Hot air is the UKs main industry

#2
Money money money money.

whilst other nations may have the larger manufacturing bases etc etc, it is mostly done off of credit and/or financial instrumentation set up and administered in the UK.

For instance. Shipping. Responsible for moving 99% of all the worldwide cargo. Mainly financed out of london, with resources deposited here by owners based worldwide.

I could go on. Youve got shares, leveraged debt, risk management, export credits, futures, bonds, metals, aggregates etc etc.

Fair enough we may not produce much in this country (although BAE, Westland, Cummins, CAT, Honda, Vauxhall, as well as all the software and IP producers in the numerous universities may disagree) - but we manage the accounts for most of the world outside of the US.

Also, its a very, very outdated way of looking at exports to say that you need to have a physical good to sell. Name three of the biggest companies in the world - TimeWarnerAoL (IT, Magazines), Microsoft (IT), Pfizer (Medical, patents). They dont build much, or take big factories - their value is in their intellectual products and licences.
 
#3
The article is bang on. We can't survive in the world market by polishing each others shoes and buying houses for ten times what they are worth.

A nation of telephone sanitisers?

Nothing else has the "value added" effect of manufacturing.
 
#4
Also Germany has always been one of the largest exporters in the world. It was set up after the Marshall Plan to be self sustaining and self financing. To be self financing (and therefore less of a burden ot the UN at that time) it needed to be a leading exporter. This process has just carried through to the modern day.

Ref Japan - they have lost their edge in any case. Their 'revolution' was in manufacturing incorporating robotics, which is now a mature industry, studied worldwide. Their current manufacturing base is supported by an interest rate that is in real terms, negative.

Annnd something else whilst im pontificating. The interest rate is so cheap in Japan, that many of the hedge funds and banks borrow yen, convert to dollars or sterling, and then lend that money to the UK and US at higher rates. If Japan increases if interest rate, the banks profits are slashed dramatically, and they put up interest rates to the rest of the world.

Ergo, watch Japan.

France produces bugger all apart from Cheese and hot air.
 
#5
Whilst you make the point that accounts dept of UK PLC has a world class position and does bring in a profit 'Daede'!

the manufacturing section has been dangerously run down! and in some cases completely disbanded and sold off, but without any real replacement for the workers?

Not everyone can work in the city and not everyone has the capital the market and the werewith all to be self employed!

case in point i cannot complete with china, and the practical market for my goods localy is not wealthy enough to support high manufactured high value goods!
 
#7
Halo - appreciate your point, but it all depends on whether you believe in a market economy or not.

If your goods arent being bought by your local market, then theory (and life) dictates that there isnt a market for them.

With regards to manufacturing being 'run down' - if it is costly, innefficient and isnt competing on a global scale, then why should it be subsidised by the tax payer?

Look at Rover - nice cars, sold at a loss for years, subsidised and eventually shut down. Now around the site, you have a huge number of cutting edge engineering firms exporting their knowledge in design and fabrication around the world. You only need to look at any kind of motorsport to see that the engineering is predominantly run by brits.

Another case in point - the oil and gas market. Dominated by the USA and Norway, however we still have a vibrant market, supplying advanced engineering, modelling and 'high end' supply services. Practices developed on the North Sea for well production and stimulation are being exported worldwide,w ith the result being more oilfields coming online overseas.

I always listen to people complaining about the decline in manufacturing, but twenty years ago it was the coal mines, and twenty years before that it was the huge influx of manual labour from the demobbed forces, and twenty years before that it was the great depression.
 
#8
Andy - oil companies values are cyclical.
14% of the worlds oil reserves are controlled by oil companies, the other 86% by national oil companies (Saudi Aramco, PDVSA etc etc).

As oil reserves fall (or oil prices rise) governments will take a higher percentage of earnings as tax per barrel, or will straight nationalise the fields with SLA's to the oil companies.

You are already seeing a repositioning of the European Supermajors (BP's new slogan is Beyond Petroleum, Shell is now the biggest investor in the world in offshore windpower).

Car companies are only the largest by retained asset value - they own big factories, on lots of land, with lots of metal. These were typically bought 20 - 30 years ago, when prices were a magnitude lower.

Also bear in mind with asset heavy companies, they value their own assets. Often these values are inflated to suit whatever borrowng that company has - it is the equivalent of you saying 'i need to borrow another 15 grand. right, change the house price up 15k, then issue shares / debt against the new value'.
 
#9
And more to the point, the Fortune Global is calculated off of balance sheet values, which can be 'tweaked', for better or worse.
 
#10
What we are witnessing is a transfer of economic power from West to East. China and India are the world's manufacturers and in a free market this would always happen as wages were too high in the West and too low in the East. The East is playing catch up and eventually their wages will be on a par with ours.

The only real way to produce wealth or money is to take raw material and process it - i.e. add value. Financiers do not produce wealth and manufacturing is always the hub of the economy and provides growth. This is an old fashioned opinion but I believe it nonetheless.

It will not happen overnight but eventually Chindia will achieve economic superiority - the problems will really happen when they want political superiority!
 
#11
Daede said:
Halo - appreciate your point, but it all depends on whether you believe in a market economy or not.
Indeed the market economy is a vital part of industry and commerce, however I belive it has too be tempered with national interest also!

Daede said:
If your goods arent being bought by your local market, then theory (and life) dictates that there isnt a market for them.
This is true, but I don’t expect that constant diversification to chase a market is sustainable by all business as a profit model let alone the retooling reinvestment need too diversify in some cases!

Daede said:
With regards to manufacturing being 'run down' - if it is costly, inefficient and isn’t competing on a global scale, then why should it be subsidised by the tax payer?

Look at Rover - nice cars, sold at a loss for years, subsidised and eventually shut down. Now around the site, you have a huge number of cutting edge engineering firms exporting their knowledge in design and fabrication around the world. You only need to look at any kind of motorsport to see that the engineering is predominantly run by brits
I firmly believe that government just throwing subsidy after subsidy towards business is both foolish and a waste of tax revenue, but tax revenue has been raised to support the country is it not! Therefore intelligent use of government funding towards business is vital.

As an example and as I live in the SW farming were has been the dominant industry here, our farmers cannot it seem compete on a global scale should we let them become theme parks and become totally dependant of foreign food imports?


Daede said:
Another case in point - the oil and gas market. Dominated by the USA and Norway, however we still have a vibrant market, supplying advanced engineering, modelling and 'high end' supply services. Practices developed on the North Sea for well production and stimulation are being exported worldwide,with the result being more oilfields coming online overseas.
Without a doubt we are still at the cutting edge of development in this and many fields but the tiger economies are studying our methods and will move too supply there own experts as they have done with much manufacturing!

Daede said:
I always listen to people complaining about the decline in manufacturing, but twenty years ago it was the coal mines, and twenty years before that it was the huge influx of manual labour from the demobbed forces, and twenty years before that it was the great depression.
I being of mature years ‘sighs’ have seem much change in both the private and public sectors, I have seen the fall of industrial Britain, and while the world of business never stands still I don’t believe we can sustain growth on just the city and a few top level niches!



Silver_Bull said:
The only real way to produce wealth or money is to take raw material and process it - i.e. add value. Financiers do not produce wealth and manufacturing is always the hub of the economy and provides growth. This is an old fashioned opinion but I believe it nonetheless.
Exactly!



edited for mongo editing :oops:
 
#12
Daede,
Don't you feel that having the City of London as the only driver of the economy over exposes us? That investment in true human resources, real education, degrees and the sciences is a must if the City is to remain as the engine for the economy. That to seemingly neglect manufacturing removes any depth the economy may have.
 
#13
The West still has the edge in engineering and technology but the East is now producing many graduate engineers - we produce many fine Media Studies graduates! Eventually Chindia will overtake us in this area as well.

After leaving the army I worked in manufacturing for many years as a project engineer and have witnessed its demise in the UK (and US). I now run a steel fabrication company with most of my customers in the construction industry. I have adapted and even though my company manufactures I actually class it as a construction subcontractor. We have adapted to survive - many others did not.

Manufacturing in the past allowed the working man increased wages - as is happening in Chindia. In the West the working mans wage has been at best stagnant (allowing for inflation) for the last few years.
 
#14
Silver_Bull said:
The West still has the edge in engineering and technology but the East is now producing many graduate engineers - we produce many fine Media Studies graduates! Eventually Chindia will overtake us in this area as well.
I have to say that this is so true my field is fashion and graphic design at uni i nealry half of my class was from mainland china and were here to study and looking foward to returning home too work in the top layers of their manufacturing industry, engineering and the sciences are aslo following this trend!



Silver_Bull said:
Manufacturing in the past allowed the working man increased wages - as is happening in Chindia. In the West the working mans wage has been at best stagnant (allowing for inflation) for the last few years.
here lies the rub whilst we strive to keep our labour costs down by holding down wages, this reduces the disposable income to keep our economy bouyant. :(
 
#15
Is the issue whether you are manufacturing or not a bit of a red herring? Surely the issue is whether there is a positive contribution to the balance sheet of UK plc. If it be making saleable goods or selling a service ABROAD then the contribution is positive, if it is just recycling money within the UK then the contribution is neutral, but if importing either service or goods then the effect is negative. Hence the balance of payments is a paramount indicator of the nations financial health.

If money is trapped inside an economy or more is earned from external sources and placed into that economy the ecomomy grows, but if money comes out then it contracts. Where the UK has problems is that whilst the economy has apparently grown it has done so on the back of higher goverment borrowing and windfall taxes. It is not a sustainable position.
 
#16
halo_jones said:
here lies the rub whilst we strive to keep our labour costs down by holding down wages, this reduces the disposable income to keep our economy bouyant. :(
Unfortunately the consequence of globalisation (apart from cheap electronic goods) means that wages will fall in the West and rise in the East until parity is achieved.

It suits the politicians as it keeps the "inflation" figures down. Don't forget that the true definition of inflation is an increase in the money supply and that asset price increases are a result of this!

Never believe Tony or Gordon when they tell you high oil prices feed inflation - high oil prices (and all asset classes) are a RESULT of inflation. True inflation in this country (as defined by an increase in the money supply) is running in excess of 10%.

Simply put - the more dosh that is sloshing around the economy the higher prices will rise.

Sorry for moving off topic slightly.
 
#17
Silver_Bull said:
halo_jones said:
here lies the rub whilst we strive to keep our labour costs down by holding down wages, this reduces the disposable income to keep our economy bouyant. :(
Unfortunately the consequence of globalisation (apart from cheap electronic goods) means that wages will fall in the West and rise in the East until parity is achieved.

It suits the politicians as it keeps the "inflation" figures down. Don't forget that the true definition of inflation is an increase in the money supply and that asset price increases are a result of this!

Never believe Tony or Gordon when they tell you high oil prices feed inflation - high oil prices (and all asset classes) are a RESULT of inflation. True inflation in this country (as defined by an increase in the money supply) is running in excess of 10%.

Simply put - the more dosh that is sloshing around the economy the higher prices will rise.

Sorry for moving off topic slightly.
I think that you have actually nailed the topic, parity in wages is perhaps starting too happen as 'Chindia' hold on our markets increase.

However if we do not strive to create work for our work force what will happen in the long term! that is my question and one that i have yet too see a perfect answer.

Liabour have squandered many assets in the last 15 years and allowed and in some case encouraged the selling off of UK plc.

And as for the city ask your self who owns both LLoyds of london and the London stock exchange!

While foreign investment is an important part of our economic health, remember that when push comes to shove and they feel the pinch he will shut down his foreign production, before they shut down there home manufacturing or services.
 
#18
I think you need to take that in context.

The prime driver of any economy is its access to, use and control of finances. This is true for any country. The problem in this country is that everything is centred on London. We have the parliament here, the financial markets, the biggest airport, the most immigrants etc etc. We do not have any manufacturing.

It is a great big fish bowl, that the rest of the UK looks at and imprints its own prejudices upon.

However, you cannot argue that the UK economy is purely driven by the City.
The biggest company by revenue in the UK is BP - it pays something like £325,000 tax an hour to the government - this isnt including the personal tax, Vat etc etc that all of its employees and their dependants pay. BP employs a large amount of people in Lowestoft, Aberdeen, Liverpool, Edinburgh, Bristol. Not only this, but BP designs and researches almost all of its new technology in the UK, in conjunction with UK Universities, with UK students. That’s true investment in human resources, showing students how to understand what they learn has real commercial application. This encourages investment in the sciences, mathematics and other areas - we are still market leaders in technology for vehicles, aircraft, arms, heavy engineering, pharmaceuticals, chemicals, photovoltaics and so on.

I would suggest that economies such as those of Manchester, Glasgow, Bristol, Newcastle, are much more diverse and therefore are deeper in the truer sense.
As they have had the emphasis taken from them, they have matured as areas relatively sufficient in other industries, but again you need to look at history. The north has always been, and will continue to try to be a manufacturing base - you can go back to the cotton and wool processing in the 1800's in manchester, fishing and farming further north, coal mining up the 80's - the North has always been at the centre of UK production. Hence when you mention the decline of manufacturing, you will always get the same voices proclaiming how many factories have closed down, how many people are out of work etc etc.

The true fact is that (I hate labour with a passion by the way) - unemployment is about 1m people, of which something like 75% are long term (ie don’t want to work). So whilst manufacturing has reduced, these people are now working in design, technology, engineering, consumer based, property, construction, shipping, financial services, you name it.

London and the south east has always been a global centre of finance and related services - from shipping and ship broking with the East india companies, insurance with Lloyds from the stone age, to commercial and investment banking - these are mature industries that have grown and expanded with the capital. They have not appeared overnight, and neither will they disappear overnight.

You state 'I don’t expect that constant diversification to chase a market is sustainable by all business as a profit model let alone the retooling reinvestment need too diversify in some cases' - you are misinterpreting the theory of a market economy. If the market matures and you do not, you go out of business. If the market sources goods from another source at a lower price, you go out of business. The chase is always to be ahead of the market, or offering something that it cannot get elsewhere, not trying to enforce a local produce that is overpriced and under-quality.

With regards to national interest tempering market forces - real world example here - koreans pay 4000% more for their rice due to trade restrictions on imports, than they would if they sourced it from over seas.

That is the equivalent of a loaf of bread from tescos going from 1 pound to 40, because the government decides to keep the farmers working.

Next 'Without a doubt we are still at the cutting edge of development in this and many fields but the tiger economies are studying our methods and will move too supply there own experts as they have done with much manufacturing' - that’s happened since the year dot. It happens in war fare,it happens in the school playground, it happens in classes. If the other guy is better than you, you watch what he does and copy it. But if hes clever, he gets better, and the guy that copied him is still doing things the old way. To say 'tiger economies copy us' is a bit of a non-argument (think of what weve copied from Japan).

Also, in case anyone hadnt guessed, im a bit biased as I work in the city (and used to live in the wilds of Scotland), so ive seen both sides of the coin.
 
#19
Just to clarify Halo, the LSE is a PLC, and is owned by anyone who has access to a share trading account.

Lloyds is owned by its partners and backers, who underwrite worldwide risk. These partners are based anywhere in the world, but their funds are parked firmly in the UK, where they earn interest, and pay tax on said interest.
 
#20
Annnd Silver - 'Never believe Tony or Gordon when they tell you high oil prices feed inflation - high oil prices (and all asset classes) are a RESULT of inflation. True inflation in this country (as defined by an increase in the money supply) is running in excess of 10%.'

Wrong.

High oil prices are dictated pretty much by Saudi Aramco. They are currently investing over 11bn USD into their infrastructure, and always publish a 'base price' below which their investment plan is unsustainable - currently that is USD 55 per barrel west texas light sweet.
Ergo, for them to stickto their investment plan, they will keep prices above USD 55.

I believe you are referring to the price of fuel at the pump, which is subject to taxation at 55p per litre - this is linked to the fuel escalation mechanism, which is tied to inflation. Basically means that from now on, you will pay £1.00 (+/- 10p) for unleaded.
 

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