Read the full article at the Cardiffian website.
As the UK announced the inflation rate increasing to 4%, data released by the World Bank revealed 44 million people have been thrown into poverty since last summer as a result of rising food prices.
The inflation increase made the headlines today as Mervyn King, the Bank of England Governor will be expected to write to the Chancellor of the Exchequer, George Osborne, explaining why inflation remains about the target level of 2%.
Mr Osborne, in an interview with the BBC blamed in part rising commodity prices on the increased level of inflation.
Yet the Guardian economics editor, Larry Elliott, picked up another angle on the effects of rising commodity prices, although the issue has been pressing for some time now.
Rising food prices will push more people into poverty (World Bank)
According to Index Mundi, an internet market data provider wheat prices have almost doubled year-on-year.
But how does rising commodity prices such as the price of wheat affect people on the ground?
Last week I wrote about high inflation in Egypt contributing to unrest, which is exactly what Elliot draws from Robert Zoellick, the current World Bank President in the Guardian article.
Rising commodity prices passes increased charges to importing countries, causing inflation. This means the price of products will go up to meet the cost of importing commodities and pass this on to the consumer. If wages and interest on savings do not stay in line with inflation, they are gradually eroded and relative wages fall.
But the problem of rising food prices could be exacerbated by the worst drought in China for over 60 years, according to a recent report in this week’s Economist. It writes, if China, which is traditionally self-sufficient in grains, could set wheat prices to rocket should the country start to import wheat.
As global markets are interconnected, rising prices will not only affect us in the UK (and in Wales) as we see petrol prices and food charges going up, but developing countries will be hit even harder as those with little struggle to keep up with rising prices.
Coupled with the rise in Brent crude oil, we should expect Mr King to be writing letters to the government for the foreseeable future.
As protesters erupt on the streets of Cairo for the seventh day in a row, political pressure is mounting on Egyptian President Hosni Mubarak to step down after a 30 year autocratic rule.
While the geopolitical implications for the region are monumental (as Egypt is supported with American aid in part for its favourable relationship with Israel which could change under a new government) the dual force of inspiration from events in Tunisia and economic woe has pushed the north African country to the brink of revolution.
Live twitter feeds and video have made events exciting to watch unfold on the TV or on the laptop, listening to updates from BBC correspondent Jeremy Bowen or Channel four’s John Snow. But behind all the pictures fed through by the media much is at stake.
Dividends have failed to filter down to the Egyptian people despite the country experiencing GDP growth of over 5 per cent in 2010, meanwhile high inflation (around 12.8 per cent) and rising unemployment have caused discontent with the those in and out of work.
And now, tens of thousands of Egyptians are standing up to say they have had enough of the same.
Things may just be about to change – and Egyptians hope it will be for the better, with greater economic prosperity and greater democracy to improve their lives.
But there is one other issue I would like to investigate: do the events in Egypt affect us in the UK or indeed in Wales?
When I visited Cairo in the summer of 2010, our tour guides were predicting an uprising against Mubarak as we passed through what seemed a chaotic city centre with growing unemployment, a place where 20 per cent of the population live below the poverty line.
Of course the tourism industry will take a hit, with over 20,000 British citizens stranded in the country while others holidaymakers and business travellers have been advised by the FCO to avoid making the trip except in urgent circumstances.
The BBC made this clear earlier today. Meanwhile the Financial Times reported yesterday that businesses have started to evacuate staff. Investors look on nervously as shares fell in Cairo by 16% in two days last week.
Similarly, the political unrest in Egypt, which has moderate oil reserves yet its Suez canal acts as an important thoroughfare for oil and gas, have also pushed up the price of it to over $100 a barrel, which will inevitably push fuel prices up in the UK if they are sustained at this high level for any great length of time.
In fact, David Cameron on today’s BBC breakfast show hinted he could introduce a “fuel stabiliser” to help reduce prices for fuel motorists have to pay when asked about the effects of events in Egypt on fuel prices.
So while I watch updates stream through on Twitter, events unfolding in Egypt have reminded me of the importance of economic policy and geopolitics, and their impact on the lives of everyday people on the ground.
Whatever unfolds in the next few days will not only make history of or for President Mubarak, but it will send ripples through neighbouring north-African countries into OPEC, international trade, UK motorists and most importantly, the lives of everyday Egyptians.
AS Ireland laments the death of its Celtic Tiger the Chinese are preparing to see out the year of tiger to ring in the new year of the rabbit. It seems 2010 has brought the death of the tiger, making it an endangered species in the West.
This year finance ministers in the Eurozone have struggled to keep inflation low, ensure banks are furnished with credit and balance the demands of taxpayers against investors. With all the talk of cuts and austerity, what has got us in this mess, and what does 2011 hold for Western Economies?
The Eurozone has had a rocky time. In May the IMF and the European Union announced a support package for Greece to the tune of 120bn euro. In November the same pair had to come to the rescue in Ireland with an 85bn euro package, despite the country’s initial denial that it needed any help. Fears of contagion in the Eurozone have not yet been quashed as some investors anticipate bailout deals for the Iberian peninsula.
For much of the developed western world it has been a year of austerity with spending cuts, tax hikes, bank bailouts, quantitative easing and emergency summits. The UK’s coalition government announced its comprehensive spending review in October, passing the buck (certainly not literally) to regional governments. Next year VAT, a consumption tax, will rise to 20% while spending cuts in the public sector will mean around 330,000 public sector workers will lose their jobs.
“Go East young man” has been the motto of the middle class with increasing numbers of investors and students looking for better job prospects and growth in Asia. Meanwhile the Euro crisis has prompted a move by the Chinese government to pour capital into the west by buying European bonds to ensure European financial stability.
The Welsh View
As for Wales – The Ryder Cup may have brought much international attention in 2010, but in terms of the economy, Wales has received very little good news of late. The office for national statistics released data last month revealing Wales as the poorest nation in the UK. And with an workforce heavily reliant on the public sector, a drive in the private sector may be hampered by poor technological infrastructure.
Reasons to be cheerful
While there has been much doom and gloom in the past year there are still some reasons to be positive for 2011. Wales is set to cash in on London 2012 as it will host 14 football matches and be used as a training base before the games by some international teams. It has never been easier to start a business, with a boom in online start-ups and the Cardiff Bay development has brought life to the Welsh capital. One indicator we will all be watching with anticipation is GDP, as the CBI has predicted 2% growth for the UK economy in 2011.
In Europe it is yet to be seen whether the ECB issues e-bonds or will increase the EFSM to stabilise markets.
Let’s just hope there is not a double dip recession, turning the year of the tiger to the year of the Bear.
At primary school nothing excited us more than snow. Although the teacher wouldn’t let us out of class until the end of the day, we talked about it, thought about it and even planned our next hiding spot to pick off unsuspecting parents and classmates.
People are curious about snow. Who would have thought a frozen bit of water could cause so much intrigue. Some people poke their heads out of their doors just to see what is happening, others inspect the ground in their front garden and on top of their cars, while others still dig a clear path outside their driveway to minimise the risk of being sued.
Then there are those who are unable to resist the juvenile desire to form a rough sort of spherical shape and launch it at a wall, lamppost or passing pedestrian.
But today thousands of people across the UK are not so intrigued or enthusiastic about the big freeze. A White Christmas could put festivities “on ice” this year.
As flights have been cancelled right across the UK, it is important to know your rights and get the customer service you have paid for.
This scenario happened to me today. At the crack on dawn I dragged a heavy suitcase through the mushy streets of Cardiff in search of a taxi or any form of transport to get to the Airport. I checked all the updates at my departure and destination airports, both reassuring that flights were operating as per usual.
Eventually a taxi driver spotted me making deep tracks in the snow-laden pavement and took me to the airport. I wasn’t too bothered about the fare, a hefty £25, as I was sure my flight was due to board shortly. When I got to the desk, however, I was told the flight had just been cancelled.
My flight has been rescheduled for tomorrow, but I will lose out on airport transfers. Is the flight company liable to pay compensation? According to the Airport Users Traffic Council compensation is not handed out when flights are cancelled due to ‘extreme circumstances’, which includes bad weather.
Under the same act, the airline is required to refund me within seven days or offer a re-routing. But I will not qualify for compensation for hotel stays or transfer costs.
Aside from the cost of the snow to individuals, businesses will be hit as employees are stranded and shoppers postpone their big Christmas shop. It was estimated earlier this year the effects of snowy and icy conditions will cost businesses £1.2bn a day.
In the meantime as I am thinking of a plan ‘B’ – it could be a good time of year for ferry companies.
To see what areas have been affected visit the interactive UKsnow website.
It’s official. Wales is the UK’s poorest nation.
A headline posted on the Wales Online website may not have surprised many had it been published in the early 90s, given the economic decline from years of booming coal and metal industries. But decades have passed since then. Surely enough time has elapsed for this country start to develop new economic strategies and to lift itself out of poverty?
Of course, poverty is relative. So what does being ‘poor’ actually mean? The claim made by Wales Online is based on data released by the Office for National Statistics, looking at Gross Value Added per head, a measure of average income. The data revealed the GVA for Wales was just 74.3% of the UK average.
This means that if I live in Wales I will probably be earning 74.3% of what I would be earning if I lived elsewhere in the UK. Not a great advertisement for the young, bright and ambitious.
Some would argue that the GVA does not take into account living costs, which may be true, but it still does not explain the fact that the GVA per head in Wales has dropped from 85% of the UK average GVA to the 74% it is at today. Meanwhile unemployment in the region is at 8.1% of the population compared to 7.7% in the UK.
On that definition Wales is slipping into poverty.
So what is being done about it?
The WAG published a 50 page document in July called d Economic Renewal: a new direction which identified six key sectors to the future of the Welsh economy.
– Energy and environment
– Advanced materials and manufacturing
– Creative industries
– Life sciences
– Financial and professional services
And earlier today, the WAG launched a strategy called Digital Wales. In a statement on the WAG website First Minister for Wales, Carywn Jones, outlined some of the problems facing Wales in the drive to get the country online.
– A third of the adult population in Wales does not use the internet;
– Less than 40% of Welsh SMEs actually sell on-line;
– One in six Welsh employers consider the IT skills of their employees insufficient;
– Less than a quarter of the population currently use online public services;
– High speed broadband is not yet available in many parts of Wales.
As far as I can see, in addition to the many infrastructural challenges to growth in the digital sector there is another significant obstacle to economic growth in Wales. The the job market is heavily reliant on the public sector, which will soon face cuts as austerity measures are implemented.
Now with the explosion of the internet it seems digital industries are more important than ever, but with poor infrastructure will these measures from the Welsh Assembly Government be too little too late?
An uncomfortable week ahead for the Irish
It will be an uneasy week for Ireland as its Budget for 2011 will be announced on Tuesday. The Guardian has called for the Irish politicians to go back to the IMF to renegotiate its bailout package as the Irish taxpayer is expected to pay one out of every five pounds in interest on its debt. If it a renegotaition is not reached, writes the Guardian, a further bailout deal could lead to a ‘Treaty of Versailles’ scale legacy on the Irish Economy.
Sheep Thieves influenced by market trends
It is very rare that the Financial Times makes me laugh, but this weekend’s edition induced a chuckle as I read the headline “Ram-raiders flock to rustle sheep as global trends shepherd in price rises.” It wasn’t so much the Sun-esque headline that grabbed my attention but the fact that farmers will have to be watching the markets to anticipate new trends in the activities of thieves. The FT’s North of England Correspondent, Andrew Bounds, explains: “The weak pound means many sheep are being exported, while traditional sellers such as New Zealand are struggling with drought and sending what lambs they do have to newly wealth Asia. This is helping push up prices at home.”
As prices are pushed up, stealing sheep becomes more profitable. The same happens when commodity prices such as steel rise. In such instances theives have stolen manhole covers.
A round up of the Welsh Business News
Christmas is on its way and many shoppers are holding off for a bargain in the early sales. But Director of St. Davids Mall, Steven Madaley, has warned retailers won’t be slashing prices before the official post-Christmas sales. The higher rate of VAT is to come in this January, encouraging pre-Christmas buying.
The Welsh Assembly Government has announced a consultation session on the future of the banking system as the Independent Commission on Banking (ICB) comes to Wales next week. The ICB will be at the Pierhead in Cardiff Bay on December 8 to debate and hear evidence.
Other Cardiff Related Business News:
More next week.
The Cardiff Business community heard how BBC coverage of UK trade with China does not show the full picture at a business event in Cardiff earlier tonight.
Over one hundred people attending the event organised by the Cardiff Confucius Institute heard from business leaders who are currently operating in with the world’s fastest growing economy.
Representatives from leading Welsh Businesses presented case studies and success stories of working China, dispelling claims in the UK media that a trade imbalance was desperately in favour of the world’s fastest growing economy, which saw its GDP increase by 8.7% last year.
Stewart Ferguson of CBBC, the China Britain Business Council, challenged reports from BBC’s business editor Robert Peston who said Chinese exports to the UK were three times the figure for imports.
In an article on the BBC website earlier this month Mr Peston said: “In 2009 we sold £8.7bn of tangibles and intangibles to China, and we bought three times as much, £25.8bn, from the Chinese,” he says.
“Although over 10 years our sales of goods and services to China have increased by a seemingly healthy 4.6 times, imports have risen by a far greater multiple, 6.6 times.”
Mr Ferguson said although this was true, there were other contributions to the UK economy from China such as £2bn per year coming from Chinese students in China.
He added there are 4,000 British enterprises in China, while UK based accountancy firms dominate the Chinese market and as over 150m Chinese residents are expected to flock to the cities over the next ten years demand could grow for UK goods and services.
Just two days ago the Office for Budget Responsibility (OBR) reviewed the figure of public sector job losses down from 490,000 announced by George Osborne in the CSR last month to 330,000. Despite this good news, both the public and private sector will suffer as a result of government spending cuts.
In these austere times as public sector contracts dry up and the banks refuse to lend, many business leaders will look to streamline their operations to save money and retain staff where possible.
Meanwhile globalisation has enabled companies to outsource to emerging markets like China or India and cut corners where possible to trim their budgets.
But as cutbacks are made, will responsible business practices suffer?
Sitting in his BiTC office boardroom, Mr Simon Harris, told me this is not necessarily the case.
When asked whether businesses were less likely to invest in responsible and sustainable business projects Mr Harris said:
“This is a particularly important time to focus on responsible business practice.”
“Our argument is that to separate yourself out as a business from the rest you need to look at how you are different from the rest.”
“In the retail sector consumers are becoming more aware of where their food comes from and purchase fair trade goods, for example.”
“So, if a business can promote a very positive responsible attitude then there is a possibility that consumers would be more likely go for those businesses than those that aren’t.”
“There is evidence that business leaders across the UK see responsible business practices as being key to their strategic development within the next few years.”
Mr Harris did, however, admit the CSR and public spending cuts could affect operations of the BiTC.
“With reference to the BiTC, as it does receive funds from the WAG, it will be difficult to renew some of the programmes we are running,” Harris said.
“In terms of the private sector if there is a continued or double dip recession it could be more difficult for them.”
Mr Harris said he was hopeful projects such as working in schools and exposing business leaders through projects such as “Seeing is Believing,” would help promote responsible business practices.
In as the recession continues it remains to be seen how business practices will react to tighter budgets and and a contraction in the public sector.
Applications open tomorrow for the BiTC flagship awards the Wales Recognition Awards 2011.
BiTC is a UK based business-led charity, which seeks to promote responsibility in the workplace, marketplace, community and the environment and it is a member of The Prince’s Charities. It’s headquarters are in London.
Times may be changing in the media business, but is The Times changing the business of media?
Will Lewis, the man who brought down scores of politicians by uncovering the expenses scandal with the Telegraph in 2009 and famously broke the Exxon merger with Mobil at the Financial Times in 1999 addressed the Cardiff Business Club. at St. David’s Hotel and Spa in Cardiff Bay last night.
The former Editor-in-Chief at Telegraph Media and current Group General Manager at News International, which owns The Times newspaper, outlined some of the fast-moving changes taking place in the newspaper industry, sharing some of his experiences with the Cardiff business community. He said:
The last five years has seen the digital ecosystem evolve. It offers a real opportunity.
News International, the publishing arm of Rupert Murdoch’s media empire, has been in the spotlight recently as being one of the few news organisations to introduce a paywall for its Times newspaper. According to News Corp the paper has sold 105,000 digital products since they were launched five months ago, although around half of these are monthly subscriptions.
But in his speech last night, Mr Lewis defended the paywall saying there were many changes facing his industry.
He said the rise of search facilities, broadband, iphones, ipads, quality websites and applications have changed the way we consume news encouraging a shift towards digital platforms, a trend accelerated by the rising cost of paper.
There is a change imperative for newspapers.
Mr Lewis said there needs to be more customer contact while branding will play an important role in determining where people choose to consume their news, even on an international basis. “Let’s not restrict content to our shores,” he said.
He hinted many newspapers were not adapting to change quick enough, saying the news industry needs to move away from a strategy of damage limitation.
More of the same is not a recipe for growth.
At a tough time for newspapers Mr Lewis challenged the news industry: “We need to back ourselves to bet on ourselves.”
The paywall issue has been raging over the past few months, with many of the major newspaper outlets holding different opinions about online business models. The Guardian, for example, secures its online revenue base from advertising.
But as the pawyall concept is relatively new it is still unclear whether The Times’ “charge ahead” will pay off or not.
The Cardiff Business Club is a business membership group, which invites with guests of international standing in business, law, politics and other areas to speak on a monthly basis.