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A bad week to bury relatively good news from the economic front

27 October 2012

9:00 AM

27 October 2012

9:00 AM

The news agenda has gone mad. Imagine this is the issue of 27 October 1917, and our headlines are filled with allegations concerning the depravities of the late Mr Oscar Wilde, calls for a new enquiry into police handling of the 1888 Match Girls’ Strike, and rumours that Mr Bonar Law is habitually rude to servants — while reports of the first engagement of US infantry, a potential turning point in the war in France, are consigned to the inside pages. That’s more or less how it is today: analysis of what may be a turning point in the great economic war, at least on the domestic front if not on the more tumultuous European one, barely makes it into the bulletins at all.

But by the time you read this, the Office for National Statistics should have announced a growth bounce in the third quarter of up to 0.7 per cent. Consumer optimism is at its highest level for a year (according to a Deloitte survey), inflation on the Consumer Prices Index measure is down to 2.2 per cent, and the number of people in work grew by 212,000 in the quarter to August, to a record 29.6 million; 170,000 fewer people are claiming out-of-work benefits than they were two years ago, and youth unemployment is also falling.

Given job cuts in the public sector and financial services, plus hiring freezes in most major companies other than supermarket chains, these numbers suggest a positive fever of activity in the small-to-medium company sector where sustained recoveries traditionally take root. And that chimes with my favourite indicator, the StartUp Britain Tracker of new business registrations, which is about to hit 400,000 for the year to date. Of course, as in 1917, there will be setbacks and darker days to come. But wouldn’t it be good to see all this on the front page, in place of Jimmy Savile?

My Starbucks boycott

I have already been boycotting Starbucks for many years, ever since I first winced at the watery coffee and recoiled from that pseudo-sociological nonsense about ‘a third place’. So my support won’t add much impact to the campaign to persuade the Seattle-based chain to pay tax on the profits from its 735 UK outlets, rather than siphoning them off to Switzerland. In fact it has paid no corporation tax at all on £1.2 billion of sales over the past three years — but its methods are (we’re told) entirely legal, and are also common practice with the likes of Facebook, Amazon and Google.

In effect, through ‘transfer pricing’ and offshore booking, multinationals can choose how much tax they pay in any given domicile. That makes a mockery of calls for ‘internationally competitive’ corporate tax rates — but also makes a mockery of ethical image-making. If you believe your own guff about Fairtrade beans, recyclable cups and support for youth charities, you should also recognise a basic social duty to pay a modicum of tax in your host country: it’s just another aspect of corporate citizenship.

Wrestling Russian bears

If BP chief Bob Dudley had realised that as an oil executive he was fated to spend the best part of two decades wrestling with bears in Siberian snowdrifts, I’m guessing he might have chosen a less challenging career — as a naval officer like his father perhaps. But at last he seems to have come out on top, having exchanged BP’s half of the TNK-BP joint venture, with its chorus line of troublesome oligarchs, for a 20 per cent stake and a couple of boardroom seats in state–controlled Rosneft. In addition, he will collect $12 billion of cash, which he is expected to pass on to BP shareholders as consolation for everything they’ve had to endure these past few years.

The problem of TNK-BP was that it was never clear who pulled the strings: the oligarch trio of Fridman, Blavatnik and Vekselberg had enough muscle to force Dudley himself to flee the country when he was trying to run the joint venture, and to spike BP’s earlier attempts to do deals with Rosneft and the other state giant, Gazprom. But it was never clear how much support they had from the Kremlin, which was prepared to let them bully their foreign partner but still saw TNK-BP as a competitive threat to its directly held oil and gas interests. Though he may shiver at the thought, at least Bob Dudley now has a direct line through Rosneft to Vladimir Putin.

Scrapheap challenge

Sad to see Manganese Bronze, maker of the black London taxi, going into administration. The company’s name refers to the alloy from which it used to make ships’ propellers; then it owned a portfolio of great British motorcycle marques, all now passed into history; and since 1973, when it acquired an existing Austin design, it has manufactured the cab which is so often described as ‘iconic’ yet never achieved that status anywhere but in our own capital. Production was moved to Shanghai five years ago, sales of the current TX4 model are suspended because of a steering fault, and Nissan of Japan is eagerly promoting its fuel-efficient, low-emission rival, the NV200. Losses have mounted and the last hope is for a bailout by Geely, Manganese’s Chinese joint-venture partner and 20 per cent shareholder.

There is a case study to be written on why the most comfortable and manoeuvr-able taxi ever designed — vastly superior to New York’s yellow cabs, for example — was never an export success. Was it a failure of marketing or of manufacturing scale, or was the product itself so irredeemably retro that foreigners associated it with -Beefeaters and pea-soup fog? If there’s a company on the planet that can rescue the London taxi from the scrapheap, it is surely Tata of India, which has done such a remarkable job of reviving Jaguar Land Rover. The Indians have a real fondness for British heritage brands; the Chinese, I suspect, see them only as symbols of our economic decline, to be picked off one by one. Happily, I shall be posting a despatch from India next week.

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