forces do that for us a in 2008 but interfered.

    Missed opportunity.

  • Comment number 57.

    Ishkander @47

    Spot on Sir.

    These now global banking, insurance and other financial companies once had origins and some loyalty to the social and economic wellbeing of the UK. Today their total accountability and business pressures are beyond any significant influence of the EU or our own lightweight politicians. Move on they will, into a business environment without any legal controls or restrictions that would even dare to mildly threaten their motives of profit maximisation and minimum taxation and other potential liabilities.

    The suggestion that UK expertise could be required in the BRICS to set up these financial services is 'shooting for the moon', what business skills and enterprise are required to conceive these business within the ever-growing economies of BRICS that are not already established in their more complex manufacturing activities? None of course.

    In this thread a contributor has already made the point that the Netherlands and Germany have many larger insurance and pensions companies than the UK, may I add the Japanese companies, Marubeni, Sumitomo and Mitsui already have the T shirts in the far east markets.

    Two German and a French former colleages of mine are agreed on one thing,
    that the UK has learned nothing since 1914, 'we are working class lions led by desk-bound donkeys', referring to the ordinary hard working paying their way British citizen and our totally useless governments of the past 60 years.

  • Comment number 58.

    Our exports to the rest of the EU are doing quite well - is that surprising, surely thats why we are a member of the EU benefiting from a (reasonably) free, frontierless market. We would probably be selling even more were we a member of the Eurozone!

    However, our exports are not growing as well as they should be simple because we don't make anything anymore. The last commercial aircraft came off the production lines years ago, there are no British volume car manufacturers any more, trains now come from Bombardier (Canadian), Alsthom (French) or Siemens (German); car parts are now sourced from the likes of Bosch and Valeo - rather than Wilmott Breedon and Lucas. Need I go on?

    Thatcher is largely responsible for this situation when she famously suggested we don't need manufacturing. The Germans and French know that they do, and ensured that the supported and nurtured it, through good time and bad. The UK didn't, and we are where we are as a result!

  • Comment number 59.

    many are complaining about the short term thinking of our politicians - the reason is very clear, its because of the short term thinking of the electorate?

  • Comment number 60.

    The last Office for Budgetary Responsibility Forecast in Nov 2010 stated:

    "We therefore forecast a strong contribution to growth from net trade throughout the forecast horizon."

    http://budgetresponsibility.independent.gov.uk/econ-fiscal-outlook.html

    The Report goes on to say:

    "This forecast is consistent with exporters gaining market share through the early part of the forecast. Exporters look to have a recorded a loss of market share in 2010 as global trade flows bounced back. Consistent with the most recent data, we expect this to turn around sharply in 2011, with a further gain of share in 2012. This would be similar to the experience over the 1990s recession. From 2013 onwards the path for market share resumes its longer term downward trend, driven by fast-growing emerging economies expanding their share of the global economy."

    (C) OBR 2010.

    This forecast is not borne out by the figures just released and as the -0.5% growth figure for the last Qtr. is also nothing like what the OBR forecast, at what point will Mr. Chote & the OBR start biting the hand that feeds them and revise their forecast significantly downwards?

    We cannot sustain this level of trade deficit - and the rigged exchange rate and the polluted, repressive low wage economy of China is yet again a major cause of our trade imbalance.

    Import tarriffs are essential to stop the UK going the way of the Irish and for the government to take £1Tn of demand out of the economy in tax increases and spending cuts is suicidal.

    If we do not see 2m new private sector jobs (CBI says won't happen) and the £400 Bn investment in industry (will Merlin deliver this?) plus the increase in exports by a third (not on these figures!) then Osborne's budget strategy will INCREASE the deficit, not reduce it and the UK will be trapped in the same recessionary spiral as Eire.

  • Comment number 61.

    40. At 11:25am on 10 Feb 2011, davidbrent wrote:

    32. At 10:29am on 10 Feb 2011, prateek wrote:

    How can british provide services to consumers in China and brazil while sitting in Britain???

    ----------

    Indian call centres and IT outsourcers seem to be able to provide services to Britain from India (whether or not British consumers desire this state of affairs) so why can't the reverse be true. Globalization is here to stay so it's about time the government developed a strategy for ensuring British workers benefit from it rather than continually being the victims. Of course, it will take a government that is actually concerned with the interests of the British worker, rather than that of banks or multi-nationals, for this to happen.


    It will happen though not quite in the way you imagine.

    At our present rate of decline the UK will provide call centres to the sophisticated emerging economies of the BRICS. After all English is a (the) world language.

    China is already outsourcing processes to countries with lower unit labour costs.

  • Comment number 62.

    49. At 12:20pm on 10 Feb 2011, Co-operateordie wrote:
    Management is so much better too: without the ability to bully and sack workforces, German managers have to manage, so they are much better at it.
    We have the low-skill, flexible, hire-and-fire labour market the bosses wanted, and our economy is going down the tubes. Coincidence?


    Very well put and spot on.

    The fortunes of both the Mini and Rolls Royce cars have been transformed by German management. Next, Rolls Royce Aerospace.

    Robert Peston made the point in his Blog recently "Why don't Brits rule the corporate world?"

    Strange though. These 'German bosses' never went to the right schools. They just went to state schools. This is very relevant.

  • Comment number 63.

    It's no wonder we export most to Europe when we are in the wretched EU, more's the pity.

  • Comment number 64.

    Just to get this off my chest: it's not fair to label the UK as being useless in manufacturing cf Germany. We are capable of producing world class engineering across a range of product areas, both consumer and industrial, so there isn't some sort of national DNA disability in the UK people.

    However, there are many factors in making manufacturing sucessful. Spot where we fall down as a country:

    1) product ideas - the UK is absolutely full of them, more imagination than I've seen anywhere else on the planet.
    2) skillful workforce - jury's out on this, but please remember that most VW's are made by lowly educated immigrants. VW have internally trained them to produce good quality products, so we should have no problems.
    3) capable engineers - just about OK in quality & quantity.
    4) capable management - virtually non existant in the UK. Badly trained, short term views, too political, no vision.
    5) sympathetic and consistant financing - as point 3, nobody is interested, and are too greedy and variable in their approaches.
    6) good sales & marketing teams - no problems here.
    7) level playing fields - don't think this is a real issue with the rest of Europe.

    So I suggest our entire countries weakness is down to poor managers and poor finance. In particular, we are all run by accountants with short term views, rather than people who understand things take time and money to bear fruit.

    Generalising, perhaps, but we can all point to a large number of examples, Rover's demise for instance wasn't anything to do with the workforce and engineers, just poor management and investment.

    Seems we're back to banks again...

  • Comment number 65.

    The end-game is here, people. Whilst the BBC witters on about the trade-deficit Stephanie fails to look at the big picture; the chart shows clearly that the net GDP (the but that we, as a country are allowed to kee) of the UK is being pushed down by our exports to the US.

    We need to get away from this capitalist mentality - only by entirely removing the trade deficit can we hope to gain some sort of equilibrium on the world stage. Our banks - hah - would have us continue to lend lend lend to spend spend spend on Chinese goods. But the real target of the government is to make all of the working classes unemployed so they can finally relax.

    Only when the masses are working for the elite will we see the horrible truth; that this has all been a game.

    The smart money is in silver - you'll note that there is no analysis of that in Stephanie's blog, or these numbers. Like everything else; if it's important then it's not reported.

  • Comment number 66.

    No Government has help our manufacturing industry, over the last number of years, especially the last "Labour" one. No intiatives of any kind to encourage business that actually produce goods for export, quite happy to see factories demolished or refurbished and turned into flats - the City and Banks are the way forward!

  • Comment number 67.

    #65 Our banks - hah - would have us continue to lend lend lend to spend spend spend on Chinese goods.

    Funny but I thought that the problem now is that the banks are NOT lending enough these days. Damned if they do, damned if they don't. Why not just hang them all and maybe that would satisfy the blood lust of some people?

  • Comment number 68.

    It looks like the old manufacturing/service description divide is still causing a divide between all of us. It is good to see Germany showing that knowledge intensive engineering is successful, similarly the UK has knowledge intensive service expertise - the use of complex securitisation has done "good" in the past, care is needed at conclusion jumping.

    What I would like to see is a discussion on where knowledge intensity is important in the supply (and value) chains. Clearly knowledge intensive capital engineering and complex capital financing approaches are upstream and therefore volatile (-bullwhip effect), but neverthless value adding in the long term. Downstream design seems value creating, whether Apple or Dyson, I don't really know where knowledge intensity features in between. Wherever knowldege intensity is important though, the resource is built overtime and with uncertainty - so a stable economic environment together with risk reduction & management are needed. And this requires the Government-MPC-financiers to all play a blinder, and not be distracted by opposition politicians, cognitive biases, micro-politics or media commentators.

    Two things concern me on the "high quality education" front;- (i)(a) the UK is making it harder for students to obtain visas, whether this is to go to so-called top universities or to private providers it brings money into the country - UK Border Agencies need to assist and help more (i)(b)aside - there are many international students on UK engineering degrees, hmmm. (ii) The new student loan regime still seems to burden the tax payer with the risk and not the universities - so on the face of it, though I might have misunderstood, the universities don't need to focus on either of effectiveness or efficiency.

  • Comment number 69.

    68. At 3:27pm on 10 Feb 2011, Mike3 wrote:
    "What I would like to see is a discussion on where knowledge intensity is important in the supply (and value) chains. Clearly knowledge intensive capital engineering and complex capital financing approaches are upstream and therefore volatile (-bullwhip effect), but neverthless value adding in the long term. Downstream design seems value creating, whether Apple or Dyson, I don't really know where knowledge intensity features in between. Wherever knowldege intensity is important though, the resource is built overtime and with uncertainty - so a stable economic environment together with risk reduction & management are needed. And this requires the Government-MPC-financiers to all play a blinder, and not be distracted by opposition politicians, cognitive biases, micro-politics or media commentators."


    Are you having a larf ?

  • Comment number 70.

    The UK needs to develop mass exports of high quality luxury goods. It is embarassing to see low-quality but costly British chocolates trying to compete with Swiss and Belgian chocs in international airport shopping areas. If we had a high standard of luxury goods such as the french have then the UK might have a chance at some fair competition in overseas markets. But the brits need to develop some taste buds first.

  • Comment number 71.

    Could we all give a round of applause for the bankers and investment firms of '08.
    Creativity will be the path out not slicing up the shrinking pie.

  • Comment number 72.

    34
    There was nothing wrong with the 1960's. I was married in 1958, my sons were born in 1963 and 64. My wife did not have to work, along with just about everyone else we knew she was able to stay home to look after and educate our children. I was on a moderate wage but could afford a mortgage on a pretty good 3 bedroom house. Then of course there was the music, the Beatles etc. Life was pretty good with nothing much to worry about, I was in my late 20's then and I would not want to be in my late 20's now.

  • Comment number 73.

    68 mike3

    It is difficult not to agree with the EconomicsStudent's interpretation of your paragraph.

    My factual observation would be that Dyson used to manufacture in the UK. It also sought to expand its manufacturing base here, employ more people, generate more output, etc.

    The problem that it had was that the local MP and council blocked the proposals at planning stage, forcing production to the Philipines. Just like a wind turbine manufacturer that wanted to invest in production on the Isle of Wight.

    Unfortunately, the political party of the people involved in blocking this manufacture in the UK were from the party, which is now the senior coalition partner in government.

    #67sandywinder

    There needs to be less lending; overdrafts and loans and more capital investment in the small and medium companies from the banks. They need to be in it for the long term, not just for Christmas, or their next bonus, tied to their next overdraft loan sale. The way that banks invest and interface with small and medium enterprises needs to be completely transformed. Project Merlin does not really make provision for this, sadly.

  • Comment number 74.

    69. At 3:49pm on 10 Feb 2011, EconomicsStudent wrote:

    "Are you having a larf ?"


    I am now.

  • Comment number 75.

    71. At 5:03pm on 10 Feb 2011, ghostofsichuan wrote:
    Could we all give a round of applause for the bankers and investment firms of '08.
    Creativity will be the path out not slicing up the shrinking pie.


    U mean like creating phoney assets? definitely not cheering for those leeches.

  • Comment number 76.

    Stephanie
    If we're so good at pensions why has the government already signed the contract for administering the NEST scheme with Tata Services an INDIAN owned consultancy.
    It's time we emptied the sink estates of their NEETS, by repatriating high volume employers, call centres, administration and the like from the BRICS and let their graduates contribute to growth in their domestic economies, rather than trying to colloquialize in pidgin English. Any company operating an offshore call centre where those jobs could be done in the UK, should be taxed to the extent of the costs they are saving by going offshore.

  • Comment number 77.

    #72. There was nothing wrong with the 1960's. I was married in 1958, my sons were born in 1963 and 64.

    My comment about prosperity levels in the 60's wasn't implying people lived in abject poverty, but rather people lived a much simpler life materialistically.

    Do you remember normal people in the 60s ripping out their kitchens, block paving their drives, going on foreign holidays every year. I think the activities that have been common for a large part of the population are very likely to decrease back to how it was in the 60s. Except that now both partners will be needing to work.

  • Comment number 78.

    68. Clearly knowledge intensive capital engineering and complex capital financing approaches are upstream and therefore volatile (-bullwhip effect), but neverthless value adding in the long term.

    Wow, I have missed all that Management Consultant speak. You ARE a management consultant, surely?

  • Comment number 79.

    @davidbrent
    @TheComingStorm
    Your argument is valid that Indian companies are providing IT services to britain. My argument is not about IT services but services such as Insurance, pension funds and others which the british may have a competitve advantage.
    How will Britain sell Insurance policies, pension funds or high quality education through IT???
    Do you believe that a person in Brazil or India will buy a insurance policy from britain???
    Or take it the other way if someone calls u from India to buy a Insurance policy wont u go for a British Company.

    Before drawing conclusions you try to research that what IT services Indian coorporation delivers to UK and rest of the world.They provide software development,customer services and other services but they dont sell anything like insurance through IT to Britain or anywhere else.

  • Comment number 80.

    77. At 5:38pm on 10 Feb 2011, jonearle wrote:

    #72. There was nothing wrong with the 1960's. I was married in 1958, my sons were born in 1963 and 64.

    My comment about prosperity levels in the 60's wasn't implying people lived in abject poverty, but rather people lived a much simpler life materialistically.

    Do you remember normal people in the 60s ripping out their kitchens, block paving their drives, going on foreign holidays every year. I think the activities that have been common for a large part of the population are very likely to decrease back to how it was in the 60s. Except that now both partners will be needing to work.


    Wot no more DIY.

    'Er in doors' won't be pleased but I will be.

  • Comment number 81.

    We need our banks to concentrate all of their lending and investment instead of investing massive sums of our UK plc money overseas ... we know the profits are better for the banks in the emerging economies but that is holding back Britain's development in large infrstaructure and other projects: energy, transport and other electrification, Trident replacement, full Uk recycling, intensive UK farming.

    This needs radical govt policy to set the right conditions and in politician's talk, to introduce 'ground breaking' initiatives ... such as 'modern selective protectionism' to dramatically alter the UK course instead of just simply hoping, that one day (the year 2129 comes to mind but I don't know why) ....that the UK eventually succeeds in exporting our way out of every kind of economic trouble.

    The UK is uniquely different to every other country in the world and we must stop comparing ourselves with other countries and forge a new path, a new economic identity and make sure that our banks throw in every penny they can find to UK plc as their only task ... that is the only reason for having UK investment banks ... to lift the UK out of trouble ... they have no other reason for being in the UK ... they are not doing any big favour in the UK by controlling 90% of UK capital and putting in only 10% to the Exchequor ... in strategic UK terms the UK investment banks are weak, inefficient, and actually are a massive liability for UK plc and in economic terms have a negative value in terms of opportunity costs (regarding missed opportunities for UK plc) and key optimal output values are not even registering.

    The govt needs to set a new environment at the next budget (but I don't see or hear any evidence that it is doing this) whereby most, if not all of UK capital, is used to finance UK plc.

    UK operating costs and UK employment laws are not attractive to some of the clients of our UK investment banks ... who prefer to invest in those countries not having UK standard human rights, zero employment laws, have child labour and massive natural resources available for cheap foreign raiding.

    The lack of strategy for UK plc means that we have zero 'selective modern protectionism' and as a result, of that, our UK exporting systems are not sufficiently well targeted and organized to be able to compete effectively.

    Are the national newspapers still going to keep printing that the UK economy is the 6th (12th?) largest global manufacturer - does any serious economist really believe this figure to be accurate.

    Sounds like UK plc needs a 'business secretary' .... any movement there yet?

    Exporting more for countries like Britian is being promoted at the wrong time ... just as many countries are protecting themsleves and their own domestic economies and are trading more internally.

    The message about the need for the UK to start exporting much more is about 13 years too late ... we've missed the boat and catching up is going to be a damned hard swim.

    The UK banks need pulverising into shape by UK govt and so that UK total focussed internal lending/trading ... Or better still ... just keep on with the same mess and within a few years net UK Emigration will be positive!

    UK exporting is going to grind to a halt when the interest rates have to be raised to deal with UK inflation ... so the clear logic is ... follow another path ... have another strategy.

  • Comment number 82.

    Forgot to mention ... some ... hundreds and thousands of UK businesses went into insolvency last year because of ... wait for it ... their businesses could not withstand a lower value GB pound exchange rate.

    Apparently, this was because the management had signed contracts to pay for raw materials being delivered from overseas as a fixed exchange rate ... when the GB pound devalued by 20% in the last two years and imports became more prone to inflation ... bang went their margin ... and into the hands of administrators.

    I know this is so because I visited a large factory closure in Nov 2010 and this was explained to me by an expiring company that used to supply both the domestic UK market and with a smaller balance of exports.

    A low GB pound exchange rate is good for British industry/exporting? Things are never as simple as the business stereo type media driven headlines suggest.

    British businesses are being crucified with import costs ... this needs a new UK strategy for UK plc.

  • Comment number 83.

    I realise that this may be unpopular, but we have seen balance of trade difficulties for many years. We can be innovative and original, but we don't succeed often enough. Back in the 60s, it was a monthly barometer of the nations health; often we were sick. So this isn't a new or recent thing. You have to wonder why and surely it comes down to the way each individual was trained and now does his job and his attitude to it. Is our job just a meal ticket to the next electronic gizmo or clothing status symbol? Or does it actually mean something to the individual, something to take pride in?

    Sadly, I do not think we take enough pride in our job and ourselves to excel. This comes down to attitude and expectations through our school and university years. Not enough is demanded of our children. I am sure standards have slipped in the public exams. Too many new ideas have been tried too quickly within the education system. Whilst there are good teachers, there are too many stories of poor teachers for them all to be distortions of the truth.

    Change is needed and it should come from the adults asking more of our children. If your child is not understanding something at school, help them to understand, or seek help for them. Most children are inquisitive when young, most want to know why, how etc? I suspect we have been too busy to answer on many occasions. If a child becomes used to second rate answers from its parents and relatives, it will believe that this is acceptable behaviour and learns to imitate it. Then maybe our country will learn how to make many more products others want

    The change should start with us .............
    By changing our attitude to work and teaching our children properly .....
    [not closing libraries would be an excellent start, it sends entirely the wrong messge. Eton and Harrow; Oxford and Cambridge have the money for up to date libraries; so why must the rest of the country have reduced access to libraries?]............
    But it will take time ..................

  • Comment number 84.

    #9 13 years of dumbing down education is not going to make Britain an education centre of choice !! Only the main universities are still attractive to foreigners who want a good education for their children and are willing to pay well for that. Now, even that is in doubt as various politicians want to set quotas for students of differing abilities.

  • Comment number 85.

    "78. At 5:42pm on 10 Feb 2011, jonearle wrote:

    68. Clearly knowledge intensive capital engineering and complex capital financing approaches are upstream and therefore volatile (-bullwhip effect), but neverthless value adding in the long term.

    Wow, I have missed all that Management Consultant speak. You ARE a management consultant, surely?"


    Nope, "sadly" not, just do any old bits and bobs that come along, not really attracted by the rodent race. But having re-read my paragraph it is a little worrying that one can just write this stuff and give an appearance ... I'll just hope the professionals aren't doing the same.

  • Comment number 86.

    84. At 10:16pm on 10 Feb 2011, ishkandar wrote:

    #9 13 years of dumbing down education is not going to make Britain an education centre of choice !! Only the main universities are still attractive to foreigners who want a good education for their children and are willing to pay well for that. Now, even that is in doubt as various politicians want to set quotas for students of differing abilities.

    I have worked for a few Universities and colleges predominantly on contract. I have not worked for large universities but for the smaller ones. In 2005/6 I worked for one such university, 99% of the students were overseas students, mainly from India and Africa. Their relative governments paid for the teaching. I was offered a full time position with this university but I could not reconcile the miss use of regulations so I declined. I did spend 6 happy years working for a 6th form college; in 2003 we were overwhelmed by the influx of Chinese students who were again funded by their government.

    I haven’t worked in education since 2006 so things may well have changed.

    I agree with your dumbing down comment and I have been involved in many staffroom discussions on this and to give the vast majority of the teaching staff their due, they were not in favour!

  • Comment number 87.

    Hmmm..... any advice how to leave the country? And do I have to turn out the lights?

  • Comment number 88.

    The opening remarks of Dominique Strauss-Kahn, Managing Director, International Monetary Fund at the Lecture and Discussion on: "Towards a more stable international monetary system" in Washington DC, February 10, 2011 makes for very interesting reading, Global currency anyone ?


    http://www.imf.org/external/np/speeches/2011/021011.htm

  • Comment number 89.

    I have been back in New Zealand for about a year now. I am amazed that British industries have not taken advantage of the comparative advantage which has developed in trade between the two countries. There is a high New Zealand dollar vs devalued pound. For example Jaguar cars. Jaguar has a presence here but the prices are set by the Jaguar NZ. This means an XF which sells for £30,000 in the U.K sells for £60,000 in N.Z.This equates to low volume sales. There was a time when 90% of the vehicles on NZ roads were British! If there was some aggressive and competitive marketing. The XF at $NZ120,000 competes against a similarly spec-ed Ford Falcon at $47,000. Yes I know NZ is a small market but it adds up. If the UK exported to NZ as much as they did up to the 1970s if would have a positive influence on Britain's Balance of Payments.

    While living in the UK we quite liked the Premier Inn model of Hotel. The French have the similar Formula One model down here. I believe British owned Hotel franchises have potential in the southern hemisphere. Overall tourism - domestic and overseas - is doing well!

    Are there British Fashion labels? Have not seen any of the labels here! Export your Department stores!

    You need to better that a 24 hour visit by Mr Hague to promote trade!


  • Comment number 90.

    @ #30. Corrado Blaise:
    You mentioned about your response to my comment #92 on 04 Nov 2010 on "Why the Fed matters more" article.

    First of all, THANK YOU for your comment. I really appreciate and share your concern about the inflation in general essential commodities of day to day consumption.
    I did in general point to that in my point#10 when I mentioned about "Indian consumer prices".
    I am very well aware of the poverty in India, because in my own past I have faced it myself. It's difficult, there were some moments where the destiny seemed to be really in the hands of stars ... But we somehow pulled ourselves out of it without the help of government ... And deciding not to depend on the help of government (now when I see in retrospect) seems to have worked it's wonders to pull ourselves out of many difficulties ...

    My point about exiting overpriced shares was just ment to show one of the effects where the slightly above average people who tend to be fooled by rising stock market (and stock brokers and sham financial advisors) and TEND TO *BUY* at high and eventually loose their hard earned money .. to learn it the hard way. The exact thing that they ought not be doing. [Sorry for my poor language skill]
    And if you read between the lines only that point was touched because only those who have access to internet potentially tend to invest in stock market (statistical co-relation if you will ..)
    That's why that point.

    But you are absolutely right. The last thing that we want in India is inflation that pushes poor even farther down the vicious cycle of poverty.

    I hope you understand last part of my comment was not about making quick money, but about how to PROTECT onself (NOT LOOSE MONEY) against the wave of imminent inflation that is not in my (common man's and India's) hand when it is triggered by U.S.

    THANK YOU once again and have a good day today :)

  • Comment number 91.

    More analysis should be done on these stats. Exports to China - you wopuld be surprised at the value of recycled/scrap metals we ship there.Exports to India - diamonds are a large part of the stats which are wholesaled.

    As a small business who exports 80% of business, it does not surprise me that the focus with SME's is in Europe and North America.It is not realistic to tackle markets like the BRIC's countries.In Brazil and India for example my engineered goods attract a 100% imprt duty to protect local industries.These are only waived if the goods are in a duty fee zone, for rexporting.

    I have not even reached saturation point in selling to North America/Europe.Govt should be concentrating on helping selling more into these markets, not with the BRIC countries, for SME's

  • Comment number 92.

    wrt 90. At 05:40am on 11 Feb 2011, jjoshi2008 wrote:
    @ #30. Corrado Blaise:
    You mentioned about your response to my comment #92 on 04 Nov 2010 on "Why the Fed matters more" article.
    Your point has beeen taken.
    I have no problem with capitalism, however there comes a point when good business becomes exploitation.
    The government is concerned about ticket touts buying 2012 London olympics tickets and then reselling them on for inflated prices yet they don't have any issues with commodity speculators buying huge quantities of grain futures, causing prices to rise and then quickly reselling them for a big profit. These inflated prices will eventualy lead to higher food prices for the man in the street.
    Maybe certain commodities should be made non-transferrable i.e. these speculators will actually have to take receipt of the commodity. This would ensure that only legitimate food wholesalers and manufacturers set the price and not an investment bank on Wall st.

  • Comment number 93.

    Reading this article it is clear the journalist has spoken to very few business people. If she had she would understand why so few of them export to Brazil, Russia, India & China. I happen to know a lot about this subject. Britain's best chance is supplying its historical trading partners ie. the developed world. Its mainly because these countries rely on state capitalism where 'corruption' is normal. Most British business people dont have the mentality for this & are happier dealing with territories where the rule of law applies & they should be left alone to export where they feel happiest.

 

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