UK manufacturing ‘powering ahead’

The UK manufacturing sector is in rude health, thanks in large part to strong demand from overseas customers, an industry survey suggests.

The Engineering Employers Federation says the sector will outperform the rest of the economy next year.

However, the group says further expansion will depend in part on continued recovery in overseas markets.

Meanwhile, business group CBI has called manufacturing the “unsung hero” of the UK economy.

‘Record output’

After surveying more than 500 leading firms, the Engineering Employers Federation (EEF) said manufacturing firms were “powering ahead” by recruiting new staff and investing in their businesses.

“Manufacturers are ending the year on a high and should enter 2011 on a strong footing,” said the group’s chief economist Lee Hopley.

“The survey has shown record responses on output and orders for much of this year and, if this continues, we should see exports and investment delivering better balanced growth across the economy.”

However, he added that firms were struggling to find enough skilled workers and were facing rising input costs.

He also sounded a note of caution about the wider economic recovery, which he called uncertain.

”UK manufacturing is in many ways the unsung hero of our economy” – John Cridland, CBI

Government role

The CBI also argued manufacturing is “well placed to lead the country’s recovery”.

“UK manufacturing is in many ways the unsung hero of our economy,” said John Cridland, the group’s soon-to-be director general.

“Big productivity gains in the past 10 years have made it leaner than ever before.”

However, he said the government needed to play its part in the sector’s continued revival.

It must create a tax and regulatory environment to help manufacturers double the growth rate of exports by 2020, he said.

Spending cuts

Last week, a closely-watched survey suggested the UK manufacturing sector grew at its fastest rate for 16 years in November, with a record rise in employment.

The government has stressed the need for exports to play a greater role in future economic growth, particularly in light of its spending cuts and tax rises that are expected to hit consumer spending.

Manufacturing currently accounts for about 13% of the UK’s total economic output.

 

 

 

 

Source: http://www.bbc.co.uk/news/business-11921894

 

China buys up the world

IN THEORY, the ownership of a business in a capitalist economy is irrelevant. In practice, it is often controversial. From Japanese firms’ wave of purchases in America in the 1980s and Vodafone’s takeover of Germany’s Mannesmann in 2000 to the more recent antics of private-equity firms, acquisitions have often prompted bouts of national angst.

Such concerns are likely to intensify over the next few years, for China’s state-owned firms are on a shopping spree. Chinese buyers—mostly opaque, often run by the Communist Party and sometimes driven by politics as well as profit—have accounted for a tenth of cross-border deals by value this year, bidding for everything from American gas and Brazilian electricity grids to a Swedish car company, Volvo.

There is, understandably, rising opposition to this trend. The notion that capitalists should allow communists to buy their companies is, some argue, taking economic liberalism to an absurd extreme. But that is just what they should do, for the spread of Chinese capital should bring benefits to its recipients, and the world as a whole.

Why China is different

Not so long ago, government-controlled companies were regarded as half-formed creatures destined for full privatisation. But a combination of factors—huge savings in the emerging world, oil wealth and a loss of confidence in the free-market model—has led to a resurgence of state capitalism. About a fifth of global stockmarket value now sits in such firms, more than twice the level ten years ago.

The rich world has tolerated the rise of mercantilist economies before: think of South Korea’s state-led development or Singapore’s state-controlled firms, which are active acquirers abroad. Yet China is different. It is already the world’s second-biggest economy, and in time is likely to overtake America. Its firms are giants that until now have been inward-looking but are starting to use their vast resources abroad.

Chinese firms own just 6% of global investment in international business. Historically, top dogs have had a far bigger share than that. Both Britain and America peaked with a share of about 50%, in 1914 and 1967 respectively. China’s natural rise could be turbocharged by its vast pool of savings. Today this is largely invested in rich countries’ government bonds; tomorrow it could be used to buy companies and protect China against rich countries’ devaluations and possible defaults.

Chinese firms are going global for the usual reasons: to acquire raw materials, get technical know-how and gain access to foreign markets. But they are under the guidance of a state that many countries consider a strategic competitor, not an ally. As our briefing explains (see article), it often appoints executives, directs deals and finances them through state banks. Once bought, natural-resource firms can become captive suppliers of the Middle Kingdom. Some believe China Inc can be more sinister than that: for example, America thinks that Chinese telecoms-equipment firms pose a threat to its national security.

Private companies have played a big part in delivering the benefits of globalisation. They span the planet, allocating resources as they see fit and competing to win customers. The idea that an opaque government might come to dominate global capitalism is unappealing. Resources would be allocated by officials, not the market. Politics, not profit, might drive decisions. Such concerns are being voiced with increasing fervour. Australia and Canada, once open markets for takeovers, are creating hurdles for China’s state-backed firms, particularly in natural resources, and it is easy to see other countries becoming less welcoming too.

That would be a mistake. China is miles away from posing this kind of threat: most of its firms are only just finding their feet abroad. Even in natural resources, where it has been most active in dealmaking, it is not close to controlling enough supply to rig the market for most commodities.

Nor is China’s system as monolithic as foreigners often assume. State companies compete at home and their decision-making is consensual rather than dictatorial. When abroad they may have mixed motives, and some sectors—defence and strategic infrastructure, for instance—are too sensitive to allow them in. But such areas are relatively few.

What if Chinese state-owned companies run their acquisitions for politics, not profit? So long as other firms could satisfy consumers’ needs, it would not matter. Chinese companies could safely be allowed to own energy firms, for instance, in a competitive market where customers could turn to other suppliers. And if Chinese firms throw subsidised capital around the world, that’s fine. America and Europe could use the money. The danger that cheap Chinese capital might undermine rivals can be better dealt with by beefing up competition law than by keeping investment out.

Not all Chinese companies are state-directed. Some are largely independent and mainly interested in profits. Often these firms are making the running abroad. Take Volvo’s new owner, Geely. Volvo should now be able to sell more cars in China; without the deal its future was bleak.

Show a little confidence

Chinese firms can bring new energy and capital to flagging companies around the world; but influence will not just flow one way. To succeed abroad, Chinese companies will have to adapt. That means hiring local managers, investing in local research and placating local concerns—for example by listing subsidiaries locally. Indian and Brazilian firms have an advantage abroad thanks to their private-sector DNA and more open cultures. That has not been lost on Chinese managers.

China’s advance may bring benefits beyond the narrowly commercial. As it invests in the global economy, so its interests will become increasingly aligned with the rest of the world’s; and as that happens its enthusiasm for international co-operation may grow. To reject China’s advances would thus be a disservice to future generations, as well as a deeply pessimistic statement about capitalism’s confidence in itself.

 

Source: http://www.economist.com/node/17463473

 

 

Why should you care about currency wars?

Leaders from the G20 major economies are heading for the South Korean capital Seoul for their fifth summit. But have they run out of steam?

They certainly have some important and difficult issues to tackle. Arguments about currencies and the related question of international trade imbalances have generated a lot of heated debate in the run-up to the summit. And they will be difficult to resolve.

The central issue in what has been called a currency war is currencies either being driven down or prevented from rising to maintain or improve a country’s competitiveness.

The US has a central role on both sides of the argument as accused and accuser.

The US Federal Reserve has been widely blamed for driving the dollar down with policies that force down interest rates and increase the US money supply.

The effect has been to encourage investors to seek better returns outside the US, and by selling dollars to buy foreign assets, they lower the value of the US currency.

US proposal

At the same time, the US have kept up the long standing criticism of China for maintaining its Yuan at a level that they, American officials, think is artificially low and unfairly competitive.

Ahead of the summit, the US came up with a concrete proposal – quantitative limits for current account imbalances – the current account being made up of trade in goods and services plus some financial flows.

To achieve that, China would have to allow its currency to rise, exactly as the US wants.

But there is little chance of that being accepted at the summit.

There is too much opposition, from China and others too.

That is not to say this summit will not achieve anything.

There will almost certainly be an official endorsement of new rules for banks, already agreed by regulators, to make them better able to withstand storms.

It is another, and controversial, matter whether the new rules are up to that task.

Earlier action

Nonetheless, there is a view that the G20 summits have lost momentum.

Certainly, in the early stages – the first summit was in Washington in November 2008 – the gravity of the global economic situation helped to focus minds. It was still pretty scary by the time of the second one, in London’s Docklands in April last year.

Language such as “on the brink”, “the abyss”, “another depression” was widely used at the time, and some big decisions were taken quickly.

They agreed to triple the resources available to the International Monetary Fund for rescue loans.

There was also more or less coordinated economic stimulus from government spending and tax cuts.

Whether that works is controversial, but many economists think it helped prevent things turning out even worse.

Morris Goldstein of the Peterson Institute of International Economics in Washington says that without G20 coordination there would probably have been less stimulus.

He says that if a country acts alone, some of the extra spending “leaks out in terms of imports”.

He argues that G20 cooperation also helped make the effort to fix the banks more effective.

Overall, “in terms of crisis management, I give them pretty high marks”, Dr Goldstein says.

More recently, he says, the record has been much more modest.

Alistair Darling, the former UK Chancellor of the Exchequer also says that momentum of the early summits has gone, though it has to be said those early summits were the ones he was involved in.

Still, it does seem that, now the global economy has stepped back from the brink, progress is slower, and world leaders in less of a hurry to do deals.

Given the uneven nature of the recovery, and the tensions in the currency markets, it would be too much to say we are back to business as usual.

But it is certainly a lot less unusual than it was when the G20 summits got started.

 

Source: http://www.bbc.co.uk/news/business-11725352

 

 

 

What would Americans think of the French strike?

Over a million people have taken part in protests against pension reforms By Matthew Price BBC News, France The widespread protests against the French government’s plans to raise the age of retirement from 60 to 62 are part of a wider battle about the future of French society and how much the government spends to support the poor. I am going through a little bit of culture shock. For the last three years I have been based in the US. And the only protests I have covered, the only ones vocal enough to have been worth reporting on, have been angry mobs demanding the government stop spending and get out of their lives. Now, just one week into my new role as Europe correspondent, I am faced with angry mobs demanding the exact opposite – an end to government cut backs and a promise that the state will continue to provide for them. Talk about a change of scene. Oil tankers have been stranded outside Marseille for weeks The Americans could never stomach – or indeed even understand – what has been happening in Marseille. The stench of rotting oranges, old coffee grounds and the occasional soiled nappy, sticks in the nose as you walk through the narrow lanes of the old city. And every day that the rubbish collectors remain on strike, the piles of overflowing black bags and cardboard boxes grow ever higher. Wind your way past them and down to the port where 1,000 stylish yachts bob quietly, and look out across the sparkling blue waters of the Mediterranean, and you will see more evidence of these strikes – the oil tankers anchored offshore waiting for port workers to return to their posts. Then there are the petrol stations – the bright red covers strapped over the pumps which tell you they are “hors service” – out of service. Out of petrol to be more accurate. The strike is taking its toll. Will the French people finally get back what the workers want – a government that sees its main purpose as being to look after the citizens? But what Americans would also perhaps not understand, is how despite this slap in the collective face, everyday life is not on hold. Basically, it is to be expected here. “It’s France – it’s normal, huh?” one man shrugged before heading off back to work. Another, having found a petrol station with supplies said he had to drive around the city a bit, but it was okay. In fact, for a city that has been deemed the epicentre of French union militancy, there was not at first much evidence of it. Yes, there was the rubbish, and the thought in the back of your mind that you might run out of petrol, but where were the picket lines? Road blocks For three glorious hours, I drove along the coast looking for strikers and watching the wind surfers zip across the sea. At one junction leading to a fuel storage depot, a sun-tanned policeman and his swaggering colleagues told me there had been a protest earlier but they had closed it down. Eventually I ended up at a Total refinery, which I knew to have been having problems. Even here – no picket. Just the wind whipping across the massive empty car park out the front and a sign tied across the gates – “plant on strike”. The next day though came word of a shut down at the airport. Strikers had blocked the road to the terminal. This sounded more like it. A proper bit of “argey bargey a la Francaise” surely? Well, not by the time I had made it there. Within an hour or so, the strikers had forced perhaps 100 or so people to abandon their hire cars a short walk from the terminal, and then cleared off. Airport in disarray – job done. ‘Personal responsibility’ Some hours later, I received a call from the main train station. A group had plonked themselves on the tracks in front of a TGV bound for Paris. They shouted for a bit, but again soon vanished. Lightning strikes, I guess you could call them. The big question, of course, is where all this is leading? Is this indeed the big social movement that the unions say it is, a movement that in true revolutionary style will end with the overthrow of the court of Sarkozy? Will the French people finally get back what the workers want – a government that sees its main purpose as being to look after the citizens? My sense is the answer is twice, “Non”. And indeed, most French know the world has changed since the days of the all-embracing welfare state. They know the age of austerity inevitably implies an age of personal responsibility. And personal responsibility is something the Americans I have lived among for the last three years have adopted as a way of life. I am reminded of a trip I took with a truck driver – named DuWayne – from Wisconsin. One thousand kilometres (600 miles) into an epic ride across the states, he mentioned the French lorry drivers’ proclivity to strike. “We’d never do that here,” DuWayne proudly told me. “We work hard.” And it is true – they do. One year he spent 352 days on the road, in order to pay the bills. I told him that the French strike to protect their working conditions, which were far better than anything he had ever known. He looked at me, shocked, as if to say, “You mean the French have it better than us?”   Proposed Pension Reforms:   Raise the retirement age from 60 to 62 by 2018 Raise the security contributions qualification from 40.5 to 41.5 years Raise the age pensioners can receive a full state pension from 65 to 67

Source: http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/9118869.stm

French police break key strike blockade near Paris

The BBC’s Christian Fraser said riot police had “wrestled back control” of the refinery as they clashed with protesters.

Clashes have broken out outside a major oil refinery in France after riot police moved in to clear strikers who blockaded the terminal for 10 days.

Two people were hurt outside the Grandpuits refinery east of Paris, one of 12 facilities affected by strikes.

President Nicolas Sarkozy ordered the authorities to lift the blockade earlier this week after thousands of petrol stations across France ran dry.

The Senate will vote later on the pension reform that sparked the action.

Ministers said the bill would clear its last major hurdle in a matter of hours, after the Senate was asked to halt debate on hundreds of opposition amendments and hold a single vote on all of them.

Changes to the retirement and pension age could become law next week, once they pass the committee stage and a final vote is held in both houses of parliament.

Tear gas

Police also acted to remove protesters from two fuel depots, in an attempt to restore supplies at the start of the school half-term.

Teargas was used to stop 200 demonstrators blocking access to a site near the southern city of Toulouse.

At a depot in Grand Quevilly in north-west France, police removed protesters for the second time in a week. The demonstrators had been cleared on Tuesday but reimposed their blockade two days later.

Hundreds of riot police were deployed in Lyon in an attempt to prevent a repeat of the sporadic violence that has broken out in the city in the past few days.

The unions have called two further days of protests on top of the rolling strikes in protest at the government’s plans to increase the retirement age from 60 to 62 and the full state pension age from 65 to 67.

‘Scandal’

Around 100 police arrived at Grandpuits at 0300 (0100 GMT) with a local government official who said he had an order to reopen the plant.

The Total refinery at Grandpuits, the closest to Paris, is seen as critical for supplying fuel to the city and the main airports at Orly and Charles de Gaulle.

Union official Charles Foulard condemned the action as “a scandal” after police had acted in the middle of the night when the number of protesters was relatively small.

He said it was a disgrace that striking workers were being forced to help restart operations at Grandpuits under an emergency order.

“It’s a grave moment for our democracy. Never, never have striking workers been requisitioned,” he said.

A decree, known as a requisition, can compel strikers to return to work under threat of prosecution if the authorities believe there is a threat to public disorder.

“There is not much left in the pumps. This will relieve some of that”- Jean Michel Drevet – Seine and Marne prefect

A few hours later, dozens of strikers formed a human chain at the entrance to the refinery in an attempt to stop the requisitioned workers going in.

Scuffles broke out as police moved in to clear the entrance and minutes later workers were seen going into the refinery.

At least two people were hurt. One man was taken away by ambulance.

‘Not much left’

The official who carried out the order, Seine and Marne prefect Jean Michel Drevet, said the blockade had been lifted before dawn so as not to provoke trouble.

He added that the decision had been taken by the government to alleviate the fuel crisis.

“There is not much left in the pumps,” he said. “This will relieve some of that.”

Production has been disrupted at all 12 of France’s oil refineries as workers protest against the government’s reforms.

Fuel depots and thousands of petrol stations across the country have been hit. People travelling to France from other countries are being warned they face disruption because of the strikes.

Oil industry officials met French Prime Minister Francois Fillon on Friday to discuss fuel supplies.

The head of the French Petrol Industries Association, Jean-Louis Schilansky, said afterwards that France could manage for several weeks by increasing imports and pooling reserves.

“The Unions and the left insist that the street is not to be ignored. President Sarkozy says France cannot afford the current pension system and that change must come”- Gavin Hewitt, BBC News, Paris

Energy Minister Jean-Louis Borloo said one in five petrol stations was still dry but he said the situation was gradually improving.

“Some days ago, 40% of the stations were dry. Then it went down to 30% and today it’s between 20 and 21%,” he said.

National protests against the raising of the retirement age began at the start of September, and earlier this week more than a million demonstrators took to the streets across France.

Youths have clashed with police in parts of Paris and Lyon as well as in other towns and cities.

Meanwhile, two police officers have been ordered to stand trial in connection with the deaths of two youths in a Paris suburb in October 2005.

Zyed Benna, 15, and Bouna Traore, 17, died after they ran into an electricity sub-station in the Paris suburb of Clichy-sous-Bois while they were being chased by police.

Their deaths sparked an outbreak of rioting and violence across the French suburbs which lasted for weeks.

The two police officers have been charged with failing to assist persons in danger.

Source: http://www.bbc.co.uk/news/world-europe-11603953

Spending cuts will delay jobs recovery says ILO

It will take five more years for the job market in many countries to return to pre-recession levels, according to the International Labour Organisation.

The UN body says there are 23 million fewer jobs now than there were at the start of 2008.

It has warned that the spending cuts which have replaced stimulus measures in several countries will delay a full recovery in the job market until 2015.

The ILO studied the employment data of 69 developed and developing nations.

Deep Cuts

In its annual World of Work Report, the agency said that despite “significant gains” with economic growth, “new clouds have emerged on the employment horizon and the prospects have worsened significantly in many countries”.

Several European nations are implementing cuts in public spending in an attempt to rein in their budget deficits, which have risen because of falling tax revenues, stimulus spending and bank bailouts.

“Those policies that helped countries avoid the worst of the crisis are now withdrawn, and countries have applied very deep cuts in spending,” report author Raymond Torres told the BBC World Service.

“That, of course, is having an impact on jobs”.

‘Risks of demoralisation’

Around 40% of jobseekers have been without work for more than one year, the report says, running “significant risks of demoralization, loss of self-esteem and mental health problems”.

The ILO has recommended “active labour market policies”, such as focusing on vulnerable groups, particularly the young. It also suggests countries make better use of savings to spur productivity and job creation.

The report also notes that 25 countries have so far experienced social unrest since the financial crisis, including emerging economies.

The ILO predicts that global unemployment will be 6.5% this year, a slight fall from 6.6% in 2009.

Source: http://www.bbc.co.uk/news/business-11454455