This Financial Times video report looks at the economic transformation of East London prompted in part by high levels of inward investment from the Far East. Consider the economic benefits of this investment but also the challenges of rejuvenating a part of London which for decades has lagged behind the rest of the capital in nearly every economic and social metric,read more...»
More on the implications of the UK’s massive current account deficit. Geoff has put together almost everything you need on the topic here, and he points out that the main implication is a net leakage from the circular flow of income, reducing AD and weakening multiplier effects.
A current account deficit is not necessarily a disaster; after all, imports are good too, sustaining our standard of living and is partly a reflection of the demand for intermediate goods our economy needs to stay efficient.
I’m going to pick up on the the statement that there is nothing wrong with a trade deficit. It simply means that a country must rely on foreign direct investment or borrowed money to make up the difference.read more...»
A significant 5 year rail infrastructure investment plan adds weight to the belief that capital spending will be a major driver of the next phase of the UK economic recovery. Network Rail is state owned, a not-for-profit business whose commercial returns are reinvested into the rail network.read more...»
There seems little that is stopping the surge in London house prices at the moment but do you think the rapid acceleration of prices is good for either London or the wider UK economy?read more...»
A century ago, Scotland probably had the most globalised economy in the world. Since then, especially since the 1960s, Scotland has de- industrialised, and because industry is so much more globalised than other sectors, the economy has also ‘de-globalised’.read more...»
Here is a good example of an inward investment project likely to create a strong multiplier effect for the economy of East Yorkshire.read more...»
One type of market failure that contributes to inequality and unemployment is the geographical immobility of labour.
If the labour market really ‘cleared’ effectively, wages would equalise across the economy. Workers would drift away from regions with low wages and/or high unemployment towards areas where wages were higher and labour was scarce.
Why are people finding it hard to move across the UK in search of work?read more...»
If you are looking for a solid example of a manufacturing industry that experienced deep long term structural contraction then the UK steel sector is a good one to use.
Global steel output has more than doubled in the last four years but what remains of the UK steel industry is battling against rising costs and the challenge of meeting stringent climate change policies. The Financial Times visits Celsa's plant in Cardiff to find out if UK steelmakers still have a viable future. Can British producers take advantage of a rebound in steel output and profits if the European Union economy shows signs of a more durable and stronger recovery?read more...»
The government wants more new homes to be built, so too do hard-pressed home-buyers facing a continued problem of low property affordability. But cautious construction companies are reluctant to press ahead favouring share buy-backs (returning money to their shareholders) and only a limited expansion of new building.read more...»
Are skills shortages holding back the economic recovery? The Financial Times is running a video series looking at the problems businesses are having in recruiting people with technical skills. The apprenticeship programme is expanding but will it be enough to meet the growing gap between demand for and supply of engineers and other specialist jobs in industries surrounding precision engineering, nuclear power and many others?
According to an article in the Financial Times:
"Migrants are filling a fifth of jobs in industries such as oil and gas extraction, aerospace manufacturing and computer, electronic and optical engineering because of a lack of skilled British graduates."read more...»
It was an industrial dispute that reshaped not just the British coal industry but also many other sectors. In 1984 a national strike broke out pitting Arthur Scargill against Margaret Thatcher. Channel 4 news looks back at the 30th anniversary of the start of a year-long bitter battle whose scars are still apparent.read more...»
Mind the Gap! Evan Davis has produced two superb programmes on the regional imbalances in the UK economy. In the first he focuses on the agglomeration / network economies of scale that help to explain the skew in business investment towards the capital. In the second he looks at which cities elsewhere in the UK might be drivers of renewed growth of incomes, investment and growth! Here are the links:
Mind The Gap Episode 1 - click here
Mind The Gap Episode 2 - click hereread more...»
Cost benefit analysis, economies of scale, energy economics, regional development, economic growth, competitiveness ... there is a veritable a tidal wave of applied economics in this article from the Guardian on plans for Tidal Lagoon Power.
Peter Marsh, formerly the manufacturing editor of the Financial Times, has let me know of the imminent launch of an unusual and interesting photographic project linked to the world of manufacturing. It's an exhibition of pictures of UK manufacturing operations taken by some of the world's top photographers and which will tour Britain from the end of January to September next year.read more...»
If you didn't quite grasp the importance of agglomeration economies in driving and sustaining growth and wealth creation in cities, then this wonderful piece from Bridget Rosewall will do it I am sure! It highlights the importance of vision and a willingness to take risks in bond-funded infrastructure projects in London (and elsewhere). Bridget Rosewall's new short book is available direct from the publishers - click here for details
With London’s Victorian sewage system struggling to cope, the 25km Thames Tideway tunnel is intended to boost capacity. But the £4.2bn Super Sewer project has run into considerable and vocal opposition. London's main sewers are over 150 years old and built for a city for 2.5 million people. The population of London is now over 8 million and when heavy rainfall arrives, there are frequent and sizeable discharges of raw sewage into the river Thames. 39 million tonnes of untreated sewage flushes into the Thames in a typical year - that’s enough to fill the Royal Albert Hall 450 times. The sewage discharges puts the UK in breach of the EU Urban Wastewater Treatment Directive.
Critics of Thames Water argue that they have under spent on sewage system maintenance over the years despite recording persistently high profits. Thames Water announced £150 million profits in 2012.
Residents around the 21 proposed construction sites have protested about the externalities connected to the project. Other opponents argue that the money would be better spent on cheaper sustainable urban drainage techniques.
Future generations will benefit but today's water users will pay most of the construction cost with higher water bills imminent for a number of years to come. The Thames Water proposes adding £70 to £80 a year indefinitely to the average bill of Londoners to fund the 16-mile sewer from Acton in west London to Abbey Mills in east London. But a report by Bloomberg New Energy Finance calculates that the tunnel could be built for between £30 and £35 per household per yearread more...»
The phrase ‘industrial policy’ seems to take us decades back in time. In 1964, a powerful catchphrase of the new Labour Prime Minister, Harold Wilson, was the need for Britain to embrace the ‘white heat of the technological revolution’. Sadly, by the 1970s this vision had deteriorated into a list of institutions, stuffed with dull businessmen and trade unionists, meeting to decide how to prop up yet another failed sector of the UK economy.
But the concept is now back in vogue. Perhaps surprisingly, given the historical experience, the coalition chose to preserve Labour’s Technology Strategy Board (TSB) quango. The TSB has a budget of £400 million to “accelerate UK economic growth by stimulating and supporting business-led innovation”. A key way in which it plans to do this is through the purchasing decisions of the public sector.read more...»
The cost of renting property in many parts of the UK continues to rise - would rent controls make any difference? Here is an updated Unit 1 economics revision presentation.read more...»
UK immigrants who arrived since 2000 are less likely to receive benefits and less likely to live in social housing than UK natives. What’s more, over the decade from 2001 to 2011, they made a considerable positive net contribution to the UK’s fiscal system, and thus helped to relieve the fiscal burden on UK-born workers.
The positive contribution is particularly evident for UK immigrants from the European Economic Area (EEA – the European Union plus three small neighbours): they contributed about 34% more in taxes than they received in benefits over the period 2001-11.
These are the central findings of a comprehensive analysis of the fiscal consequences of immigration to the UK, published today by the Centre for Research and Analysis of Migration (CReAM) at University College London.read more...»
The recovery in the British economy is now firmly established. Output in the services sector, the largest part of the economy, is above the previous peak level prior to the crash in 2008. There is a widespread myth that the recovery is fuelled by debt-financed personal spending. Yet since the trough of the recession in 2009 the economy as a whole has grown faster than spending by consumers.read more...»
There are lots of resources out there for students and teachers wanting to cover the debate about HS2 - here is a brief selection of video clips on the debateread more...»
As part of our introduction to micro economics we have been looking at the shortage of housing in the UK. The chronic shortage of affordable and suitable housing raises many micro (and macro) issues and I find it a good example of an issue where different policy measures can be looked at in a non-technical way as a path into supply and demand analysis. It also covers the ground with topics such as scarcity, changing needs and wants, affordability, cost-benefit principles, opportunity cost and production possibilities.read more...»
The International Business Times is producing a series of short videos on life, work and enterprise inside Tech City - a fast-growing hub of digital start ups and established tech businesses centred around Old Street / Digital Roundabout. The clips reveal the energy of the start-up economy in this part of London and the importance of network effects, collaboration and attracting human capital in accelerating routes to market for lean start-ups. This series of short videos is worth a look if you are interested in this potentially significant catalyst for growth in the UK economy and to learn more about the factors that influence the emergence and success/failure of start ups.read more...»
Britain's exports of whisky have been growing strongly in recent years helped by a lower pound and fast-rising demand from whisky drinkers in emerging markets. Whisky exports set to rise to £4.5bn by 2017 even though sales to traditionally strong markets in the European Union have stalled because of persistent recession in countries such as Spain, Portugal and Italy. This Channel 4 news report looks at the experiences of two whisky producers - one a small-scale manufacturer and the other the giant Diageo to consider prospects for UK exports as a way of strengthening the recovery,read more...»
In a world dominated by hyper-productive (but often loss-marking) industrial milk farming here is a heart-warming, touching and rewarding documentary that has swept critics off their feet at film festivals during 2013. The Moo Man is a remarkable story of a maverick farmer and his unruly cows, filmed over four years on the marshes of the Pevensey Levels. In an attempt to save his family farm, Stephen Hook decides to turn his back on the cost cutting dairies and supermarkets, and instead stay small and keep his close relationship with the herd. How can a milk farmer operating on such a small scale compete and survive in today's world? The Moo Man provides some revealing answers!read more...»
The UK Coalition government has introduced a controversial welfare cap - imposing a maximum on the total social security spending per year for each family. The welfare cap limits households to £26,000 a year. Couples and single parents receive no more than £500 a week in benefits, while the limit for single people is £350, although there are some exemptions.
The cap is designed to ensure that benefits payments do not exceed the income of the average working household and is designed both to cut total welfare spending and as part of a strategy of improving incentives for people to actively look for and take paid work.
Critics argue that a welfare gap does little or nothing to address deeper underlying problems such as the soaring cost of renting property and the lack of affordable child care.
Social spending varies greatly across different countries. The Economist live chart below looks at some of these differences.read more...»
Frustrated by the noise of trans-Atlantic airplanes flying low overhead, a school near London's Heathrow airport has come up with an innovative solution - superadobe structures originally designed for use in earthquake zones. This short news video from Reuters is a vivid reminder of the negative externalities created from jet aircraft - in this case disrupting lessons and playground activities.read more...»
Arising from a recent visit to Sheffield, Peter Marsh, formerly the Manufacturing editor of the Financial Times, wrote an article on how Britain's steel city might benefit from the new industrial revolution - here is the link to follow
We link here to a recent lecture given by Professor Doug McWilliams at Gresham College that might be of particular interest to students and teachers who are taking the transport economics option.
London has some major disadvantages that would make any transport policy difficult. However, even given the constraints, the current policy mix is so far away from ideal that it could be costing each household about £1,000 more than it should if transport were to be organised rationally. The lecture outlines some proposals for transport reform in the capital.
Miners made redundant from Maltby Colliery in Yorkshire many of whom with decades of experience faced years on the unemployment register when the mine closed earlier in 2013. But some have been thrown a lifeline with the rising demand for miners in the UK potash industry.
FOOD banks are a rapidly growing phenomenon in the UK. A few years ago, they barely existed, but an estimated half a million people now make use of them every week. On the face of it, it seems that poverty has sadly become endemic since the financial crisis, with many families unable even to feed themselves. Real incomes have declined since 2007, putting pressure on household budgets. But the pace of increasing demand is surprising.
In fact, the food bank is a market. It is, however, complex – with particular features which mean that it is likely to grow rapidly, exactly as we have seen. The key point is that food is not the only commodity traded.
The scale of the new London Gateway Super deepwater Port is truly stunning and its importance to the economy as a trading nation is hard to underestimate - Britain will have a new world class hub port in a key location impacting on many trades and services in and around the South East and beyond. It has taken 10 years to establish and build this huge new infrastructure project, building eventually started in 2008.
Behind the port sits Europe's largest logistics park connected to the South east by road and rail.
This Financial Times news video looks at the background to the project - it is a good example to consider of the macroeconomic consequences of the investment. What price a new Thames Estuary airport (supported by Boris Johnson) to amplify the transformative impact in the years ahead?
Update: BBC news (November 2013) - click hereread more...»
This morning's news stories include an implied threat to close MOSI (The Museum of Science and Industry) in Manchester, in order to keep the Science Museum in London open.
Should museums charge admissions fees or not? Is a museum a merit good or not? If entry is free, are you tempted to avoid placing money in the transparent collection box as you go in? If is free, how should the museum fund its activities - encouraging donations, marketing guidebooks, souvenirs, themed gifts, or reliance on government grants? This begs questions about how a government allocates scarce funds?
Florence's Uffizi Gallery does not charge children or pensioners, amongst others. Can you identify which museums have more price inelastic demand, and face a smaller drop in visitor numbers should charging be reintroduced? Why would visitors pay €18 to climb Pisa's famous leaning tower?
mind that AQA had set a question on this topic in 2004. "Using the data and your economic knowledge, assess the case for and against providing free entry to museums."
MOSI is supposed to be one of Manchester's biggest visitor attractions, but would there be a negative multiplier effect if it closed? Should the cultural heritage be preserved? This clip from Yes Minister helps focus a debate.
According to the Scottish National Party, after the referendum on independence next year, Scotland will be a land of milk and honey. The highest per capita levels of public expenditure in the UK can easily be sustained. The whole of the revenue from North Sea oil and gas will belong to Scotland, regardless of the wishes of England and the Shetland Isles. Scotland can remain within the EU, despite clear statements from Brussels that it would have to reapply for membership, and the near certain Spanish veto this would attract.
Here is a streamed (and downloadable) presentation on policies to cut unemployment in the UK economy.read more...»
He's back but he's still angry! In this latest version of The Angry Economist, our favourite curmudgeonly analyst wants to know students' opinion on George Osborne's economic policies - no wonder his blood pressure has risen!
This simple Powerpoint resource is aimed at getting your students to analyse and evaluate economic policies - 8 of the Chancellor's policies are presented and the Angry Economist randomly picks a macro-economic objective to consider. All you have to do is get 8 volunteers from your class to do the analysing - a great 10 minute activity whilst revising for the up-coming macro exams at either GCSE, AS or A2 level.
Here is a list of the policies the Angry Economist wants students to look at (you may wish to recap on them before you start the activity):
- Reduce Government debt
- Increased number of private sector jobs
- Increased allowance before Income Tax needs to be paid
- Cut Corporation Tax
- Set up Regional Growth Fund
- Funding Lending Scheme
- Deregulating some planning rules
- Frozen Council Tax
Of course, the beauty of this resource is that you can change any of these policies to whatever you want them to be.
Click on this link to download the Angry Economist 2.
PS. Click on this link to have a look at the original Angry Economist.
Where have all the miners gone? To judge by the rhetoric of the BBC and other Leftist media outlets, whole swathes of Britain lie devastated, plagued by rickets, unemployment and endemic poverty – nearly thirty years after the pit closures under Lady Thatcher!
The reality is different. There is indeed a small number of local authority areas where employment has never really recovered from the closures in the 1980s. But, equally, there are former mining areas which have prospered.
On the morning that news of the death of Margaret Thatcher came through on the news wires, I was visiting Woodhorn Colliery Museum near Ashington in Northumberland. It was an eagerly anticipated journey having seen the Pitmen Painters (now on a national tour) a few weeks earlier.
The play celebrates the work of the Ashington Group of painters who began studying art as part of an Workers' Educational Association course in the mid 1930s and eventually found themselves on a life-changing pathway as they drew inspiration from their life and work in the pit communities of the North East.
If you are in the North East please pay a visit to the Woodhorn Colliery Museum. First of all, it is free save for the £3 car parking charge. Second there is a stimulating, evocative and often moving exhibition on the rise and eventual fall of the coal mining industry in the UK. Just a few weeks back Maltby Colliery one of the last deep mines in England, was closed as owners Hargreaves Services said it was no longer viable. And the Daw Mill colliery in north Warwickshire recently shut down with 650 jobs being cut, after a big fire at the facility which made future use of the mine impossible. Despite a plethora of open cast mines, there are now only two deep mines left in the UK at Kellingley Colliery in Yorkshire and Thoresbury Colliery, Nottinghamshire both run by UK Coal.read more...»
Here is another film to add to our collection of films with an economic dimension. Promised Land from Oscar-nominated director Gus Van Sant stars Matt Damon and is an anti-corporate thriller that centers on the controversial natural gas process of fracking.read more...»
On Thursday 31st of January 2013, the long-awaited LSE Growth Commission Report was published and launched in London. The document itself is available for download from this link and I urge all teachers and students interested in growth, competitiveness and the fairness agenda to have a look at it. It is full of rewarding and important insights into the drivers of balanced growth in a modern advanced economy.
I will be adding new resources and links to this blog following the launch event
Key Points from LSE Growth Report
- Strong rule of law
- Generally competitive product markets
- Flexible labour market
- A world-class university system
- Openness to foreign investors and migrants
- Independent regulators including competition authorities
- Strengths in many key sectors including high end manufacturing
LSE Commission Growth Agenda
- Greater autonomy for schools, tackle the long tail of under-performance. Conditional cash transfers for families to pupil attendance and performance. Focus league tables less on % attaining 5 A-C grades. Reveal performance at the bottom end.
- Concentrating on skills (improving human capital) gives people the resilience to recover from global shifts in the division of labour
- Critical infrastructure essential for competitiveness in modern economy. For the UK, transport and energy are infrastructure areas with biggest issues; there has been a lack of clear strategy and lots of dithering / political delays.
- Huge opportunities for UK - industrial revolution driven by search for low-carbon technologies driving innovation - can the UK keep up?
LSE Commission proposes:
- 1) Strategy Board (for planning)
- 2) Planning Commission (for delivery)
- 3) Infrastructure Bank (for funding)
- Innovation is the third channel for increased growth
- Problems in UK capital markets mean innovation is not properly funded - short-termism remains a structural weakness of the markets
- More competition in retail banking
- Business bank that prioritises lending to SMEs and innovative firms
Changing the compass of economic performance
- Commission suggests that focus on GDP is not helpful
- GDP misses out on who gets the growth and measures production not income
- Need more focus on Median Household Income
- Median household income and GDP per capita have been decoupled since about 2002. GDP no longer tracks it
UK trend growth rate can be lifted by 0.5% with effective structural reforms - large compound effect on incomes over the long run
Institutions and incentives matter for growth. Macro stability important too. UK politics too short term and adversarial. Fundamental weakness is the failure to create a stable policy framework.
More focus needed on evidence based policy making to make government smarter.
Here Professor John Van Reenen, Director of CEP and co-chair of the LSE Growth Commission, presents a 'manifesto for growth' for the UK economy over the next 50 years, backed up by the Growth Commission's report.read more...»
Today's announcement of routes for the HS2 project highlights the importance governments ascribe to public works projects.
At our Teaching the Global Economy at the RSA (London) in November 2012, the distinguished development economist Professor Paul Collier spoke on some of the leading development issues of the moment. A-level student Mark Austen was there to scribe some notes on the talk and the subsequent Q&A discussion. Here are his notes together with some connecting links and other resources. We hope that you find them useful.read more...»
Premier Foods is the UK's largest food manufacturer but in November 2012 they have announced the closure of two large bakeries that have - for many years - produced Hovis bread for supermarkets. The closure of the factories follows the loss of its £75m-a-year contract with Co-operative supermarkets. Hundreds of jobs are set to be lost in the spring of 2013 with damaging consequences for the local economy. What types of unemployment can you associate with these factory closures? What measures might be appropriate in addressing the extra unemployment problem that will result?
BBC news: Hovis shuts bakeries - click here
Hovis bakery worker devastated - click here
Peter Marsh's talk at our Global economy conference in London on Monday challenged us to think in fresh terms about what manufacturing is and the opportunities for British businesses to make successful headway in premium and precision manufactured products in a fast-changing global environment. Here are the slides from his presentation. The FT special reprot - Making the Future is well worth tapping into - here is the link. We have also linked to some of his recent video pieces for the Financial Timesread more...»
My AS macroeconomics students this week are researching the topical issue of a living wage and the possible macroeconomic effects. The title of the assignment is:
"The introduction of a living wage in Britain to supplement a minimum wage will improve the long term performance of the UK economy" Discuss. (20 marks)
I have put together some news articles and videos on this topic using a Pinterest Board. You can find it by clicking here
BBC Newsnight Report on Living Wages - July 2012 - click here
Michael Heseltine’s report on economic growth came out last week. It contains 89 recommendations. A mere 57 varieties, to recall the famous Heinz slogan, might have connected it more with popular culture.
The conventional wisdom is that bus transport in many countries including the UK is an inferior good - demand declines as real incomes fall. Consumer perceptions of bus travel are hard to shift and default choices when it comes to transport are often deep-rooted and tough to change. The total annual number of bus journeys made in the UK experienced a long term decline from the 1950s for nearly forty years although a recent House of Common select Committee report found that, since the mid-1990s, there has been an upturn in total passenger numbers for Great Britain, largely as a result of the introduction of national concessionary travel schemes and passenger growth in London.
Perhaps this rather wonderful video from Denmark does more than most to make bus travel cool once again! What do you think?read more...»
The headline news from the Financial Times could not be starker. Ford Motors has announced the closure of its last two remaining assembly plants in the UK with the probably loss of thousands of jobs. The Ford Transit plant in Southampton will close in early 2013 and a tooling factory will close in Dagenham, east London. Workers in these two factories are paying a heavy price for the sustained fall in new vehicle orders and production since the credit crunch came in 2007. Since then there has been a more than 20 per cent decline in total demand for vehicles. New passenger car registrations in Europe are expected to be just over 9 million in 2012 compared to 13 million in 2011 and 15 million in 2007. Demand for commercial vehicles has also suffered as businesses have cut back on their capital investment.
Ford is not alone in making difficult decisions to restructure their European business as a way of stemming losses and maintaining competitiveness in a hugely difficult market. Many other leading car manufacturers are taking steps to lower their production costs and survive this turbulent period:read more...»
This article in the BBC about the 21st anniversary of the launch of the Big Issue newspaper acts as a timely reminder that we can find our very own examples of absolute as well as relative poverty in the UK.read more...»
Former Labour Deputy Prime Minister John Prescott was once (perhaps) quoted as saying: "The Green Belt is one of Labour's greatest achievements, and we intend to build on it!". Danny Boyle's dramatic and wonderful London 2012 Olympic opening ceremony "Isle's of Beauty" began with an unforgettable rural landscape which was soon to be transformed by an altogether harsher industrial landscape during the pandemonium.
For many years we have regarded our greenbelt protected land as a bulwark against urban sprawl and over-rapid commercial and industrial development. But this is about to change with a change in planning laws and regulations that will make it easier to turn farmland into business parks and new housing?read more...»