Week ending 26th April 2013

A year ago it looked as though the end game was in sight for the euro, then things quietened down.  The general view was that somehow the Eurozone would muddle its way through to a solution over time.  However the Eurozone reappeared last week in the business, economic and political sections of the media and it seems nothing much has changed or is likely to and the slide continues.

Mrs. Merkel mentions the war

Spain’s unemployment has continued to rise and hit a new record of 27% with 57% of under 25s out of work.  Italy has finally cobbled together a government which includes Silvio Berlusconi’s party so not much change there.

Stern Auntie Angela is once again pushing for stricter Europe-wide control over national budgets, still pursuing the idea that if only everyone could be more like the Germans then all would be well.  This is diametrically opposed to the French position that wants banking union or in other words if only everyone could be more like the French then …. Well you get the picture.

The ability of the Eurozone politicians to come up with policies and proposals that effectively cancel each other out is not altogether surprising if you look at European history.  Differences like this arose regularly sometimes leading to war which would sort it out one way or the other.  Now that option is not available (thankfully) but the Eurozone doesn’t seem to have found an alternative that works so the differences and the problems they cause rumble on.

Of course this is what the euro was supposed to be all about.  A common currency leading to “ever closer union” would be the mechanism by which all differences would be resolved.  Indeed Auntie Angela has warned sternly of the risk of a return to conflict between European countries if the euro fails.  However it is clear from a number of developments from last week that the pressure on the euro is building.

Austerity light

With GDP throughout the Eurozone falling and even the German economy feeling the pinch it seems everyone (apart from stern Auntie Angela) is questioning whether austerity has gone too far.  Almost any country that cares to ask is being granted an extension to deficit reduction targets.  The IMF came out with a strange argument that George Osborne was “playing with fire” by pursuing the current rate of deficit reduction in the UK and that there is the “fiscal space” in the UK to indulge in a bit of “fiscal loosening”.   The mood appears to be swinging towards the idea that some sort of “light touch” austerity is the answer because austerity itself has become the problem.

All this is a classic and big scale example of tackling symptoms rather than the core problem which is the euro itself.  In fact it’s worse than that.  When you tackle symptoms and this produces consequences you don’t much like this causes you to tackle these symptoms as well, so you get further and further away from the core problem.

No FTT no €30bn

An example of the Eurozone focusing on symptoms and not the problem is the attempt by Germany and 10 other countries to introduce a Financial Transactions Tax (FTT).  As the tax will apply to trades across the world if they originate in one of these 11 countries it is not surprising that many other countries including the US and UK are against it.  A Swedish minister has warned that it will be a disaster and will not work.  He should know as he actually introduced it in Sweden and found it was a disaster and didn’t work.

Last week Jens Weidman President of the Bundesbank no less announced that “From a monetary policy point of view, the FTT in its current form is to be viewed critically”.  He also warned that it could raise the costs of government borrowing and outweigh the revenues raised by the tax.  I think we can take that as a “nein”.

The only argument I have found in favour of the FTT is that it could raise up to €30bn which would be used to …lower government deficits!  Well perhaps, but if it raises borrowing costs then once again the EU will have cancelled itself out and long since lost sight of the real problem.

George Osborne has taken to matter to the European courts.  It would be rather good if he could get the European Court of Human Rights to rule against FTT.  Would be almost worth putting up with Abu Qatada to win that one.

Whatever it takes or whatever it costs?

One of the moves that kept the lid on the whole mess for a while was the European Central Bank (ECB) becoming in effect the lender of last resort in the Eurozone.  Last summer it launched its emergency rescue strategy, Outright Monetary Transactions (OMT), buying up the bonds of countries like Spain and Italy and bringing about a spectacular fall in their borrowing costs.  This followed Mario Draghi’s statement that he would do “whatever it takes” to deal with the Eurozone’s sovereign debt problems.

However he omitted to mention that his plan required the German taxpayer to “pay whatever it takes”.  Last week the Bundesbank having poo pooed the FTT did the same to OMT, taking it apart point by point.  Germany’s constitutional court is due to rule on the legality of OMT in June.  If it rules against OMT it pretty much means the end of the euro.  With stakes that high the markets seem confident the court will find some formula to avert that kind of crisis.  However it does show just how close run this is all getting.

Italian job

Now that we have a new Italian government perhaps we will see some action to stop the Italian economy choking to death.  However be careful what you wish for.  Strangely Italy is not fundamentally a basket case, its problem being lack of competitiveness brought about by letting its labour costs race 30pc ahead of Germany’s.  In particular it has a primary surplus of 2.5pc of GDP (something George Osborne can only dream about currently).  This means Italy could leave the EMU and regain competitiveness without facing a funding crisis.

So why doesn’t Italy do just that?  Mainly because its political leaders have not so far been prepared to play rough.  The latest PM Enrico Letta does not look like the man to change that and the government he now heads is unlikely to last long enough to achieve anything meaningful.  But even with a PM who was very nearly named after a cup of weak coffee, you never know.

Why does all this matter

You may be wondering why I am boring you all to death with this stuff.  Last week the UK GDP figures were published and apparently we managed a whole 0.3pc growth in the last quarter, avoiding the triple dip, which sounds more like the latest offer from KFC than a meaningful economic concept.  Also it was reported that many businesses are sitting on mountains of cash and are reluctant to invest and even more reluctant to borrow to invest.  Behind the flat economy and reluctance to invest is uncertainty and that uncertainty is all about what’s going to happen in the Eurozone.  Even when nothing does happen what might happen is scary enough to keep most CEs and FDs awake at night and holding on to their cash cushions.

So the crisis and the uncertainty are set to continue. The UK’s and indeed the world economy cannot recover properly until the EU faces up to the fact that the euro in its current form just cannot work.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

Week ending 29th March 2013

This week’s TWb4TW is more politics than business for a change, though as always there are lessons we can learn. 

Aspiration Nation

This week sees the start of some of the biggest changes in decades for the NHS.  These changes are made even more significant given that the Tories said in their election manifesto that this is one thing they would not do.  We are used to politicians not doing what they promised but this may be a first where they do what they promised not to do.

As a precursor to these changes there has been a rewrite of the NHS “constitution” as the framework for the new look NHS.  Robert Francis in his report on the Mid-Staffs hospitals scandal recommended that patients’ rights be formally enshrined in this new constitution.  He wanted to make it explicit that “patients are put first” and that “everything done by the NHS should be informed by this ethos”.  A good idea would be the response from most of us I suspect.  However all that Jeremy Hunt the Health Secretary has come up with is that the health service will “aspire to put patients first”.

Yes I kid you not, these are the actual words that have been written in to the new NHS constitution and published last week.  Coming hard on the heels of George Osborne’s “aspiration nation” budget speech it seems that “aspire” is the new theme for this government as the alternative to actually delivering a result.  After all it has a loftier almost spiritual feel to it when compared to “doing your best” or “trying hard”.  In fact as long as you are “aspiring” you don’t even have to bother with either of those.

The other thought that occurred to me was if the patient has not been at the core of the NHS constitution previously than what was?  Could it have been?

“The NHS exists to enable doctors’ receptionists to satisfy their need to exercise complete power and control over the rest of the human race”.

Or

“The NHS exists to increase the income and egos of medical consultants in equal proportion for ever and ever”.

Or

“The NHS exists for politicians to mess about with, even when they say they won’t and so they can feel they have done something worthwhile”.

OK I am using 3 stereotypes to make a point (and get a cheap laugh) but to actually put the words “aspire to put patients first” into the NHS constitution is just as big a nonsense.  The question is how could this happen?  I have a horrible feeling it is because:

Clever people do clever things

A lot of clever people would have worked on the new NHS constitution, politicians, lawyers, civil servants, representatives of medical professional organisations and so on.  We know these people are clever because they all have firsts from top universities and say things the rest of us can barely understand.  They will have worked far in to the night to produce a set of words about patients that would ensure that it would be difficult or even impossible to be held to account for anything that actually happens to them.  The person who came up with the word “aspire” may well feature in the next honours list!

However what has got lost amongst all this cleverness is a clear sense of purpose.  Without a clear sense of purpose which everyone involved can understand and relate their own role to then the project is doomed to fail.  This has been proven in research and practice time and time again in both private and public sectors but still clever people almost invariably get this wrong. The problem is that for clever people having a clear sense of purpose is just too simple and keeping it simple is not what clever people do.

 

I don’t like your attitude

The Francis report on the Mid-Staffs scandal is an example.  Whilst the recommendation for patients’ rights to be enshrined in the NHS constitution is spot on, Robert Francis and his inquiry team could not resist going further and coming up with no less than 290 recommendations on how to do this.  Now if you want to make something actually happen 29 would have been too many and 290 introduces such an enormous drag factor on change that any meaningful change is unlikely to be achieved.

The number of recommendations is a product of getting into too much of the detail of what should be done, rather than focusing on what needs to change and then holding people to account for making that change happen.  The Mid-Staffs scandal is being used to demonstrate that the standard of patient care throughout the NHS is sub-standard and that this in turn is down to the “attitude” of nursing staff in particular.  One recommendation for fixing this is that nurses should spend a year on the wards caring for patients including feeding and washing before they qualify.  I suspect like me many people were surprised to find this did not form part of current nursing training.  However the inference here is that this will sort out the “carers” from the rest and fix the “attitude” problem, at least Jeremy Hunt seems to think so.

The very worst place to start trying to change people’s attitude is to tell them it needs to change.  What is more the attitude of rank and file staff in any organisation is a direct result of the attitude of the leadership.  Consequently attempting to change attitudes amongst staff without first changing the thinking and behaviour at the leadership level is bound to fail, as all the research and practice again demonstrates.  For the NHS this leadership “attitude” problem goes right up to the top political level.  Perhaps if any politician “aspiring to reform” the NHS was required first to work for a year on the wards, caring for and washing patients, we might get better outcomes for the NHS and all of us who use it.

Arising from the ashes

Back to business now and one good story last week was the news that Jessops photographic shops will be returning to the high street.  TV dragon Peter Jones acquired the brand, stock and other assets from the administrator in a joint venture with restructuring specialists Hilco.

The return to the high street was a surprise as Jones was expected to relaunch Jessops as an online retailer only.  He is smart enough to know that in spite of the best efforts of previous managements and owners Jessops is still the leading brand in the specialist photographic equipment market.  What’s more because, as Jones himself says Jessops sells a “technical product” the click and collect model that a combined high street and online presence enables is best suited to the core Jessops customer’s needs.  So absolutely the right business model and Jones expects to have around 40 stores open by the end of April enabling him to cover the UK with click and collect and to offer the technical advice that the Jessops customer values.  Half the 500 staff will be previous Jessops employees.

The only slight doubt I have is that Jones is to be both Chairman and Chief Exec.  Given his many commitments it will be a challenge for him to give the attention to detail that will be needed to make this all work.  He will need to find leaders amongst his management and staff to help him with this.

And finally

Congratulations to Nick D’Aloisio the 17 year old who sold his app Summly to Yahoo! for £20m.  Apparently this app detects the key points in news stories and automatically rewrites it to fit on to an Iphone screen.  Even though this is still bigger than the average Sun reader’s attention span Yahoo! is very excited about it and maybe they are right to be.  However as they are also the company who took over the management of the Sky e-mail service last week and promptly emptied over 10,000 old e-mails from my business partner going back years into my two mail boxes, I am not so sure.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good Easter break and hope you have a great week this week.

That was week ending 14th December 2012

This is the last TWb4TW until after the Christmas and New Year break. I started writing these articles in April and can hardly believe it is now nearly the end of the year and I am still writing them. I have been encouraged by the kind responses from you the people that read them and I thank you for those.

This week I thought it appropriate to produce my Christmas wish list, wishes for myself and others.  Here goes.

Cable not able

Last week Vince Cable took yet another swipe at big global companies that don’t pay enough or any UK tax. For Mr. Cable it is still the moral high ground that matters so no mention of our unfit for any purpose tax system. If the companies concerned are obeying the law then it is clearly the law that needs changing if it is not producing the result the country needs and that is the job of government.

Whilst Mr. Cable has done some good work at BIS underneath he is fundamentally anti business, or if isn’t he certainly sounds like it. I once heard him speak and claim that he was experienced in business because he had spent time as an economist at Shell. Anyone who knows anything about what economists do in organisations like Shell will know this doesn’t count as business experience.

So my Christmas wish for Mr. Cable is that he should get another job.  Minister for Overseas Development might suit his moralising better or perhaps being made to run an SME for a year might give him some “real” business experience.

It’s the economy stupid

Talking of experience my Christmas wish for George Osborne is that he too should find an opportunity to get some real experience. He is an example of yet another politician who is no doubt very intelligent but has done nothing but politics almost since he left primary school. This was demonstrated in the Autumn Statement and its aftermath where he was clearly more interested in scoring political points over Ed Balls than coming up with radical policies that would really get the economy moving. You can usually leave Ed Balls to score political points over himself, so why not get on with the job we pay you for, George because it really is the economy that matters and you are not stupid.

Does one more make a difference?

After the announcement that Canadian Mark Carney is to succeed Sir Mervyn King as Governor of the Bank of England last week we heard that Hector Sants was to join Barclays as head of compliance. Sants was previously Chief Executive at the FSA.

Now you can’t blame all the FSA’s failings on Sants. However he did step up to Chief Executive in time to rubber stamp RBS’ acquisition of ABN AMRO and he did publish just a 12 line press release on the FSA’s investigation into RBS, rather than publish the full report.

I understand that Barclays already have around 1800 compliance officers. So whilst Carney’s appointment does represent a new direction at the BoE you have to ask what real difference appointing a regulator to head up compliance will really make at Barclays.  My Christmas wish for Mr. Sants is good luck, but I have a feeling he will end up between a rock and a hard place with this one.

Train the trainers

The investigation into what went wrong at the DfT over the West Coast Mainline fiasco continues but with growing signs of avoidance tactics from anyone in the DfT who could possibly be blamed. My Christmas wish is that anyone at senior level in the DfT should be given a train set for Christmas and  required to assemble it in to a working model of the West Coast line in 30 minutes or be shown the door. Simple and effective.

HP used to work

I own an HP printer which I bought in the days when you could truly say buy HP because you just plug it in, turn it on and it works. What’s more my printer still does work, even though HP has had about 5 CEOs since I bought it. My Christmas wish for HP is that they should make me an offer for my old printer, with a suitable Autonomy sized premium and I would be delighted to sell it back to them. Then they could examine it and discover what it was that they used be really good at.

Oh no it's Silvio

You could not make it up; Silvio Berlusconi is running for Prime Minister of Italy again. This proves the view of a previous British ambassador to Italy who said “it is not difficult to govern the Italians, it is simply unnecessary”. Sr B’s first public pronouncement was to state “who cares about how much interest we pay to people who invest in our debt obligations compared to Germany”. This will be music to many Italian’s ears but maybe this time not enough of them will buy the message. So I wish Silvio Berlusconi everything he deserves.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. TWb4TW will be back in the New Year so have a great Christmas and New Year holiday.

That was week ending 15th June 2012

Looking back on the week before this week there is one question that seems to run through many of the news stories and that is “what is going to happen”?

Eurozone debt crisis

We would all like to know what is going to happen with this one. Or rather we all want to know what someone (anyone) is going to do about it.  So let’s have a go at working out what is going on.
First we have Ireland, Portugal and Greece who receive bailouts of various sizes and implemented a range of austerity measures to put their public finances in order. Then Greece says it likes the money but not the austerity so holds a series of inconclusive elections in the hope this will achieve a different result. What this different result might be is not clear even to the Greeks so it’s no good asking them what is going to happen.
In the meantime the bailouts for Portugal and Ireland appeared to be working. Then suddenly they might not be working and then again they might be. So the Irish and Portuguese are confused as well.

Spain absolutely definitely did not need a bailout but wouldn’t mind a bit of help to sort its banks out. This “bit of help” turns into a €100bn loan with no new austerity strings attached according the Spanish Prime Minister. For a very brief moment it seemed as if the Eurozone had at last actually come up with a solution for one country at least.  However all this did was to move the problem off the Spanish banks’ balance sheets and on to the Spanish government, demonstrating once again that filling a black hole with thin air leaves you with … a black hole. So the Spanish still do not know what is going to happen, even with the €100bn!
Then we have Italy who can’t even understand why they might have a problem at all and finally France. They elected a socialist government mainly to punish previous President Sarkozy for agreeing to austerity measures which were not first thought of by the French. The French belief is that there is no crisis in France and even if there was then only French solutions can be contemplated. Last week these included lowering the retirement age from 62 to 60 “in the interests of social justice” and making it much more difficult and costly for businesses to shed employees. Quite how this is part of a solution is something only the French can understand so not helpful for the rest of us.
And then we come to Germany whose Chancellor Angela Merkel has the answer which is that everyone else should become more like the Germans. What she has overlooked is that one, everyone else is starting from a different place and two, its never going to happen!
All of which means that looking to the Eurozone to provide the answer to “what is going to happen” will get us and them nowhere.

Meanwhile … back in the UK

Our government’s approach is that it is much more important to hold an inquiry into press standards and relationships with politicians than to address the needs of the economy. Indeed politicians from all sides seem to support this, as last week we even had Alex Salmond and Ed Milliband in front of Leveson.  The PM spent 5 hours there which, with all the rehearsal time he would have had to put in must have pretty much wiped his week out.

It does connect to the question “what is going to happen”?  In the case of Leveson the questions are can anyone remember what the point was of setting up this enquiry and has anyone any idea of what will happen at the end of it all, if we ever get there? Or will it just go on and on until every man, woman and child in the land has been questioned?

However in the middle of the week George Osborne (who I think has not so far appeared before the Leveson Inquiry) popped up to announce £145bn of cheap money for the banks. Wow that’s a big number, eat your heart out Espana! If George had this amount stashed away somewhere you would think he might have mentioned it before now. I mean it’s not the sort sum you would find down the back of a sofa.

Initially headlined as a boost to growth it quickly became apparent that it was actually pre-emptive action to help the UK economy deal with whatever fall out from whatever eventually happens in the Eurozone whenever that may be. Whilst this might seem a sensible and even bold step to take when it comes to the debt crisis you can think of a number, any number and it will still not be enough. However it is at least a signal from the UK government that something is going to happen and maybe soon.

So …..?

So that is all we have. Something is going to happen and it might happen soon. Nobody knows what will actually happen so it’s pointless worrying about what is going to happen until something does.

Is there anything the rest of us can do? The evidence is that there will be little or no growth in the UK or the world economy overall for the foreseeable future. What I believe we must do is to ensure we are “moving our businesses forward”, deliberately and effectively. This means defining what “moving forward” would mean for any particular business. This is not the same as the simplistic concept of business growth, or though that might well be an outcome of “moving forward”.

So have a think about what “moving your business forward” would look like for your business and why this could be the best way to cope with “what is going to happen”.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.