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Insights from the UK and beyond

from Lawrence Summers:

Why the UK must reverse its economic course

It is the mark of science and perhaps rational thought more generally to operate with a falsifiable understanding of how the world operates. And so it is fair to ask of the economists a fundamental question: What could happen going forward that would cause you to substantially revise your views of how the economy operates and to acknowledge that the model you had been using was substantially flawed? As a vigorous advocate of fiscal expansion as an appropriate response to a major economic slump in an economy with zero or near-zero interest rates, I have for the last several years suggested that if the British economy – with its major attempts at fiscal consolidation – were to enjoy a rapid recovery, it would force me to substantially revise my views about fiscal policy and the workings of the macroeconomy more generally.

Unfortunately for the British economy, nothing in the record of the last several years compels me to revise my views. British economic growth post-crisis has lagged substantially behind U.S. growth, and the gap is growing. British GDP has not yet returned to its pre-crisis level and is more than 10 percent below what would have been predicted on the basis of the pre-crisis trend. The cumulative output loss from this British downturn in its first five years exceeds even that experienced during the Depression of the 1930s. And forecasts continue to be revised downward, with a decade or more of Japan-style stagnation now emerging as a real possibility on the current course.

Whenever policy is failing to achieve its objectives, as in Britain today with respect to economic growth, there is a debate as to whether the right response is doubling down – perseverance and intensification of the existing path – or recognition of error or changed circumstances and a change in course. In Britain today such a debate rages with respect to the aggressive fiscal consolidation that the government has made the centerpiece of its economic strategy.  Until and unless there is a substantial reversal of course with respect to near-term fiscal consolidation, Britain's short- and long-run economic performance is likely to deteriorate.

An effective policy approach to Britain's economic problems must start with the recognition that the principal factor holding back the British economy over both the short- and medium-term is the lack of demand. It is certainly true that Britain faces important structural issues, ranging from difficulties in promoting innovation to deficiencies in the system of worker training. But it is apparent from the relatively low level of vacancies, the reluctance of workers to leave jobs, the pervasiveness across industries and occupations of increased unemployment and the testimony of firms regarding the formation of their investment plans that it is lack of demand that is holding the economy back from producing as much as it could.

from Breakingviews:

Memo to UK’s new air strategists: let numbers talk

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

After years of make-do-and-mend, the UK is once again arguing about the London’s airport capacity, and the possibility of a third runway at Heathrow. Most people seem keen only to rubbish plans they dislike. The right approach is to give airtime to all ideas - and then make a firm decision.

from Jack Shafer:

The leadership lessons of Chairman Rupert

This piece originally appeared in Reuters Magazine.

Rupert Murdoch has endured more crises during his 80-plus years than Richard Nixon and Odysseus combined, so the CEO and chairman of News Corporation can be forgiven for seeming nonplussed by his current predicament. He took over the family newspaper business in Australia at 21, when his father died, and expanded it. He fought the British unions in 1986 and won. He repelled the bankers in 1990, when he was close to insolvency. He has survived two divorces, the purchase and sale of MySpace.com, a bunch of other digital disasters, and even the predations of John Malone, who threatens Murdoch family hegemony with his purchase of News Corp stock. And now, referencing his media empire’s latest fiasco, the British Parliament has deemed Murdoch “not a fit person” to run an international company.

If Murdoch were the sort of pompous captain of industry who collected leadership maxims, Look for Trouble would likely top his list. He craves competition, and has repeatedly bet his company on new ventures like 20th Century Fox, the Fox Network, NFL football and his satellite operations.

from John Lloyd:

Julian Assange’s fall from the heavens

Julian Assange, a fallen angel, remains, as of this writing, a guest of the Ecuadorian Embassy in London. There he has sought asylum to avoid extradition to Sweden, where he faces rape charges that he denies, and, he believes, possible extradition to the U.S., where he fears he may be tried and found guilty of espionage and sedition, for which death is still the extreme penalty.

When we talk of fallen angels, we invoke the original fallen angel, Satan or Lucifer, once beloved of God, the highest in his closest council, whose pride impelled him to challenge for heaven’s rule – and came before his fall to Hell. Assange was an angel of a sort, at least to many. They saw his role as founder of WikiLeaks and leaker of thousands of pages of cables on Iraq and Afghanistan, and then from U.S. embassies all over the world, as the act of a liberator, a rebel with a cause, one who could poke the U.S. in the eye in a new way, with only a laptop at his disposal.

from The Great Debate:

Britain’s Liberals flex their muscles, a little

Every marriage goes through its bumpy patches. Just ask British Conservative Prime Minister David Cameron and his Liberal Democratic coalition partner, Nick Clegg. They have just gone through the most serious spat since they cobbled together their civil union two years ago, when British voters removed Gordon Brown’s Labour government but didn’t give the Tories a clear mandate. The coalition is a marriage of convenience, a dynastic coupling where neither side is under any illusion that love or affection is involved.

The pretext for the current very public disagreement was a Labour motion in the House of Commons demanding an investigation into whether the minister responsible for deciding whether Rupert Murdoch could buy the 58 percent of broadcaster Sky he does not already own broke the government’s own strict code of conduct. Jeremy Hunt, the man at the center of the fight, has been shown to have made up his mind in favor before being given the job of impartially adjudicating and to have been ultra-cozy with the Murdochs, sending Rupert’s son James a high-five text suggesting that the deal was a fait-accompli. The Murdochs admit bombarding Hunt with no fewer than 788 exculpatory emails. Despite this, Cameron saw no problem with Hunt’s lack of objectivity, and Hunt has defied endless Labour calls to resign.

from John Lloyd:

Not all are jubilant about the Queen’s Jubilee

The last few days of Queen Elizabeth’s Diamond Jubilee celebration have prompted the outpouring of patriotism and affection. But it did not faze Britain’s most determined protester. Peter Tatchell generally campaigns against homophobia and for gay rights: In one of his many (and one of his best) public projects, he tried to make a citizen’s arrest of Zimbabwe President Robert Mugabe when the latter came shopping in London in 1999, drawing attention to the president having called gays “pigs and dogs”. (London’s finest arrested Tatchell, not the dictator, for that episode.)

He was out again this weekend, on a wet, cool and blustery day as a flotilla of boats sailed down the Thames to salute the monarch. Just by Westminster Bridge, he and fellow leaders of the British republican party rallied a crowd of like-minded folk and some hecklers, who heard him say that though he thought the queen was personally quite nice, she was at the pinnacle of a pernicious class system, possessed hundreds of flunkeys and hundreds of millions of pounds, and must now stand aside to let the British people elect their head of state, as people should in a democratic country.

Press round-up – April 11

ABI warns over Barclay’s pay deal
Shareholder unease about the pay deals granted to bosses at Barclays intensified on Tuesday as a leading group of big UK institutional investors flagged its concerns about the bank’s pay policy ahead of its annual meeting in a fortnight.   (FT)
UK back on track, OECD claims
Britain is on the brink of a lasting recovery, according to  the Organisation for Economic Co-operation and Development (OECD), as momentum builds in the global economy. (Telegraph)
Unilever end stand-off over pensions
Unilever has struck a deal with two of the biggest unions representing its employees to cut pension benefits after a seven-month stand-off with workers that saw the Anglo-Dutch multinational suffer its first nationwide strikes. (FT)

Goldman’s co-head of M&A retires
Yoel Zaoui, one of Goldman Sachs’ most senior dealmakers, is leaving the bank after a 24-year career advising on some of the biggest deals in global mergers and acquisitions.

Press Round-up – April 10

Facebook to buy instagram for $1 billion
Facebook is paying $1 billion to buy Instagram, a fast-growing online photo-sharing site, in its largest acquisition to date.   (FT)

Spectrum sale in UK fans 4G hopes
Everything Everywhere, the UK’s largest mobile operator by customer numbers, has appointed Morgan Stanley to sell spectrum that could be used to roll out 4G mobile broadband services in the UK ahead of other operators. (FT)

Press Round-up – April 5

Rothschild eye cross-channel unity
The Rothschild family plans to secure “long-term control” over its international banking empire by merging its French and British assets into a single entity and implementing a new form of governance that provides immunity from hostile takeover. (FT)

Amazon probed over corporation tax payment
Amazon.co.uk, Britain’s biggest online retailer, generated sales of more than 3.3 billion pounds in the country last year but paid no corporation tax on any of the profits from that income – and is under investigation by the UK tax authorities. (Guardian)

Press Round-up – April 4

BTG Pactual IPO to value bank at $15 billion
BTG Pactual is set to float later this month in a deal that will value the rapidly growing Brazilian investment bank’s equity at up to $15 billion and the shareholdings of a swathe of executives at more than $150 million each.   (FT)

Dutch bicycle group in talks to buy Raleigh
Raleigh Cycle, maker of the bicycles in Britain, could be sold to Accell, a Dutch bicycle-making company. (Telegraph)

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