pro manchester CEO

Sunday Times and Croissants - CEO's update 23rd October

There is something special about Sunday morning, the Sunday Times, hot croissants with honey and butter, excellent. Headlines, university entries are in record fall as prospect of fee hikes bite. A possible ten per cent drop in entrants across the board will challenge HEI business models significantly. Oh for the days when education was state funded as a key ingredient for economic growth and development.

David Smith, suggests we can learn lessons from the Irish in managing inflation and growth. Critical of monetary policy and the benign neglect of sterling, UK retail spending is exhausted, he explains, by price inflation exacerbated by low interest rates and QE.  On this, he is right. Unfortunately, with Irish unemployment almost twice the levels of UK, this is a comparison one would not wish to pursue with QE zealots and Adam Posen in particular.  More later.

Economics news this week, despite low growth, the borrowing figures suggest the deficit targets will be met this year. Just another five years of austerity and we can put the heating back on. The retail sales figures are out, volumes are flat but values are up by over 5%. No surprise as inflation CPI basis hits 5.2%. The headline rate is expected to peak in Q4 then fall rapidly in 2012 as the VAT increase and energy costs unwind.

Back to the day job, Monday, internal meetings in the morning, then out in the afternoon to look at property options should we decide to move next year.

Tuesday, Chris Melia and Rebecca Firth from Colliers, are in the office to discuss a research project. In the afternoon I record a piece for Radio 5, challenging the second round QE asset purchase programme. Sir Alan Budd is on air supporting the MPC move and challenging my views. Shock.

In the evening, it is the IOD - Bank of England dinner in Liverpool, the Governor delivers a keynote speech. I am a guest of the MPC but as QE sceptic, I am placed next to Adam Posen for assimilation into the QE collective. Posen has been calling for more asset purchases since October last year. He is a formidable character, an intellectual bulldozer when it comes to QE. I receive a one on one tutorial which develops into stern lecture, to disagree - to be dismissed as a Patrick Minford acolyte. Ouch! It is a great evening, I return home head spinning, I have been Posened but am unmoved!

Wednesday, I am before the Manchester City Council scrutiny committee (economy, employment and skills) together with Rob Pailin from RBS and Paul Breen from Business Finance Solutions. The discussion is about access to finance and funding for SMEs. An interesting exchange, Rob coping well with some light flak.

Thursday morning, Charlie Bean the deputy governor of the Bank of England is with us for breakfast at the Lowry hotel. Charlie is on the MPC, the FPC, the G7 and the G20 finance ministers group. He speaks well, giving his off the record views on the economy and QE. It is a good pro.manchester event, thanks to John Young and Simon Caunt for arranging this (and the seating plan on Tuesday!).

Later, Tom Glass from the e-word is in to hand over my new blog and web site. It looks really cool, we will make the switch next week.

Friday, a good session with Martin Turner, excellent macro economist at MBS. Together with Brian Sloan, Chief Economist at the Chamber of Commerce, we discuss the preliminary numbers for the pro.manchester Q4 Economics Review, out in two weeks. NIESR will also provide some forecast input into the Q4 review. Interesting.

Saturday, working in the morning, then off to play tennis with Mary in the afternoon. I lose 6-8. Mary has a new racquet, my strings are too old.

As an MPC twitcher, it has been a great week, the MPC have been out en masse in the North West, dinner with the Governor, an evening with Adam Posen and breakfast with Charlie Bean. Excellent.

Hope all is well with all, more news next week,
John
John Ashcroft
Follow on Twitter @jkaonline, or join me on LinkedIn or Google+.
Check out the pro.manchester blog post for regular updates, moving soon to a new site, johnashcroft.co.uk thanks to Tom Glass and the eword.

Sunday Times and Croissants - CEO's update 16th October

There is something special about Sunday morning, the Sunday Times, hot croissants with honey and butter, excellent. Headlines, China has made a secret offer to save the euro with an offer to purchase sovereign debt and infrastructure assets. With three trillion dollars at risk, a strong euro land is a prerequisite of a good asset spread. Euro fans relax.

Inflation is heading to 5% adding further mystery to the Bank asset purchase programme. Oliver Letwin made the news, the minister reads his papers in the park, then adds a new dimension to the freedom of information act by dumping them in the nearest waste bin.

Sad to see Liam Fox resign this week, not sure the if-you-fire-me-it-shows-you-are-weak challenge to the Prime Minister was a great tactic. Hopefully the Strategic Defense Review included a little more guile. Not sure about that.

David Smith, discusses the merits of digging holes and building houses as a way of stimulating growth. Jobs can be built with bricks and mortar the headline and they can.

Economics news this week, production figures are flat, unemployment is rising, the trade figures for August suggest a modest improvement in the trade deficit. Fans of the J curve get excited but imports are down, as the suffocated take less oxygen.

The NIESR preliminary estimate for Q3 GDP suggests growth of just 0.5% year on year. The unemployment figures suggest this is too optimistic. We are in a liquidity trap, the economy is flatlining. To offer more QE, is to throw more water on the drowning. The markets resist the banks offer to buy more gilts this week. They know something the bank does not.

Tuesday next week I am a guest of the Bank of England at the IOD dinner in Liverpool. I will be sitting next to Adam Posen, he has been calling for more QE since Noah landed at Ararat. I decide to read his book - Restoring Japans Economic Growth [1998] by way of preparation. He also wrote on inflation targetting with Bernanke. Have read this also, (not this week), now that is devotion.

Back to the day job, Monday, internal meetings in the morning, then a meeting with Colliers International to welcome them into membership. Colliers together with Ask Developments will strengthen the property group significantly, Colliers complete our property agents set.

Tuesday, Gateway breakfast followed by a pre board briefing meeting with Paul Johnson as the Deputy Chairman, standing in for Paul Lupton this month. Good turnout for Gateway, I surrender my seat to John Young from the Bank of England. It is only fair, John did the seating plan for next week. Lunch, it is Sir Howard and the annual address to pro.manchester members, nearly 200 at Stocks. Sir Howard is on great form and very upbeat about the prospects for our city.

Wednesday, coffee with Jeff Jones from BDO in the morning as we chat about the market and prospects, then off to look at possible property options for a move next year. My office is enormous but the team are worried about delusions of grandeur, as if.

In the afternoon a presentation of the Greater Manchester Forecasting model. Neil Gibson of Oxford Economics is very impressive talking about the Manchester economy. The detail of the Manchester data is excellent. Who would have thought pie makers would offer revealed comparative advantage in Bolton and Wigan?

Thursday, early start for the board meeting, it is over within the hour. The last for Robert Sheffrin, Treasurer and Finance Director. Robert is setting up a new VC advisory business in Belgrade and Sarajevo. Good luck to him, Robert was good to work with and we all wish him well.

Later a meeting with Angela Harrington from Manchester City Council. We discuss the project to assess the future demands of the business and professional services sector in Greater Manchester over the next ten years. A project we will undertake with the New Economy over the coming months. Angela is the regeneration manager for employment and skills.

Friday, the morning is devoted to the Greater Manchester Chamber of Commerce Council meeting. Martin Douglas is in the chair and Clive Memmott on the desk. Dr Brian Sloan Chief Economist, gives a presentation on the latest quarterly survey. Good session.

In the afternoon a meeting with Barry Robinson from Pheonix Venture Partners. Pheonix opened an office in Manchester this year and will be a great addition to the MPEG group.

Saturday, decide not to watch France versus Wales but finish off the Michael Lewis Boomerang book. It is his collection of articles from Vanity Fair about Iceland, Ireland, Greece and sub prime USA. Exploding Range Rovers in Reykjavik, empty building blocks in Dublin and news of the rail system in Greece. The rail losses are so great it would be cheaper to put every Greek rail user in a taxi. It is a sad read about the price populations pay for the failure of leadership, especially in lands of ice and ire.

Saturday afternoon, off to play tennis with Mary, it is a draw eight all. Later today, we are off to a birthday party for Rachel, deputy CEO and head of operations at pro.manchester. Good chance for Mary to meet the team and compare notes. Oops!

Hope all is well with all, more news next week,
John
John Ashcroft
Follow on Twitter @jkaonline, or join me on LinkedIn or Google+.
Check out the pro.manchester blog post for regular updates, moving soon to a new site, johnashcroft.co.uk thanks to Tom Glass and the eword.

The wrong option : In a liquidity trap - say no to more QE on planet ZIRP

Last week, the Governor of the Bank of England said This is the most serious financial crisis we have seen since the 1930s, if not ever. Well is it? Just like the 1930s the UK is in what we call a liquidity trap, a situation where monetary policy is unable to stimulate the economy either through lowering of interest rates or increasing money supply.   

Liquidity traps occur when rates are reduced to the zero bound or thereabouts and cannot be reduced further. In real terms UK rates (base rate minus inflation) are negative 4% plus.

The liquidity trap is compounded when expectations of adverse events, either deflation or in the current situation, a lack of aggregate demand, are manifest. Firms are loathe to invest, households are constrained to spend, government spending is limited by a desire to resolve a fiscal debt crisis.

In the UK, the first round of Quantatitive Easing or asset purchases was essential to improve liquidity in the banking system at a time of crisis. 

Inter bank lending was dessicated, LIBOR spreads were extending. The central bank was becoming not just the last lendor of resort but the only lender of resort. Action had to be taken to inject cash into the economy by undertaking a series of asset purchases predominantly gilts. The programme of some £200 billion was equal to 14% of GDP it had to be done.

This is not an argument for more asset purchases, for the exercise came at a price. QE forces up bond prices, pushes yields lower, punishes savers, places more pressure on sterling, increases import prices, leads to higher inflation, greater pressure on real incomes, a reduction in household spending, actually reduces demand and leads to lower growth.

Ten year gilt yields have fallen to 2.4% and thirty year gilt yields have fallen to 3.4%. But what does that mean? Gilts are mis priced, the real risk return on ten year gilts is negative. Effectively investors are paying the government to hold bonds.

Policy makers assume that lower interest rates at the longer end of the curve will lead to a higher level of investment. This is not the case. Any return on investment or payback calculation is a function of cash flows from a determined demand horizon. 

Cost of capital does not feature in the basic investment model. Until the uncertainty about the forward level of demand and growth is cleared, investment plans will remain on the shelf. 

The Bank of England suggests that QE increased GDP by between 1.5% - 2.0% but also led to an increase in inflation of between 0.75% and 1.5%. [Joyce M et al in the September Bank of England Quarterly Bulletin.] This is a highly speculative analysis.

If it were right, this would mean, that at best, the QE2 round of £75 billion would kick growth by just over 0.5% but increase inflation by over 1% on a pro rata basis according to the banks own figures.

One cannot be entirely confident in the bank’s hypothesis. QE led to a fall in gilt yields as a first round effect but thereafter the relationship between QE and the effect on growth and inflation is tenuous. The argument for further QE is intellectually weak and at best the potential economic impact minimal. The risks outweigh the return.

In fact I would argue that a further round of asset purchases merely oils the liquidity trap, digging a deeper hole, increasing the inflationary impact and reducing growth as investment plans are reigned back and household incomes are placed under greater strain. Sometimes the correct action is to do nothing, especially when it is more of the same toxic solution.

In 2008, writing about a zero interest rate policy, I wrote “Welcome to planet ZIRP. Unfortunately, we do not have a handbook, or fully understand the terrain. Our process of quantatitive easing, the plan to helicopter money may work but as a fire fighting option, it may be like dropping water into a desert, such are the fissures in the financial system." We just don’t really know what is achieved. So in the meantime we should say no to more QE and or asset purchases.

Sign up today and "subscribe" for e-mail notification of updates. Or follow me on Twitter @jkaonline , join a great network on LinkedIn or Circle me on Google+.

The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

 

Sunday Times and Croissants - CEO's weekly update 9th October

There is something special about Sunday morning, the Sunday Times, hot croissants with honey and butter, excellent. Headlines, am shocked by news of a UK Saudi bribery scandal in the defence industry, of all places! Surely, this should by subject to a D notice and kept off the front page. 

No such notice for Doctor Fox, who will be called into the headmasters office on Monday for conduct unbecoming. His best man had printed some joke cards which suggested he was an advisor to the defence secretary. Even more shocked. 

David Smith writes on QE and credit easing. Both David and the Sunday Times leader speak against more asset purchases at this time. We are in agreement but DS is slightly more positive about the possibilities for credit easing. Of this more later. 

Economics news this week, the GDP figures are revised down for the second quarter, the good news - the downturn in 2009 was 4.5% not 4.9% and 2007 was even better than anyone realised. Comforting. 

Producer prices head in the wrong direction as September output prices increase to 6.2% and input prices increase to 17.5%. Very strange, concerned about deflation, the Bank of England announced a further round of Asset Purchases as much as 75 billion sterling. What is going on?

Last week, Andrew Tyrie, the Chairman of the Treasury Select committee claimed he was unimpressed by the Big Society and the lack of a growth strategy, saying economic policy was inconsistent, incoherent, contradictory and at times irrelevant. 

At the party conference, Tyrie was mugged by Steve Hilton, and given the hair dryer treatment in a side room. Tyrie emerged claiming, Big Society is the best thing since Bread Sliced and feeling a lot more positive about the growth strategy. As for the Osborne speech, Tyrie exuded praise. It is a huge step forward, a speech focussed on growth for one of the best economies in the world. What did Hilton say - if only he had been in the England dressing room at half time. 

Watching the Osborne speech, at times the Chancellor appeared to stare at the auto cue with a fair degree of incredulity. Such is the danger of auto cue when ideas can be added at the last minute, even the Chancellor appeared bemused by some of the material. 

This must have been the case with the  idea of credit easing. This is a new idea which no one, including the Chancellor, knows anything about. The project appears to suggest SMEs will issue long term bonds with a low coupon, packaged into a series of CDOs, AAA rated by Standard and Poors, bought by the Treasury, sold to the Bank of England and placed off balance sheet in a structured investment vehicle backed by a RMBS (Rumours of Monetary Backing Somewhere) then written off over thirty years.

As one excited delegate explained on Newsnight, there is a company in my constituency that has been turned down ninety times for funding, I am so pleased - now they will be able to get some money, thanks to the new initiative from the Chancellor of the Exchequer. Excellent.

Latest : The Treasury is studying the proposal to see how best to morph into Goldman Sachs or reverse into the Lehman corpse. Credit easing - call it credit fantasy. How can this feature in the November statement? 

Back to the day job, Monday, internal meetings in the morning, across town, bumped into Simon Walker, the new director general of the IOD. It is his first day in the job. I am on my way to meet with Mike Emmerich, Mike is very pleased with the 50 million pound Graphene funding announced by the Chancellor, in which the New Economy had a guiding hand. Mike explains the Graphene manufacturing process involving a food blender, four pencils and two dodgy acids. It seems straightforward. Did not realise Mike was a potential nobel prize winning physicist but he obviously is.

Tuesday, a meeting with Paul Johnson from the Institute of Fiscal Studies, Paul will join the list of great speakers for the business conference in March. In the afternoon, filming with the KPMG team as part of a senior partners presentation. I am asked what does K P M G stand for. It is a trick question, I reply KPMG is a global network of professional firms providing Audit, Tax and Advisory services. 138,000 outstanding professionals many in Manchester working together to deliver value in 150 countries worldwide. Exactly.

Wednesday, I have a Business Leadership Council Transport sub group meeting, at Manchester Airport, then a meeting with Rob Pailin from RBS. Rob and I will appear before

the AGMA employment, economy and skills scrutiny committee later this month. Tom Dempster is in from the council later that day. Tom is preparing an access to finance briefing paper to be presented to the scrutiny committee.

Thursday, Paul Smith from MCR is in for coffee to discuss a series of events. Richard Jeffery calls in to talk about the Business Growth Hub. It is a huge project for Business Solutions and for the city. 

In the evening, the Institute of Directors awards dinner. Simon makes a brief speech as the new DG. I am on a great table with Clive Memmott, Geoffrey Piper, David Highams and others. Fifteen awards and a crooner later, I am heading home around midnight. Clive and I have discussed the merits of a change in title from CEO to Director General. It has legs.

Friday, I am guest speaker at the Manchester Insurance Institute Awards lunch at the Hilton hotel.  I talk about economics and QE2. It is a once in a lifetime to chance to appear more boring than the insurance underwriters group. I succeed. 

Finally, to close the working week, a quick check on Google Earth, to see if Greece, Portugal and Italy are still there, they are. I relax.

Saturday, up early for the rugby, England are out. Gloom. Tennis in the afternoon. I lose 6-3, check the biorhythms, I am on a physical high but Mary has played too well.   

Hope all is well with all, more news next week, 

John

Follow on Twitter @jkaonline, or join me on LinkedIn or Google+. Check out the pro.manchester blog post for regular updates. 

 

Sunday Times and Croissants - CEO's update 2nd October

There is something special about Sunday morning, the Sunday Times, hot croissants with honey and butter, excellent. Headlines, Cameron says sorry to women following a series of gaffes at PMQs. I am not some sexist beery bloke who goes down the pub, says the prime minister. Next week an apology to beery blokes who go down the pub, in the pursuit of the ever elusive marginal vote. 

David Smith suggests Osborne seeks solace in lessons from history. A reference to the austerity package delivered in the 1981 budget and others. The Chancellor is sticking to his guns, the lad is not for turning. This is no time to be pulling faces at my economic strategy, a sort of you gurn if you want to headline!

Economics news this week - very thin on the ground. Nothing from the Office of National Statistics for ten days, sulking over a reprimand, presumably, for messing up the construction stats release. Apparently the second quarter figures included March, April, May as opposed to the more conventional, second quarter analysis. It is easily done but no wonder there are so many post hoc adjustments to the data sets.

The Labour party conference came and went. Ed Milliband launched the latest in the Predator film series with a new blockbuster - Predators and Producers. Producers good, predators bad. So much for competition theory, he should be told, we are all predators, fast becoming scavengers, in evaporating markets. Editor Note - asset strippers - those in pursuit of undervalued under leveraged assets - those were the days.

The Labour attacks on government policy were so thin that Andrew Tyrie, the formidable Chairman of the Treasury Select committee decided to help out. Tyrie is unimpressed by the Big Society and the lack of a growth strategy, suggesting economic policy is inconsistent, incoherent, contradictory and at times irrelevant. Who would have thought?

Tyrie has a point, why spend billions on a Libyan adventure and then try to save millions making 1000 sailors redundant?

In an interview for the Telegraph, Osborne claims “We CAN lead our country out of this”. I am shocked. Up until now number eleven had been maintaining we WERE out of it. Apparently, the problem is not in the UK but in Europe. A deadline has been set by the Chancellor to sort it, or the Europeans, can not join the November G20 meeting in Cannes.

Something did happen in Europe this week. The Germans voted to extend the size and scope of the bail out fund to 440 billion euros. So far so good, just another trillion or two to complete the job. Despite the sceptics, the world needs the euro and euroland. No one gets in or out. The problem with the Germans, they do not have a word for fait accompli.

In the 1960s, the world shuddered as the super powers moved to nuclear war allegedly over Cuba. Contrarians, believe the real Krushchev objective was to remove US missiles from Turkey. International strategy was dominated by a MAD strategy. The concept of Mutually Assured Destruction, in which conflict between opposing sides would effectively result in the complete, utter and irrevocable annihilation of both the attacker and the defender. A MAD strategy hovers over Europe, as the only option to resolution of the current crisis.

Back to the day job, Monday, internal meetings in the morning and in the evening the  Insider Leaders Dinner at the Lowry Hotel. Fred Dunn interviewed by Michael Taylor - great session. On a good table with Richard Hughes from Zeus Capital and Jennie Johnson from Kids Allowed.

Tuesday, I am published in The Times - Business Insight. My article on why regeneration is more than a phase leads the front page. For those who missed it, check it out on the blog. Check also - Why more QE is the wrong policy option - also on the blog.

Later, preparation of the Business Conditions Survey report published later in the week. Then, write up of of a research proposal for AGMA on the shape of the financial and professional services sector in 2020. Head hurting, escape to play tennis with Mary in the afternoon.

Wednesday, planning meeting for the pro.manchester Business Conference 2012. We have a great line up of speakers again. The formal launch begins in October but Kirsty Wark and Gavin Esler return to the Point on the 1st March 2012, reserve the date now.

Thursday I am in Bolton for a meeting with Rob Campbell Pro Vice Chancellor of Bolton University. Rob describes the challenge of developing a higher education financial strategy in the current climate, as rebuilding a boat, in which one is sailing, through stormy seas. Excellent!

This is followed by a Marketing Manchester board meeting in Bolton Town Hall - the artillery suite. Despite the venue, no explosions in the meeting, all passes well, a great team, doing a great job, a solid board report and financial analysis.

Friday, an editorial meeting for SME club and lunch with Chris Barry from Business Desk North West. Chris has always been a staunch ally of pro.manchester and it was great to have a chance for an informal catch up. Rosso again, forty quid for two. Cool.

Finally, to close the working week, a quick check on Google Earth, to see if Greece and Germany are still there, they are. I relax.

Saturday, up early to watch the England Scotland game. It is a win, bring on the French. In the afternoon - tennis, it is a draw, six all, singles with Mary. I point out my biorhythms are rock bottom, all at once. (I know because there is an app for that).

Hope all is well with all, more news next week,
John
Follow on Twitter @jkaonline, or join me on LinkedIn or Google+.
The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

Why more QE is the wrong policy option..

The UK is in a liquidity trap, a situation where monetary policy is unable to stimulate the economy either through lowering of interest rates or increasing money supply.  Liquidity traps occur when rates are reduced to the zero bound or thereabouts and cannot be reduced further. In real terms UK rates (base rate minus inflation) are negative 4%.

The liquidity trap is compounded when expectations of adverse events, either deflation or in the current situation, a lack of aggregate demand, are manifest. Firms are loathe to invest, households are constrained to spend, government spending is limited by a desire to resolve the debt crisis.

The first round of Quantatitive Easing was essential to improve liquidity in the banking system at a time of crisis. Inter bank lending was dessicated, LIBOR spreads were extending. The central bank was becoming not just the last lendor of resort but the only lender of resort. Action had to be taken to inject cash into the economy by undertaking a series of asset purchases predominantly gilts. The programme of some £200 billion almost 14% of GDP had to be done.

This is not an argument for more asset purchases, for the exercise came at a price. QE forces up bond prices, pushes yields lower, punishes savers, places more pressure on sterling, increases import prices, leads to higher inflation, greater pressure on real incomes, a reduction in household spending, reduces demand and leads to lower growth.

Ten year gilt yields have fallen to 2.4% and thirty year gilt yields have fallen to 3.5%. Policy makers assume that lower interest rates at the longer end of the curve will lead to a higher level of investment. This is not the case. Any return on investment or payback calculation is a function of cash flows from a determined demand horizon. Cost of capital does not feature in the basic model. Until the uncertainty about the forward level of demand and growth is cleared, investment plans will remain on the shelf.

In 2008, I wrote :  Welcome to planet ZIRP. Unfortunately, we do not have a handbook, or fully understand the terrain. Our process of quantative easing, the plan to helicopter money may work but as a fire fighting option, it may be like dropping water into a desert, such are the fissures in the financial system."

In 2004 a Bernanke paper  “Monetary Policy Alternatives at the zero bound” concluded :
“Despite our evidence that alternative policy measures [QE} have some effect, we remain cautious about relying on such approaches. We believe that our findings go some way to refuting the strong hypothesis that nonstandard policy actions, including quantitative easing and targeted asset purchases, cannot be successful in a modern industrial economy.  The effects of such policies remain quantitatively quite uncertain”.

The Bank of England suggests that QE increased GDP by between 1.5% - 2.0% but also led to an increase in inflation of between 0.75% and 1.5%. [Joyce M et al in the September Bank of England Quarterly Bulletin.]

At best, QE2 round of £50 billion would kick growth by just 0.4% and inflation by over 1% on a pro rata basis according to the banks own figures.

One cannot be entirely confident in the bank’s hypothesis. QE led to a fall in gilt yields as a first round effect but thereafter the relationship betwen QE and the effect on growth and inflation is tenuous. The argument for further QE is intellectually weak and at best the potential economic impact minimal. The risks outweigh the return.

In fact we would argue that a further round of asset purchases would merely oil the liquidity trap, digging a deeper hole, increasing the inflationary impact and reducing growth as investment plans are reigned back and household incomes are placed under greater strain. Sometimes the correct action is to do nothing, especially when it is more of the same toxic solution.

Sign up today and "subscribe" for e-mail notification of updates. Or follow me on Twitter @jkaonline , join a great network on LinkedIn or Circle me on Google+.

The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

Regeneration is more than a phase - The Times Business Insight today

The danger when we think of regeneration is to think of it as a phase. It is not a phase, it is a continuum, a constant process of Darwinian evolution and adaptation. It is a slow and steady process but it is a RAPID movement, one in which businesses and economies,  React, Adapt, Plan, Invest and Develop.

The problem with the French as George Bush might have said, is they don’t have a word for Renaissance, or if they do it is a bygone era, a phase long discontinued. Regeneration is a constant ongoing process. It is what we do to survive.

At present businesses and economies in Manchester and the North West are having to react and adapt to a economic outlook which offers low growth and a higher level of inflation. One in which incomes are squeezed by higher food, energy and utility prices putting real incomes under pressure for the foreseeable future.

A government policy aimed at rebalancing the economy involving the march of the makers, rebuilding the workshop of the world is a novel trope. The desire to rebalance the economy and an external deficit which has been out of synch since The Treaty of Versailles and beyond, is misplaced.

A monetary policy, which undermines the exchange rate, leads to a depreciation of Sterling and generates price inflation compounds the problem, more QE will compound the problem. The private sector has to accept the challenge, of policy priorities misplaced.

Nevertheless, across the North West examples of regeneration apply. Blackpool Pleasure Beach continues to invest heavily in new initiatives to stimulate traffic to the award winning site. Nickelodeon land is open and SpongeBob’s Splash bash is there to welcome all.

In Liverpool, the huge investments on the waterfront continue, with the opening of The new Museum of Liverpool. It is the largest newly-built national museum in the UK for more than a century.

Across the road from the Museum and the Liverpool One Shopping Centre is a brand new development with more than 160 high street stores assisting the regeneration programme for the city.

Moving East and the Atlantic Gateway is a framework for collaboration between Manchester and Liverpool city regions. The challenge of the Atlantic Gateway is to become one of Europe’s leading low carbon, economic growth areas, second only to London.

Further East and the finishing touches are being made to the future new home of Salford Rugby League Club. Salford City Council formed a joint venture company with Peel Holdings to develop the £16 million stadium, seating 20,000.

It is in Manchester where the best examples of regeneration can be found, setting an example for the North West and the UK. Plans for the integration of the city transport network continue with an extension of the modern and impressive tram system across the city and into the travel to work areas.

In new industries, the city sets the example with new industries encompassing digital, media and creative well blessed with Media City in Salford and Trafford, the Sharp project in East Manchester, the Hive and Corridor projects in the city centre.

Incubators thrive in the developments within the University, including UMIC, the Manchester University Innovation Centre and Manchester Science Park.

The cranes hover again over Manchester as the plans for the Co-operative bank NOMA development take shape. NOMA,  comprises a 4 million square feet, 20-acre mixed-use project. Further East and the £100 million investment in the Manchester City FC academy has recently been announced. It's a great project for our city.

The Nobel prize for physics in 2010 was awarded to the university’s Andre Geim and Konstantin Novoselov for the groundbreaking development of Graphene. The real challenge now to grapple with graphene and develop marketetable products capitalising on the inherent strengths of the product.

Manchester has developed as a modern service sector economy with a very strong business,  professional and financial services sector. pro.manchester is the members organisation for this important sector in the city. It represents the largest advisory group in the North West. This month we launched our SME club, a free advisory service for businesses in Greater Manchester and beyond. Why? Manchester is a great community, we all want businesses in our city to survive and thrive as part of the regeneration process. JKA

This article was originally published in The Times Business Insight on the 27th September 2011.

Sign up today and "subscribe" for e-mail notification of updates. Or follow me on Twitter @jkaonline , join a great network on LinkedIn or Circle me on Google+.

The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

Sunday Times and Croissants - CEO's update 25th September

There is something special about Sunday morning, the Sunday Times, hot croissants with honey and butter, excellent. What a week! Headlines, the global economy is pushed to the brink according to the Saturday FT but within 24 hours the G20 announced a three trillion deal to save Euroland. Even the Greeks get to stay but with a haircut. David Smith suggests we should pick a pump to rescue recovery. Not more QE says DS, it is good call. 

This week, the LIb Dem conference. Vince Cable talks of a gear change in Whitehall, a reference to dress down Friday as opposed to any change in economic policy, as hints of an infrastructure spend are knocked back by the Treasury. We are in a crisis, says Cable, it is the economic equivalent of a war, building from the rubble, the people need to be told the truth, there is no Father Christmas. Ouch! Politicians can be so brutal.

According to Vince Cable, the world is in a difficult place. Plans are afoot to relocate to another part of the Galaxy, where the gravitational pull of sovereign debt on growth is much lower.

The head of the World Bank warned the world is in a dangerous zone thus ruling out relocation within the Milky Way as a short term solution. The IMF World Economic Outlook produced a down grade for growth in the world and the UK. The elegant Christine Lagarde gets the terminology right suggesting the world is in a difficult phase. Here but not forever.

Economics news this week, the borrowing figures were not great for the Chancellor, the worst August figures since the abacus was created. Targets will be missed, we need growth to make the numbers work. Otherwise, automatic stabilisers kick in, reducing tax receipts and pushing up spending. Why do they call them stabilisers when they just upset the debt reduction plan?

Hints from the Bank of England of more QE in November, as much as £50 billion. QE forces up bond prices, pushes yields lower, punishes savers, places more pressure on sterling, increases import prices, leads to higher inflation, greater pressure on real incomes, a reduction in household spending and possibly lower growth. What is the point of more QE, we might as well give the money to a group of UBS traders.
Policy makers genuinely believe that ever lower interest rates will stimulate investment. Not one, can ever have ever done a payback calculation, in which return on investment is a function of cash flows from a defined demand horizon in which cost of capital is irrelevant. Eliminate uncertainty, offer growth, only then will investment return.

What is happening to markets? The FTSE closed the week at 5067, marginally above the critical 5,000 level. Which way next, it is a fifty fifty call. (See what I did there?) Ten year gilts are 2.4% and thirty year gilts yield 3.5%. Something is wrong, it is like the tide receding from the beach before the Tsunami. A desiccation of yield and liquidity. Say no to more QE on planet ZIRP. Google - planet ZIRP - for more information.

By the end of the week, more economics humour as the Chancellor lectures Europe re inaction on debt and Greece. Osborne warns that patience is running out and the eurozone has six weeks to sort out the problem. He even asked on Friday where do the Europeans think the growth will come from? Now, that is a good question, not from net exports, the march of the makers and capital investment, that is for sure. Qui s’appelle la bouilloire noire, monsieur George?

Back to the day job, on Monday, Robert Chote Chairman of the Office of Budget Responsibility is with us for a private lunch which included Sir Richard Leese, Robert Hough and a trio of Chairman past, present and future of pro.manchester. The OBR revised forecast for the UK economy is due in November. Robert spoke candidly and off the record.

Tuesday a day off to meet with two old friends and former Coloroll Directors, Jeremy Sholes and Bill Dobie. Bill is 82 and recently had a severe heart attack and near death experience. Cholesterol - as a Scot and a great bag pipe player, Bill looked well as he tucked into Stuffed Mushrooms, Calves Liver and Onions, excellent. We reminisced and recalled great moments.

Wednesday and early start for an economics presentation at Colliers. Walter Boettcher chief economist depressing everyone with his overview. Walter placed some hope on QE2 for recovery but according to the Bank’s own dubious calculations, 50 billion would kick the economy by less than half of one percentage growth. Not sure Walter really believed it anyway.

Later a meeting and lunch with Chris Bagley from the Federation of Small Businesses. Chris will be a great ally for SME club. Lunch at Rossos, Forty Quid for two. Not bad.

In the evening, launch of the future pro·manchester Professional Innovator Challenge at MOSI, the Museum of Science and Industry. Mark Rock, founder of AudioBoo made the keynote presentation. Sponsored by Beever and Struthers the challenge promotes innovative flair in financial and professional services in the city. future.pro manager, Sam AudioBooth recorded the first pro.manchester boo ever. Great stuff.

Thursday, early start for the pro.manchester plenary board meeting at Deloitte. All over within the hour. Excellent. Time for a lie down before the BDO dinner at Manchester City in the evening. Hugely impressive venue and key Manchester City execs outline their international plans for the club and the brand over the next ten to fifty years. Thanks to Jeff Jones and the BDO team for the invitation.

Friday and it is the Marketing Manchester Tourism Awards lunch at the Lowry Hotel. A three hour session with fifteen awards. Drew Stokes and Paul Simpson presented with Eamonn O’Neal from MEN media anchoring the show. I am on a great table between Angie Robinson and the Linda Thomas, Deputy Leader of Bolton Council. Great fun. I am a thorn between roses. Excellent event, it is my first visit.

End of the day close of polling for the pro.manchester Business Conditions Survey, sharing the data with Brian Sloan from the Chamber of Commerce to finish the week.  Finally, a quick check on Google Earth to see if Greece is still there, it is.

Tennis on Saturday and later today, a family gathering for the christening of Emily, our first grand child. Should be a fun afternoon,

Hope all is well with all, more news next week,
John
John Ashcroft
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Sunday Times and Croissants - CEO's update 18th September

There is something special about Sunday morning, the Sunday Times, hot croissants with honey and butter, excellent. Headlines today, Cable clamps down on top pay. Don’t get this. All the fuss about the 50p tax rate and the Secretary of State for BIS wants top executives to pay less tax.

If this were my business, bearing in mind the Treasury take on top pay including NI is over 70% I would not push this agenda item, just at this time. David Smith writes on the scramble for recovery and suggests we are firmly in the something must be done territory. Leaving top pay alone should be added to the list.

Ed Milliband had a rough ride at the TUC conference this week. Milliband said he believed it is a mistake for strikes to happen. Shouts of shame and rubbish the acclaim, only one woman stood up, then to go to the toilet, charisma delusion manifest throughout. Only sixty per cent of labour voters think their leader can be Prime Minister according to a Times poll. Who would have thought there were so many optimists in the Labour party?

Economics news this week, UK inflation, retail sales, trade and unemployment all heading in the wrong direction. Christine Lagarde offers a veiled warning to the Chancellor about overdoing austerity, David Smith hints at the need for a Plan B, the Treasury is getting jumpy and Danny Alexander warns of a long slow road to recovery.

Meanwhile, the Chancellor in Manchester on Friday, oblivious to the problem, continued his assault on rhetoric, speaking of a budget on our terms, not on the market terms, weathering the storm, ahead of the curve with a plan designed for good times and tough times, helping business to survive and thrive. Excellent.

Merkel and Sarkosy give the Greek Prime Minister Papandreou a telephonic hug on Wednesday, then told him he couldn’t have any money until October. It is a sort of high finance, love you, love you not, game, in the form of Das Hahnchen, Poulet or kotOpouloo. All this despite the warnings from Tim Geithner of catastrophic risk in delaying a decision to bail out the Greeks. The Sunday Times outlines the option of Acropolis now or kick the can down the road yet again.

Arrests this week at UBS as trader Kweku Adoboli manages to lose two billion dollars in subtle trades going back to 2008. How do you do that? Easy, work in a team called Delta one, trade ETFs and bet ten billion. Simps.

Three economists at UBS who suggested the collapse of the Euro would lead to war, death, pestilence and famine should have been arrested. Collapse would lead to debts equivalent to 25% of GDP in the main Euro economies, they say, not a 25% collapse in GDP as was suggested by Portillo at the BVCA Dinner on Thursday night.

The main message of the UBS paper, the Euro is too big to fail. Never forget the German economy is the biggest beneficiary of the fixed currency system, with an enormous trade surplus bigger than that of China.

Back to the day job, on Monday, Alex Connock called in to discuss his new venture and possible options for finance. Tuesday, Gateway breakfast and the formal launch of SME club with Sir Richard Leese pressing the big red button to launch the site. Thanks to everyone who attended and helped the launch. SME club is an important development for our city, it is going to be huge.

The launch was a symbolic moment, no time for cliches, the hand of history was on our shoulder. But punching a button achieves nothing, unless we act  like a team of synchronized swimmers, in the same pool, on the same wavelength, moving with precision timing, to the same music, splashing in the right direction, ahead of the waves, with a plan designed for low tides and high tides, helping businesses to survive and thrive. Yeah, I can do this.

Thursday a briefing meeting with Paul Lupton, chairman of pro.manchester, prior to the board meeting next week. Later a meeting with Aegis, BPO, (Business Process Outsourcing) specialists, the latest coup for Midas bringing a potential 600 jobs into the city centre in 2012.

Thursday evening the BVCA dinner in Manchester, five hundred at the Hilton hotel. I am a guest of Mark Florman Chief Executive and the BVCA  chairman. A great evening with Mark Advani from ISIS and the guys from Baird Capital Partners on the table. Michael Portillo was the guest speaker sharing his Portillo moments, fifteen minutes stand up, then fifteen minutes comedy as he talked on economics, needlessly spooking the audience with misquotes from the UBS paper.

Friday and 600 words for a Times article on regeneration. I point out, the trouble with the French, as George Bush might have said, is they do not have a word for renaissance.

On a geek note, I am migrating to Google Chrome. With Safari, I am seeing more spinning wheels than a Las Vegas casino, it is worse, since the Lion  OS update. Is anyone else having a problem?

Hope all is well with all, more news next week,
John
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Sunday Times and Croissants - CEO's update 11th September

There is something special about Sunday morning, the Sunday Times, hot croissants with honey and butter, excellent. Headlines today, the 50p tax rate raises nothing. No surprise in the news but we will have to wait for the official HMRC report next year before the Chancellor will address the issue. Twenty economists have written to Number 11 urging abolition.

Unfortunately, this has nothing to do with economics just a manifestation of a coalition government conflicted between the dogma of envy and the pragmatic of policy.

David Smith expresses concerns about growth and the need for a Keynesian boost to capital and infrastructure spending. Yes, the recovery is off track as our recent Economics Quarterly suggested.

Economics new this week, producer prices on Friday suggest the peak in input prices may have passed as the rate of change falls to 16% in August from 18% in July. Other news confirms the slow down with the OECD suggesting growth for the UK of just 0.3% in the final quarter of the year. The march of the makers may yet give way to the march of the corporate undertakers, if we are not careful.

This week, I read the Alistair Darling book, Back from the Brink. You have to admire the way in which both Darling and Brown reacted to the banking crisis. The Governor does not escape criticism having been slow to react, deemed out of touch with the banking sector and overly obsessed with moral hazard and a reluctance to bail out the banks. So much for the lender of last resort.

Phillip Stephens writing in the FT on Saturday suggests the former chancellor has written a refreshingly unvarnished account of what happened, revealing just how close to complete financial shutdown we were. It is a gripping tale, told well, he says and it is.

The book touches on the HBOS merger, apparently the Bank of Scotland referred to the Halifax managers as the Haliban. So much for post acquisition team building.

Physically, Darling is easily recognised by his shock of white hair contrasting with his deep black eyebrows. On a visit to China, he was asked if he actually dyed his eyebrows. Since they have the appearance of large black hairy, caterpillars, no surprise had he been asked if they were on the menu for the state banquet that night.

Darling cautions, quite rightly, that Chancellors have to show humility and honesty to gain the respect of the voters. It is true, Chancellors should demonstrate a high degree of economic competence along with intellectual honesty and integrity, avoiding cliches and sound bite were possible.

Recent speeches from number eleven include back from the brink of bankruptcy, the march of the makers, ahead of the curve, offering a safe haven, on a rock of stability, masters of our own destiny, executing plans designed in tough times for tough times, acting first like a tug of war team pulling in the same direction, then like a football team, playing in the right position. We will not win anything if we all charge ahead in the same direction, we would just let in goals at the back. Excellent.

Back to the day job, On Monday I was in London to meet with NIESR the National Institute of Economic and Social Research. Jonathan Portes is the new Director, previously, Chief Economist at the Cabinet Office. NIESR will help with the table output for the Economics Quarterly Review in future.

Later a meeting with Mark Florman the new CEO of the BVCA. It is good to meet Mark having enjoyed a great relationship with his predecessor Simon Walker, now at the IOD.

In the afternoon tea and sherry at the House of Lords with Lord Wade and Baroness Wheatcroft. It is always great to visit the upper house and catch site of Lord Lawson of Blaby and Baron Bannside (Lord Paisley) and others.

Tuesday, lunch presentation with the British Israeli Chamber of Commerce. Gideon Klaus had asked me to talk about pro.manchester and the potential business propositions between Tel Aviv and Manchester.
Gideon works so hard for the Chamber and Brian White was in the Chair. My thanks to them.

In the evening, reception at Harvey Nichols for the new Chairman. Two hundred and fifty people turned up to enjoy the evening and to hear Paul Lupton outline his plans for the year in office. It was a good evening and for pro.manchester a different venue. 

Wednesday an evening dinner with MCR  and their guests Barclays special situations team. MCR have just been appointed to the Barclays panel and listening to me talk about the British Economy was their special treat, that and a great meal at the Restaurant Bar and Grill. How lucky can some people be!

Thursday almost one hundred people turned up for the members briefing on SME club, thanks to Deloitte for hosting the event. We outlined the plans and ideal engagement for member companies.  Gina and the e-team, have done a great job to pull the programme together for the formal launch next week.

Just received an e-mail from Al Mackin at the e-word, he has not received his Sunday missive yet, concerned Tesco may have run out of croissants, as if! Here it is.

Hope all is well with all,
More news next week,
JKA

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Check out the pro.manchester blog post for regular updates.