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Dynamic content on all matters to do with growing businesses from Keith Willey

New Economy Hides a Radical Change

It seems there’s gathering momentum that a New Economy will emerge in the UK post the financial sector meltdown and it will be based on manufacturing – that was the message I took from a Policy Exchange meeting at the Royal Institution today.  Well, that’s a load of twaddle of course because what people really mean is some re-balancing between the sectors, whilst we must mention ‘services’ too because actually that’s where we all work more or less isn’t it?  It is a serious point though and we really do need to stimulate manufacturing because we quite simply look a bit underweight against certain peers plus we need more output that is as readily exportable as manufactured goods.  Otherwise what’s the point of being a trading nation/ an open economy? Clark demonstrated great mastery of his brief and offered thoughts on what might be done about things if the Tories get in next year.  For a start, he doesn’t like the idea of supporting national champions and he feels government needs to really understand the value chain before it offers support.  Regarding the latter he cites a previous government’s mistake in championing chip manufacture as a way to profit from the computer boom (“fortunately they went bust before we could waste any more money”).  He also showed a good grasp of the dynamics in the entrepreneurial sphere – the need to create and support the fast growth companies and the problems facing the VC industry in playing its part in that.  He was at pains to say that the Tories’ policies are known only to George Osborne so we can but hope that Osborne is listening to his elders – for now though it was mission-accomplished for KC as we all felt soothed.  Meanwhile on the Labour side there was a lot of endorsement for some things that have been brought in – not least the Technology Strategy Board which many people felt was the right configuration at last – even if it’s underfunded and hasn’t quite got all its ideas up and running.  If we do indeed change government will they be big enough to keep the good things that have been achieved?

Meanwhile I can’t help feeling that debating the nuances of capital allowances, R&D tax breaks et al might just be a case of ‘fiddling whilst Rome burns’.  Aren’t we in the middle of a massive economic crisis – one that has yet to properly impact most of us?  Another fairly recent report highlights the role of Defence and related industries in the UK economy… written in an effort to stave off cuts to the sector.  Those cuts (as surely there must be some) could have a huge impact on manufacturing in the UK – directly and indirectly.  Right now the focus seems to be on reducing the wage bill for government bureaucrats working in Defence and some talk about all our troops getting the equipment they need.  I cannot help wondering though whether that equipment is in fact going to be needed.  Whilst trying to steer clear of party politics, it strikes me that the warning bells from all points about the Tories’ ‘Little Englander’ stance are well founded.  Norway, yes Norway is being mentioned as the model towards which the Tories would like to work.

It’s all so complicated and beyond simple measures how on earth can the politicians sort this all out?  I really would like to see a high-tech manufacturing-led recovery but I wouldn’t bet on it would you?  I’ll stop on that sobering thought.

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Will business owners get better banking soon?

Whilst everyone waits anxiously to see whether we can navigate out of the current mess in banking there has so far been precious little that indicates things are really going to be different ‘afterwards’, whenever that is.  The most obvious example is that banking bonuses clearly will stay the same unless legislation is attempted.  We’re witnessing how practically difficult that might be.  What of the business banking that matters to the entrepreneur though?  That too has complications.  The big bank likely to take radical action is RBS.  Formerly run by Britain’s most admired banker Sir Fred Goodwin it is now ‘controversially’ run by Stephen Hester.  I say controversially because apart from his shocking compensation package (after all he won’t be hanging around to end of contract will he and could do it for nothing and reap glory couldn’t he?) he also has to find a ‘Plan B’.  His Plan A was to cut back to the UK core banking position but that doesn’t seem to anticipate the strength of feeling at large towards banks.  That feeling is driving a political agenda that surely will demand a restructuring of their UK business.  Oops!  Need a new vision chaps.  His career shows definite flair for leadership but if the plan lacks substance don’t we just get another personality cult?  The Telegraph might have anticipated this

“If there is a possible weakness in Mr Hester’s business approach it could be with his political skills. Taking over a partly – possibly fully – nationalised bank will require immense diplomacy in dealing with civil servants and ministers.  Although he is known for his support of transparency and openness, Mr Hester is also famed for the way he dominates meetings, imposing his will as much by force of personality as intellect.  Having politicians and civil servants, some of whom may be on his new board, as paymasters rather than private shareholders will present an altogether different challenge.”

Meanwhile we are getting snippets of what might emerge in the gaps left by rudderless big banks.   Sandy Chen is looking to set up a new bank, albeit with small capital to start with.  There could be great chunks of commercial banking oprations to pick up or prey on, not least RBS.  Naturally, Richard Branson is also said to be thinking of having a go but then again he would wouldn’t he?

So far it is hard to see a logic whereby entrepreneurs can really expect banking to improve – at some level of course modern credit-scoring plus market segmentation lead to rational ‘abandonment’ of smaller and medium sized clients.  At another though, given the disruption afoot, now is the time for business owners to make their needs clear:  get your bankers to pitch for business and regularly consider switiching around until and unless you see real added value beyond the commodity service.  No more Mr Nice Guy!

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