Despite the hype, environmental campaigners worry the Bill's flagship provisions - the legislative framework for the Electricity Market Review (EMR) - will see the implementation of a new set of incentives which lack the necessary ambition.
The fear is that, with EdF now the only main game in town when it comes to new UK nuclear build, we will see another dash for gas to take up the slack. This despite a recommendation from the independent Climate Change Committee that policies need to be aiming for a near total decarbonisation of our power sector by 2030, if we are to have any chance of hitting our long term 2050 carbon targets. Gas is cleaner than coal, but not that clean - at least not until we have commercially viable carbon capture and storage.
In consequence, many environmentalists were lobbying for a commitment in the Bill to a carbon free power sector by 2030. But that was never going to happen; transitioning to a low carbon economy by 2050 whilst keeping the lights on could be a tricky balancing act, so why make that even harder with a self-imposed 2030 target?
Nonetheless, the EMR proposals have much to commend them, although the principal measure - contracts for differences for low carbon generators - are still lacking in detail, with the key terms such as contract length, strike price and method of allocation all still a work in progress. This detail will be critical, because the government is hugely dependent on massive private sector investment if its energy and carbon policies are to deliver, and the market is still waiting for political and regulatory stability over the longer term.
So, more patience required before we get to see the meat on the bones. No one can criticise the government for rushing its EMR proposals through.
But at least it seems we may now have a coherent and long term national energy policy in relation to biomass, or more accurately, bioenergy. What's more, it could be a policy that will create jobs - as many as 50,000, according to the UK's National Centre for Renewable Materials and Technologies.
In a stellar example of joined up government, the finest brains at DECC, Defra and the Department of Transport have got together with some technical experts to come up with a bioenergy strategy.
This strategy, published last month to coincide with David Cameron's rather less than wholehearted contribution at the "Clean Energy Ministerial" in London, sets out 4 key principles to guide policy.
First, bioenergy must offer genuine carbon savings to 2050 and beyond. Second, it must be cost-effective in meeting energy and climate change objectives. Third, it must take into account the needs of the wider bioeconomy. Finally, it must be ready to respond to any risks to key priorities such as food security and biodiversity.
This is sensible, because the difficulty with biomass as an energy source is that it's not always sustainable, nor is it always low-carbon (or, indeed, renewable). A particular and ongoing concern is the potential for diversion of land use away from food production to fuel production.
Yet it does have potential as a transitional fuel to replace coal power generation, and it is a great way to divert waste from landfill. And as a transport fuel, it also offers a solution to the conundrum of how to reduce airline and shipping emissions.
Government believes that, with the right policy measures in place by 2020, bioenergy could contribute between 8 and 11% of the UK's total energy requirement - across power, heat and transport. And that increases to 12% by 2050. The current percentage share of UK energy requirements delivered by biomass is a paltry 3% - most of it reserved for power generation.
Having set out its strategy, the report goes on to suggest a set of "energy deployment pathways" - trendy government speak for low risk developments in biomass use that will likely comply with the 4 key principles.
These include a convergence with waste strategy, namely end-of-life materials as an optimum use of biomass. Other key pathways include use of biomass for power generation as a way of weaning us off coal, and also to provide low carbon heat for buildings and industry, through either biomass boilers or through use of biomethane. And, of course, the use of biofuels for road transport.
This strategy from government is important and timely, because for bioenergy to fulfill its potential we need more research and development. And bioenergy is an international issue, and an opportunity. So it is especially important that we should be nurturing home grown technology development.
Furthermore, at a time when global energy markets are facing challenges as never before, and with a fundamental review of our UK electricity market underway, anything which signals a future policy direction that is supportive of UK technology development is to be welcomed.
SGH Martineau is hosting a conference on bioenergy on Friday 15th June, at the splendid Woodbrooke Quaker Study Centre in south Birmingham, at the former home of George Cadbury in beautiful parkland. All of these issues, and more, will be discussed and debated by a panel of experts - for more details and to get involved, click here.
The article was based on a survey conducted by Constructionline - a pre-qualification certification scheme for contractors and consultants - which revealed that of the 115 SME contractors surveyed 54 per cent had seen a decrease in their workload in the last three months. One of the biggest challenges, according to 42 per cent of SMEs, is winning new work, while cashflow was also cited as another major worry.
Even the biggest contractors aren't immune from the effects of the challenging market conditions. According to recent reports, Balfour Beatty could lose around 600 jobs as part of a restructure of its £3.4bn turnover UK construction services arm. Carillion is also downsizing its UK construction business in order to cope with the shrinking market.
The fact of the matter is that it is difficult out there and with cuts to public sector capital budgets beginning to bite, coupled with a struggling private sector, the prospects for the construction sector look fragile.
The latest figures from the Office for National Statistics (ONS) appear to back this up and even go as far as suggesting that a sharp fall in construction output is to blame for the double-dip recession.
The ONS said construction output fell by three per cent during the first three months of the year, adding that a fall in government spending had contributed to the particularly large drop.
However, some have questioned the validity of the ONS data.
The latest UK construction Purchasing Managers' Index, published by CIPS and MArkit, makes more positive reading, for example. It said that construction output rose during April, albeit at a slower rate than in March.
There are signs that the housing market is improving and the need in sectors such as education and healthcare is as demanding as ever, so there is work out there to be won.
As is the case for any business trying to win work in an increasingly competitive market, the key to success and survival is innovation.
At Willmott Dixon we have developed standardised products for schools and swimming pools, which makes them more affordable. In a cost-driven market, this kind of thinking is becoming fundamental.
In the housing sector, we are helping to develop an innovative model that allows us to partner with local authorities and land owners to develop housing for private rent. The key to such deals is a funding stream not reliant on Government grant.
History tells us that only the fittest survive. Those that adapt to the changing environment live on, while those that don't react quick enough wither and die.
Yes it's tough, but opportunity only knocks for those who are willing to go out and look for it. As they say, fortune favours the brave.
Recent news has been dominated by a number of stories that have at their basis economics. I have chosen two which seem to demonstrate that, as the Chinese say, we live in interesting times.
Greece's travails continue to make headlines that suggest we are witnessing the very messy, and potentially catastrophic, end to the dream of single currency.
Friday's flotation by Facebook's, using what is known as an 'IPO' (initial public offering), raised over $105billion. Whilst this amount wouldn't solve Greece's crisis, it would certainly help.
What Facebook's launch certainly does indicate is that if you give investors the opportunity to buy something that has potential, they will buy; even if the world as we know it, at least in some parts of Western Europe, are going to 'hell in a hand- basket'.
What does it tell us, most especially in terms of economic modelling and business prospects?
]]> Firstly, let's consider Greece's current situation which, we are warned, will be likely to be replicated by the much larger Mediterranean countries of Spain, Italy and Portugal and, to a lesser extent, Ireland.From a personal perspective, not having to change currency every time you crossed a border in Europe made utter sense. Travel and, of course, trade would be easier which is to everyone's benefit.
Peston's very thoughtful programme analysed the cause of the current economic crisis; the fact that countries, most notably Greece, are so heavily in debt that they are bankrupt and require outside assistance.
As Peston made clear, the origins of the Eurozone can be traced back to the Treaty of Rome in 1957. The objective was to create a 'common market' that would effectively be a "United States of Europe" and which could enjoy the benefits of political and, more crucially, economic union (as occurs in the UK).
The magnitude of the task was daunting. It was only just over a decade since the second-world-war and many nations were still emerging from problems caused by the privations of war. Moreover, Europe was, and still is, a diverse collection of countries with different languages, customs and cultures and, of course, economies.
To the credit of the founders of the project, many of whom had personally experienced the effects of war, the motivation was a better world where everyone shared in the benefits of wealth creation. What became apparent very quickly was that the nation that had caused the war, Germany, was recovering quickly and would be one of the dominant players (the other being France).
Nonetheless, the logic of what has become the European Union was pretty simple. Every country would be drawn into an economic arrangement that would increase trade and raise living standards; most especially in the poorer, mainly Southern Mediterranean countries such as Portugal, Italy, Spain and, of course, Greece; the now infamous 'PIGS'.
And, the theory went, with increased wealth comes unity that underpins co-operation in trade. This, in turn, makes conflict less likely.
History, as Churchill famously said, is written by the victors. It will be fascinating to see how the Eurozone project will be judged in future.
The thing is, in the here and now, it doesn't look good.
The credit crisis of 2008 is cited by most commentators as having been brought about by the availability of cheap finance that created the development boom in the USA and across Europe. In many countries, such as Spain and Ireland, there is a phenomenal quantity of unfinished properties for which there is no market.
For many who purchased such many properties, there is the problem of negative equity. As Peston's programme made clear, for the individual experiencing bankruptcy there is little hope.
Cheap finance also lies at the heart of what has caused Greece's current problems. Greek's are no different to anyone else and enjoyed the benefits of becoming wealthier. As long as the world economy was doing fine there were no problems.
But the credit crunch changed all of that. Greece now owes 160% of its GRP (Gross Domestic Product). As the Greeks are discovering, political (and economic) unity only goes so far. The austerity package that, by and large, the Germans imposed has proved, unsurprisingly, unpopular.
Greek are sick of being lectured that they have no choice; you have to either earn more or spend less. But what more can Greece do? Huge numbers of workers have been laid off: especially in the public sector. Spending on social security and pensions has been slashed and taxes increased.
But these measures have simply worsened Greece's plight. Ironically for a country that has a long tradition of civilisation and democracy, after the recent election it cannot form a government. Greek people have had enough of austerity (a trend that is being repeated across Europe).
And even worse, the very intention of the founders of the common market in 1957, increased union and prosperity, is now being cited as causing the opposite. Parties on the extreme right and left that offer the prospect of redemption through isolation are becoming more popular.
Worryingly, Europe displays characteristics all-too resonant with the period before the second-world-war. And worse, the 'old enemy', Germany, is viewed as being part of the problem (some have suggested it has achieved economically what it failed to do militarily) .
There is the definite possibility that the Syriza Party, led by Alexis Tsipras, may emerge as the victor in the next Greek election on 17th June. Tsipras has stated his intention to withdraw from NATO and tear up the terms of the EU/IMF bailout package. This could lead to something once unthinkable; an EU member leaving.
Lest we think that it won't impact on us, I have seen reports that estimate the knock-on cost would be a 5% drop in output across the Eurozone. Even though the UK doesn't use the euro, as other economies slow down we will feel the effects.
As Sony Kapoor of the Brussels-based thinktank Re-Define has suggested, what we are seeing in Greece (and the other crisis-hit economies), is a 'dance of death'.
Economic theory does not have any easy answers.
No such problems for Facebook. The fact that the IPO was, just, taken up - it was underwritten by banks, which begs the question whose money they were using? - indicates that it is seen as having huge potential for future earnings through advertising to its 900 million users.
Facebook made a $1billion last year which was a 65% increase and shows no indication that it is slowing down. Its founder Mark Zuckerberg, and other investors (including that paragon of social justice singer Bono), must be pleased with themselves.
Facebook believes that it has potential to develop through expansion in developing economies in Asia, Africa and South America.
Its prospectus suggested that it may become a marketplace for goods, like Amazon, and that it may follow Google in developing a phone network in order to propagate the advertising and sales that will be essential to justify the hype surrounding the launch of Facebook's IPO.
But there are detractors. Some suggest that the projections for Facebook are far too optimistic. As these commentators argue, in the world of social networking, things move fast and that success can be very temporary. They point to the fact that MySpace and Friendster were once dominant in a way that Facebook now is.
What is to say that Facebook won't also be surpassed? Indeed, that other corporate technology giant Apple is said to be interested in exactly the same markets as Facebook.
There are already warnings about the Facebook phenomenon.
An Associated Press-CNBC poll in America has suggested that users of Facebook don't' think it has permanence. And worse, many point out that Facebook is simply seen as a free way to keep in contact. Its users don't use it as a marketplace and, indeed, may resent the inevitable increase in advertising.
According to eMarketer Debra Williamson, advertising may prove to be less lucrative than expected and believes that revenue growth will slow to 64% from 88% last year. Pointedly, General Motors decision not to continue with its Facebook advertising campaign does not bode well.
Another major concern of the Facebook IPO is that Zuckerberg maintains overall control. Some have questioned whether one person, regardless of how bright or energetic he undoubtedly is, can continue to develop Facebook in the way that will be required to be worth its initial valuation. He may be compared to Apple's Steve Jobs but the context and challenge is very different.
So, whilst there is much hullabaloo about Facebook, the suggestions that economic theory of oversupply has not been fully heeded.
I can offer no instant answers. If I could I would sell them at a fortune!
However, what seems abundantly clear is that we need some clear thinking. In order to assist I would recommend a book that I am currently reading by David Orrell Economyths: Ten Ways Economics gets it Wrong (Icon Books, 2010).
Orrell's view is that economic theory, especially neoclassical, is too reliant on rationality and that traditional modelling and predictions. As we know, there were very few people who predicted the global financial crisis of 2008 (those who did were ignored).
If traditional economic theory has been unsuccessful, according to Orrell, there is a need to consider better ways to deal with the influences that are much more complex and unpredictable than the standard models predict.
As Orrell and other commentators contend, the fundamental belief in markets as being like machines that conform to 'laws' (like physics) and exhibit rational standard behaviour is plain wrong. Instead, Orrell asserts, economic theory must learn to cope with chaos and incorporate irrationality.
Whether the models that Orrell and others posit would have reduced the causes of the current problems that beset Greece (and beyond), or would give cause for concern with respect to the hundred billion flotation of Facebook is debatable?
I'm sorry to sound evangelical, but surely we deserve to be in a better world that, on the one hand, allows European countries like Greece to go bankrupt, with all of the attendant social consequences, whilst at the same time creating billionaires out of what may be a very temporary fad.
If this is the consequence of unfettered neoliberalism then it doesn't seem right. We need better a better way to get out of the crisis. Perhaps a good start would be to hold to greater account the economists who currently have influence within the bodies that currently control Greece' s fate; European Commission, European Central Bank and the International Monetary Fund.
Chinese visitors to the UK have grown but do lag behind those for the rest of Western Europe though Government is trying to improve the visa application process in response to this. Over the last nine months I have made my own very modest contribution to this traffic helping to host visits by about twenty delegations to Birmingham and spent a couple of interesting hours this week with the most recent such group - some twenty visitors to Birmingham from a municipality close to Guangzhou . This one, fairly typically, comprised the mayor, some supporting City officials and group of business people .Most cities in the world would be dwarfed by Guangzhou with its population of 13 million but Beijiao itself is probably the size of Coventry - so, a tiny place in Chinese terms but a mid ranking City in Europe.
My audience listened encouragingly, politely applauded the phrases from my tiny stock of Mandarin ( I always imagine little thought bubbles floating above the patient Chinese at this point echoing Dr Johnson ' ... its not done well but one is surprised to hear it done all' ), the mayor asked some polite questions and they were on their way. Where to ? In this instance another day or so in England, then Germany, Switzerland and home to Guangdong province.
For many of my previous visitors their trip to the UK takes in the inevitable tourist hot spots - London, Oxford, Stratford, York and Edinburgh - and one would have to be a saint not to look to take advantage of tax free shopping and the opportunity to avoid Chinese domestic taxes that a jaunt into Europe ( or, more specifically, Bicester provides) . However these visits almost always have a serious component and a desire to learn something from western experience. The mayor's questions to me focused on some fundamental issues ' How do manage the development from a manufacturing to a post industrial city ? How do you ensure that the people have the skills that the new economy will require ? The new development that you envisage - how is it going to be financed ? To say the least - all pretty searching stuff.
But at the source of the questions - and a major stimulus for the delegations making their way regularly to this and a host of other cities across Europe- there is a clear sense appreciation that notwithstanding the transformation that has impacted in those twenty years ( and it as obvious in and around Beijiao as anywhere in China)- the challenge that the future presents them is even more daunting.
But what is the opportunity that this presents for the UK and for Birmingham and how can these official visits translate into serious business opportunity- here the challenge presented by the mystery/ puzzle/ enigma seem to loom large. The patient building of relations across language and other cultural differences requires times and persistence. But in fact at one level there's no mystery at all - and to use another glib expression - you don't need a crystal ball when you can read it in the book.
And the book in question is the '12th Five Year Plan of the People's Republic of China' - unlikely to make it to the Times best seller list on the strength of the title alone but for my new friend the Mayor of Baijaio, her officials and tens of millions of their counterparts across China, its sets out what is expected of them and how their achievement will be judged.
In English it only runs to some 60-odd pages and if you are looking to act on William Hague's exhortations to get on a place and go sell stuff - don't think of travelling without it if you are in-bound to China.
]]>EEF's recent export survey showed that even amid the economic turmoil we saw last year, nearly 65% of companies surveyed saw an increase in total export sales in the last twelve months. The focus of exporters is predominately geared towards emerging markets, where manufacturers expect to see strong growth in the next five years. As domestic and traditional markets remain weak, 45% of companies said they were more interested in exporting to new markets than they were a year ago.
However, challenges remain for UK manufacturers. It is still the case that around half of all UK exports go to Europe. With news this morning that the region narrowly missed a return to technical recession, and a Greek exit looking increasingly likely, the economic situation on the other side of the Channel will remain a challenge for UK companies.
Similarly, exporting to emerging markets is not easy.
There are specific barriers to entry into most new export markets, from business practice or language differences to exchange rates or poor credit protection; or a lack of knowledge about specific markets. But UK manufacturers are ambitious, and are putting the foundations in place to continue the growth in exports to new markets that we have seen throughout the recovery so far.
When the Greeks leave the Euro, clearly the Greek economy will, short term, absolutely tank. Import costs will rocket and so will the prices of basic commodities to the poor ordinary Greeks. Internally held Euros stuffed in biscuit tins and mattresses may help to cushion the immediate blow, and the drachma will float freely massively up and down making everyday life very difficult.
There will be real hardship for ordinary people and businesses who did nothing to cause this impending poverty crisis on our own European doorsteps.
But once the drachma settles down on the currency markets and stringent exchange controls operate (and other old fashioned levers get pulled) then the Greek economy will start to sell things to itself, localise its economy initially; and then eventually its exports will become attractive to all of us.
Never mind the cheapest winter and summer sun holidays available for decades for us poor, benighted, north Europeans!
Let us remind ourselves that the 'bank' most to blame for the Greek mess and ultimately the collapse of the Euro is Goldman Sachs. And the banking product most to blame was their big derivative bet - the Credit Default Swap. The markets believed one of their own.
The Greek economy was oversold and the Greek government creatively accounted their deficits way into the future - turning current pressing liabilities, already past due, into future long-term possible contingencies. With a little help from their Goldman Sachs friends' financial engineering of currency and sovereign default swaps.
This became self-fulfilling and even more sovereign debt piled up on the false sell, and even more money (debts) piled into Greek banks. The Maastricht rules were circumvented by default swaps: arranged, most commentators report, by Goldman Sachs.
At least this sort of thing isn't happening today!
Apart from the fact that it is. Big banking behemoth, JPMorgan, lost $2billion in just 6 weeks on very complex derivatives in March/April this year. And where did this happen? London!
Will we ever learn?
The collapse of the Greek economy and then the Euro is usually explained as important to us because of our trading relationship with the Eurozone. Businesses will suffer directly.
And as I pointed out last month, it is to Ireland that we have some of our most important and significant trading links.
The collapse of Greece will lead in turn to Euro exits and economic turmoil in Portugal, Spain and Ireland (probably in that order) and possibly thereafter to Italy.
I'm afraid the real problem for us is not our trading, business relationship with a disintegrating Eurozone. It is, instead, our banks' relationship with the banks in the exiting countries and beyond.
Once Greece goes all bets are off as to the stability of UK banks suddenly at massive risk to Eurobank debt pretty much all over the place. And nobody really knows where that will end. They really don't.
To repeat once more what Sir Mervyn King said in February when asked about a Greek Euro exit: "I don't think anyone could be fully prepared for what will be the unforeseeable consequences if such an event were to occur..."
To paraphrase Bill Clinton: "It's about the Bank debt, stupid!"
]]>GM Europe had earlier announced it was looking to cut up to 400,000 units of capacity a year from its European operations from 2014 (when its current deal with unions expires), with the firm suggesting that Ellesmere Port and Bochum in Germany were the most vulnerable.
That enabled the firm to kick off a fresh round of its well-honed divide-and-rule strategy, pitting plants and governments against each other in a bidding war to offer the most concessions to the firm. It's a typical feature of the auto industry, controlled as it is a in a top-down way by giant, mobile 'original equipment manufacturers' (OEMs) keen to screw down costs by playing off sites against each other.
That would take output at the plant to around 200,000 units a year - something close to what's seen by many auto analysts as the 'Minimum Efficient Scale' for a car assembly plant. Under the plan, as well as going to 3 shifts a day, costs would be cut by sourcing more parts locally in the UK (a very recent trend given higher transport costs making local sourcing a more competitive option).
The Coalition government has recently unveiled a £125 million fund to help develop local suppliers around the UK's major manufacturers, and this support is seen as important along with training and launch aid for a new model.
Ellesmere Port employs some 2,100 people directly, and up to 700 contractors or agency workers, and supports more in the supplier chain (including here in the West Midlands) and at dealers. It's thought that GM Europe is expected to announce the addition of another 500-700 extra jobs to build the next generation Astra model at Ellesmere Port from 2015.
Ellesmere Port was seen as vulnerable to possible closure in part because it currently sources a large proportion of components from mainland Europe and exports assembled cars back to the continent, in part because of the ease of laying off workers in the UK as against other sites, and in part because of the lack of a supportive industrial policy to support long term investment.
To be fair to the current government, its steps have been useful in securing the plant, and the challenge now is to use that support (wrung out of the government by the firm) so as to get spillovers in terms of wider capacity building in the supply chain.
I'd previously suggested that the three elements of GM Europe's recent strategy were: 1. capacity reduction (i.e. closing plants); 2. shifting production outside of western Europe; and 3. playing plants and workers off against each other to secure cost reductions even in those plants remaining open.
On 1, the decision to spare Ellesmere Port suggests that Bochum in Germany is firmly in the firing line, with Astra production at Russelsheim also ending. On 2, the German magazine Der Spiegel recently claimed that GM plans to produce as many as 300,000 more cars in low cost locations such as Brazil, China, India, Mexico, Poland and Russia and exported to Europe.
The third element, highlighted here, has been an attempt to reduce costs even at European plants that remain open by engaging in a divide-and-rule game whereby GM signals that it has excess capacity and then plays off plants against each other so as to screw down costs and wages and to get workers to work as flexibly as possibly.
Ideally from the firm's point of view this involves some state support in terms of new model launches, training and supply chain initiatives so as to 'safeguard' plants and jobs - at a cost to the taxpayer. This is exactly what seems to have been forthcoming.
Academics have suggested that GM has had more capability to engage in such "coercive comparisons" as it has followed a deliberate production strategy of setting up parallel lines of production across countries through widespread platform sharing. In contrast some other firms (Ford, Daimler and VW) displayed varying degrees of specialisation across countries and hence had a lesser ability to undertake such actions.
But in reality, such practices are common in the industry especially at times of over-capacity, and means that GM Europe has looked not only to cut capacity but also to squeeze concessions out of remaining plants to screw down costs.
Make no mistake, though: I'm delighted if Ellesmere Port is kept open and invested in. The plant has a lot going for it - the plant is flexible and efficient, the workforce is very good, and the exchange rate is currently in the UK's favour (for now at least despite a recent 10% appreciation).
Government launch aid support and other help also appears to have been critical - despite Vince Cable stating last year that he wouldn't go around 'waving chequebooks' at car firms. Quite what he meant by that was not clear, but basically launch aid is a key part of keeping production in the UK, and Cable appears to have realised that.
After all, all our research on 'life after Longbridge' has shown the importance of high quality manufacturing jobs. Manufacturing really does matter, especially when we need to 'rebalance the economy' as politicians keep on saying.
And let's not forget the role of workers and unions here. It's again a textbook case of management, unions and workers working flexibly, as they did during the recession and at GM Luton last year, to safeguard jobs and encourage investment.
Professor David Bailey works at Coventry University Business School
The current unemployment rate for the West Midlands is around 9 per cent which is - when converted to something meaningful - is the lives of about 240,000 people.
Or, in other words, whilst welcome, these 8,600 new jobs might shave next to nothing off the total unemployment for the region.
]]> What is sad about these meagre returns is that the Fund is specifically targeted at areas of the country like the Midlands and the North where there has been a heavy dependence on public sector jobs. This is important because the Office of Budget Responsibility have estimated that 710,000 public sector jobs will be lost between 2011 and 2017.At this point you might be wondering about how all the of Office of Budget Responsibility people fit into one office or what the government does with the financially irresponsible: are they put in the corner of the office with a hat on?
What you cannot argue with, though, is that the gloss underlying the Coalition claims that the private sector will - on its own - lead us out of from Plan A(usterity) has certainly worn off.
Back to those pesky statistics. Sorry. Mark Hart and his colleagues at Aston University did a fascinating analysis of job creation by the private sector over the period 1998-2010. They looked at the official ONS business dataset. What they found is that in the boom times (1998-2008) that 2.67 million jobs were created annually. However, these were gross jobs. And like other stuff sold in big packets with bright lettering offering a BOGOF, you should always check the label. Once you take off jobs lost, about 170,000 net jobs were created by the private sector each year over the period 1998-2008.
Over the period 2009-2010, Mark Hart estimates that 2.28m jobs were created by the private sector each year. However, 2.5m jobs were lost. So, around 270,000 net jobs were lost, on average, by the private sector in 2009 and 2010.
Such statistics might make you want to abandon Plan A and want to go back to PlanAWM (Advantage West Midlands). However, the West Midlands region did not improve economically over AWM's tenure as 'manager'. The West Midlands remained in mid-table obscurity (despite billions being spent) whilst the successful (London and the South East) got all the trophies and the North East propped up the league.
The answers are not easy. Nor is there just one simple thing that can be done to improve the fixture and fittings of the West Midlands. And I don't think that there are any quick fixes. Least of all do I think that the government is on its own going to solve our economic problems. But I do think that there are some things that the government can do.
Here then is my simple ABC plan for the government. Point A is that it has to remain Austere. Sorry, but if we don't want to end up like the Greeks who have to go to the equivalent of wonga.com for their money, the government needs to stick to its overall budget.
Point B stands for Building. By that I mean infrastructure. This means that stuff like redeveloping the mines of Mordor (better known as New Street Station) gets a big tick. So, too, does HS2.
Finally, Point C is to Cutting red tape. Politicians need to wean themselves off making laws because they can do it. What they would be better doing is simplifying existing laws.
All the studies I came across in the early 1990s emphasised the importance of understanding how Japanese companies had successfully learned the lessons of implementing improvement based on teamwork, using statistical process control, obsession with customer satisfaction and constant development of products and service through innovation.
The lexicon of management started to include expressions such as excellence and the quest to become 'World Class'. Significantly, commentators acknowledged, as far as the latter was concerned, it was Japanese companies that dominated any list of the top companies.
The message to others was that you must get better or get beaten and that Japanese companies had cracked the secret of success.
Recent announcements by two Japanese companies, Toyota and Sony, show that success is never permanent and that you have to work hard to remain 'the best'.
In the case of Toyota there is a belief that after a number of recent crises it is well on the road to recovery and will continue to be regarded as one of the world's most successful car makers.
However, Sony's misfortunes seem to be continuing and it has just announced record losses. Sony has discovered that the dominance it once enjoyed has gone and that competitors are outpacing it in terms of innovation and excellence.
What has gone wrong and what does it tell us about the relevance of Japanese management techniques that were once proposed as a sure-fire way to achieve success?
Sony, as far as I was concerned, was the best available and, for sure, was superior to the European brands that had always been the only choice.
Long before I was aware of quality management techniques such as SPC (Statistical Process Control) and TQM (Total Quality Management), I was being 'seduced' to purchase products that were not just great in terms of performance, but were much more elegant in their design.
And if Japanese products were becoming the first choice of music lovers, there were starting to have an even more dramatic impact in another sector; car manufacturing.
As many employed in local car manufacturing were to discover, if you couldn't get better in order to meet the Japanese challenge, the consequence was not just that you got beaten, but, all-too-frequently, terminal decline.
Perhaps it should come as no surprise that companies such as Sony and Toyota that were pioneers of quality and excellence are now under threat themselves.
Indeed. as they are finding, others have learnt to emulate the quality and innovation that made Japanese producer so successful (and often at lower cost); precisely how Japanese goods made inroads into Western markets such as the UK.
In the case of Sony, a company that I feel I grew up with (certainly in terms of listening to music), the decline is due to a number of factors. Primarily, however, it is believed that it no longer has the creative edge that provided us with products such as the Walkman and PlayStation.
Sony produced such a variety of products that it opened its own stores selling, among other things, audio equipment, televisions (including 'home cinemas'), cameras, telephones and computers. Its reputation for quality was so good such that it felt able to charge a premium.
The trouble for Sony is that others such as Apple and Samsung are now viewed by customers as providing products that are better. One telling statistic that I came across was that even though Sony is now valued at £9 billion, this is only 3% of Apple.
In order to compete Sony needs to recreate the innovative capability that made its products so attractive. But it must do this against a backdrop of losses.
Accordingly, Sony's chief executive has promised to fight back and is attempting to reduce its costs by job losses; something once believed to be anathema in Japanese management philosophy.
Moreover, like many other electronics companies, Sony makes mobile phones. The ability to compete in this market is seen as important to any recovery and Sony hopes to sell more than 33 million of its version of the smartphone (up from 22.5 million last year).
To achieve this objective Sony purchased the Swedish company Ericsson.However, there is doubt that this strategy will work. According to industry analyst SR Kwon of Dongbu Securities in Seoul:
"In handsets, without big innovations, Sony will still be a second-tier smartphone market player."
Worse, he believes, Sony will need to catch up with others rapidly (something that will be hard to achieve):
"I'm just not impressed by Sony smartphones. Will Sony get much better as time goes by? I'm not that optimistic. Currency is not the only problem: the bigger problem is that Sony has failed to catch up with consumer trends in TVs and handsets."
As Kwon indicates, televisions are another area of concern for Sony. These were once a very valuable part of its business but now make significant losses.
Simultaneously, Sony's rivals are marching ahead and Samsung has announced that it is planning to launch what is called the OLED (Organic Light Emitting Diode) television later this year.
Samsung, which currently makes over £100 million from televisions and believes that OLED will be the standard television technology within a couple of years. Technological development in how we watch television, it seems, never stops so beware before you rush out to buy the current technology!
That great pioneer of quality improvement through the implementation of a variety of techniques, Toyota, has also experienced problems that include the fact that as consumers throughout the world suffer the effects of the financial crisis, they tend to cut back on major purchases such as a car.
Additionally, the dreadful Japanese tsunami last year affected Toyota's productive capability especially in its supply chain.
However, Toyota, unlike Sony, is recovering and hopes to treble its profits to over £8 billion.
Like Sony, Toyota recognises that production costs are a concern and need to be reduced. But Toyota, a company that believes in the importance of its employees, is going to refocus its efforts of improving processes.
In a world in which jobs can be moved effortlessly from one part of the world to another, Toyota has held firm to its belief that the majority of its production should remain in Japan.
As Jeffrey Liker, a professor based at the University of Michigan who is an expert on Toyota's legendary lean manufacturing system argues, this 'honour' it has to its workers, creates a problem due to the strong yen which makes its products expensive when exported.
The challenge, he believes, is for Toyota to reduce costs through 'other means'.
One of these 'means' is to utilise a key characteristic of lean; muda which is the continuous quest to reduce waste.
By reducing costs and improving profitability, according to Akio Toyoda, grandson of the founder, the company can concentrate on continuous innovation and improvement through the use of kaizen.
And like Sony, Toyota knows that it faces competition.
Even though it wants to improve its operating margins to 4.5% (up from the current 1.9%), it is aware that major competitors achieve better returns. In Japan Nissan and Honda are achieving 7.1% and 6.5% respectively. But in South Korea Hyundai is achieving an operating margin of over 10%.
China is simultaneously an ever-present threat and opportunity. Toyota knows that it cannot compete against the significantly lower production costs (especially labour).
However, any country as populous as China (over 1.3 billion people) and which has a burgeoning class of those with sufficient wealth to purchase items such as cars presents a lucrative market.
As Toyoda acknowledges, there is a constant challenge to address emerging markets such as China:
"As we seek growth in emerging markets, a big challenge for us in a market like China, for example, is how to speed up product launches and come up with the right products for the market."
There is also the fact that Toyota faces competition from Western brands such as Volkwagen which shares parts and technological development with the more 'upmarket' Audi.
This is an approach that Toyota is seeking to emulate in order to significantly reduce development costs.
In America Toyota is facing increasing competition from the domestic manufacturers that once so feared its reputation for providing its customer with a quality product.
Hubris, it seems, played a part in Toyota's problems as it concentrated on opening new factories and lost the obsession with efficiency and quality that created this fear among western car makers.
So, what is the lesson?
For any organisation whether they seek to make profit or not, reputation is crucial and if people perceive you to be the best, then that is what you will be. However, once customers think that you have lost your 'mojo', as seems to be the case with Sony, then decline follows swiftly.
So, like Toyota, you have to constantly find money to reinvest in product design and innovation. If you do not, it is highly likely that your competitors will do so and you will lose your reputation and market share.
As Sony has found to its cost, once this happens it become a major struggle to recreate the success that made you a world class brand.
Considerable efforts to tackle this issue have led to the training of some GPs in Occupational Health together with the introduction of the 'fit note' two years ago which shows what people are able to do, rather than what they can't do. Companies themselves have also become far better at adopting strategies to manage absence and train managers.
This has produced significant gains in tackling short term absence which EEF's survey evidence has shown declining continuously in recent years. However, our latest survey published this week has shown that the overall gains have now flattened out, whilst of greater concern is the divergence in short and long term absence.
In particular there has been a jump in long term absence due to factors such as stress, anxiety and depression which some will conclude may be a knock on effect of the job insecurity that many people now feel. However, whilst the reasons may be many and complex, it perhaps suggests that the efforts to date have now been exhausted and that government needs to re-invigorate its policies in this area. In particular,
EEF is urging government to implement the recommendations of the Frost/Black review of work and wellbeing, including an electronic fit note, training of all doctors in Occupational Health, as well as tax breaks for those companies who invest in rehabilitation themselves. As well as helping get people back work quicker it would also take pressure of the NHS capacity which is still seen as a barrier by almost one third of companies. The gains made to date have been considerable but a fresh approach from government, companies and other bodies is now needed.
]]>Deputy PM Nick Clegg had previously claimed the fund could generate up to half a million jobs. I'd still like to see the calculations behind his claim as that figure is wildly out-of-line with the NAO's estimates. While the RGF may create 328,000 jobs in total, these are of various durations and the NAO estimates that only 41,000 extra full-time equivalent jobs could be created over the next seven years as a result of the RGF, at an average cost of £33,000 per net additional job (which is "broadly similar" to past programmes with comparable objectives).
Labour has not surprisingly jumped on the report, pointing to figures in the NAO report putting the average cost of creating an additional job under Labour's Regional Development Agencies (RDAs - abolishing in haste by the coalition) at £28,000, some £5000 less per job than under the RGF.
On a positive note, the NAO found that the projects selected for investment by the RGF offer more jobs for taxpayers' money than those that were rejected and do fulfill the overall mission to support private sector growth in areas that relied more on the public sector.
However, the NAO found that taxpayers would have received much better value for money if RGF bids had been more closely scrutinised, noting that "over 90% of the net additional jobs could have been delivered for 75% of the cost, with the cost of each job then being £26,000".
It added that "value for money was not optimised because a significant proportion of the fund was allocated to projects that offered relatively few jobs for the public money invested... Applying tighter controls over the value for money offered by individual bids would improve the fund's overall cost-effectiveness.
The report suggests civil servants should be allowed to step away from assessing less profitable projects to concentrate on getting new projects under way. This would tally with some key criticisms made by commentators on the inertia of the scheme and the length of time taken to get due diligence done.
As the NAO notes, "officials' time freed up from post-appraisal checks on projects where public money is providing fewer jobs could be spent on getting other projects up and running more quickly. Despite the government's desire to get projects up and running quickly, only about one third have received final offers of funding, the NAO said.
None of this is to deny that some good projects are being backed by the RGF. And firms that have benefitted so far in the West Midlands include Alstom Grid, Bosch Thermotechnology Ltd, Jaguar Land Rover and Aston Martin, with the fund expected to create more than 10,000 jobs in the West Midlands directly, and to safeguard or indirectly create another 64,000 in the region.
But the NAO report is nevertheless damning in terms of the inefficiency of the RGF process.
Such failings in policy should come as no surprise to readers of my blogs and columns here at the Birmingham Post, as I have repeatedly pointed out weaknesses in the new policy regime.
Firstly, I've stressed that the fund is small, representing a big cut in funding for economic development as compared with what went through the RDAs. As a result a large number of worthwhile projects have anyway been turned away.
Secondly, the RGF it is doled out in a top down, centrist way from London in stark contrast to the old RDA spending where decisions were made near the ground in the regions. This is despite much talk of 'localism'; in fact the opposite has been the case with the RGF where decision making has been centralised. It would make sense to devolve the decision making process to LEPs given that the RGF is meant to be 'regional' (i.e. sub-national). But of course that would show how little money there is available for each LEP.
Recentralising policy to London away from the old RDAs took away a great deal of regional knowledge and intelligence about key firms, clusters and technologies that could and should be supported, and instead handed decisions over to a small London elite.
Thirdly, as noted above, the RGF has been painfully slow in getting due diligence done on projects once approved (in part because so few civil servants have been assigned to do this work) which means that the money takes ages to actually get out into the real economy. So much so that the NAO notes that only a third of successful bidders have received final offers of funding. So much for any urgency in the government's 'growth strategy'.
Business groups have been highly critical - and rightly so - of how long it takes between the initial RGF decision and the confirmation after due diligence has been completed. One wonders whether there are enough civil servants processing the RGF bids, or whether the original decision-making process was robust.
Fourthly, on the latter point, there is very little in the way of transparency or clarity regarding the whole process of how decisions are made. In particular, questions focus on how applications have been appraised and approved (what criteria have been used?). There has also been little assurance on how the jobs created or safeguarded and private sector leverage figures have been calculated. In addition, any conditionality relating to the awards (factors such as job numbers or leverage changing over the life of the project) hasn't been announced.
Given that bidding for the next round of RGF money (worth as much as £1billion) was announced recently, and runs until June, it is still pertinent to ask whether lessons have been learned. In particular, will ministers finally put in place greater transparency and accountability in how they make decisions on what projects get RGF funding? And will they make sure that the money gets spent quickly?
Whilst some of the RGF awards - particularly here in the West Midlands - are welcome, sadly so far at least the RGF has been a case of too little, delivered too late, and with too little clarity.
And it seems, according to the NAO, it has been delivered inefficiently as well.
Professor David Bailey works at Coventry University Business School.
The extent of the presence over seas is shown by the fact nine in ten companies are already exporting and exports account for more than half the turnover of two fifths of companies. The survey also shows that 65% of companies saw their exports grow in 2011, with a fifth of companies seeing growth of more than 20%. This year 70% of firms expect exports to increase. In addition, the survey shows the extent to which emerging economies are taking over from slower growth in the Eurozone, although the EU still accounts for around half UK exports.
Ninety per cent of companies already export to developing economies and the survey shows half expect exports to emerging economies to increase this year
India and South East Asia lead the way in the immediate future with almost a third of companies expecting exports to increase in 2012, with China and the Gulf States close behind. In the next five years exports to China and India are expected to increase by 46% and 39% respectively whilst, in contrast the figure for Russia is just under a quarter.
However, the survey throws down a challenge to government to provide the framework to support this potential and increase exports to meet the Chancellor's £1trillion target. In practical terms this means between now and 2020, the UK will need to match the annual growth rate of South Korean goods and services exports of nearly 9% a year in the decade prior to the recession in 2008. West Midlands companies will do their bit to help the UK meet this target but there is no doubt it will be challenging. They key now is for business and government to work together to provide a framework of support, especially for smaller companies, that will help deliver it.
]]>So, take two very British 'brands', Weetabix and snooker. Anyone who grew up in in Britain in the 1970s and, especially, the 1980s will probably have been exposed to both.
The announcement last week that a majority stake in the makers of Weetabix has been sold to Bright Food, China's second largest food company will probably come as no great shock. It is part of a growing trend for cash-rich Chinese companies to buy western brands.
Bright Food has already tried to purchase stakes in United Biscuits, maker of much-loved British staples such as Jaffa Cakes, Hula Hoops and Twiglets and has shown interest in Campbell's Soups and Premier Foods.
The list of companies already purchased by the Chinese is interesting. As well as being highly diverse, it suggests that there is both desire to some as vehicles by which they can exploit the rapidly developing market at home and others simply to raise revenue.
So, for example, Gieves and Hawkes the Saville Row tailor was also sold last week to Trinity which paid £32 million but could rise to twice that depending on sales in China.
Water companies are popular. Thames Water was sold for £600-£700 million in January to China's sovereign wealth fund and Northumbria Water for £2.4 billion last year to Hong Kong based tycoon Li Ka-shing . Additionally, Felixstowe Port is owned by Li Cheung Kong Infrastructure.
As we know only too well here in Birmingham, there has been Chinese interest in local businesses. Birmingham City Football Club is owned by the now infamous Hong Kong businessman Carson Yeung. And after its collapse MG Rover was taken over by Shanghai Automotive Industry Corporation.
Imminent deals of British companies to the Chinese said to be in the offing include Lotus Cars and Horizon Nuclear Power which is being considered by state-owned Guangdong Nuclear Power.
But back to Weetabix and snooker.
Some commentators have questioned why the fact that it is now majority owner of Weetabix has not attracted the same publicity that Birmingham-based Cadbury did when purchased by Kraft food. Perhaps part of the reason is that there is a belief that this is such a great brand that its production will not be moved to China where breakfast cereals have little presence.
Weetabix, which also makes Alpen and Ready Brek, was invented in Australia in the 1920s but has been made in Northamptonshire since before the second world war by the George family.
Weetabix currently own two factories in Burton Latimer and Corby and employs over 2000 workers. Weetabix is exported to over 80 countries and generates sales of more than £420 million.
Weetabix is the biggest selling breakfast cereal in this country (on average we consume336 of the individual biscuits each year). This made it a very attractive proposition for Bright food.
However, if the intention of Bright Foods is to use Weetabix as a way of breaking into the Chinese breakfast cereal market there is a challenge. As we all know, because of its population, China provides huge potential for any producer wishing to increase market share.
Given that last year the Chinese spent some £410 million on breakfast cereals compared to our £1.43 billion suggests as much. The thing is, the Chinese population have high levels of lactose intolerance which means that there may be reluctance to consume Weetabix in the way that we do.
However, Bright Food's chairman Zongnan Wang, who completed the Weetabix deal, believes that there is great potential in wheat cereals to the increasingly wealthy citizens of China (and greater Asia) who have always existed on the traditional breakfast of rice and steamed bread.
Nonetheless, Bright Food will rely on existing markets for Weetabix to ensure continued return on investment. And Bright Food will continue to use the incredible cash reserves it has to complete other takeovers.
As Marcia Mogelonsky from market researcher Mintel, and who is an expert on food and drink, suggests, they will use Weetabix as a "toehold" to develop markets in Western Europe and the world, followed by the world.
There is a belief that eastern companies are looking to purchase ready-made brands that have global recognition.
Some commentators believe that we are witnessing something profound. Clive Black, who is an analyst at Shore Capital, sees Bright Food's acquisition of a majority share in Weetabix as part of a shift of the Western hegemony:
"...[it's an example] of the global power shift from the west to the east. It's similar to how the bourgeoisie took over from the aristocracy 200 years ago"
This might seem alarmist but there is an undoubted shift in economic power. Remember that the Chinese were largely not exposed to the consequences of the global financial crisis caused by, among other things, the American sub-prime market.
Indeed, there are some who suggest that this would not be the first time that China has considered conquering the world. Gavin Menzies in his book, 1421, The Year China Discovered the World, argues that in March of that year a large fleet of ships set off.
As Menzies suggests, China discovered counties that the great European nations would not achieve for another couple of generations.
There has been criticism of Menzies' book; most particularly the basis of his research. Others ask why the Chinese didn't continue their quest to discover other counties and, of course, their resources.
Economically, in contemporary terms, at least, the quest is very much continuing. China has been securing supplies of raw materials (minerals and ore), from Africa for a number of years. British companies are simply a continuance of this trend.
So, what about snooker?
The first bank holiday weekend has become traditional for the 'World' snooker championships that take place at The Crucible Theatre in Sheffield.
That the world championships have been played there since 1977 means that The Crucible is synonymous with that tournament. However, there are some who suggest that the future of this most quintessential British game lies elsewhere; China.
For those who remember the early 1980s there seemed to be almost continuous coverage of snooker. Its retinue of players, 'Hurricane' Higgins, 'Interesting' Steve Davis and 'Whirlwind' Jimmy White, to name just three, were household names.
But we grew tired of the constant coverage. Sponsors recognised this and withdrew which, of course, meant that the game was less televised. Coupled with the ban on tobacco advertising, the game's authorities looked elsewhere to attempt to for ensure that it could recreate the revenues it once enjoyed (one of the reasons we see players wearing advertising on waistcoats).
It is China that snooker looks to in order to secure survival. The game is extremely popular and the potential viewing figures are phenomenal. So, it seems, we are likely to see even less snooker in the future; certainly on free-to-view channels.
As the quotation goes, 'money makes the world go around'. This has never been truer. The recent acquisitions of companies like Weetabix by the Chinese and the move eastwards of the 'sport' of snooker clearly demonstrates that traditional brands are not sacrosanct as far as British ownership is concerned.
It begs the question, what brands will be next to create interest from China?
For example, Samsung's galaxy handset is acknowledged to offer better technology than Apple's iPhone but at a lower price.
As Francis Jeronimo from analyst IDC comments, why would you buy the iPhone, which has a five megapixel camera, if you can purchase a Samsung that has an eight megapixel camera and a better (brighter) display for less money?
Notably, Samsung's rise has been achieved from roots that gave no indication of the current pre-eminence it enjoys in electronics. Indeed, Samsung is a company that has learnt to adapt, diversify and innovate in a way that demonstrates the importance of being both agile and creative in terms of both strategy and technological development.
The history of Samsung is instructive for any organisation that wishes to innovate its way out of the current economic crisis.
After second world-war it had its own flour mills and had started to develop other interests such as insurance. Significantly in 1969 Samsung-Sanyo Electronics was established and started producing black and white televisions in 1972.
During the 1970s whilst Samsung invested in industries as diverse as 'heavy', chemical, textile, petrochemical, shipbuilding and textiles, it was in electronics that it gained recognition abroad by export of its products. In 1974 is began producing washing machines and refrigerators and in 1979 began making microwave ovens.
The 1980s was another decade of what was, as well as breath-taking development of new products, expansion into global markets.
In 1980 it commenced production of air conditioners. Having 1982 having produced 10 million black and white television s in 1983 Samsung started making personal computers and developed video cassette recorders which were exported to the US the following year.
In 1985 is established Samsung Data Systems to create an ability to become a leader in information technology (including systems integration, management, networking and consulting).
Significantly in 1987 as well as launching Samsung Aerospace Industries, it recognised that innovation was the key to continued success and created two research and development institutes.
Following the death of its founder in 1987, who was succeeded by his son Kun-Hee, Samsung started a restructuring of existing business and the development of new ones with the aim of being one of the top five electronics companies in the world.
From the 1990s Samsung's dedication to development best-in-class products was what marked it out as a company capable of competing with any other global 'player' and contributed to the digital technology we enjoy as standard.
So, as well as starting to make mobile phones in 1993 and producing the first ever digital video disk recorder (DVD-R) in 1993, it began manufacturing in China and acquired US firm HMS.
From this base Samsung was able to focus on continued development of revolutionary products that were regarded as world-class because of the obsession with total customer satisfaction.
It also developed the technology that revolutionised computer and television screens. And with resonance to Fugifim, which sponsored the 1984 Olympics, Samsung became a contributor to athletics; assisted by Kun-Hee being selected as a member of the International Olympic Committee in 1996.
From the late 1990s Samsung has cemented its position as one of the most widely respected (and admired) companies in the world - particularly in electronics. Looking at its achievements over the last decade or so demonstrates that its pace of development through innovation remains phenomenal.
Samsung's research and development into both flat screen technology for its digital televisions and computer monitors and touchscreen technology for its mobile phones and tablets have ensured that the reputation of its products mean that they are as good (if not better) than competitors. And better still, they are not the most expensive.
So, it's as easy as that! Well, of course it isn't. Constant innovation through research and development is expensive and time consuming. Undoubtedly Samsung has been helped by the fact that many of its competitors in, for example, mobile phones, are experiencing difficulties helps.
Not getting into a 'death spiral' is imperative as, it seems, once you experience losses it is extremely difficult to recover. Horace Dediu who used to be a senior manager at Nokia, and is now an independent analyst, states that he has found no instance of a firm that has been able to recover from experiencing losses.
Whilst innovation may not be easy or inexpensive, it seems that if you don't engage in it you will not survive. This is the message that is contained in the latest edition of The Harvard Business Review (May 2012) which considers the importance of innovation.
Adi Ignatius, editor in chief states the belief that innovation is a company-wide process that is 'total' and must be 'across the organization'. Further, he contends, if it is regarded as something ad hoc it will not succeed.
In their article 'Innovation and Creativity', Bansi Nagji and Geoff Tuff stress the need for companies to have a balanced portfolio of innovation as well as having the 'ability to approach it as an integrated whole'. Interestingly they state that having carried out research found a 'striking pattern':
Outperforming firms typically allocate about 70% of their innovation resources to core offerings, 20% to adjacent efforts, and 10% to transformational initiatives.
They go on to stress that there is an inverse ratio in that innovation investments in that typically there is a 70% return from the 'transformational realm'.
Further, as well as suggesting that there is a need to discover talent for 'breakthrough efforts,' there should be separation from the core business through a defined structure and sufficient funding.
As they summarise, whilst innovation is never likely to be a dominant activity, it will require particular things to be put in place:
1. Those with 'talent' should be identified/appointed who possess appropriate skills to deal with complexity, uncertainty and ambiguity
2. Management should focus on a few 'promising ideas' rather than trying to attempt to operationalize many that will only dissipate effort and cause confusion
3. Metrics should be used to assess non-financial achievement (especially in the early phases)
As Samsung shows, the desire to innovate and create is an objective that must come, involve all members (it is part of the culture), and that there is no limit to what you can attempt to be involved in.
The Committee said it remained concerned at the absence of National Strategy at the heart of government which is a point very similar to our comments before and after the Budget, namely that the government needs an economic strategy to promote growth that matches the focus and clarity on getting the deficit down.
They also suggested government should produce an annual National Strategy Report to Parliament, to allow it to be held to account for its performance against its overall strategy. We made our own suggestion for accountability arrangements in our Budget submission: that the National Audit Office should monitor the performance of the government against its economic strategy in the same way as the Office for Budget Responsibility monitors the government's fiscal performance against the Fiscal Mandate.
EEF believes these two ideas could be married up so that at every Budget statement the National Audit Office would produce an annual assessment of the government's economic performance against a series of indicators. For example, under the cost of doing business by 2015 Britain should have below average EU industrial electricity prices, the most competitive tax system in the G20 and should see a net reduction of 10% in the burden of complying with domestic regulation. Another measurement could include the performance of UK Regions such as North Wales and how much inward investment we attract.
By being measured against such indicators we would see true accountability for the government on its economic performance. This would ensure it is held to account in parliament on an annual basis, not just at the ballot box every five years.