Tuesday, 24 January 2012
Tube Drivers - are they overpaid?
The revelation that tube drivers have secured packages worth in excess of £60k has surprised many. Everyone goes on about how that is more than senior managers and senior teachers etc etc. But I think that it is a very difficult job to do. Its lonely, its dark, its repetitive and you do need some particular skills such as following complex signals that few people have. Oh, and you really cant make a mistake as that would be dangerous. Working in a tunnel all day needs to be rewarded. Having said that monopoly power helps in that they can flex their muscles to get a good deal.
Wednesday, 11 January 2012
Dubai a city of the future?
Despite the credit crunch there is still a great deal of building going on with multiple towers being erected. None of these are speculative by the developers but have been "pre-sold" to investors. As such these investors have "parked" money in Dubai. They are not interested in the normal rates of returns that developers require and they will be happy to have the building half occupied for the short -medium term. There view is a very long one.
Who are they? The beneficiaries of globalism. Chinese, Emirati, Indians, Greeks, Russians, just about anyone who has more money than knows what to do with. It is just another investment class for them. Besides a tall building in Dubai is a bit of ego trip for some of these people as well. Funnily enough London is benefitting from this influx of foreign cash as well.
All it is doing in London is pushing up prices but in Dubai it is still pushing up buildings!
I was surprised at the fact that Dubai is less "tacky" than I expected. I suspect this is because the Chic brands and European architects had and still do have a big say in the way it looks and the rulers have allowed them a free hand. The new hotels are not too gaudy and have a sophisticated feel.
Why I think the City will succeed.
1. The sheer amount of wealth in the city and its surrounds. Many people are working in Abu Dabi and living in Dubai as the rents are cheaper and so giving Dubai an advantage
2. Geography. The new wealth in Sub Saharan Africa and the Indian Subcontinent is nearby and it is the closest "chic/westernish" city to them. Between the US and China
3. Infrastructure is quite good, by luck more than judgement, as some of the most ambitious projects were put on hold. ( Travelling around the city is now easy )
4. Big businesses want to be there as it is a gateway to Africa/India and the Arab world.
5. Weather ( sort of ) it can be stinking hot in Summer. 45 degrees
6. A commitment to tourism. Egypt has benefitted enormously by investing in this industry.
7. Build it and they will come ( Canary Wharf was a ghost town for a decade and now look at it! )
The Challenges it faces
1. The rise of China could pull more businesses away to Singapore, KL, Hong Kong, Australia,
2. Political instability in the Middle East following tentative steps by the populace against established rulers.
3. Some rules and regulations both religious and political that may put it at a disadvantage against other cities.
Monday, 9 January 2012
What will 2012 Hold
2011 was to many people a year to forget. The Royal Wedding wasn't enough to bring back the feel good factor. The economy has slipped back from some growth earlier in the year and a string of retailers failed to make it past Christmas. More are expected to follow. Employment issues are still hurting lots of people, including the young.
I, however, do not share all the gloom and pessimism that is out there for three main reasons.
1. The Queens’ Diamond Jubilee
2. The London 2012 Olympics and Paralympics
3. Manufacturing growth in automotive, aerospace and Hi Tech
The London Olympics; these are huge events on the world stage with the UK putting on a world class show, it is a great shop window for UK plc.
Jaguar Land Rover has announced that it is going to have to increase capacity to meet the strong demand for its cars especially the exciting Evoque model. Thousands of new jobs are expected to be created over the next few years. JLR has already announced 8,000 new jobs in the last 15 months. Across the automotive sector significant new investment has been announced and new jobs are on the way at Honda, Nissan, Toyota and BMW (Mini). A recent survey of hi tech manufacturing saw more than two thirds stated they will be growing and taking on more people.
We lead the world in many hi tech sectors and growth is expected in many of these.
Of course, the pessimists will say that such optimism will be swamped by the Euro zone which may collapse and will contract and therefore harm our prospects. Once the euro politicos make a REAL decision about a controlled break-up of the Euro, with Greece the first to leave it, then uncertainty will reduce over time. Uncertainty holds back investment. I do see a risk that the Euro has a disorderly collapse, that would be frightening for many. However, UK is sitting outside and can control its own destiny to a greater extent.
I see growth returning after half way 2012, we may skirt with recession in the next few months however. I see growth back on trend in 2013 as investment multipliers kick in and hopefully Euro uncertainty is mitigated.
Lack of lending to small businesses may still be holding back growth but a number of new and dynamic entrants into the funding market will hopefully see a more ready supply of credit. On the flip side expect to see growth in insolvencies of heavily indebted companies that have had their debt "extended and pretended" by the banks.
Rising growth and asset values could lead to banks to believe they can knock these zombie companies down and get money back from the process of asset realisation.
Hawkin's Bazaar is an example of a hugely indebted business. With £46m of debts which are largely unsecured. The banks and PE houses will take a hit on that company’s debts, but I gather that cash was so short wages and rents were not going to be met easily. Many more zombies will fail but thousands of smaller SMEs are surviving without bank debts. Increasing numbers of new entrants into this market include Crowd Funding companies, new banks like Metro Bank will provide some of these companies with finance if they need it to grow.
I, however, do not share all the gloom and pessimism that is out there for three main reasons.
1. The Queens’ Diamond Jubilee
2. The London 2012 Olympics and Paralympics
3. Manufacturing growth in automotive, aerospace and Hi Tech
The London Olympics; these are huge events on the world stage with the UK putting on a world class show, it is a great shop window for UK plc.
Jaguar Land Rover has announced that it is going to have to increase capacity to meet the strong demand for its cars especially the exciting Evoque model. Thousands of new jobs are expected to be created over the next few years. JLR has already announced 8,000 new jobs in the last 15 months. Across the automotive sector significant new investment has been announced and new jobs are on the way at Honda, Nissan, Toyota and BMW (Mini). A recent survey of hi tech manufacturing saw more than two thirds stated they will be growing and taking on more people.
We lead the world in many hi tech sectors and growth is expected in many of these.
Of course, the pessimists will say that such optimism will be swamped by the Euro zone which may collapse and will contract and therefore harm our prospects. Once the euro politicos make a REAL decision about a controlled break-up of the Euro, with Greece the first to leave it, then uncertainty will reduce over time. Uncertainty holds back investment. I do see a risk that the Euro has a disorderly collapse, that would be frightening for many. However, UK is sitting outside and can control its own destiny to a greater extent.
I see growth returning after half way 2012, we may skirt with recession in the next few months however. I see growth back on trend in 2013 as investment multipliers kick in and hopefully Euro uncertainty is mitigated.
Lack of lending to small businesses may still be holding back growth but a number of new and dynamic entrants into the funding market will hopefully see a more ready supply of credit. On the flip side expect to see growth in insolvencies of heavily indebted companies that have had their debt "extended and pretended" by the banks.
Rising growth and asset values could lead to banks to believe they can knock these zombie companies down and get money back from the process of asset realisation.
Hawkin's Bazaar is an example of a hugely indebted business. With £46m of debts which are largely unsecured. The banks and PE houses will take a hit on that company’s debts, but I gather that cash was so short wages and rents were not going to be met easily. Many more zombies will fail but thousands of smaller SMEs are surviving without bank debts. Increasing numbers of new entrants into this market include Crowd Funding companies, new banks like Metro Bank will provide some of these companies with finance if they need it to grow.
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