Apart from plenty of other rapidly developing crises, the economy is starting to turn seriously bad. Growth has stalled and is going backwards and the cost of living crisis is becoming all too real for millions of people. Businesses that rely on significant amounts of energy are seeing huge increases in their bills and are jacking up prices and laying off staff. The public sector unions are spoiling for a fight and we can expect to see disruption to transport and health services and probably other areas too. Truss is going to have plenty to deal with on 5 September but seems uniquely unqualified to do the job.
We have falling export trade, labour shortages and rising costs of red tape due to Brexit. The FT report that hospitality is the latest sector to reveal around 172,000 EU workers have left the industry and not returned. All of this is bound to have an impact.
On Newsnight last night, Sir Charles Bean, a former deputy governor of the BoE was talking about how ‘tight’ the labour market is with 500,000 people fewer in the available workforce without mentioning Brexit at all
Some Brexit supporting economists are claiming other EU nations are also suffering from low growth and rising energy costs but none as badly as we are. In particular we now have the worst inflation in the G7 - according to the BBC quoting The Daily Telegraph - again all without using the dreaded 'B' word.
The ONS yesterday announced that CPI had reached 10.1%. This is the worst inflation for 40 years, mostly of course driven by high energy costs but there is no doubt that Brexit has contributed to the problem and will make it more difficult to solve.
Anybody who lived through the seventies and eighties knows how painful, divisive and problematic inflation is once it gets out of control. Nowadays the government uses CPI or Consumer Prices Index because it's lower than the old RPI or Retail Prices Index and so sounds better. But RPI is important because it includes mortgage interest payments and they are rising as the Bank of England tries to bring inflation back to the 2% target.
These are the numbers published yesterday for July 2022. Note RPI was higher than CPI by more than 2%:
• RPI – 12.3%
• CPI – 10.1%
• CPIH – 8.8%
RPI includes mortgage interest payments: this means it is “heavily influenced” by house prices and interest rates while CPI takes no account of housing costs but factors in all the other goods and services that people buy. CPIH tries to include some housing costs but uses an approach called “rental equivalence”: this is not the mortgage payments but how much rent the householder would pay for an equivalent property. Clearly rents are not rising as quickly - at the moment.
As far as I can see, since early last year the BoE and the OBR have had to constantly increase their forecast for inflation. It wasn't long ago that we were told it would peak at 10% and start to fall back. At the moment I think the forecast for CPI is for 15% next year but I would be surprised if that forecast did not get worse as businesses begin to pass on increased costs to consumers.
Unlike the seventies, our present problems are not caused by an excess of money but deep supply issues including shortages of labour, and will be far harder to resolve.
I don't believe the present generation of politicians understand inflation or its impact on the economy and the lives of millions of people. We are entering the next bout of uncontrolled price increases in a far worse position than we had in the 1970s. At least we could afford to pay our heating and food bills. There were no food banks delivering basic foodstuffs to families, now there are about 2-2.5 million people a year receiving three days' worth of emergency food from Trussell Trust foodbanks alone.
Trussell have 1400 food banks and there are another 1100 independents. This winter is going to be absolutely brutal - even if it's a mild weather winter.
Liz Truss
Liz Truss has been recorded telling some civil servants that British workers need to 'graft' more. This isn’t a surprise since she co-authored a book in 2012 which said Britons are the worst idlers in the world. She says we lack 'skill and application' and its about 'mindset and culture' and that workers want 'easy answers.'
Here it is:
On 1:30 Liz Truss actually admits it's not the EU that caused Britain's problems.
— philip #FBPE 🇺🇦 (@philiparrogers) August 16, 2022
Why is no one picking up on that? https://t.co/Oj5WgIjdn4
She is certain to be the next prime minister in a few weeks so her opinion, even if it’s a secret one, means something. I think what she said is simply articulating a widely held belief in Tory circles, the sort of stuff bosses come out with when their businesses are failing. In sales for example you hear it a lot of it. Lost an order? It must be the salesman’s fault.
Needless to say, she is wrong. The experience of Nissan in Sunderland is proof that given the right management, the right investment and training, British workers are just as productive if not more than anywhere else.
In fact, British workers probably work harder than others in France or Germany but in doing so produce less because they aren’t working as efficiently or with the right equipment.
We know Germany installs ten times as many robots as we do. You can see this in the numbers compiled by the International Federation of Robotics (IFR). They have done this for years and years so it’s hardly a revelation that a German worker produces more. Other countries are not far behind Germany. We are at third world levels.
We do have an attitude problem but it’s often borne out of frustration that the management is asking the workforce to do impossible things or things everyone except the senior staff knows are idiotic.
In my experience in Europe, bosses and owners don’t expect miracles and they understand their markets and know what customers want unlike many British manufacturers.
When I started selling French machines in 1993, you were also responsible for overseeing the installations and on the first order I received (not huge but still £180,000) I dropped in unannounced a few weeks after start-up and bumped into the customer's MD showing a magazine editor our two “wonderful machines.” It had never happened before and was a lightbulb moment for me.
For years at British companies, I thought that in selling you had to expect a certain level of blowback (or worse) from customers when the product or system you had sold them didn’t live up to the claims. If you were smart, you let the contracts people take the flack and you tended not to go back if you could avoid it. The French taught me that it didn't have to be like that. The Italian company I worked for at the end was even better.
It was a pleasure to go back to old customers and be told how good the equipment is or how well its working. That does wonders for your confidence and helps you to sell more.
At the French plant in Alsace, nobody seemed to work especially hard. they had two hour lunches and left on time but during working hours they were very serious, extremely efficient, used top quality components and had first class engineers who applied their experience and learned from it.
These were sack palletising machines, reasonably complex but certainly not rocket science yet there has never been a single British designed machine. There were a few American designed units and several Italian designed machines, no more than ten at most, built under license here in the UK and that’s it. All the others - hundreds and hundreds of them - came from Europe, mainly Germany or Italy.
Not one British company ever invested in designing their own palletiser. Amazing.
This isn’t due to the workers who I assume would have been happy to assemble the machines. It was down to management and perhaps to the quality of engineers. Managers spent so much time fire-fighting problems elsewhere they probably couldn’t face the risk of even bigger ones while the engineering department got a design that worked.
How are 'lazy' British workers supposed to influence that?
Truss is I am afraid as wrong about British workers as she is about everything else.
