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Economy
At last it is official. Despite GDP and lending figures remaining weak business confidence is increasing, raising hopes that the recession may be over according to a report published on 23 November by the Institute of Chartered Accountants (ICAEW). The latest Business Confidence Monitor claims that business confidence has reached a six year high and the highest reading since the series began in 2003.
Michael Izza, chief executive of the ICAEW, said: “The recovery is very fragile and will take time. Tightening of fiscal policy, the return to the 17.5% VAT rate, continued difficulties accessing finance and a budget Christmas by consumers are all potential threats to this recovery”. He added: “Businesses are backing the recovery but banks are not”.
The week before Gordon Brown used the Queen’s Speech at the state opening of parliament as an opportunity to launch an election campaign based on the hope of economic recovery. As the battle lines between parties were drawn it appears it was a gamble which may have paid off. A poll conducted by Ipsos Mori in the Observer revealed the Conservative lead has narrowed to 31%, just six points ahead of Labour and the narrowest gap since December.
The speech written by the Prime Minister was certainly political and much criticised by the opposition parties, for being cynical and opportunistic. Midst all the pomp and ceremony there was a definite air of brinkmanship surrounding Mr Brown as the Queen announced a raft of populist legislation with little time before an election to see it enacted. Thirteen bills were introduced, included among them the inevitable clamp down on bankers’ bonuses, a commitment to halve the deficit within four years as well as an ambitious programme of social care for the elderly. David Cameron roundly attacked the Government for not including Sir Christopher Kelly’s recommendations on MPs’ expenses, while Nick Clegg for the Lib Dems called the Queen’s Speech a “fantasy package” full of unnecessary measures”.
Earlier in the month the Bank of England fuelled the mood of cautious optimism in its November inflation report by raising its forecasts for economic growth over the next two years. Mervyn King, Governor of Bank of England said that Britain’s recovery has “just started”, as gross domestic product was predicted to rise to 4% in 2011 before easing to 3% at the end of 2012. It later emerged, however, that the Bank of England’s Monetary Committee (MPC) were not all in agreement about the need to increase quantitative easing. In fact they were split three ways: seven members of the committee voted for a £25 billion increase taking the programme to £200 billion, Spencer Dale, the Bank’s chief economist, voted for no increase at all, and David Miles called for a £40 billion increase. This is the first time members of the committee have been split since the policy began in March. The fact that the inflation figures rose in October, the first time since February, seemed to do little to dent recovery hopes.
The employment rate for the quarter to September, published by the Office for National Statistics (ONS), appeared to endorse the Governor’s optimistic view. There was a small increase of people employed, the first quarterly increase since May-July 2008. The unemployment growth rate steadied, rising by 0.1% to 7.8% at 2.46 million, the smallest increase since March-May 2008 and still well below the anticipated 3 million barrier.
If the UK economy is to follow the rest of the world out of recession, undoubtedly business confidence has to recover first, thereby creating the conditions for entrepreneurs to begin the process of re-building profitable businesses. Sir Digby Jones the former controversial trade minister and former head of the CBI, takes this argument a step further. According to a somewhat bizarre report in the Sun he blamed the BBC and its business presenter for spreading doom and gloom, suggesting he should be dropped “in a swamp”. This was before the news of the apparent near collapse of the Dubai economy and the new threat to the global economy which set the FTSE tumbling. Maybe Mr Peston may know a thing or two after all.
Unemployment
Although the unemployment rate is not rising as fast as previously predicted, fuelling hopes for an early recovery, close examination of the ONS Labour Market Statistics provides a mixed picture. The male unemployment rate at 9% is higher than the female rate at 6.9%. This is due to an increase in part-time working, as full time work is no longer available and there is demand for temporary seasonal workers in the run up to Christmas. Unemployment is therefore likely to rise again in January.
Particularly worrying is the long-term unemployment rate. The number of people unemployed for more than 12 months increased by 71,000 over the last quarter, to reach 618,000, the highest figure since the three months to November 1997. To counter long-term unemployment the government announced a further £40 million would be allocated to local authorities in the most deprived areas through the Working Neighbourhood Fund. Announcing the increase, John Denham, Communities Secretary, said: “We are continuing to help them putting additional investment into the hands of local leaders and asking them to take immediate action”. The opposition were not impressed, the Liberal Democrats describing the programme “as a drop in the ocean” while Theresa May for the Conservatives said: “If Labour really cared about getting people back to work they would not have closed 54 Job Centres – one every week – during 2008 when unemployment was rising.”
Youth unemployment
The rise in youth unemployment too is of particular concern. The unemployment rate for 18 to 24 year olds increased by 0.7% over the quarter to reach 18%, the highest figures since records began in 1992. In an interesting article in the Times about tackling youth unemployment, Damon Buffini, president of the charity Fairbridge, described some imaginative ways that business can set up working partnerships with young people. The charity works with hard to employ, socially excluded young people in the inner cities and has just published an excellent report Engage – Scaling up Business Engagement. Damon Buffini, when he is not being chairman of the private equity firm Permira, is a member of the National Council for Educational Excellence (NCEE), a body set up to “drive forward the Government’s long-term aspirations for children and young people’s education”.
On 25 November at the Reading Employment Tribunal an important blow was struck for the right of young graduates to be paid for the work that they do. We wrote last month in these pages about the abuse of unpaid internships being prevalent in the creative sector. The case was brought by Nicola Vetta against London Dreams Motion Pictures Ltd and was supported by the Media and Entertainment Union BECTU (or to give its full title the Broadcasting Entertainment Cinematograph and Theatre Union). The full judgment is expected in the next few weeks and will give all workers the right to payment at least in line with the minimum wage, in addition to holiday pay accrued. BECTU has previously been active in campaigning for improvements to working conditions in the industry and has been advising the Department for Business, Innovations and Skills and the Inland Revenue on failures to pay the minimum wage.
Economy and unemployment in France
Economy and unemployment in France
Employment has risen in France in the third quarter, mainly among temporary workers, but jobs in manufacturing and construction are still dropping, according to Le Figaro.
It reports the French national institute of statistics (Insee)’s assessment that net job losses in market sectors have stabilised at 5,500 in the third quarter, contrasting with a 2.1% drop over the year. The Under Secretary of State for Employment states that “various government initiatives” have stopped the haemorrhaging of jobs. This includes small companies being allowed to recruit or replace retiring employees without having to pay social security for one year.
There have been fewer Job losses in manufacturing, down from -1.4% in the second quarter to – 1% in the third. The same positive trend appears in the construction industry.
Not surprisingly, Socialists and Conservatives disagree on the state of the economy. The Socialist National Secretary, Michel Sapin, told Les Echos that “the recovery is not here yet”, while Conservative Economy Minister Christine Lagarde believes the country’s recovery has reached a turning point.
Mme Lagarde makes her deduction from a 0.3% rise in the French economy in the third quarter and that job losses have virtually stopped. M. Sapin, a former economy minister, states that consumer growth remains unchanged at 0%, investment in industry continues to decline (- 0.7%) and concludes that “the recovery is far from being there. Growth for the whole of 2009 will be largely negative, certainly below 2%”. He estimates that it would take a 2% growth for the economy to start creating jobs.
Time off to train
On 16 November the Apprenticeships Skills Children and Learning Act finally received Royal Assent. The bill gives staff the right to request time off for training and will apply to businesses with 250 employees from April 2010. It will be extended to all businesses from April 2011. It will however be subject to consultation and the details may change. The Department of Innovation, Business and Skills (BIS) has also published a useful explanatory booklet with advice for employers on the proposed scheme.
Banking
Once again the banks have been hogging the headlines. In mid November Gordon Brown successfully courted voter popularity with a Queen’s Speech that promised a clamp down on bonuses, but he has since discovered that things are never straightforward when dealing with bankers. Against a background of sell-offs and redundancies at RBS and Lloyds Banking group, the governor of the Bank of England, Mervyn King, revealed that the banks had been given a secret £62.billion lifeline at the height of the crisis to stop them collapsing.
The Lib Dem Treasury spokesman Vince Cable was as usual robust in his criticism of the Governor and Alastair Darling’s actions. Accusing them of a cover up, he said: “It is astonishing this was kept secret for over a year. The government has treated taxpayers like children while expecting them to foot the bill. The government was pumping billions into HBOS at the time it was convincing Lloyds to take it over. It suggests the Chancellor knew he was selling a lemon but he did it to save his own skin.”
Fair criticism perhaps, when you consider that the taxpayer now earns 84% of RBS, and HBOS was rescued from nationalisation by Lloyds TSB with the government taking a 43% stake. RBS has also enraged opinion in Scotland with the news that Sir Philip Hampton, its chairman who was charged with getting the bank on its feet, has taken a second job despite receiving a £750,000 p.a. salary from the public purse. Stephen Hester, the bank’s chief executive, has also courted controversy with some share dealing of his own, according to a report in the Telegraph.
The banks have also won a landmark case over overdraft charges on current accounts in the Supreme Court. The high street banks have fought a 17 month battle through three courts in an attempt to argue that assessing the fairness of current account charges is outside the Office of Fair Trading’s powers. Maybe the small business owners will be mollified to hear RBS’s plans to relax lending terms to small businesses – or maybe not.
In the EU Gordon Brown also appears to have been totally out-manoeuvred by President Sarkozy in his attempt to lead the way on banking regulation. The UK failed to secure any of the three key economic posts, instead accepting the appointment of the somewhat low key Baroness Ashton as the new Commissioner for Foreign Affairs. Michael Barnier, the current French farm minister, was appointed the powerful Commissioner for the Internal Market. M Barnier is a sworn opponent of free market liberalism and his appointment caused outcry in the City. As yet it is not clear whether financial services will be hived off to another commission, but President Sarkozy is clearly enjoying Mr Brown’s discomfort as he is condemned for failing to protect the City’s interests. How it will be played in France is of course another different story.
Banking and pay and reward as seen in France
To say that the French are ecstatic may not be an over-statement. Nicolas Sarkozy expressed his “satisfaction and joy” at the nomination of M. Barnier as Commissioner for the Internal Market. He added: “Together we will go and reassure the City. Frankly, after everything that has happened in the financial crisis, it is all the same very reassuring that the French ideas on regulation have triumphed in Europe.”
Romandie News widely reported the British Bankers Association reaction to the nomination and M.Sarkozy’s comments.
Le Figaro simply states that France had the last word. It is the first time that a Frenchman has held this post, which is responsible for the free circulation of goods and services. It explains that EU President José Manuel Barroso hesitated for quite some time, mainly because of the UK and the City’s reticence. But after a “long telephone conversation with M.Sarkozy”, he finally accepted the French request. However, to reassure the UK, Michel Barrier has accepted that a British should take up a key administrative role right in the heart of the commission. Jonathan Fall will become director general of financial services.
Meanwhile, the Walker report on how British banks should be regulated has been widely reported in the French press, with David Walker, Vince Cable, George Osborne and Lord Myners extensively quoted.
International remuneration
A study carried out by ECA International (a company which provides employers with information and advice on terms and conditions for staff employed abroad), predicts that wages in France will rise by 2.7% in 2010, compared with 1% this year.
Information was gathered from 297 multinationals in more than 50 countries. Reporting on the findings, Le Figaro says predictions for France are encouraging. Once inflation is taken into account, the real salary rise should be in the order of 1.6%, and only 7% of companies questioned plan to freeze salaries in 2010, as opposed to 41% this year.
The study predicts an average 3.5% rise in salaries across Europe next year, against 2.2% this year. Russia will lead the way at 10%, followed by Bulgaria (7%) and Romania (6%). Wages in the UK and Italy are predicted to rise by 3% and by 2.5% in Germany and Spain. The Finns and Portuguese will be the worst off with a 2% rise.
