Business First Blog

Occupy – don’t blame capitalism

Seumas Milne wrote this in the Guardian today: http://bit.ly/qj0iVZ essentially saying the Occupy movement is evidence of a desire for the overthrow of capitalism.

Of course he’s wrong.

Occupy gives everyone the chance to overlay the protests with their own ideology. Milne celebrates it as an extension of the anti-capitalism protests in Seattle and elsewhere, evidence of a popular movement for fundamental, socialist, change. The Right likes to do the same, particularly the swivel-eyed Fox brigades in the US, who deride the protesters as loony hippies.
What everyone tries hard to ignore, because it would be inconvenient to acknowledge, is that Right and Left actually share many of the same arguments being made by Occupy; it’s the subsequent prescriptions that differ.
So, my interpretation is that capitalism should not be the target for this vilification. It is the distortion of capitalism by vested interests, politicians and lobbies working together, that has brought us down.
Company owners and boards are driven to maximise value for themselves and shareholders. It ain’t always pretty, but it broadly works. Society likes it because it provides, or used to, stability and prosperity. The role of government and the law is to keep an eye on the process and keep its harmful excesses in check.
Except in recent decades, politicians have made it clear they want to be part of the process, not the referees that their electors rely on for protection. The drive for value does not have an inbuilt morality, much as business people would like to argue otherwise. After all, human beings left unchecked do often behave badly. Faced with an open goal – compliant politicians – business people did what they are programmed to do: fought for profitable advantage, seeking to build themselves up and do the competition down. And the politicians, swooning at all the power and money that was courting them (Dave and Rebekah anyone?), did their bidding. Tax breaks, special rule changes, preferential treatment, cosy contracts – in baleful harness, capitalists and politicians broke the system.
It is now exhausted. To an extent, the corporations got what they wanted: protection from capitalism’s ruthless medicine for failure; massive injections of taxpayers cash through tax breaks or in the banks’ case, bailouts; and politicians got to feel like Masters of the Universe. Except now, the vast majority have been bled dry and do not have the financial muscle to restore themselves in the face of the grotesque imbalances that have been created.

In the spirit of the opening paragraph of this post, I will now overlay my own prescription for the corruption Occupy is fighting. Dismantle the gargantuan tax code, legislate against uninvited lobbying (government does need information from industry, but it must be on its own terms) and pay MP’s much, much more. What, I hear you cry? Pay these grasping creeps the same as senior business people? Yes, because while they are earning the same as some junior level execs, they will behave like dogs looking for scraps from the rich man’s table.

But leave capitalism alone. Give it room to breathe. Stop trying to choke and distort it. Let companies grow so they can hire people, die because they fail, and grow again. Let government keep a watchful gaze and let the law do its job.

Osborne’s trap – and he’s in it.

Fraser Nelson in the Spectator has put together an indispensable primer on that state of government spending. Read it here: http://bit.ly/np1o5U then judge today’s GDP figures accordingly.

The key political point, depressingly, is that George Osborne has been acting nothing like as tough as he’s been talking when it comes to deficit reduction, which leaves him marooned on a reef of his own making – plus, he has been deliberately misleading the public about what is actually going on (read the bit about his obfuscation of debt/deficit).

It can only end in tears – and the demand for growth stimulation of some sort can only get louder. Which, actually, is no bad thing from the point of view of business. But who will pay?

I’m going on strike

Ever since the economic crisis hit 3 years ago, and the credit crunch that ensued, many large businesses have arbitrarily extended their suppliers’ payment terms in order to hoard their own cash. As an accounting policy, it makes sense. In every other way, it amounts to a form of slow theft and when those suppliers are small businesses, it puts them in deadly peril.

At Business First we are blessed with clients who are absolutely terrific in their dealings with us…so when you read what follows, don’t rush to the magazine to try and guess who I’m talking about, because we also do contract publishing and printing work for large companies who do not advertise with us. And this is where the problem lies.

We carried out a brochure writing, design and print job in early June for a very large American corporation with whom we have had cordial relations for some time. We invoiced them on delivery, then heard nothing, until a couple of weeks later they said we’d invoiced the wrong part of the company. Our fault. So we re-invoiced and were told it would be on the system and ready for payment within days.

Rejoice!

Days came and went, so we checked in with their accounts team, to be told, ‘Oh yes, it’s on the system and will be paid on September 2nd.’

What??? It will be nearly a quarter of a year from completion to payment. Yes, there was a brief screw-up by us, but really…!

We immediately complained to the accounts person and to my client contact. We heard nothing.

So today I wrote to my client and said that with great regret I am withdrawing our services. It may well have the same effect as a mosquito trying to bite an elephant. I’d like to feel there might be some pang of loss, but hey ho, it’s not like we’ll bring them crashing down, so it may seem an empty gesture that will hurt us more than them.

But (and I can’t believe I’m say this…it’s work!!! Money!!!) it really does boil down to the principle of the thing. If a client can behave like that, then they’re not a client, they’re…well, insert any number of unsavoury terms. I’m running a few through my mind as I type.

They don’t deserve us. So they’re fired.

And I feel unaccountably pleased about it.

Corruption – this time it’s our money.

The latest issue of Business First contains a pretty damning indictment of our financial system by Toby Baxendale.

Until last year he was CEO/owner of Direct Seafoods before selling it for £45m. Now he is devoted to exposing the corruption at the heart of our money supply.

And this corruption is every bit as bad – worse even – than #hackgate, for the simple reason that it has been going on so long that no one bothers to question it any more.

Worth a read. http://bit.ly/poVhZw

Chaos at the gate

Watching the British establishment tear itself to pieces is like watching a slow-motion car crash…except it is not that slo-mo, events are happening at a frightening speed. (For the editor of a magazine that comes out every few weeks it’s deeply frustrating. What I wrote on #hackgate last week and what will appear in print this week will look very tired!)

The other frustration is that the crisis in the Eurozone is getting barely a mention, and even then the crash-bang-wallop of toppling news executives and police chiefs, not to mention the slamming of cell doors, is drowning out what few alarm bells are being sounded.

Spanish and Italian 10 yr bond yields have jumped beyond 6pc and are edging towards 7pc. One analyst told Bloomberg this afternoon that when Spanish bonds hit 7pc, all bets are off: we’re down to the end-game. ‘The point of no return’ was the phrase used. And there has been a rash of stock suspensions in Italy.

Gulp. There’s a strong part of me that wants EMU to fail, that resents the arrogance of the Euro elites and their casual approach to their citizens’ democratic rights. I spent 4 years in Brussels in the 1980s and loathed their smug self-satisfaction. But the impact on British business of a disorderly collapse of the Euro would be cataclysmic. We simply cannot afford it to happen. But we are powerless to stop it, as, apparently, are the Euro elites themselves.

While chaos brews, Britain reaches the nadir of its decadence, diverted by the death throes of the real ruling class…the nexus of weak-minded politicians, unscrupulous media and honour-lite policemen who also presumed to run the country for their own, rather than the public, good. There’s even a serious debate over the future of David Cameron (although, unless there’s a smoking gun lying around somewhere, he’ll be down but not out in my opinion.)

Journalists and commentators love to end pieces like this with a bold assertion or prediction. But who would risk such a thing? It’s all too dreadful for words.

The Gaping Hole in Osborne’s Plan A

On Radio 4 this morning it was clear the Chancellor does not believe his policy is failing to promote growth. With the IMF giving him affirming strokes, what hope is there that he will actually listen to those in the trenches?

A social enterprise solution to the empty house scandal

Empty houses are a blight on communities. Valuable accommodation is left empty for a variety of reasons, some understandable, some not, but whatever the reason, neighbourhoods suffer the consequences.

A remarkable social enterprise called 3dotproperty www.dotdotdotproperty.com offers a sensible solution: owners will pay to have their buildings cared for by guardians, who will pay a £50 per week fee for their accommodation. Houses come back to life, the communities’ broken teeth are mended and vandalism and squatting eradicated.

It will be interesting to see if it works – they are in pilot phase at the moment, and looking for owners of empty houses to get in touch. One to keep an eye on.

The Money Matrix

While politicians and central banks struggle to keep their economies moving forward through increasingly choppy waters – and try to stop others from sinking – there is a growing movement that says not only are their efforts doomed to failure, with dreadful consequences all round, but that they are locked in a deadly embrace that they could not undo even if they tried.

This movement has yet to coalesce into anything easily identifiable by the media (we all need brands, right?), except to say its philosophical roots lie in the Austrian School of Economics as embodied nowadays by the Ludwig von Mises Institute in the USA (www.mises.org)and the Cobden Centre in the UK (www.cobdencentre.org).

Their basic point is that there is an unholy alliance between central banks and politicians (with allegedly free market banks inevitably complicit up to the hilt) that keeps an unsustainable financial system fuelled by magic money, created out of fresh air. They believe this conspiracy has created a new aristocracy of bankers and civil servants who wield enormous power, granted to them by the politicians who receive the cash they need to pursue their reckless spending on warfare and welfare.

Who pays? According to this narrative, it is ordinary wealth producers, the business people who struggle under ever-increasing taxes and regulation; the workers whose wages are bled white by the inflation caused by these monetary policies; savers and pensioners on fixed incomes…the poor and powerless are being made to support the rich.

Superficially such an agenda fits into a classic socialist paradigm, fighting for the rights of the poor against the machinations of the rich, but of course it does not. Socialist governments love this dance more than most because they believe in the power of the state to manage economies, and for that they need money. They love that money almost as much as they love power.

This as-yet-unnamed movement does not find favour among the political and economic establishment here or in the USA,  intellectually or politically. But be prepared to hear its voice get louder, particularly when it comes to the belief that the value of money must once again be pegged to a tangible asset, such as gold.

This blog by Detlev Schlichter gives a very good flavour of their argument. It is worth investing the time required to read it. It ain’t pretty. http://bit.ly/lpQuYd

What price the glorified online Rolodex?

Business First’s investment commentator Tim Price of PFP Wealth Management is in coruscating form with his latest blog Dotcon (read it at http://thepriceofeverything.typepad.com)

With his customary mix of sardonic wit and barely concealed astonishment at the combined shenanigans of governments and banks, he marvels at the latest manifestation of investors’ enthusiasm for any stock with a dot.com involved – in this case the extraordinary LinkedIn float which saw the stock price jump 173% from its $45 launch. And repeats his oft-made warning that the equity markets are neither as stable nor as good value as they might appear.

“…equity markets are not conspicuously cheap relative to the known threats, those of the US least of all. Anyone arguing to the contrary is likely to belong to the sort of Wall Street sell-side firm that has just floated a glorified online Rolodex at 578 times its 2010 earnings.”

That link again: http://thepriceofeverything.typepad.com

Big companies – your country needs you to pay your bills on time

The banking industry body that manages the BACS transfer system has come up with an astonishing piece of research that demonstrates why so many companies currently find themselves strapped for cash.

Basically, many large companies are taking on average 39 days more than agreed terms to pay their bills to smaller suppliers. The research shows…

….a third of SMEs reporting that big businesses are behind late bill settlement. And those operating in the manufacturing industry are most likely to suffer delay at the hands of the big corporates, where 41% of the sector’s SMEs experiencing late payment said large companies were to blame for overdue invoices.

More than half (53%) of the country’s SMEs have experienced late payment – that’s up from 45% in June 2010 – with the average owed at any one time standing at £27,000. And when SMEs do finally get paid, the length of time they’ve had to wait is an average of 39 days beyond agreed payment terms, an increase of nearly eight days since June 2009. That rises to almost 50 days within the distribution sector, while businesses in the North are waiting an average of 52 days longer than anticipated – that’s almost two months.

The burden of chasing overdue invoices is also impacting on smaller British businesses, as they’re forced to spend an average of ½ a day every week pursuing payment. That equates to more than 158 million man hours lost to the British economy just in chasing bill settlement.

This is a scandal. Over the last few years, business generally, and that includes large companies, have postponed capital outlays out of nervousness and are hoarding their cash instead. While I have no evidence for this, I would not put it past many of them to have deliberately instructed their Accounts Payable departments to conserve cash further by arbitrarily extending payment terms.

Everyone is beating up the banks for not lending money to SMEs when in fact their hands are tied by the regulatory requirement to increase their capital reserves – in other words, hang onto their cash – and by the sound business principle that they must be careful who they lend money to. Poor lending decisions in the past helped create the mess the banks got into in the first place. A great many calls on the banks at present will be for cash flow reasons – overdrafts and so on. And that usually means a business is wounded and possibly fatally so.

So if these larger companies were to stop hoarding their cash – which will be earning pretty poor interest anyway – and pay their bills on time, a tremendous amount of cash would be sent gushing through the economy and small business owners could sleep easier at night. And pay their own bills on time too.

Just imagine – sticking to credit terms could be seen as an act of patriotism. There’s a thought.

Nostalgia really is what it used to be

I spent a very enjoyable 45 minutes yesterday in a shop called Past Times in Worthing. As its name suggests, its stock-in-trade is nostalgia and it does a very good job of it too. Inevitably there was a healthy trade in the latest austerity chic poster. There are even some very fetching door mats bearing the wartime exhortation….

And of course there were lots of items bearing the Union Flag and much to do with the Royal Wedding. The shop was pretty full and doing great business. Nostalgia really is selling well. Just look at how successful anything bearing the name Vintage has been in the last couple of years. But like so many marketing phenomena, one questions whether the market is capitalising on an apparent outbreak of yearning for simpler times, now that we can’t afford more complex ones, or whether the market is reflecting something that has been growing in strength for some time, at least since the world economy imploded in 2008. After all, it takes time to produce the goods I saw on display, so my guess is the market has been doing what it does best, quietly listening out for the unspoken needs and yearnings of the populace and seeking ways to fulfil them.

And then my thoughts turned to some of the musings coming out of the political sphere, particularly about a new strain emerging in the Labour Party, calling itself Blue Labour (which, unsurprisingly, overlaps quite a bit with Red Toryism). Blue Labour seeks to capture the imagination and votes of traditional working class British people who may have voted Labour but retained very strong small-c conservative values, particularly belief in one’s country, family, self-sufficiency and the need for a good education. Values that have, to a greater or lesser degree, been diluted and in some cases undermined by the metropolitan elitism of the modern Labour Party of the last 50 years.

David Cameron really has been ploughing the same furrow with his Big Society concept, but has been strikingly poor at articulating what he means by it. I believe he is right that people want a future built on once-cherished values, on local pride, local community action, free from the bossiness of central government. It will be interesting to see if the Blue Labour-ites have any greater success at articulating policies that reflect this.

Inadequate Budget

Disappointed by Osborne’s budget. No boldness, nothing to fire the imagination, just tinkering around the edges of tax and incentives. In my view, radical simplification of business taxes, even down to the level of flat tax, would be the economic Red Bull we need. Life would be simpler, tax lawyers and accountants would have to retrain, admin departments would shrink and the civil service would have to….aah, I forgot, the civil service is probably the reason this is such a lukewarm business budget in the first place. Turkeys don’t vote for Xmas…

From the IoD on the Budget:

Institute of Directors boss Miles Templeman says: “We welcome the raft of supply-side measures announced in the Budget. The combination of reduced corporation tax and planning liberalisation will help to lift business confidence at a difficult time. However, the scale of deregulation in areas that really matter to business in general, such as employment law, is still very limited. And while the 21 new enterprise zones have real potential, we question why the whole of the UK can’t be an enterprise zone.”

Well said, Miles. The entire country should be set free.

Legal Existentialism

There is an extraordinary and potentially explosive campaign being waged by a man called Roger Hayes of Birkenhead (not to be confused with Mr Roger Hayes…to understand why, read this: http://bit.ly/gqceSB). Not being a lawyer, I don’t fully understand the ramifications, but his argument boils down to the fact that councils do not have the right automatically to levy council tax on us without first agreeing a contract. Two courts have now agreed the fundamental point on which he is arguing his case, that of our identities as individuals being separate from our legal identity as corporations. Worth watching. And if you have some informed input, I’d love to learn more.

The inside story of the HBOS debacle

Paul Moore used to be head of regulatory risk at HBOS back in the heady days of the mid-2000′s. Then he ran into the buzzsaw of the go-for-broke, sell-at-all-costs culture that ultimately drove the bank to the edge. And in the process had his career and reputation shredded. Read his cautionary tale of dastardly boardroom deeds in the latest Business First. http://bit.ly/93PTF9

Growing anger at BT

Last year (2009) BT made profits of £1bn. Last year, British business lost £1.5bn to the crime of phone phreaking. This is when hackers break into corporate voicemail systems, work out the call forwarding or outside line access codes, then pass them on to overseas gangs who sell the open lines for cash to anyone who needs to make a call. (In developing countries, that is a lot of people.) The FBI reckons some of that cash goes to Al Quaeda.

British businesses who get hit receive a phone bill many times larger than normal, sometimes hundreds of times bigger – and they are obliged to pay it. No ifs ands or buts even if the bill is enough to put them under. The anger is coming from companies who have been hurt by this crime and from the reseller industry who bundle wholesale services provided by BT and other Tier One telcos and sell them on to companies. They are caught between their supplier, who insists on being paid, and their irate client.

Don’t BT and the other telcos have a right to payment? Yes, and I should add that they are obliged to pay the overseas carrier where the call terminates for their part of the call charge. That can be pricy. But at least one court case is in the making that will challenge the telcos to accept they have a legal duty of care to protect their customers. BT also charges the police £1500 to access call records which, given the difficulty in tracing these gangs anyway, is a deterrent to actually . And the level of complacency is astounding. There is some anti-fraud advice on BT’s web site, but why make a fuss when all these millions of unearned pounds are sloshing into their account?

The real culprits are the phone system manufacturers whose protections, other than Panasonic which now offers a specific anti-hacker firewall on its machines, are woefully inadequate.

While you protect your networks and your PC’s from viruses, spammers and hackers, your phone system is quietly leaving your backdoor wide open. Take heed.

You can read about it here: http://bit.ly/93PTF9

@alankirwin Holloway: “…some…

@alankirwin Holloway: “…some complete…person…” Love it. And bang on.

Graham Honeyman of Sheffield F…

Graham Honeyman of Sheffield Forgemasters wins THREE IoD awards including national director of the year. Message to government?

Alan Sugar at IoD #IoD_DOYA: C…

Alan Sugar at IoD #IoD_DOYA Clegg and Cable in govt like Leyton Orient in Champions League.

Interesting article. http://ln…

Interesting article. http://lnkd.in/4ZvP_W

@DanHannanMEP Good work; measu…

@DanHannanMEP Good work; measured, articulate. Nauseating double standards from those who would give Stalin a soft pass.

Frustrated business wannabes, …

Frustrated business wannabes, read it: Anti-entrepreneurs: why people won’t start businesses | Smarta http://t.co/OC3Te7a via @AddThis

http://blogs.ft.com/westminste…

http://blogs.ft.com/westminster/?p=59471 Of interest to opponents of the current lop-sided US-UK extradition treaty.

Currently reading: https://ipa…

Currently reading: https://ipatter.com/businessfirst New twitter-like device that allows 3000 characters. Giving it a go. Follow me?

@grantshapps Re Connaught. Why…

@grantshapps Re Connaught. Why don’t councils use local firms, with insurance-style checks on claims? Keeps cash local, opens competition.

“@psbook: Brilliant! Why Camer…

“@psbook: Brilliant! Why Cameron hired Andy Coulson http://twitpic.com/2kyjli (via @ShortyMcStompy)”<< superb

It’s started. http://twitpic….

It’s started. http://twitpic.com/2kuv11

Can’t help thinking the more @…

Can’t help thinking the more @Kevin_Maguire tries to emulate @campbellclaret, the less he succeeds. I’d regard that as a result. Does he?

Odds on the SFO getting Asil N…

Odds on the SFO getting Asil Nadir bang to rights? On their track record…oh, about zero I think…

@OliverCooper Link broken…

@OliverCooper Link broken…