It is a sign of the pressure being felt at the heart of the eurozone that France and Germany, the main drivers of the European project, have had such a public spat in the last 24 hours. Yet the subject of that spat is a subject that has exercised many an economist as the economic downturn has progressed.

To recap, France has argued that years of moderate wage rises in Germany has raised the competitiveness of the latter country at the expense of its neighbours. Christine Lagarde, the French finance minister, has told the Financial Times that Germany should raise domestic consumption, helping weaker eurozone nations to boost exports and shore up their finances. Germany has responded by arguing that its success is based on strong companies and has suggested that other countries would be better off building their own industrial sectors in the German fashion than crying foul about German success.

Who is right? Well, both. Read more »

   Filed under: Economics, Europe, Financial crisis, Globalisation, Investment, Manufacturing | No Comments »

   Filed under: Investment | 1 Comment »

“One Creme Egg please.”

“That’ll be 50p, sonny.”

“I don’t have any cash.”

“Well, I’m afraid you kind of need to…”

“What if I paid you £5 later?” Read more »

   Filed under: Investment | 2 Comments »

The Cadbury/Kraft deal repeats all the same mistakes that generated the downsides of the last twenty years:

1. It’s a deal done to enrich shareholders rather than for the benefits of the company;

2. It’s a deal recommended to shareholders by people with a massive vested interest in the deal going ahead (notably the Board and a mass of consultants);

3. It’s a deal that relies heavily on borrowed money to fund the buyout;

4. It’s a deal that allows the supposedly free operation of the market and its benefits to trump other issues such as national identity, job security, and quality of produce even though we know that the mergers and acquisitions have a poor record of improving company performance;

5. And it’s a deal which goes through because it is largely supported by short-term investors after a quick buck than those with a long-term interest in the company.

Maximum discomfort now needs to be felt by Kraft and by those who will benefit from this deal. Only through public and media pressure might we be able to stop another era of pointless and damaging mergers and acquisitions.

The vested interest that drive this activity deserves to be as big a scandal as the bank bonuses.

   Filed under: Investment | 3 Comments »

Industrialists have some reason to cheer after today’s publication of the Pre-Budget Report.

The PBR contained an additional £200m for the Strategic Investment Fund, the body set up in this year’s Budget to support the ‘New Industry, New Jobs’ initiative. Read more »

   Filed under: Investment, Manufacturing, Pre-Budget Report | Comments Off

Hold the front page! Actually, the Financial Times did hold a bit of the front page. This is for the shock news that the CBI, Britain’s bosses organisation, has, in the FT’s words, “backed Conservative plans to cut the budget deficit swiftly and sharply”.

Before continuing, I should confess that I have a few chums in the CBI. For five years now, I have represented the TUC in meetings with government on manufacturing industry, among other things, and my CBI counterpart and I usually agree much more than we disagree.

But this is serious territory. Read more »

   Filed under: Economics, Financial crisis, Investment, Politics, Tax | 2 Comments »

We are all understandably angry about banker’s bonuses and the seeming irresponsibility of the capital markets. They have cost us a fortune; in wealth, in jobs, in public spending. But railing against the capital markets won’t get us very far unless we have an alternative.

So here is the big question: “What should our capital markets look like? What functions should they carry out, and how would you judge if they are doing a good job?”  Answer that, and we might get a better handle on how policy and action can create the world we want to see. Read more »

   Filed under: Beyond Crisis, Economics, Investment | 1 Comment »

With Britain now in the grip of the worst recession since the 1930s, we’ve got to do everything in our power to safeguard pension schemes. Unless we act now, there is a very real danger that ordinary people could pay a severe price in retirement for the monumental profligacy of City bankers. Read more »

   Filed under: Investment, Pensions | 2 Comments »

We’ve been examining the voting records of institutional investors for seven years now at the TUC, through our Fund Manager Voting Survey (2009 full survey here), and we’re noticing a worrying trend- we’re now down to 40% of fund managers responding to our survey, compared to 68% only five years ago. The data that many other fund managers are choosing to make public outside our survey is often only partial and of a pretty low quality.

Coupled with this, there seems to be a pattern of complacency amongst many funds. The vast majority of institutional investors didn’t challenge the remuneration reports of leading banks in the run up to the crash. Only one respondent (Co-operative Insurance Society) opposed RBS’ acquisition of ABN Amro (which is now widely regarded as one of the worst deals in UK corporate history). Such a strong pattern of siding with the board on controversial decisions looks like fund management on autopilot. Read more »

   Filed under: Investment | 3 Comments »