pro manchester CEO

Sunday Times and Croissants - CEO's update 21st August

There is something special about Sunday Morning, The Sunday Times, hot croissants, with honey and butter, excellent. Headlines from the front page, government ministers are to adopt problem families! What all of them? Another great idea from the Big Society. Putting the problematic with the dysfunctional could create all sorts of social mayhem. Good luck with that.

David Smith on the other hand explains why we are all so glum. It is the old misery index, the sum of inflation and unemployment ratios. Inflation CPI basis hit 4.4% and the unemployment rate hit 8%. Hence a misery index of over 12 compared to most of the years 2000 when the index was between 6 and 8. Are we all glum? Not me because I had two days off last week and played tennis.

It certainly was a big week for economic news. Inflation - up, unemployment - up, retail sales flat and borrowing figures disappointing. Further news from the MPC minutes, all of the doves are now back in the coop with noone voting for a rate increase. Things have taken a turn for the worse.

The unemployment figures are particularly bad. The claimant count is rising and signalling a return to recession. The July figure is almost as high as August 2008 and the start of the awful recession. There is a high (co-incident) correlation between the GDP stats and claimant count. A rise of around 100,000 in the third quarter, suggests negative growth in the second half of the year.  

The PSNBR figures confirm borrowing will fall this year but to around 130 billion pounds compared to the 125 billion OBR target. VAT the great success as revenues increase substantially whilst other hauls are stagnant. Ed Balls may call for a rate cut but it is the only facet of the fiscal hike that is working.

The Chancellor, confronted by the bad news of a recovery off track said, well what can we expect given the trends in the world economy. Excellent. Grab a fiddle and play those Roman tunes. The old songs are the best.

Back to the day job, we welcome two strong additions to the pro.manchester team. Emma as the new finance and admin manager has already begun to tighten up procedures. Gina as the new marketing
manager has a great task ahead. The day of the SME club launch nears, in fact it is D minus 23.

On Thursday, a quick meeting with Dr Brian Sloan, great economist and head of business and economic policy at the GM Chamber of Commerce. Another session with Clive Memmott CEO of the CoC and as I was leaving, I bumped into trio of CEOs including Angie Robinson, Tim Newns and Richard Guy. Another great day in the CEO spotter's diary. Four in the afternoon, result.

More time off for me next week, it is August and the sun drenched tumbleweed drifts around Spinningfields. Where has everyone gone? Will you ever come back again properly asks Rachel? All too soon, all too soon.

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

John Ashcroft CEO pro.manchester.
Director Marketing Manchester, Visiting professor MMU Business School. Business Leadership Council. Council GM Chamber of Commerce.
Follow on Twitter @jkaonline, or join me on LinkedIn or Google+. Check out the blog post for regular updates.

Public Sector Borrowing in June - are we heading back to the brink of bankruptcy?

Public Sector Finance figures for June were released on Thursday, borrowing was actually up compared to June last year, are we heading back to the brink of bankruptcy? The Chancellor of the Exchequer was keen to herald the austerity measures as a move back from the brink of bankruptcy following the Labour profligate years. But are the figures really moving in the right direction?

In the first three months of the year, borrowing was down by just £0.4 billion from £39.5 billion to £39.2billion. Extrapolate this for the year and the borrowing forecast would struggle to drop below £140 billion for the financial year. This would equate to 9% of GDP and well above the OBR forecast for the year.

The problem is that despite the austerity measures, total receipts have increased by  4.6% but spending over the first three months of the year has increased by 3.4%. The interest bill in the first quarter is up by 14% and social security payments are up by nearly 5%. Reducing spending in a low growth economy presents significant difficulty.

Revenues present a mixed picture. Mugging the high street with the VAT rise has yielded spectacular results with receipts up by 17% in the first three months adding £4 billion into the coffers. VAT receipts could contribute an additional £20 billion in a full year if the rate of gain continues. Income and capital gains receipts on the other hand are up by less than 2% at 0.5 billion and taxes on production are up by less than 3% at £1.4 billion,

At first glance the figures are a Keynesian delight. Rebalancing the economy by cutting spending and increasing taxes will result in low growth economy with resilient spending and sluggish revenues. It is difficult to balance the books when breaking the backbone of recovery. 

The Office for budget responsibility offers some hope by pointing out that revenues last year included £3.5 billion from the bank payroll tax which was not repeated last year. If this element is excluded revenues are up by 8% and “close to our full year forecast”. Sounds better but the BPT is not a surprise item and hardly a credible apologia.

Next week the GDP estimates for the second quarter will be released. They will make dismal reading with growth year on year likely to be less than 1%. The economy is slowing, the public finances are not recovering as planned, essential imports continue, there is no net export growth, no march of the makers, no rebalancing of the economy, we are a few steps further away from the brink of bankruptcy but the precipice is still in sight. 

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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.