An interesting article in last week’s Economist looks at whether Britain really can “rebalance” its economy with “exports at its heart”.  It looks at the Jaguar, Land Rover plant at Halewood as an example of what Britain can achieve.  The factory worked overtime during the Christmas holidays to keep up with export demand, and there is talk of expansion plans that will create 1500 new jobs.  In the year to November 2011 exports of cars to China rose by 23%, and to India by 67%.  Britain must “BRIC” it and look to the emerging markets of Brazil, Russia, India and China, and our well established trading partner the USA, to help us export our way out of recession.

At the moment, only 5% of our total exports go to the “BRIC” nations.  The USA imports more UK products than any other single country and judging by this month’s reduction in unemployment, the USA’s economy is recovering well.  These are the markets that the “Economist” says the UK should aim to supply.

The current situation of looking to Europe, which at present takes 52% of our exports is like being “shackled to a corpse” complains the conservative M.P. Douglas Carswell.  It asks whether Britain’s diminished manufacturing industry can respond quickly enough to lead our recovery.  To our advantage, however, the pound has devalued by nearly 25% since 2007 on a trade weighted basis and we have a government promising to remove “red tape” and promote manufacturing.  Now is the best chance, we will ever have to rebalance the economy.

Lets hope the government make the correct decisions to allow this to happen!

You can read more HERE.

 Kodak has filed for bankruptcy in a bid to survive a liquidity crisis after years of falling sales related to the decline of its namesake film business as digital cameras have taken over the market. (Guardian)

Fresh & Easy has been an expensive US road trip for Tesco, with the chain racking up losses of £700m since the first stores opened in the autumn of 2007. To date Tesco has ploughed more than £1bn into establishing the US venture (Guardian)

Workers at John Lewis are unlikely to strike over terms and conditions. Staff also receive employee perks – worth £70m this year – ranging from holiday homes to sailing clubs, theatre outings, theme park admissions, and even a choir, all subsidised. It also one of the dwindling number of companies to operate a final salary pension scheme which is funded entirely by the company (Guardian)

Inflation fell at the fastest rate in three years in December, to a six-month low of 4.2%, raising hopes that the squeeze on hard-pressed households’ living standards will start to abate in 2012.

Here are the 4 pictures for this week’s quiz. Entries to the blogteam via sdw@kingschester.co.uk or post your entry as a comment.

Winner is the first to identify all 4 stories.

With the recent inflation figures being released for December, a sharp fall from 4.8% to 4.2% suggests that Mervyn King’s predictions for the future of the UK economy are coming to life with last year’s spike in inflation followed by rapid decreases all seemingly occurring. So is it the time to celebrate?

Inflation is the increase in the general price level, as measured by the Consumer Price Index (CPI) and the Retail Price index (RPI). So surely a decrease in it is something to cheer for? This is obviously true for households, the constant complaints evident in supermarkets of how expensive everything is means that these could be over. However, we shouldn’t bring the champagne out just yet. With prices still increasing at a rate of 4.2%, this is much larger than the increase in wages so prices are still eroding consumers’ real income.

Being British, then, doom and gloom is still evident. Unemployment is continuing to rise and wage growth below inflation. And, of course, dear old Europe continues to find itself under increasing amounts of pressure. However, apparent stagnation of China’s economy, decline in global commodity prices and unemployment continuing to rise could mean that the rate of inflation is set to fall still further, a bonus for all consumers.

Royal Bank of Scotland confirmed on Thursday it would cut about 3,500 investment banking staff, in an overhaul of the unit. It had alreadymade about 2,000 investment bank job cuts in 2011. The plans bring staff cuts announced since mid-2011 or reported to be in the works to133,500 at major banks. (Guardian)

More than £4bn was wiped off the stock market value of Tesco on Thursday after Britain’s biggest retailer delivered its worst Christmas sales performance in decades and warned it would see “minimal” profits growth this year. (Guardian)

Fears that the US might ban imports of orange juice from Brazil drove orange juice futures to an all-time high on Tuesday as health regulators began testing all incoming shipments for traces of an illegal fungicide called carbendazim. Orange juice futures jumped almost 11% on the news. (Guardian)

The biggest leap forward in Britain’s rail network since the 19th century was announced on Tuesday with a £32.7bn investment in high-speed rail linking London with Birmingham, Manchester and Leeds. The HS2 high-speed rail scheme to be running by 2026 and completed by 2033, will almost halve some journey times between England’s biggest cities and make it significantly quicker to travel from the north of England and Scotland to London. (Guardian)

EDF Energy raised expectations of widespread cuts in household power bills from other “big six” firms by reducing its gas bills for 1.4 million customers by 5%. The move – to come into effect on 7 February– came on the day that an investigation by the consumer group Which? showed the top firms received 4m complaints last year. The next day, British Gas announced it was cutting its standard tariff by 5% with immediate effect and Scottish & Southern Electricity said it would reduce gas bills by 4.5% with effect from 26 March. (Guardian)

The company admits it misjudged the desire of its British customers for promotional discount coupons in these hard times and its underlying sales revenue consequently fell, when those of its main rivals either rose or flatlined.

Nearly £5bn was wiped off the company’s stock market value on Thursday after the supermarket juggernaut hit the wall during the peak selling season. The firm has broken 30 years of unchecked financial success with the shock warning that UK profits could fall in the coming year. The upset sent shockwaves through the City with the shares closing down 16% – thought to be its biggest one day tumble ever.

It wasn’t just the profits warning that inflicted a 16%, or almost £5bn, dent in Tesco’s stock market value. It was chief executive Philip Clarke’s admission that “long-standing business issues” must be addressed urgently. He is happy with Tesco’s prices, but that’s about all he can find to cheer. Quality, range and service must improve, he says.

These days Tesco’s rivals have copied Tesco’s tactics, such as how to use data from loyalty cards, and added a few of their own ideas. As Clarke put it, the competition unleashed a “barrage of coupons” over Christmas while Tesco stuck with its Big Price Drop campaign. The coupons won. Also Tesco’s leadership in non-food lines, such as clothing and electrical goods, now looks less of an advantage.

It will be interesting to see will be able to cope with their problems and still make their predicted £3.7bn profit. But will their future strategies be more successful than their recent one? Or is this the beginning of the end of Tesco’s dominance?

Here are the 5 pictures for this week’s quiz. Entries to the blogteam via sdw@kingschester.co.uk or post your entry as a comment.

Winner is the first to identify all 5 stories.

Here are the business news in pictures stories from last week of Michaelmas Term:

“European Union leaders agreed on a new ‘fiscal compact’ to tackle the eurozone’s debt crisis. Here are the main points of the agreement, reached in the small hours of Friday after overnight talks.” (Guardian)

“Aviva’s sponsorship of ITV’s hit drama Downton Abbey strays too close to advertising, rules Ofcom. Under the media regulator’s rules, programme sponsorship is treated separately to TV commercials and must not “contain advertising messages or calls to action”, but Ofcom said the sponsorship credit ‘amounted to an advertising message’, which therefore broke broadcasting code rules.” (Guardian)

“HSBC has been hit with a record £10.5m fine for selling unsuitable products to almost 2,500 elderly customers. The bank’s NHFA subsidiary is also expecting to pay £29.3m in compensation for the way it advised elderly customers, who had an average age of 83, to buy investment bonds that were used to help them pay for their long-term care.” (Guardian)

“The Indian government has suspended its decision to allow international supermarkets to invest in India’s £300bn retail market in the face of political opposition. Finance minister Pranab Mukherjee, pictured, was reported on Monday to have told leaders of both rightwing and communist opposition parties that the government would postpone the move to allow global companies such as Walmart, Tesco and Carrefour into India until more people were convinced of its merits.” (Guardian)

“The Mr Men and Little Miss brands are to join Hello Kitty, the latter’s Japanese owner Sanrio has confirmed. After completing the purchase on Tuesday from UK company Chorion, which is being broken up, Sanrio said it was launching a UK-based subsidiary with the aim of making more international acquisitions.” (Guardian)

Sir James Dyson has warned China that it risks being expelled from the World Trade Organisation (WTO) over copyright breaches including rip-offs of his inventions. China’s reputation among foreign investors is being diminished by the flouting of product copyrights and a two-speed patent system that appears to discriminate against non-Chinese applications.

The inventor of the bladeless fan and the bag less vacuum cleaner says “They are creating an unlevel playing field by taking our technology and selling it all over the world.”

Dyson argues that China benefits from strictly monitored IP regimes outside its own border, but has failed to crack down on domestic offenders as it pursues rapid economic growth.

Dyson is pursuing 20 design or patent cases around the world, many of them related to the distribution and sale of products made in China. The inventor did not put a figure on the amount of lost revenue but said the total was “quite a lot”. The business has spent $3m (£1.9m) on legal fees.

Dyson claims the disadvantage was driven home by discrepancies in the bureaucratic process of applying for patents. Dyson said Chinese applications take less than a year, while it can take five years for a foreign business. “Under WTO regulations, each country is supposed to treat foreign patent applications with the same speed as local applications. But they are passing Chinese application in months and taking five years for ours.” He added: “If we have someone copying our products in China we cannot sue them until our patent is passed. This has not created a level playing field.”

How are foreign inventors meant to prosper in china if they are just stealing their ideas? Is the Chinese government doing enough?

I hoped that we now had a government capable of “joined up” thinking, yet here we are again with government policy being made up on the back of an envelope. At a stroke the government has decided that the subsidy on “feed-in tariff” on electricity from solar panels will be cut from 43.3 pence per unit to 21 pence per unit from December 12^th 2011.

An installation industry employing 25,000 people which generates £280 million in tax revenue and VAT is being  threatened, to save £220 million pounds in tariff subsidies!

We must appreciate that the government has to keep reviewing its expenditure in the light of concerns about borrowing and debt but surely this subsidy cut has been made without sufficient warning.  To halve the subsidy with little more than a month’s notice, leaves contractors and the public feeling that the government cannot be trusted.

It also casts doubt on whether the Government can meet its target of 20% of electricity generation being met from renewable resources by 2020. If it does not, the decision may come back to haunt the Government as the UK becomes ever dependent on energy imports.

Useful follow up articles:

CBI accuses Government of ‘own goal’ over solar power (Telegraph)

Industry ‘trust’ in Government in tatters (Telegraph)