Busy doing something

It’s off to work we go this summer, according to Will Mooney, Carter Jonas partner and head of commercial in the eastern region, as he considers the difference between being in business and being productive

It is a truth universally perceived that nothing happens in the summer months. It is, apparently, a ‘slow news’ time. Great. So there’s nothing going on in Greece, Syria, Turkey or, closer to home, with welfare reform or the Labour Party’s leadership race that’s been worth reporting or commenting on during July and August will see little of substance to report either? If only it were so.

Clawing back from the weighty economic and political scene, I know that with the exception of a two week break away from the office – but not work, necessarily - my summer will continue to be as busy as the rest of my year and as so it is for most business peers.

But is being busy the same as being productive?

Not if recent reports hold true. The UK’s productivity levels are a fifth lower than the G7 countries’ average. In a post-recession position this should not be the case, it seems. Some commentators point out that the recessions of the 1980s and early 1990s burst forth in to a time of increased productivity, fuelling innovation and growth.

At this point, we have to acknowledge our fortuitous position in the East of England in being a location where innovation is the main driver of business activity - whatever the wider economic picture.

The UK economy is acquiring form for underperformance. Called the ‘productivity puzzle’, there are ongoing efforts to try and unpick the reasons why.

One strand involves the examination of the methodology and definition of ‘productivity’. In an age where much business is based on knowledge, data and information in providing services, it may no longer be credible or useful to measure ‘productivity’ in the way it can in economies where industry and manufacturing dominate.

Greater minds than mine are charged with considering how advice and services which, eventually, lead to revenue generation can be calculated and judged against conventional measures of productivity.

Indeed, is it even relevant to judge productivity in a complex world where social and business time and networks mingle? Many a coffee shop brainstorm session has brought forth an idea which, down the line, has resulted in revenue generation for many parties – not least the coffee shop owner.

How can we measure the contribution of the cappuccino to productivity? Yet without that setting and stimulant, the idea which eventually resulted in money being made might not have occurred.

It’s an over-simplification of the modern productivity puzzle but it illustrates the complexity of a business life away from a manufacturing setting where input versus output can be assessed more easily.

Another view of the puzzle suggests that the poor productivity can be blamed on quantitative easing (QE) and low interest rates.

This view argues that many businesses are only around post-recession because of the ‘easy money’ supplied by QE and the perpetuity of low interest rates. In to this mix comes the tolerance of lenders who, mindful of an atmosphere of bank-bashing, have been reluctant to pull the rug from under these unprofitable and unproductive businesses when they really should have done so.

In this view, as long as these ‘zombie companies’ have been able to service their debt, they have survived and have held back the natural innovation and productivity surges which should occur post-recession.

With the Bank of England, for the second year in a row, making mid-summer murmurings of interest rate rises in the not too distant future, perhaps August is a actually a good time to bury what will be bad news for some.

Will Mooney MRICS
Partner
Commercial, Cambridge

The business of America is our business

As the race for the White House in 2016 begins in earnest this summer with big hitting Republican and Democrat candidates lining up for their party’s nominations, Will Mooney, Carter Jonas partner and head of commercial in the eastern region, takes his cue from a past-President

In quoting the 30th President of the United State of America, it must be acknowleged that what Calvin Coolidge actually said in a 1925 speech was, “the chief business of the American people is business”. In being misquoted for the best part of a hundred years, the essence of what he said has remained true in characterising the clout with which the USA has dominated global relations, particularly those with Europe, for the past century.

Even when positions of international isolation and economic protectionism were taken by successive presidents after 1919, there were US treaties which looked to its Pacific and Central America interests and negotiations which resulted in several formal ‘payment plans’ so Europe could begin to settle its World War One debts.

Edging towards the Second World War in the late 1930s, saw Franklin Roosevelt attempting to move Congress towards an understanding of ‘collective security’. By September 1940, it authorised the spending of $10.5 billion on arming the nation and, in the first quarter of 1941, the Lend Lease Bill was enacted which enabled Britain’s continued participation in the war. On 07 December that year, Pearl Harbour was bombed and isolationism was no longer an option.

The last repayment on the Lend Lease agreement was £45 million pounds and was made under the Blair government in 2006. Tony Blair wasn’t born until 1953.

When that post-1945 period of European history could still be called ‘modern’, any ‘O’ level scholar of the subject - and of the day - would be able to reel-off successive speeches and policies of the period in which the United States’ willingness and ability to be at the centre of things was crucial.

No longer the Prime Minister when he made it, Winston Churchill’s ‘Iron Curtain’ speech of March 1946 was made in Missouri in the presence of President Truman. In September that year, albeit in Zurich, Churchill referenced the creation of a ‘United States of Europe’.

NATO – the North Atlantic Treaty Organisation – is an alliance which stands to this day with considerably more member countries than its original set of north western European nations, the USA and Canada when the Treaty was signed in 1949.

Foreign policy wise for decades post-1945, ‘the domino theory’ prevailed in those countries who did not want others or themselves to succumb to European communism and the expansion of the Soviet Union and the influence of Chinese communism across Indo-China. It was President Eisenhower who gave voice to this as the policy driver in a landmark speech in 1954.

Crucial to backing up any policy position in any stage of history is economic might and, for the USA in the 20th Century, this was built on the supremacy of its industrial and business wealth. The £13 billion dollars’ worth of aid - worth circa £120 billion in modern times – made available by the USA in form of the 1948 Marshall Plan saw many European countries avail themselves of it in re-building and modernising after the Second World War.

As to what our ‘O’ level selves might have made of where we are now? Well, in writing an essay about the nature of the USA’s influence on the European and wider world stage in the first decades of the 21st Century, we would have to consider the importance of trade and aid and could argue the supremacy of the former.

Will Mooney MRICS
Partner
Commercial, Cambridge

Regions to be cheerful

Will Mooney, Carter Jonas partner and head of commercial and professional services in the eastern region, ponders the politics of the powerhouses.

The recent Budget statement acknowledged the potential of regional powerhouses and the considerable heft that economically successful regions contribute to the national and international performance of the UK.

Not before time. On the face of it, there appeared to be positive policy initiatives which could be good for the eastern region and spending plans for the kind of things for which this region – if you consider Cambridge as the heart of the hub - is known and recognised.

There will be £11 milllion to invest in new technology incubators to be channelled through Tech City UK – the government body which funds technology clusters. A £40 million pot will assist with research in to the ‘Internet of Things’ which, in his speech, the Chancellor rightly identified as the next stage of development in ‘the information age’.

Then there was the potential of a deal whereby 100 per cent of growth in additional business rates could be brokered for and kept by local authorities in areas like Cambridge, among others. This was described in the speech and in the subsequent media coverage as a ‘roll out of the Manchester model’ and a key component in formulating a northern powerhouse which sees Manchester and Leeds at the metropolitan heart of this hub.

Naturally enough, many in business in this region gave what is couched as a ‘cautious welcome’ to this and other elements of the Budget and for understandable reasons.

It is churlish to say it, but there has been a full-on eastern powerhouse for the best part of 20 years and does the powerhouse model, in modern times, really orginate in Manchester? We’re a long way from the heyday of the wool trade in which industrial Manchester was the centre of that economic power push.

Equally, one could argue that at a county level, never mind a regional level, there are issues of disparity and identity with which we struggle here in a way that a northern powerhouse might not. Although try telling that to the Houses of York and Lancaster.

In Cambridgeshire, there is a marked distinction between the north and south of the county; try lumping Ipswich in with Norwich and you won’t be popular; locations in Hertfordshire and Essex which border London have more in common with each other than their country or coastal county compadres. And whither Lincolnshire and Northamptonshire? Arguably, the former has more in common in its southern rump with north Cambridgeshire and the latter, a compatability with the Oxford corridor.

While government and civil service assistance to provide the broad policy and economic framework and infrastructure in which any region can seek to prosper is to be welcomed, it is questionable whether direct intervention - some might say interference - in trying to impose a regional identity and common cause is the best use of their time in the modern age.

After all, the latest detailed study of the genetic sources of the UK, has identified that there are 17 dominant genetic clusters which tend to reflect the de-facto, regional identities, not bureaucratic boundaries, within our nations. The largest of these clusters covers southern, central and eastern England and dates back to the the collapse of the Roman Empire when Angles and Saxons settled here.

Will Mooney MRICS
Partner
Commercial, Cambridge

Negative split times

Will Mooney, Carter Jonas partner and head of commercial and professional services in the eastern region, feels the economic recovery is now a marathon not a sprint.

No athlete myself, I am, however, familiar with runners’ focus – which can border on obsession – on their negative split times. My familiarity extends no further than knowing that, in essence, this means finishing a run faster than you started while acknowledging that there might be a sag in the middle.

Look at coverage of and comment on the Bank of England’s latest Inflation Report and it could be concluded that the UK is in that sag. We definitely started this post-recession recovery slowly and we gathered pace in the past 18 months. While we know we’ll get there in the end, the doom and gloom first glance coverage of the prospect of deflation is enough to bring the Eeyore out in any of us whose natural disposition doesn’t tend toward the Tigger at the best of times.

But the prospect of a fall in UK interest rates to the point of a negative rate was laid out in conditional terms by Governor Carney. Interest rates might fall but could rise and banking sector activity would suggest a tendency to expect the latter. Last year, we bemoaned the prospect of the rise of interest rates and many people adjusted their borrowing and spending accordingly merely in anticipation of something that has yet to happen or might not happen for a good while yet.

Financial markets don’t deal in something called futures for nothing.

The current weakness of the price of commodities such as food, oil and energy - as cited by the Bank of England – shouldn’t really be mistaken for debilitating deflation. What goes up must come down and vice versa.

Thinking of the pound in our pockets, may be deflation is not so bad for commodities in the way it is for consumer durables of which the ‘big television’ is used as shorthand. We might put off buying the new big telly but we only bought our old big telly back in the days of easy credit when consumer durables weren’t treated as durable because they were so easily replaced.

But look where that got us?

Day to day consideration of the wider UK economy can be troublesome for those whose business, professional and personal interests are rooted in this region which is so dominated by the success of Cambridge. The latest Centre for Cities report once again confirms the economic pre-eminence of Cambridge among the top ranking cities of the UK. The city scores top marks in the ranking of cities across a range of measures including the lowest number of claimants for Job Seeker’s Allowance (JSA), the highest skilled workers, the most number of patents granted per 100,000 population and the highest house price growth.

It has become normal for Cambridge to occupy these top slots in the Centre for Cities annual rankings but it’s important that this normality shouldn’t be mistaken for complacency. Those of us privileged to live, work and thrive here are acutely aware of the national and international context in which Cambridge succeeds.

There’s talk of economic normality on the horizon for the UK from some commentators but it can be a struggle to recall what that is – if we ever had it in the first place.

Before the next Bank of England inflation report, there will be a General Election and politics and democracy have a habit of interrupting economic programmes.But what do I know? It’s all Greek to me.

Will Mooney MRICS
Partner
Commercial, Cambridge

Splurge, purge and debt

Setting aside the peculiarity of making an Autumn Statement in early December, the dust has settled, for the time being, on the brouhaha which accompanied the Chancellor of the Exchequer’s latest diagnosis and prescription to remedy the financial ills of the nation.

The country is riddled with debt and it needs to be cured by short and mid-term pain for long term gain it seems.

It is politically acceptable to talk about the national debt again in a way it probably hasn’t been since the 1970s. Then, we were all about the Public Sector Borrowing Requirement and inflation, the 3-day week and the winter of discontent.

All the mainstream Westminster parties - and those aspiring to become so after the next election - are no longer embarrassed to mention the ‘D’ word again. And not only to talk about how indebted we are as a nation, but also to set out their stall as to how we can decrease this public debt.

It is okay to talk about repaying our debt, even if in repaying it what we actually mean is reducing the cost of servicing it.

In the fiscal year 2018-2019, implementation of the Government’s current programme will see us save £18 billion in interest payments. Borrowing is falling. Next year it will be £75.9 billion, falling from £91.3 billion this which, itself, has dropped from last year’s £97.5 billion.

We are aiming to be in the black to the tune of a £23 billion suplus in 2019-2020 but we are cautioned it could get messy in order for this to be achieved. Being in the black is a laudable business aim.

While it’s fine to talk about our national debt and how we can repay it, it’s still not fashionable to talk about our private debt in polite company as that’s even messier, but we have to start somewhere.

Tucked away in the detail and the in-depth coverage of the Chancellor’s statement was notice of our intention to pay back or, at least try to clear, the nation’s historical debts – some of which date back to the early 18th Century.

The refinancing of World War One debts in 1932 took the form of a bond replacing a gilt which was first issued in 1917. Now - well ,on 09 March 2015 to be precise - the British Government is set to redeem this bond which, in total with other war bonds since the penultimate year of the Great War, has cost £5.5 billion pounds in interest alone.

HM Treasury has made it known that it is the intention to repay, at the appropriate point, ‘legacy bonds’ which shored up borrowings against other expenses incurred during our nation’s history.

Some of these bonds and gilts financed the Napoleonic Wars, the setting up of the Bank of England and the clean-up when the South Sea Bubble burst and rocked the finances of the country in 1720.

Which, if any of these specific, perpetual debts are to be revisited have yet to be confirmed in detail but the fact that we, as a nation, are beginning to address our nationalised indebtedness tells the story of our times more than of those past.

Let’s hope we’ve eaten, drank and been merry in the past few weeks; for next May, we vote.

Will Mooney MRICS
Partner
Commercial, Cambridge

Our ping-pong recovery

It was exactly three years ago when I was advised that ‘being on the brink is the new normal’ for what, at the time, was the foreseeable future. In 2011, many weren’t willing to assign a specific number of years to ‘the foreseeable future’ but I think we can say that, three years on, we are back from the brink, economically.

Yet as many economic and financial commentators judge, the country is still in a strange state of being where one set of indicators suggesting positive news is offset by another giving a gloomier gloss to our recovery. Yes, the economy is growing but there will be a shortfall on the deficit above £100 billion by the end of this year.

One Eurozone economist recently characterised the UK’s growth as ‘the wrong type of growth’. Much like the seasonal ‘leaves on the line’, it’s probably the best explanation for the feed of ping-pong, back and forth, contradictory economic data this autumn and the balancing act those politicians charged with running the country are having to perform day-in and day-out as our recovery plays out.

Perhaps the bruising economic experience the UK has endured since 2008 has changed our perceptions of what amounts to recovery. Pre-crisis, debt-levels being 40 per cent of national output were considered high but now it’s 80 per cent which is the trigger point at which the credit rating agencies talk about withdrawing our triple AAA status.

The shortfall on the deficit by this year’s end would have been considered big in times past at 6-7 per cent of national output but it is not as big as it was at its 9-10 per cent peak in 2008/2009.

In October, published figures recorded that unemployment had fallen below the 2 million mark for the first time in six years. But in this current tax year of 2014/15, income tax receipts are up by just 0.1 per cent yet outlay on social benefit payments has gone down.

Wage inflation runs at just 1 per cent at this point in our recovery but the Bank of England is anticipating 3 per cent wage inflation by the end of next year and therefore tax receipts will be up.

It may feel like a heavy trudge through the recovery now but many analysts are convinced there is good news in the pipeline and, thankfully, the wisest market operators will always invest for the long term.

Before that, we have the General Election in May and all bets are off that the Chancellor of the Exchequer’s Autumn Statement – scheduled for early December – will be anything else but a necessary political and economic balancing act of ‘Austerity Lite’. There is likely to be further squeezing of public expenditure but the pinch will not be as nippingly sore as it was in the early years of this administration.

In this ping-pong recovery of ours – in which we are growing faster than Germany - whether it’s politics which is the foil to economics or vice versa, balancing is not an act: it is the reality.

Much as we did in 2011, we are going to have to accept this new reality of our recovery for the foreseeable future.

Will Mooney MRICS
Partner
Commercial, Cambridge

Breaking up is hard to do

While it’s not Scots away, Will Mooney, Carter Jonas partner and head of its commercial agency and professional services in the eastern region, wonders what the genie might get up to if it refuses to go back in its bottle.

Being Northern Irish, I’m no stranger to the damaging effects of political division and and the negative economic impact schism can have on successive generations. I’d suggest that those of us with Celtic origins followed Scotland’s Independence Referendum with a keener eye than our Anglo-Saxon peers – at least until that September weekend when that poll mobilised Westminster’s biggest guns.

The financial markets reacted in the way they always do to uncertainty. Yet, at the same time, how could a ‘little local difficulty’ in the United Kingdom influence global capital and currency markets when there is so much else going on on the international stage?

Cue a number of high profile businesses and corporate interests who expressed their concern or hinted what the consequences might be if expected to do business with, or in, a post-independent Caledonia.

Pro-independence business commentators countered by making the distinction between uncertainty and risk. Do people become entrepreneurs because they take risks or do you have to be a risk taker, first, in order to become an entreprenuer? What has to be certain before a risk becomes designated as a calculated risk and, thereby, worth taking?

In these weeks following the referendum result, there is the sense that many of the old certainties of The Union have gone or are going or are changing or are being challenged.

Not being sophisticated in the ways of psephology, I can’t say whether a 10 per cent differential in favour of remaining part of the United Kingdom is a close run thing or not. But there’s no denying that the referendum debate, has opened-up another layer of debate about a more federated British Isles.

It’s to be hoped that this opening will not become a fissure because, apart from anything else, that’s not our style of doing things in any part of Britain.

The turbo-charged timescale suggested for further devolutionary powers for Scotland - more Devo-medium than Devo-max, as it turns out - promised by the three mainstream party leaders pre-referendum has raised some eyebrows, not least of all those of the Whitehall mandarins who will be charged in getting legislation through in time for Burn’s Night on 25 January, or not.

Will Mooney MRICS
Partner
Commercial, Cambridge

Reasons to be cheerful

This summer’s international news agenda has been tough reading and viewing. “Wars and rumours of wars” have always been the drivers of news, particularly so in our digital existence with web pages and broadcast hours to be filled round-the-clock.

While it’s been far from the silly season of summers past, weaved in to the news agenda have been more positive things. Many of these stories feature the word ‘happy’ and have lightened the mood of the summer and should give us food for thought.

Happiness can and is being measured by the Office for National Statistics (ONS). In the month in which daylight was at its longest in the northern hemisphere, the ONS analysed a raft of European data to conclude that Britain is the 11th happiest country on our continent. At 71.8 per cent, we are marginally happier than France where 71.6 per cent of adults rated their life satisfaction above or equivalent to seven out 10. This puts Brit adults just behind Germany at 72.3 per cent. Top marks went to Denmark at 91 per cent, leaving Bulgaria being the least satisfied of EU countries at just 38.3 per cent. I’m not sure what governments will do with this data but it’s interesting that they are bothering to find out.

Meanwhile in the People’s Republic of China, it’s been reported recently in the western media that quality of life has been promoted above GDP as an performance measure in a number of cities and administrative areas. Apparently, focusing solely on GDP as the key to local officials’ promotion has seen industrialisation and development rampage to the neglect of the environment, agricultural land and social welfare. So in, selected areas - although it is notable not yet in the showcase cities and areas - measures of success such as raising living standards and what President Xi Jinping calls ‘hidden achievements’ will be taken into account in judging local officials’ rise through the ranks.

Countries often look to sport when it comes to fostering a feel-good factor in their populace. Glossing over the FIFA World Cup, there was the success of the Home Nations in the Commonwealth Games in Glasgow and the European Athletics Championships. The England women’s team finally triumphed to win the Rugby World Cup after being in the runner’s up position in three previous appearances. Then, billed as a comeback, there was the Test Match Series win over the Indian cricket team by England’s men which restored a little of the pride which had been so comprehensively dented by the Ashes tour of Australia last winter.

Many of us will have come back from holiday to burgeoning email in-boxes and that’s even if we did break pledges to partners and sneaked a look at our smart phones and tablets while on holiday. But not-so employees of Daimler, whose board members wanted staff to properly relax.

The car company instituted a ‘Mail on Holiday’ system on its email server whereby the auto reply told the emailer that the emailee was on holiday and the message would be deleted but gave a non-holidaying employee contact as an alternative. Imagine how much happier – and more productive – that first morning back at work must have been for those workers and execs? This will surely contribute to Germany scoring higher on the ONS’s analysis of life satisfaction data next year.

Finally, it looks like the Bank of England is coming round to nudging up the base interest rate – well, two members of the Monetary Policy Committee are anyway. The prevailing view is that to nudge in incremental amounts, when the Bank faces up to the inevitable and raises the rate, will be easier on the economy than full percentage point rises at a time.

This is the economy which, by the way, the Governor of the Bank of England confirmed in August was half way to recovery and, presumably, he’ll and we’ll know when we arrive.

Will Mooney MRICS
Partner
Commercial, Cambridge

City-state of the nation

With Scotland’s electorate deciding if it feels better together or not in September, Will Mooney, Carter Jonas partner and head of its commercial agency and professional services in the eastern region, wants to know if smaller can be better.

Early in July, the Government announced the release of the first tranche of a big pot of £6 billion of cash for the English regions. With an eye on being better together and although the phase 1 £12 billion is very much for England, the Prime Minister heralded Growth Deals as ‘...a crucial part of our long-term plant to secure Britain’s future.’

In this first phase, £71.1 million is allocated to what’s termed the ‘Cambridge Corridor’ for projects which include transport and science and technical innovation centres. The day after the Government’s announcement, the Cambridge Ahead organisation said that the £13 billion economic powerhouse that is Cambridge needs to be on its guard as its top business talent can be enticed away to London because of, among other things, Cambridge’s poor transport infrastructure and paucity of night time entertainment.

Cambridge Ahead is looking to pitch Cambridge as the ‘pre-eminent small city in the world.’ It’s a flight of fancy on my part but perhaps Cambridge could make the case for city-state status like that of Singapore, Andorra or Macau? Or those classic city-states of Rome or Athens?

Too landlocked, perhaps, for parity with the city-state of medieval Venice, there would be there would be no shortage of candidates for The Doge of Cambridge as there are plenty of shrewd citizens and the modern equivalent of rich merchants. The great buildings of Venice see themselves reflected in the palaces of learning which are the University Colleges. So influential is the business success of Cambridge, that it could make a claim for sovereignty and overlordship over adjacent counties which is a pre-requisite characateristic of historical city-states.

Of course, this idea must be treated with the levity it deserves but Cambridge continues to reinforce its position as the most commercially influential location in the eastern region. Rather than city-state, perhaps there’s a case to be made for ‘city-region’?

It is regional causes and cases for investment and development which are the cause celebre this summer and beyond, in all probablility – and not only with the policy-makers but with policy influencers too.

The RSA City Growth Commission (thersa.org.uk) published a report in July called “Connected Cities: The Link to Growth”. The report references city-regions but prefers to use the term ‘Metros’ in arguing that individual cities , such as Leeds, Manchester and Sheffield, should have the freedom to operate as collective metros to make their own decisions when it comes to infrastructure investment.

In not relying on centralised decisions from Whitehall about what’s best and how much is best for its metro, the report makes the case that this devolved approach in England would see a counterbalance to the dominance of London and the South East. In turn, this would be in the best interests of the whole of the UK’s economic growth and chances of prosperity being spread geographically to all our benefit.

In the early autumn, the UK nation state faces the prospect of losing its most northerly part but such is the jigsaw of our country that there are rumblings in Orkney and Shetland that perhaps they have more in common with their Scandanavian counterparts than with Scotland’s central belt and its kingmakers at Holyrood.

Will Mooney MRICS
Partner
Commercial, Cambridge

Rise in interest rates is inevitable

A rise in interest rates is inevitable at some point but Will Mooney, Carter Jonas partner and head of its commercial agency and professional services in the eastern region, wonders how soon is now?

A year ago in these pages I was anticipating the end of the central banks’ monetary stimulus for their economonies. In the case of the Bank of England, it was, at that point, the £375 million worth of quantitive easing.

‘Removing the punchbowl just when the party is getting good’ is the phrase attributed to the Federal Reserve’s longest serving head who first coined it to describe the withdrawal of stimulus. Now there’s another central bank party pooper in the form of the threat of interest rate rises. Or rather, it’s the talk of the threat interest rate rises which is the spectre at the feast.

The Bank of England has held its base interest rate at 0.5 per cent for more than five years. At such a record low level, the only certain way is up. But when? And by how much? Such uncertainty could be damaging at worst but is unhelpful at best.

Since the late 17th Century, governments and, subsequently, the Bank of England have used the cost of borrowing as a means of responding to the economic pressures of the times. In the early years of Margaret Thatcher’s administration, in 1981, interest rates rose to an all-time high of 17 per cent. But that was a time before the great push towards property-ownership which has set itself in the psyche of the British public in the successive three decades to the point where it is commonly accepted as the touchstone of daily, domestic economic prosperity.

Now the 2014 property-owning democracy is incredibly twitchy about any talk of interst rate rises even if they are just going to be incremental by those ‘baby steps’ mooted by some commentators. There’s also a slice of homeowners who’ve moved in to the housing market since 2008 and whose lives are highly-geared around access to finance and low interest rates. There are plenty of other homeowners for whom a time when base rates were always in double figures is a dim and distant memory - if they remember it at all.

There is a view that interest rates are too blunt an instrument to control the complexities of a modern economy. But, in early June, when the European Central Bank slashed its deposit rate to below zero – minus 1 per cent – so it actually will cost commercial banks to keep their money centrally, it must have left many a lay person marvelling at the sophistication of economists, financiers and policy makers. Far from blunt.

In order to avoid the economic - and party political - collateral damage a big hike in interest rates could mean, we’re beginning to see policymakers hint at returning to a time when supply and demand mechanisms were deployed by governments in order to control the economy. Specifically, in 2014 , the housing market.

Measures include the new Mortgage Market Review – the pre-mortgage interview recently introduced where lenders look beyond income to consider household expenditure as a factor before making a mortgage offer. Then in his Mansion House speech, the Chancellor of the Exchequer took his own supply and demand ‘baby steps’ in trying to make councils bring forward brownfield sites for development. There are some who say this should go further and developers should be given the right to build on the green belt.

How far it is politically advisable for the coalition administration to try and control supply-side market conditions with a more hands-on approach remains to be seen.

What would be helpful is certainty. The market doesn’t like uncertainty. Endless speculation about rises in borrowing costs at a time when, in my own commercial property sphere, investors are ready to commit to more than ‘baby step’ investments is probably more harmful than the level at which any actual rise will be pegged.

Will Mooney MRICS
Partner
Commercial, Cambridge

A bitter pill for some to swallow

Some party political interests piled in to the recent Pfizer/AstraZeneca corporate tussle and this has made Will Mooney, Carter Jonas partner and head of its commercial agency and professional services in the eastern region, think about how potent a mix international business and national politics can be.

In the weeks which preceded Pfizer’s accelerated courting of AstraZeneca – which, appears, for the time being, to have peaked in mid-May with its delcined offer to AZ shareholders of £55 per share - there were almost as many reviews of the translation of a 2013 book by a radical French economist being undertaken by economic and financial journalists as those of their literary and cultural commentator peers.

The book was “Capital in the 21 Century” by Thomas Piketty and it was even reviewed in the Daily Telegraph by the immediate-past governor of the Bank of England, Mervyn King. While Lord King appeared not view the book as one of those works which changes the way we should look at the world, it pricked his interest enough for him to argue a different viewpoint to that of Monsieur Piketty.

The guiding premise of the book - not that I have read it, you understand – appears to be that, in this century, capitalism works in presumption in favour of inherited wealth over earned wealth because capital’s rate of return outstrips that of growth.

It’s a view. And not one a mere property agent is equipped to examine further.

My comment is only the coincidence of the timing of the book’s publicity and what might well play out as one of the biggest corporate capitalist battles of this decade. National politicians were struggling to keep up with a bigger battle than they could possibly control when it came to the AZ/Pfizer business. They knew it and most of us interested in the adventure knew it too. Yet the politicians couldn’t resist feeling they had to make some kind of pronouncement on it and take a position. It wasn’t edifying to see them operate their analogue arguments in this digital age.

In knowing that they couldn’t sanction whatever outcome there was going to be to Pfizer’s approach to AstraZeneca – save changing a tax regime which gives such R&D business interests a favourable home in UK PLC – the national body politic held court as the CEOs of both companies were questioned by a Westminster parliamentary committee for two days in a week which must have been one of the busiest in those two CEOs’ executive lives.

Those whose interests it suited likened the AstraZeneca situation to that of the recent sell-off of the Royal Mail and talked, wistfully, in terms of the selling off the nation’s crown jewels.

AstraZeneca and its work is one of the jewels in the corporate crown of the UK scene but it’s not a nationalised industry and it’s not ours to sell and never has been. Although in the mists of corporate time, there was a connection with the once mighty UK chemical institution ICI before ICI Zeneca was formed as part of a de-merger in the mid 1990. But it was never a state-owned operation. The Astra was put into Zeneca in 1999 as the result of a merger with Swedish company Astra AB and it then set off on a programme of acquisitions of its own which is still current.

The point is, in the 21st Century, fluffy and patriotic feelings about PLC companies are irrelevant. Whether Anglo-Swedish or American in origin, international companies are corporate citizens of the world and can, and will, choose to domicile themselves in whichever location suits them and their shareholders’ interests best at any one point in time.

To attract the best of business it seems, the best any single nation’s politicians can do is create an environment and circumstances in which as many of these companies as possible feel welcomed enough to locate and recruit and certainly not adopt a political posture which might put-off such companies in future.

Will Mooney MRICS
Partner
Commercial, Cambridge

A little knowledge can be a dangerous thing

Does access to all kinds of information and knowledge at our fingertips really make experts of us all? Will Mooney, Carter Jonas partner and head of its commercial agency and professional services in the eastern region, still values expert advice.

Computer coding becomes part of the National Curriculum in September this year and not before time really as the ability to code will be another pillar of education basics alongside the established three Rs for a numerate and literate society as we make our way in the 21st Century. Already, many primary schools run after-school coding clubs with the assistance of code-literate parents under the supervision of school’s own ICT staff.

While my heart lifts at coding’s inclusion in the curriculum, the same heart sinks a little at hearing of a training business which aims to teach executives to code in a day. It sinks in the same way as those of GPs when patients come to their surgeries with symptoms and diagnoses they’ve been researching on the Internet.

Okay, may be the course doesn’t promise to make the executive a coding expert in a day and it is laudable that knowing how to code is a vital business skill coding is being acknowledged, but there are no guarantees that senior and middle ranking execs – whose expertise is very much not in the nuts and bolts of coding - who leave that course won’t think they know enough in a day to pronounce an opinion on the matter and make business decisions based on a course which has cost a lot of money. As the saying goes, a little knowledge can be a dangerous thing and especially so in the minds of hands-on company executives.

It could also be seen as quite insulting to people who have coding expertise which has been gained after years of study and practice. A coding course does sound sexy in the way that chartered accountancy or company law in a day doesn’t. Both are crucial to the running of a company but it’s hard to imagine a day’s course attracting interest from the time-pressed modern exec.

Sending shudders through residential property peers will be news of the alliance between the founders of Poundland and Match.com who are coming together in the form of Estatesdirect.com to cut out the middlemen estate agents when it comes to housebuying and selling. Good luck with that in a housebuying chain of more than one.

It seems that with access to all kinds of expert knowledge and information at the touch of a button or the swishing of fingertips across a screen, we like to think we do or can know-it-all. It is almost as if there is no respect for true experts who have studied and practised in their particular field for years and can give advice based on that expertise.

Aptitude and application aren’t as valued as they used to be or as treasured as they should be and we view experts with a degree of suspicion more than we used to.

While there has always been a counterpoint to most expert opinion, we don’t have to shift ourselves to go and find it these days in the way we did pre-Internet access. A world wide web of contra-opinion to those of the expert with whom we think we disagree or whose opinion we don’t want to hear is laid bare before us to access instantly – as long as there’s Wi-fi connection, of course.

In the dynamic of the client-advisor business relationship, you will often find that clients don’t like what expert advisors have to say to them because it is not what they want to hear. While they don’t have to like it, it is important that they respect it. Equally, the adviser needs to respect the client’s decision to ignore the advice or seek that of another expert which may better suit the client’s own view.

Calling yourself an expert can be as easy or as hard as you like to make it in the modern age, depending on your level of integrity. But that’s just IMHO, of course!

Will Mooney MRICS
Partner
Commercial, Cambridge

Acronym-Mystic

A former non-executive director of Manchester United FC has just completed a thought-provoking series of four programmes for BBC Radio 4 and also the round of media interviews it seems is incumbent upon any ‘celebrity’ personality presenter.

The series was entitled ‘MINT: The next economic giants’. While music hipsters of the early part of this century might recall a programme on BBC 6 Music called ‘Mint’ – the credentials of the Radio 4 programme presenter could not be more different than those of DJ host Marc Riley, although both hail from Manchester.

As well as an ex-non-exec of a football club, presenter Jim O’Neill is a former chairman of Goldman Sachs Asset Management and very much the moment’s ‘go-to’ economist who says he sees his discipline as a social science.

MINT is an acronym which stands for Mexico, Indonesia, Nigeria and Turkey. These are the economies Jim O’Neill identifies as the next set of developing and emerging economies to which the global investment community is looking now to reap benefits in the future.

MINT is the new BRIC (Brazil, Russia, India, China) for long term investment bets, according to Jim O’Neil. While denying in an interview that he was the originator of the term BRIC, O’ Neill appeared happy to be credited with popularising its usage three years.

So popular in fact that anybody with even a passing interest in international business and investment can identify the BRICs. The very popularity is the spur which is moving the focus of global investors on to the MINTs.

In one of the radio interviews, O’Neill confessed that his focus might have been MIST and not MINT as South Korea was in the running too. Whether MINT or MIST, two of many reasons for identifying such countries were demographics and young governments with emerging democratic mandates. In the case of Mexico, a very young government with an administration led by President Enrique Peña Nieto who is just 47 years old.

Demography is on the side of developing and emerging economies in a way it isn’t for those more established. Investments always have to look to the future and there’s nothing more encouraging for a country’s future than a demographic bulge of young people poised to aspire, produce and consume.

A young population is advantageous for growth. Older societies, where pensioners increasingly outnumber the young and need to be supported by that dwindling number of young, prove burdensome to economic growth.

From an economist’s point of view, an active policy of immigration is something to look to when demographics are against growth. But the fly in the ointment for countries facing this demographic conundrum is, as Jim O’Neill pointed out, the fact that they live by the political cycle.

While the investment community thinks globally and acts for the long term, politicians think as far as their democratic tenure permits and, in the main, are guided by the populist policies of their times.

Jim O’Neill is nearly 57 years old but he talks with a speech inflection common among young people and which has been identified as ‘uptalk’. Apparently, uptalk is not appreciated by (older) senior managers as it indicates a reluctance to commit to what one has just said and infers a question and, thereby, uncertainty in the speaker.

Jim O’Neill sounded certain. Demographics are against the senior managers.

Will Mooney MRICS
Partner
Commercial, Cambridge

Property Investors Return With Confidence

The year has been heralded as one in which investor confidence in property will return in earnest. Rural property peers have pointed to the ‘froth’ skimming off premium agricultural land values this year as property-minded investors return with more confidence to the more obvious residential and commercial sectors for the first time post-credit crunch.

But, in the commercial sector, it’s by no means the wholesale return of investor confidence in any commercial property opportunity and the smartest money is always ahead of the game in the smartest of locations.

Last summer, Cambridge greeted the news that Tesco Pension fund is backing developer Brookgate’s 65,000 sq ft Grade A building which is at the heart of the cb1 scheme. But this five storey building was already pre-let and pre-let in Cambridge is always going to be a sure-bet.

In places like Cambridge, where there are limited opportunities in a smattering of its remaining key strategic locations, funders have been prepared to invest on very specific terms for the past three years. The terms usually involve pre-let agreements, more often than not with blue-chip companies and with certainty of long term leases.

Given the limited and ever diminishing supply of commercial sites with viable opportunities in Cambridge, those which exist are big ticket items and so it’s the cream of the funders who are attracted here.

With forecasts that the development pipeline will be reduced by more than 25 per cent by the end of this year, there’s concern about future opportunities for commercial property investments.

Investors like to look ahead and stay ahead but it’s getting more and more difficult to point to the next tranche of Cambridge sites looking for funding. Land which is supposed to see the city through to 2030 is already coming in to the calculations and commercial allocation.

With so much current building activity in Cambridge, it’s difficult to convince a lay audience that there’s a paucity of sites in supply on the near horizon but it’s one we will have to face – and soon.

The year 2014 is going to be a big one for those with development and property interests here.

This year sees Cambridge City Council and South Cambridgeshire District Council’s Local Plans firming up with the identification of residential and commercial site allocations to take the area through the next couple of decades.

At the end of this month and in the early days of February, we welcome in the Chinese Year of the Horse. People born in years of the horse are believed to be active and energetic and, work wise, they refuse to give in to failure but, add the astrologers, ‘their endeavour cannot last indefinitely’.

In a twelve year zodiac cycle, the next year of the horse in 2026 - property investment funds are already backing Cambridge sites that are four years in front of that horse.

Will Mooney MRICS
Partner
Commercial, Cambridge

New father time

At the year’s end Will Mooney, Carter Jonas partner and head of its commercial agency and professional services in the eastern region, is looking forward, very far forward.

Whether your view of Old Father Time is that he hands his watch over to New Baby Time on Hogmanay or you’re of the feeling that, much like the Grim Reaper, the old fellow is a fixed feature who watches over us year-in year-out as the sands of our lives slip through the hourglass, is a matter of cultural education or superstitious belief.

What the Oxford Martin Commission for Future Generations wants us to do is exorcise our habit of short termism and think about the consequences of our actions. When I say us, what I mean are policy makers who are urged in the Commission’s report “Now for the Long Term” which calls for radical thinking in policy and business.

The Oxford Martin School (http://www.oxfordmartin.ox.ac.uk) is an “interdisciplinary research community of over 300 scholars working to address the most pressing global challenges and opportunities of the 21st Century”.

The Commission’s latest report has ideas about transforming the way governments and corporates go about their business. But the ideas are not founded on wishy-washy sentimentalism. How could it be? The international brains of the commission are chaired by the former director general of the World Trade Organisation, Pascal Lamy who only left that post in September.

The report identifies megatrends - demographics, social mobility and technology to name but three - that are shaping the 21st Century. A century which, the founder of the School Dr James Martin, says could be our best or our worst ever.

These megatrends are, by default, drivers of change and our institutions need to update themselves or become obsolete.

Business and financial systems come in for criticism for short termism. The sector is urged in the report to re-wire itself for long term investment as opposed to slavishly following quarterly reporting cycles.

Interestingly, on the day Pascal Lamy was fulfilling his media commitments about the launch of the Commission’s report, news broke of the departure from Invesco Perpetual of one of the biggest stars of fund management. Neil Woodford said his decision to leave his role managing a £24.6 billion fund and co-managing another of £6.4 billion was based on where he sees long term opportunities in his industry.

Monsieur Lamy pointed out to one interviewer that the news media seemed to be frightened by the long term too. In a time of rolling 24-hour news schedules to fill, it’s no wonder many journalists and producers look to the brevity and immediacy of Twitter and other social media platforms for news and views to source or reinforce a story or even report social media activity as news in itself. There’s a lot of air time to fill and our attention span appears to be ever-shortening.

Pascal Lamy pointed to a couple of examples where business and policy makers had come together to think about the long term with staggering success achieved in a relatively short space of time. Namely, anticipation of Y2K technology meltdown in the year 2000 and also in setting minds to tackling HIV-AIDS in the late 1980s and 1990s.

It seems fitting to quote Marx here: Groucho Marx. “Why should I care about future generations – what have they ever done for me?” But it seems that the Oxford Martin Commission’s view is that in thinking about future generations, we could actually do ourselves a favour right now.

Will Mooney MRICS
Partner
Commercial, Cambridge