Archive for November, 2011

George splashes the cash but is that an elephant I spy in yonder room?

Posted in economics with tags , , , , on November 29, 2011 by Tom Leatherbarrow

Just a quick take on the Chancellor’s Autumn Statement. How can I do that when he has just begun speaking in the House of Commons you ask? Well, this statement has been so well trailed in the press that we know exactly what Georgie is going to say with the exception of how big the deficit actually is!

We know, for example, that the Chancellor is going to unveil an infrastructure investment plan worth at least £25bn, the lion’s share of which will come from pension funds. We also know that he has plans to unlock £40bn of bank lending for small businesses which the government will underwrite and from somewhere (loose change down the back of the Treasury sofa presumably) we’ve also found a whopping £400m fund to enable housebuilders to build up to 16,000 new homes. Oh, and not only is he going to splash the cash but he is also going to take less into the Treasury coffers by deferring a 3p rise in fuel duty which was due to be introduced in January.

All good news and with money so cheap at the moment, due to historic low interest rates, now is the time that business should be investing, if only companies could be sure that demand will hold up and also gain access to finance.

Which brings me to the crux of the problem. The elephant in the room this afternoon will be the Euro. Friday’s analyst note from Nomura spoke of ‘probable’ rather than ‘possible’ collapse, the question is when?

The nightmare for George is that all these good intentions are blown away and calculations are declared null and void by a monumental Eurozone default which requires a further bailout of the banks. In a week or a month’s time this Autumn Statement could have all the relevance of a little piece of paper waved around by a former Lord Mayor of Birmingham called Neville Chamberlain in 1939!


British Gas transparent tariffs must be more than a marketing tactic

Posted in business with tags , , , , on November 24, 2011 by Tom Leatherbarrow

Today’s announcement by British Gas that it is to introduce simple and transparent pricing structures, involving one fixed and one variable rate, whilst welcome, will be viewed with cynicism by many consumers, media commentators and the company’s competitors.

Let’s make no mistake about it, this has been done under duress. The energy sector is under pressure. The Big Chiefs have already been called into 10 Downing Street for a dressing down by the PM (although not much constructive came out of it), OFGEM is investigating the wholesale markets and the media is getting increasingly cynical about a lack of competition and seemingly orchestrated movements in pricing. Today, on the BBC, British Gas’ Chief Executive admitted that the sector had lost the trust of consumers, with more than 500 different tariffs available.

But are BG’s motives entirely altruistic? Perhaps, but the energy market in the UK is mature and BG has been losing market share. Many customers will unquestionably be attracted to the transparent British Gas model and I have no doubt that the company will gain customers (however many thousands will still be out there on the old tariffs).

The true measure will surely be whether customers actually save any money. Many years ago I was told by one energy employee that most of the top jobs in the British energy sector were held by ex-British Gas employees who liked nothing more than to get one over on their old mates.

If today’s announcement ultimately turns out to be a tactical grab for market share, dressed up as corporate altruism, with no real customer benefit, then trust in the whole sector, not just British Gas will erode even further.

One to watch!

Leveson is the tabloids’ worst nightmare!

Posted in Media with tags , , , , , on November 22, 2011 by Tom Leatherbarrow

Just a quick take on the Leveson Inquiry which started slowly but is now building up a real head of steam.

For years the British tabloid press went about its business secure in the knowledge that it would always have the last word. Got caught printing a false story? “Never mind, we’ll print a retraction on page 42 and if the ‘victim’ tries to take it any further we’ll set the attack dogs on him.”

It was enough to ward off even the bravest of the brave. But now, as a result of Leveson, the last word goes to the victims and it is compelling viewing.

For the tabloids the impact of their modus operandi on targets is being laid bare for all to see and hear. The count so far is four alleged suicides, a burglary, a stay in a mental health institution, job losses galore, heartache and cruelty.

Much has been written about the Dowler family’s testimony yesterday, but Hugh Grant’s was equal to it. Responding to charges that he traded on his good name to get publicity he told the inquiry: “I don’t have a good name. I’m the man who was arrested with a prostitute.”

The Daily Mail responded today with characteristic venom to allegations of phone hacking by Grant, but it’s anger only reinforces the victim’s narrative of bullying, arrogant and heartless behaviour.

These are dangerous times for the Red Tops. The tables have been turned and the narrative of the story is beginning to run away from them. Crucially, social media and online news sites are giving the British public unfiltered updates in real time.

By the time the Daily Mail is read next morning we’ve been chewing over and discussing what we’ve seen and heard for the best part of a day.

The truth is that the tabloids have lost control of the situation and their traditional defence that these are “victimless crimes” has never sounded so hollow!

Internet statto nerds get journalism’s old guard in their sights

Posted in Media, Sport with tags , , , , on November 21, 2011 by Tom Leatherbarrow

It’s not easy when those you admire prove to have feet of clay. Barely ten days after lauding him on this very blog as being a ‘must read’ in the Independent, James Lawton crystallised the problem that many old guard journalists populating our national newspapers are facing.

Writing in Saturday’s Indy, Lawton used selective statistics to demonstrate how Kenny Dalglish’s reign as Liverpool manager is actually little better than that of his predecessor Roy Hodgson. In particular Hodgson’s points per game percentage of 1.25 compared to Dalglish’s 1.79.

Unfortunately for James, the internet is an unforgiving place. Nowadays, there is an army of statto nerd football supporters out there who are able to tell you the exact pass completion percentage of an individual player in the final third of the pitch during consecutive February’s and illustrate it in the form of a venn diagram. More importantly, in the digital age, comment boxes below articles give this army of nerds an opportunity to voice their opinion.

And so it came to pass. Within a few hours of the piece being posted Lawton was skewered on his own stats by football supporters of multiple allegiances, not just Red. Here are a few of the most choice (and repeatable) comments:

“You make a point of Dalglish’s average points haul being 1.79 over 29 games, when your beloved “English Arry” at Spurs is worse at 1.76 and Wenger’s is 1.66”

“The difference between 1.25 points per game and 1.8 is relegation and Champions League form”

“How can you use numbers which undermine your point to make a point?”

I suspect Mr Lawton won’t have lost much sleep over the reaction to his article, but he should. It may well have been a crude attempt at generating link bait but credibility is hard won and easily lost. He must realise that the days of being able to slop together a thousand words of ill-thought out comment five minutes before deadline are over. There is an army of statto nerds out there who have done their research even if he hasn’t.

Anyway, Mr Lawton can take what little solace there is from the fact that the Tomkins Times, run by the doyen of statto nerds, Paul Tomkins, has nominated him “Media Muppet of the Month”!

Government’s Feed-in tariff cut was a masterpiece of miscommunication

Posted in business, Politics with tags , , , , on November 17, 2011 by Tom Leatherbarrow

I’ve had a series of very interesting conversations with parties involved at various points in the supply chain for solar PV products over the last few days. Invariably, there is bemusement at the Government’s ham-fisted changes to the Feed-in tariff. As I said to one contact, “You know something has been b#&*%ed up when it creates an alliance between the CBI, the Local Government Association and Friends of the Earth.”

However, it is the manner of the communication and timing which has left me truly dumbfounded. The decision to announce a 50 per cent cut in the tariff, but delay implementation for over a month has created chaos in the marketplace.

It is the equivalent of the Chancellor of the Exchequer announcing that he intends to double cigarette duty in his April Budget but delaying actually starting until May. I think we all know what would happen. There would be a gigantic surge of fag buying with a stockpiling of Benson & Hedges on an unprecedented scale! Of course, that boom would lead to an inevitable bust as soon as the change came in.

Much the same is now happening in the solar PV market. Much better in my view would have been a solution which has been rumoured in another sector, namely a fuel price stabiliser, whereby consumers would be cushioned from the impact of fuel price rises by a corresponding reduction in fuel duty.

It is easy to see how this sort of solution could have been implemented in the solar PV market. Unit cost of solar PV has been falling sharply of late. A stabiliser system would have reduced the Feed-in tariff in line with any reduction in the unit cost of equipment, thereby ensuring that nobody was making a killing, but at the same time not collapsing the entire market.

Instead, the heating industry runs itself into the ground trying to satisfy short-term demand, all the time knowing that the market is going to go into free fall on December 12th.


New Independent website is [expletive deleted]

Posted in Media with tags , , on November 4, 2011 by Tom Leatherbarrow

The new Independent newspaper launched earlier this week and I am still waiting for it to work properly! Try it, go on, and see if you can go two minutes without resorting to language you only usually find down at Liverpool docks.

Broken links abound on a site which was trumpeted as a rival to the Guardian’s site and the Telegraph’s. I’d give you an actual quote but the page won’t load.

In an excellent piece in The Drum magazine on Wednesday, Matt Lindop, a digital marketer from London commented “It’s clear the site just wasn’t ready for launch.” He goes on to list a host of technical and advertising “don’t dos” which put into context the disaster this has been.

I’m no web designer, I really can’t comment, but denying me my regular fix of three of the best writers in UK journalism is driving me mad. For me there are three ‘must reads’ in the Independent, namely Hamish McRae on economics; Steve Richards on politics and James Lawton on sport (I’d post links to some of their best stuff but all you get is “The Webpage Cannot Be Found”).

At a time when the world is undergoing a seismic financial shock; we’ve just witnessed the biggest rebellion by Conservative backbenchers since Maastricht and racism has reared its ugly head again on the football pitch, the fact that I can’t read any of them is [expletive deleted].

I can’t think of a worse start for new editor Martin King.

The new £50 note celebrates manufacturing – oh the irony!

Posted in business, economics with tags , , , , , , on November 2, 2011 by Tom Leatherbarrow

The Bank of England releases its new £50 note today. The note portrays two innovators with Birmingham connections, namely Matthew Boulton and James Watt, who were instrumental in bringing the steam engine into the textile manufacturing process.

“Boulton and Watt’s steam engines and their many other innovations were essential factors in the nation’s industrial revolution,” says Bank of England governor Sir Mervyn King. “The partnership of an innovator and an entrepreneur created exactly the kind of commercial success that we will need in this country as we rebalance our economy over the years ahead.”

You’ll have to forgive me for noting a certain irony with all of this. Business is facing an unprecedented squeeze on its lines of credit, which has brought investment to a standstill. The very entrepreneurs that the Governor wants to encourage can’t find the cash to put into new ventures. In this environment, Boulton and Watt wouldn’t have been able to raise a penny and yet the Bank of England, the lender of last resort, puts both of them on a new note as a celebration of our entrepreneurial and manufacturing spirit.

Back in the real world, figures for the British economy released yesterday showed that manufacturing had unexpectedly slowed during October. As one client put it to me recently, “the bubble hasn’t burst but it’s definitely deflating and we can’t find the hole.”

If we carry on like this, the ultimate goal of ‘rebalancing’ our economy will recede ever further away. What can the Government do? Well, in my opinion, the Government’s role is to create the right environment to encourage companies to invest – but all too often the environment in the UK, in particular interest rates, has deterred long-term investment. The irony now is that with interest rates at historic lows the banks won’t lend business any money!

If we are to rebalance then what extra support does industry need? Well I’ll first tell you what it doesn’t need, namely grants to individual sectors of the economy or to geographically specific areas. Government cannot pick winners, if history tells us anything it’s that. I would argue for something much more subtle, such as the ability to write down capital equipment costs against tax. That would be a boost which both Boulton and Watt would support I’m sure!