Will the UK mini budget kick start the stagnating business economy?

Against a backdrop of soaring company insolvencies, up by 72% in the last year according to the Insolvency Service, and plummeting business confidence the new UK Chancellor unveiled a package of measures to try to deal with the current cycle of stagnation and rising costs.

The focus, said Kwasi Kwarteng, would be on growth and the measures included reversing the rise in National Insurance payments, freezing corporation tax and cutting stamp duty.

The limit on bankers' bonuses was scrapped and there will possibly be 38 new investment zones in England.

This hugely expensive package is generally called trickle down economics, whereby the hope is that with more disposable income, investors and businesses will pass on the gains to those lower down the economy.

However, it is not a new idea and dates back to at least 1972, when a similar package ushered in several years of boom and bust.

Will it work this time?

Who can tell.

Certainly the stock markets and investors were not impressed and...

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Promises, promises but not much help right now

economy Mar 24, 2022

Hard-pressed businesses already facing a perfect storm will hardly have been cheered by the 5% reduction in fuel duty announced in the Chancellor’s Spring Statement.

There will also be business rates discounts of 50% for eligible retail, hospitality, and leisure properties from April 2022.

These were the only measure to be introduced immediately and, as has been pointed out, the cut in fuel duty is unlikely to make much of a dent in fuel costs given the price rises already seen in recent weeks.

Apart from these, everything else was promises for the future.

Among them were future possible tax cuts on business investment, uprating the employment allowance, adjustments to the Apprenticeship Levy and extensions to R&D tax credits.

The director general of the BCC (British Chambers of Commerce) said the announcement “falls short of the action businesses needed to see” and one local county Chamber director said: “it’s almost as if they [business owners]...

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The pros and cons of an infrastructure boost post pandemic

economy growth Jul 14, 2020

The UK Prime Minister has signalled a massive infrastructure boost to help the country’s economy to recover post pandemic.

The details and plans for allocation of money are likely to be fleshed out in the autumn but in a speech at the end of last month he indicated that more than £5 billion would be spent on infrastructure projects, many of them in northern and central England as part of his pledge to tackle the imbalance between London and the South and the more deprived regions.

The projects will include spending on hospitals, roads, railways and schools, including what are called “shovel-ready” projects to help businesses and individuals to recover and address the expected mass unemployment.

Business directors should be planning now to take advantage of the proposals, especially those in the construction and tech sectors that are likely to be recipients of the government money.

I know of at least one company, supplying a unique range of thermally...

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Is commercial property investment no longer a safe haven?

Commercial property pre-pandemic was considered one of the more secure options for money by investors, particularly by pension fund managers.

But the consequences of changing consumer behaviour, the aftermath of the pandemic lockdown and the retail High Street revolution would suggest a pause for thought and perhaps a rethink.

While the most obvious sector of business related property to be in trouble is retail it may prove not to be the only one.

Retail has been hit by a significant move to online shopping that has been building for several years, but it is also beset by what has been called an archaic rental collection system, whereby rents are payable quarterly.

The most recent Quarter Day was on 24th June (Midsummer Day) and it has been estimated that in the region of just 14% of retailers were paid their rent that day.

It was no surprise, therefore that Intu, owner of some of the UK’s biggest shopping centres, such as Lakeside and Manchester’s Trafford Centre called...

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What lessons can be learned from the 1930s New Deal for post pandemic recovery?

economy recession recovery Jun 26, 2020

The New Deal was a series of measures introduced by President Franklin D Roosevelt to help the US economy recover from the Wall Street Crash and subsequent Great Depression.

It introduced a string of measures to better protect workers from ill-treatment and the consequences of unemployment and to better regulate banks and financial institutions.

As noted in the Encyclopaedia Britannica “Opposed to the traditional American political philosophy of laissez-faire, the New Deal generally embraced the concept of a government-regulated economy aimed at achieving a balance between conflicting economic interests”.

Perhaps one of the best-known Acts was the Glass–Steagall Act of 1933, which separated commercial from investment banking.

But the New Deal measures were also designed to stimulate and revive economic activity in agriculture and business, founded on the economic theory, as propounded by the UK economist John Maynard Keynes, that massive Government spending should...

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The future of global sea freight transport post lockdown

The words “new normal” have become something of a cliché in predictions for a post pandemic world but there is little doubt that global sea freight transport is likely to be very different for some years to come.

Even before countries started closing their borders and taking other measures to protect citizens from Coronavirus the sea freight industry was facing pressures.

Much of the pressure relates to concern by the IMO (International Maritime Organisation) about the industry’s impact on the environment and specifically its use of sulphur oxides which is harmful and is considered to be the cause many premature deaths.

From January 2020 the IMO had imposed new emissions standards designed to significantly curb pollution produced by the world’s ships which will be no small feat given estimates that more than 90% of the world’s trade is carried by sea.

To achieve this target, it proposed to ban shipping vessels using fuel with a sulphur content...

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Tech offers growth opportunities post lockdown

It is likely that there will be many growth opportunities for companies to embrace the use of technology after the Coronavirus lockdown.

Many organisations and businesses have had to switch to a remote way of continuing to provide their goods and services and this has affected everything from medical consultations to teaching, even more online shopping and whole offices now remote working.

Having discovered that it is possible to function in this way it is likely that many will carry on doing so when restrictions are eased and this will provide growth opportunities for tech companies.

Among the beneficiaries already have been providers of online tools including conferencing facilities, such as Zoom, Microsoft Teams and Skype, productivity and project management tools like Asana and Trello and online collaborative and co-creation tools like Miro and MURAL.

But for all their benefits there are also caveats in terms of speed and reliability of broadband, security and protection from...

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Is it time to stop propping up traditional so-called UK Key Industries?

The main UK Key Industries are often still considered to be aviation, aerospace, steel and car production.

As a result of the Coronavirus pandemic and subsequent lockdown the UK Government is working on a plan, called Project Birch, to provide short term bail-outs to those companies “considered strategically important” to the national economy.

However, how to define strategically important? Is it in terms of their contribution to UK GDP (Gross Domestic Product), or to the number of jobs they account for, or to their ability to be viable and profitable businesses that can operate in more normal times without state aid?

It would be reasonable for a Government to consider a business to be strategically important in terms of employment during a crisis, such as now, especially given that some of the above-mentioned Key Industries are in parts of the UK where there is traditionally high unemployment with few alternative job sources, especially when whole communities are...

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What is the difference between a Depression and a Recession?

Both a recession and a depression are characterised by an economic decline but the difference between them is down to the length of their duration with depressions lasting years.

An economy is defined as being in recession when there have been two consecutive quarters in which growth as measured by GDP (Growth Domestic Product) has contracted.

This is usually caused by a reduction in business activity and consumer confidence, such that businesses may start laying off employees and cutting back on production and on investment as their focus shifts almost entirely to their cash flow and balance sheet.

In the most recent recession, in 2008, the precipitating factor was a liquidity crisis that began in the USA where banks had lent what was perceived to be too much money on what came to be seen as risky mortgages on which borrowers then defaulted. This resulted in a loss of confidence in banks, which declined to lend to each other which in turn led to a liquidity crisis.

Recessions are...

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Time for a rethink? The global supply chain and short-term thinking

A time of crisis, such as the current Coronavirus pandemic, exposes the weaknesses of inter-dependency and systems and in this case, the global supply chain.

There is perhaps also no better time to review things and perhaps change from the short term thinking that seems to have dominated economics and businesses, especially in those economies like the USA and UK that rely heavily on the purchase of foreign goods.

It is clear that it will be a long time before life returns to normal and it is not yet clear what that “normal” will look like.

In the previous “normal” it was possible to rely on adequate supplies of raw materials for the production of various types of goods, such as food stocks on supermarket shelves.

But one of the first signs of the disruption to come was the rapid emptying of supermarket shelves as people panicked and bought large supplies of various items, for example toilet paper, hand sanitiser and pasta, in anticipation of the coming...

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