A crash course in the British economy

Made in Britain is a new show on presented by Evan Davies (of Dragon's Den fame). Unsurprisingly it is about the British economy the deficit and basically, whether Britain has gone down the pan.

It is without doubt an excellent programme. It explained relatively complex issues in such a way that anyone can understand them. It breaks some of the myths surrounding our economy such as 'manufacturing industry good, service industry not good' and ' low tech manufacturing is essential to our economy and its decline is the end of us'.

If I could, I would make it so that everyone gets shown this programme from an early age. Hopefully they would get the implied message, if you don't have a specific skill that someone in China doesn't have, then soon enough someone in China is going to be doing your job. Lets face it, that is what people in school need to be aware of. In the last few decades people could do unskilled work and get paid enough to live in the UK, but soon enough if you do an unskilled job, you will only be able to afford to live in China. Sure there will be exceptions, but that is the general rule.

One of the things that surprises me however is that when you look at manufacturing, which I accept needs to grow in the UK, some of the factories here are the most efficient in the world. In fact, Nissan's car factory in Sunderland is the most efficient in the whole of Europe*. Now that amazes me. The Germans are known for their efficiency, and the French have three big car firms. We don't have one, and yet we have the most efficient factory. How does that work?

Well, I think I have the answer. If you look at the all cars that are designed in the UK, Land Rover, Jaguar, Aston Martin, they are all owned by foreign companies. Generally they do not work well then they are owned by a UK firm, then they are sold and they do well. Japanese firms come over here and set up hugely successful factories, but British manufacturers fail. Why?

It could be that the management are retarded, and so when foreign management come along they run the factory well and everything works and the world becomes a better place. But I highly doubt it. For a start most of the management will be British too. Sure the very top might be Japanese, or the owners might be Indian, but most of the management are realistically going to be British. So it is unlikely to be that.

It could be that the principles by which companies are run are superior outside of the UK. I'm sure that is part of it. But generally such principles, once they have proven their worth, are adopted throughout the world.

No, I'm willing to bet there is an entirely different reason why British companies fail and foreign firms succeed in the UK: Unions.

When you think of the last time we had a car industry, back in the 1970s what characterised that period? Strikes. If you think of British Airways, the flag carrier of the country, which is making a loss, why has it been in the news? Best service? Huge profit? Award winning? Nope, strikes. What about transport for London? Is it known for its efficiency? No, it is known for its 1970s style 'fire a single person and we will bring London to a standstill' negotiation tactics.

So lets look at companies based here, Nissan, Honda, no strikes there. Easy Jet? Don't think so. Hmmm, a pattern here?

The thing is, no one is going to strike against these companies because they are foreign. There is no reason they have to be here tomorrow, and no reason why they can't up sticks and head to France, Germany or the Czech republic. Which means if a factory started striking, it would quickly be closed. As a result, the workers don't strike and the factories are a paradigm of efficiency.

In contrast to this when it comes to a British company the Unions assume that they can strike as much as they want and it doesn't matter because:

a) a British companies will no close its operation and move abroad;
b) the British gov will bail out the company when it is losing money hand over fist... because it is British.

The problem with this, mainly, is that it is a load of rubbish. Premise 'a' might be reasonable, but 'b' is undoubtedly completely false.

For a start the rules of the EU forbid state aid, second the country is bankrupt and three the government learned in the 1980s that it is cheaper to let inefficient companies die than to eternally prop them up with subsidies.

Union leaders however, appear rather thick, and haven't quite grasped this fact. So instead of getting what they want with BA for example, they are just going kill off another big company and when they do, it will take quite some time for them to work out what happened... or they will just blame it on everyone else for not capitulating to their demands.

I don't know if other countries have this problem, but judging but the fact that the most efficient European manufacturer's factory is owned by a French company.... and based in Spain I'd say this might be the case.

Then you look at MG, this company failed in the UK. It is now being made in China, I imagine it will do quite well too. While it was UK owned they could not cut costs of staff, although this was partly due to the lack of capital, now that it is Chinese owned they can design it in the UK and build it in China and no one can complain. Can you imagine what would have happened if they had tried this before Chinese ownership? Exactly, chaos, whereas no now one bats an eyelid. No doubt the price will be more competitive too.

Going back finally to the programme "Made in Britain", there were a couple of companies that were held up a British success stories. One of those was GSK, or GlaxoSmithKline. One of the things that the representative of GSK said really resounded with me. He noted, 'there is no reason why there should be a British company based here or called GSK. Therefore if we don't innovate the next generation of products successfully then we won't exist in future. That is what drives us'.

I guess that explains why GSK is still here. They don't think the gov will always back them up because they are British, or because they are a big employer or because they have a right to do what they do. And I'm happy to suggest, that they day they think that there will/should always be a GSK... there won't. But at least then a foreign firm can buy them and make them efficient again.

*although this was on output, units per worker which seems unfair when comparing bigger cars with smaller, less complex ones.

Strikes on the Tube, how refreshing.

"Everyone, stop using your cars and get on public transport!" The message has been barked by politicians and green campaigners for years. It always has been and always will be, unless someone faces the inconvenient truth, or should I say truths.

Politicians want us all to use public transport despite the fact they all have private cars, if you're a minister yours will be driven by someone else. So why don't they use public transport? Well, simply put, it is not reliable and even if it was it is not safe for people of power and it does not convey power or status.... the exact same reasons why many people can't use it. But we will ignore that for now, that is not my point today.

My point today focuses on the tube strikes. London (and big cities generally) are the only places where public transport works: FACT. I'm not saying that as soon as a bus leaves London for Guildford the engine stops, I mean as soon as that critical mass of people disappears buses become too infrequent, stops too distant and the whole system just ceases to function. It all becomes hugely expensive and hugely time consuming. There just isn't the economy of scale to support public transport in the countryside any further than some small buses to take the old and the young around when they have no deadlines to meet.

But the Tube does work in London, even buses, which I think are pointless, generally, work very well in London. They are excellent. The Tube may be smelly, hot and often crowded, but the fact is that even at busy times one is able to navigate around one of the greatest cities in the world without too much problem and do it a lot quicker than in a car (if you need proof think about that Top Gear episode?).

So what is my complaint? Well lets pretend we live in a world where public transport works everywhere. I know, that takes a lot of imagination but humour me, if you will. All the people who work on that public transport will be members of unions. Unions will inevitably have as their heads self important people with absolutely no concept of commerce but rather the communist ideals that somehow their members are entitled to do their work, and where there is no work they should be paid anyway regardless of the inefficiency that produces. I am convinced that efficiency is the very last thing on the mind of a Union leader. Currently Tube workers are going to go on strike. I don't know what working as a Tube driver is like, I'm told their wage is around £40,000 and they holidays are good to compensate for the shift system but I don't think that is enough to make any real decision about their working lives. What I do know is that their Union is the most militant around and even people from the US brought in to help found that their attitude seemed like they lived in the 1970s.

As a result London's transport network is ceasing to function while they blackmail their employers into capitulating with their demands. Frankly I think this should be banned. The police aren't allowed to strike because it is essential that they work. Likewise the Tube is essential to the running of the London. They shouldn't be able to strike without some form of external acquiescence. I don't know if people are going to be able to get to work while the strike is on, but if they can't that is not the same as BA workers going on strike. There are no other Tube operators and buses won't be able to take up the slack.

....amazingly I still haven't got to my point, how shocking. My point is this, if we all used public transport the Unions would be able to make whatever demands they wanted. Bus drivers would be wearing Armani overalls and being paid more than your local GP. Fine... I exaggerate, but truthfully if everyone used public transport the Unions would be able to make largely whatever demands they wanted. And lets not pretend they wouldn't go against public pressure, everyone knows the British Airways strikes are moronic in a time of recession, but they still happen. Logic does not constrain strikes it seems.

So what should be done? If we can't use public transport because it is ineffective outside of major cities and even if it worked it would be liable to be an easy soft spot for unions, what should we use?

Years ago people used to drive cars. Saloon cars. Cars with 4 doors, 5 seats and a big boot. Today these Saloon cars are even bigger. The BMW 3 series is now bigger than a 5 series used to be years ago, and why? Who knows. 90% of the population these days don't need a car bigger than a 3 series. Everyone has their own car. In years gone by Mum, Dad, brother and sister would all be in the same car. Now Mum and Dad have their own car, the average birthday per woman is only 1.8 and as soon as brother and sister are 17 they get their own car, either a banger or a Ford Ka. So what is the point in having big cars?

Who needs a 5 series? Who needs a 7 series? These cars are obsolete. If you need to show status and wealth then why don't we start producing cars that are small and supremely expensive? Makes gold plated Corsas for all I care.

Private transport is here and here to stay. I wish the government would realise that and get on with it. The sooner they do the sooner we can start pouring money into real solutions to traffic problems like motorcycle lanes or car parking for those with small light cars. The smaller cars get the more confident people will be to get smaller again and this will decrease congestion (see what they have done in Tokyo) and decrease emissions. Who knows eventually we can get rid of those big buses too.

Does the government believe in 'climate change'?

Recently a court case in the UK decided that London Heathrow Airport could not have another runway built because it clashed with the governments papers/commitments on climate change.

Now I'm going to ignore what mot lawyers would be interested in (how can a court make such decisions on government policy) and focus on the concepts behind climate change in the first place.

Instead I'm going to focus on why the government that is so committed to leading the way in carbon emission reduction seems so happy to build new runways, even when they are in some of the most stupid places you could image.

You see climate change seems to be to a topic that divides people down the middle, purely because those who do believe in it are so fervently passionate about it that it often affects their whole lives, it is, in a manner of speaking, their religion.

It effects everything from where they go on holiday, to the brand of tea they drink. A Muslim won't buy pork, a Christian may prefer fair trade, a climate an environmentalist may buy food that has been transported the shortest distance (no Australian wine or New Zealand kiwi fruit for you!)

Then you have the issue of whether it is actually happening. The average global temperature hasn't changed for the last ten years. Considering China has become a major economic player (and pollutant producer) in that time such a result is very odd indeed. Even at this moment everyone reading this is likely to be surprised, check it out since you inevitably won't believe me.

However, my problem is not with whether or not climate change is happening or not, but rather the two faced hypocrisy of those running the government. The government wants YOU to believe in climate change because then you cannot complain each time it hikes up petrol duty, each time it refuses to build a car park (thus making you drive around for 15 minutes trying to find a space) and it gets money for ticketing your car. Each time it raises road tax. Climate change is in effect a source of free money to the government. A licence to tax at will and to do so with the moral high ground, all the while being driven around the Westminster area in a nice Jaguar paid for by the public.

But what about the behaviour of the government itself? The government wants to expand Heathrow so that it has 3 runways. It wants to do this because it will make the airport more effect, it will increase the number of flights that are possible, it will create jobs and revenue. Revenue of course being the magic word.

Now don't get me wrong, I don't think that is bad. Our economy needs money. Without competition the jobs just go else where. All the other European Capitols have many more runways, usually 5 or more. But the point is how can you on the one hand tax anything that produces a mg of Carbon Dioxide and then on the other accept that Carbon Dioxide is just a part of life and economy. Either you accept that it is required if we're not to live in the dark ages (literally dark in this case) or you don't.

So I went looking for more evidence that the government really believes that climate change is real. I thought about the Thames barrier. "Wait a minute! They wouldn't have built that if there was no real threat of climate change!" I thought to myself. But alas no, having looked into it the barrier is actually there to protect London against seasonal changes in tides. It was conceived in a time when the worry of climate change was largely nothing more than a glint in the environmentalists eye. So that isn't it either.

So I'm throwing it out there, can anyone think of real evidence that the government cares about carbon emissions?

Sure they like you buying low emission technology, but that is probably because such techology is made in developed Western nations where we're concerned about that sort of thing.

I was talking to a plumber about boilers once (fascinating conversation, I wish you were there) he said that the more advanced boilers use less gas, but because they are more complicated there is more to go wrong and so you end up just spending the money you saved on replacement parts, and lets not forget where those replacement parts are made; a factory.

Not just any factory either, quite possibly one on the other side of the earth. So that fuel efficient boiler you own has parts made from steel in India, shipped to Japan where it is processed (again using energy) then shipped around the world again to you. How much carbon did you say you were saving?

Don't get me wrong I don't want to get all 'Clarkson' on you, I'm not trying to convince not to believe in climate change, all I'm asking is, genuinely; does the government?

Koenigsegg doesn't want to take on Saab. Tough break!

So apparently Koenigsegg is pulling out of buying Saab because it does not have the resources to take it on, even with the backing of China’s Beijing Automotive Industry Holdings (a name that just flows off the tongue, very catchy).

This isn’t a big surprise, while I know someone from Sweden who says that working for Saab is prestigious job I’m not quite sure why on some levels.

The company has been losing money since 2001, not exactly the most impressive record, that means for almost 9 years the company has been nothing but a hole into which GM (which isn’t exactly loaded) has been throwing their ‘hard earned’.

Sadly, I can see why. Why would you buy a Saab? Anyone actually bought one? If so why did you do so? Do you have someone who works there who can get you discount? There are said to be 3000 people working for Saab in the UK, I wouldn’t surprise me if there wasn’t that many more units sold in the UK (once you’ve taken family and friends of sales personnel in account).

If you want a Safe car you get a Volvo, if you want a prestigious fast car you get a BMW, if you want a car that will run for all of time you buy Japanese, if you want to deal cocaine you buy a BMW with the ‘drug dealer’ sports pack. If you have a phobia of trucks then you buy a 4x4. If you are an aging executive with a BMI over 25 then you get a Mercedes. If you’re a graduate fresh out of University and you have two X chromosomes you buy a new mini. If all you need is space for a tiny white middle class woman, then you by a Range Rover. It all makes sense.

But who would buy a Saab? It isn’t particularly fast, reliable, cheap, cheap to run, economical, good to the environment, spacious, prestigious, powerful or good looking.

I’ve just checked the web-page and the starting model is about £19,000. If you have £19k hanging around I am going to bet you are not thinking “what I really, really want, and would be really excited to buy is a brand new Saab!”

It gets worse when you think what it is actually made from, the design has hardly changed much for many years, and that is great if you have what is in essence a classic, like the Porsche 911 or the Aston Martin DB9, but the Saab 9800 is hardly inspiring. Google it, lets face it, you don’t know what it looks like off the top of your head do you?

The new Saab 9-3 looks like an updated 9300 and is based on GM parts. Which gives the horrible feeling that you’re buying a Vauxhall Vectra in drag, hmmm maybe that is harsh; let’s say in a party dress. Either way it doesn’t really inspire.

The difficulty is that while I know this and I bet most other people do too, GM is far too busy with its other problems to care about what happens to a company that produces around 1-2% of the cars it sells per year. It is holding on for dear life itself, let alone worrying about one of its smaller subsidiaries.

So what can be done for the poor people who work for Saab? More so, what can be done for the poor people who buy them?

Well cash investment is what is needed, but we’re in a recession so there is more chance of me personally buying enough of the cars to keep the company going, which is a bit of a pity, because lets face it there is no reason why it can’t be a successful company.

All they need is a hat. They could take that hat and fill it with bits of paper with words on it like ‘fast’, ‘compact’, ‘economic’ and ‘reliable’. Then get a man to pick out two of these pieces of paper and (assuming they are not anonyms) they will have a new business plan! Next stop, bin the 9-3 and anything associated with their previous work and get on with it.

Who knows, in two years there is may be a car on the market that makes Saab actually worth saving.