Shocks & Stares » David Cameron H&K\'s Financial & Professional Services Team Blog Tue, 19 Mar 2013 08:00:56 +0000 en hourly 1 The Reshuffle: Three initial thoughts Tue, 04 Sep 2012 14:22:46 +0000 David Chambers Business, Foreign, Home, Deputy and a host of other key offices of state are still in place following today’s reshuffle, leading some to call it a damp squib. But that doesn’t mean the day isn’t turning out to be highly interesting in other ways. Three initial thoughts on the reshuffle from us as follows (thanks to Matt, Ed and Ed for their views):

1. Britain is back from Summer: The Olympics created an unusually long summer (silly) season and accompanying downtime for politics and business news. Yesterday’s war cry by Cameron, today’s reshuffle and a host of key European dates coming up mean the political and business communities are very much now back. Expect the news agenda to tighten significantly and the tone to darken markedly in the next week or two.

2. The Government has dodged a brick wall on Jeremy Hunt: Whether intentional or not, the shifting of Justine Greening away from Transport and subsequent attack from Boris Johnson that this greenlights Heathrow’s expansion will likely be the lead story on tonight’s evening broadcasts and tomorrow’s papers. Jeremy Hunt’s promotion to Health, despite his public embarrassment over News Corp will enjoy a much more comfortable second or third slot in the billing.

3. Women in the Cabinet is a weak point for Cameron: The Prime Minister has made his commitment to women occupying a third of his cabinet clear. Today’s reshuffle casts doubt on his ability to fulfill it. We don’t know the scope of junior roles yet, but the decision to give Maria Miller both the Culture and Equality/Women briefs looks strange, especially given her lack of profile prior to today. DCMS is an important department, particularly at present so why burden its Minister with a second job instead of promoting another female star to the second role? Labour will be itching to pounce.

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FPS’ Friday Fiver Fri, 10 Feb 2012 17:58:08 +0000 Joey Ng Another week, another Friday and that means another edition of our team’s Friday Fiver. This week, we have money-printing banks, Twitter-banning broadcasters, Newsnight-debriefing and Good week/Bad week. Thanks to our contributors DC, EJ, Hendog, and Josh-ua. Enjoy!

RUNNING OUT OF PAPER… It’s becoming increasingly hard for the Bank of England to convince people of the value of QE. As Fraser Nelson argued in the Telegraph, the Bank has gone a little quiet on their original reasons for launching QE which isn’t helping – nor is the fact that the links between QE and growth aren’t being articulated clearly, if it all. Yet at the same time, IHS’ Howard Archer is already predicting QE4 for May.

There's more of this in the games room

Source: Creative Commons/mtsofan

What the bank faces then is a PR challenge (as well as the frankly odd problem that they may run out of govt bonds to buy). If they believe QE4 is needed, then they’ve got 3 months to convince a sceptical media and public why it’s needed – expect Mervyn King’s quarterly inflation report next week to begin that process.

In the meantime, hats off to Stephanie Flanders last night for managing to explain what QE actually is and does – that may well be a first


Source: theindiepedant

Thou shalt not repost non-company tweets

Thou shalt not re-tweet rival journalist or people on Twitter

Thou shalt not tweet someone else’ beat other than your own

Thou shalt pass breaking news lines to the news desk before posting them on social media networks…

The Guardian reported that the greater powers at the broadcast station stamped down their feet, and banned journalists from reposting tweets not relating to the company. Contentious guidelines even include the warning to Sky News employees not to retweet rival reporters.

The latest development raises once again, the debate on ownership of Twitter accounts, corporate or otherwise and how a brand can be represented and equally, mis-represented on social media through its employees.

The interesting question here is whether the guidelines will be applied to other parts of News Corp’s network, and more importantly Murdoch’s own account.

NEWSNIGHT DE-BRIEF…On Wednesday, members of the FPS team attended a Gorkana event with Newsnight’s deputy editor Shaminder Nahal and planning producer Samantha McAlister to hear how the show is put together and what the team are looking for when it comes to content and guests.

For those of you with a Gorkana PR log-in, there’s a detailed summary of the event here.

Looking through our notes from the event, a number of points jump out:

  • The show has an average audience of 800,000 but this can jump significantly in a big news week. For example, at the height of the phone hacking scandal, 1.7 million people were tuning in
  • Those involved in the production of the show, are incredibly passionate about their work
  • Jeremy Paxman is apparently a joy to work with, although perhaps unsurprisingly, he is very challenging and demands a lot from those he works with

Source: Creative Commons/Ric_James

It’s a trend we have noted before, but was one that was reiterated at the event – business and economics news has become “sexy”. Newsnight’s producers are always on the lookout for people from the City who can explain the world of finance and its wider importance to the viewer.

The show’s producers left us with the thought that Newsnight is an opportunity to set the record straight or to put across a new or important view to the nation’s opinion formers. It’s not for everyone, but for those willing to take on a challenge, there are a few more prominent slots.

On the subject of setting the record straight and BBC flagships… The embattled chief executive of RBS, Stephen Hester, addressed his critics this week and the interview is a must listen.

GOOD WEEK/BAD WEEK…Credit where credit’s due, Ed Miliband has had a very good week. To be precise, Ed Miliband had an excellent PMQs. Yes, David Cameron had a very bad PMQs. His aggressive, impatient responses to Miliband’s patient line of questioning confirmed the accuracy of his likeness to Flashman ‘literature’s most famous bully’. Public bullies don’t tend to make popular Prime Minister’s. Just look at what happened to Gordon Brown:

Brown the Bully

Miliband on the other had a bit of an open goal when it came to the NHS. Even the influential ConHome has urged Cameron to #dropthebill, so to speak. The softly, softly approach worked well for Miliband though and importantly, his line of inquiry on the NHS was consistent. Cameron’s increasing frustration at having to give the same weak lines and limp backing to his struggling Health Secretary, amplified Miliband’s taunt of ‘calm down dear.’ It was typical of the bad luck Mili E has suffered with broadcasters that the news of Harry Redknapp’s court case emerged at the same time as PMQs, therefore minimising the impact of this little victory. Cameron’s an incredibly savvy dispatch box performer and will be increasingly wise to it, but if Miliband can continue to draw out Flashman Cameron he may enjoy more success in the opinion polls.

MORE BAD NEWS…Headlines have been dominated by the arrest and trial of ‘rogue’ trader Kweku Adoboli who is accused of unauthorised trading which cost his employer – Swiss bank UBS – about £1.5bn. However, a potentially more interesting story that has come to light in recent days is the sheer scale international investigation into manipulation of Libor – the interest rate used for inter-bank lending. Regulators in Japan, the UK, the US and Europe have been investigating the scheme since at least March 2011, and have now implicated employees at a number of major financial institutions. Analysts had long been suspicious that financial institutions were covering up the size of their borrowing costs during the depths of the financial crisis in 2008.

The American Securities and Exchange Commission has fined British medical equipment Smith & Nephew $22m for bribing Greek doctors to use its products over the course of a decade. The case follows a similar investigation into Johnson & Johnson last year which led to the company agreeing to pay $77m for bribes it had paid in Greece, Poland, and Romania.

The increase in intranational prosecutions and international regulatory collaboration has also highlighted differing standards about what constitutes corporate crime. Many American investors were surprised at the British Financial Service’s Authority decision to fine hedge fund manager David Einhorn for insider trading because his actions would not have been considered unlawful in the US. British authorities generally cast a much wider net when investigating white-collar crime but are perceived to have a miserable record when it comes to prosecutions. By contrast, their American counterparts have a narrower definition but pursue cases with vigour, even if that means crossing international boundaries to do so.

It seems likely that more cases of this nature will emerge in the coming months, especially if Eurozone crisis continues to destabilise international markets.

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FPS’ Friday Fiver Fri, 27 Jan 2012 18:48:24 +0000 David Chambers Hello All, and apologies for a late night Fiver – it’s been one of those weeks in financial and professional services. Still, below we have a trip through the week’s news highlights (sadly not including Tom Watson’s intern) as you head into the weekend. Thanks to Ed, Jonathan, Ross and our latest contributor, Josh Glendinning. Have a great weekend all.

UK VS THE WORLD…..While UK GDP figures dominated the headlines on Wednesday, members of the FPS team were given an insight into what lies ahead for global growth in 2012. At an event put on by British American Business we heard from, Alexis Karklins-Marchay of Ernst & Young that despite the woes of the Eurozone, the global economy can still expect growth of over 5% this year.

Much of this output will come from what Ernst & Young term Rapid-growth markets (RGMs), a set of 25 countries they expect will account for nearly half of global growth in the next ten years. Their report on RGMs and its micro-site are an excellent resource for anyone looking for facts and figures on the future shape of the world’s economy.

As an aside, one of the panellists, Stephen Castle of the International Herald Tribune, offered an anecdote from his time in the Brussels press corps. An unnamed member of the German press, brought up in the same region of the former East Germany as Angela Merkel offered Stephen an insight on Merkel’s approach to the Eurozone crisis. In the GDR, cars and appliances were never reliable, and the parts required to fix them were never available. As a result, citizens took to patching things up and making do until they broke again. The German journalist had decided Merkel was taking the same approach to the crisis…

EXECUTIVE PAY…..‘Responsible capitalism’ is the politician’s theme of choice at the moment: all three major party leaders, David Cameron, Ed Miliband and Nick Clegg, all claim to know what it looks like. It was with this in mind that Business Secretary Vince Cable announced a package of measures this week to rein in executive pay to put a stop to the culture of rewarding poor performance.

Although he has been a long-standing critic of excessive bonuses, before he could announce this week’s package he had the wind taken out of his sails. Cable’s opposite number, Chuka Umunna, pulled the rug from under his feet by getting a urgent question granted in the Commons on executive pay, thereby forcing Cable to make a statement a day earlier than planned. Rather than facing a Think Tank audience, where the statement on executive pay was scheduled for announcement, Cable was forced into presenting to a much tougher audience in the Commons, something he acknowledged was actually the right thing to do.

Once announced, the package fell short of calling for employees to sit on remuneration committees, which the unions predictably lambasted, instead entrusting greater powers to shareholders in the way executive pay it set. Cables hopes that through greater transparency, more shareholder power and the diversification of remuneration committees, a code of best practice on executive pay will be instilled across the business community. The response from the business community has been largely positive, but it remains to be seen whether they actually adopt measures of best practice.

With banker’s bonus season upon us – it was announced this week that RBS’ boss is set to receive a £963,000 bonus – one thing is for sure, this story is not finished yet. Cable’s package is by no-means the panacea to the excesses of capitalism, something he himself admitted, but it does go some way in addressing what ‘responsible capitalism’ may looks like.

LEADERSHIP PLEASE…..We noticed David Cameron grandstanding in Davos this week calling for Germany to show some leadership on the Eurozone crisis. Some of us think that Cameron would do well to follow the lead of his oft criticized, but internationally respected, predecessor Mr Tony Blair and show some leadership on the international stage. Poodle or not, it’s surely better to have a place at the table rather than a viewing platform on the sidelines. Although if a certain Monsieur Hollande gets his way, any attempt to scramble out of this drifty malaise, which sees us teetering on the brink, is utterly futile anyway.

IRANIAN OIL SANCTIONS…..The escalation of rhetoric between Iran and the West this week certainly spooked the oil markets. Iran threatened a blockade of the Strait of Hormuz after the EU agreed to a stronger sanctions regime on Iranian oil as a result of Tehran’s failure to comply with UN resolutions regarding its nuclear programme. While the West’s relationship with Iran has been nothing other than fractured since the 1979 Green Revolution, this isn’t the first time that Iran has felt the effects of an oil embargo.

During the rule of Shah Reza Khan and his son Mohammad Reza Pahlavi, the vast majority of Iran’s oil resources were controlled by the Anglo-Iranian Oil Company (AIOC – later to become BP). In 1951, the parliament voted to nationalise the AIOC, incensing the British, who lobbied to impose sanctionson the Iranians.

By 1952, the sanctions were beginning to bite and, more importantly, the United States was becoming concerned with the influence of the communist Tudeh party in the country. The British government had been toying with the idea of unseating the leadership and the election of Dwight Eisenhower allowed them to lobby successfully for CIA involvement. A coup ensued, followed by the lifting of the blockade, the AIOC back in British hands, and an authoritarian crackdown on dissent for the next 25 years.

The 1953 coup has often been cited as one of the crucial events which led to the rise of political Islam in Iran and eventual revolution of 1979. Whether the fresh round of international oil sanctions destabilises Ahmadinejad in the same way remains to be seen. However, one thing is for certain: the relationship of mistrust, animosity, and anger between Iran and the West goes a lot deeper than many people realise.

GOOD WEEK/BAD WEEK…..Counter-intuitively it’s been a good week for share dividends (and indeed a good start to the year generally) according to Anthony Hilton. As he notes, dividend payments increasingly make up the lion’s share of equity gains in pension fund tracker portfolios these days, so this is definitely good news for all of us saving for retirement. What’s less good news is the delays announced to the pensions auto-enrolment project by Steve Webb MP this week. This means employees in SMEs will face a longer wait before being made to save for retirement. While you can understand the argument that the additional cost is another burden during difficult times, that shouldn’t detract from the longer term problem this project is trying to solve – we’re not saving enough for retirement and the state faces a large bill in 30 years time unless we do.

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FPS’ Friday Fiver Fri, 13 Jan 2012 14:49:54 +0000 David Chambers Hello all and welcome to the second Financial & Professional Services Friday Fiver of the year. Apparently, Monday 16th January is set to be ‘Red Monday’ – the most depressing day of the year. With that in mind, this week’s Fiver at least attempts to lift the gloom a little with the return to blogging of our resident sharp-tongued Apprentice critic, Marie Cairney, who brings us her views on Scottish independence (as a Scot herself). We’ve also got thoughts on Tesco, Mitt Romney, cockney slang and an intriguing new report from Barclays Capital. Thanks to Ed, Jonathan and Ross for their contributions as well this week.

CAMERON THE BRAVE…..In a display of blunt brinkmanship combined with a lesson in ‘being careful of what you wish for’, the PM this week tried to push Alex Salmond into a corner on the future of the UK, most likely to the bewilderment of those around him. Perhaps buoyed by his new-found devil may care – we can go it alone – attitude recently honed in Europe, Cameron decided to raise an issue that didn’t really need to be raised right now. So much so that we were looking for some really bad news that needed to be hidden in the ensuing manufactured maelstrom.

There wasn’t any but then I guess the economic crisis can’t get much worse. Philip Clarke at Tesco might have been slightly relieved for five minutes although not even a divided kingdom could distract from those awful results yesterday (more on that below). While Marie can’t speak with any certainty or authority for a nation on how much they want to stay in the UK (being a deserter for 20 years now), she can say that if there is one thing that Scots don’t like; it is being told what to do by governments they don’t vote for, especially if they are predominantly English. Have the Conservatives learned nothing?  Instead of calling Salmond’s bluff Cameron played right into his tartan-mitted hands and raised the not inconsiderable heckles of 6 million people. Well done. Or as they say up there ‘Gaun yerself Big Man’!

Not that Mr Salmond came out of this glowing. His explanation of why we should wait until 2014 for something he has spent his ENTIRE career asking for seems equally lame. Yes, Scotland may have voted for the time-frame he proposes but the fact that they also voted for a load of other electoral goodies like free prescriptions at the same time kind of makes you think that they weren’t paying that much attention to that bit of the SNP’s manifesto. They are now though and for the first time, Marie has a slight sinking feeling in her stomach that it might actually be considered a serious option for more Scots than ever before. Hopefully common sense will prevail over patriotic, stick- it-in-the-eye-to the English fervour.  This week’s self-created constitutional crisis only confirmed something that has rumbled for some time now; that the people most likely to benefit from independence in Scotland are in fact the English. Increasingly they probably believe it too.

BUBBLES IN THE SKY…..As someone who flirted with the prospect of becoming an architect, but couldn’t stomach the seven years it would have taken to get the qualification, Ed in particular loved this stuff and it’s a great bit of PR – so hats off to BarCap. The Barclays division published a report this week which claimed to have figured out that ‘there is an “unhealthy correlation” between the building of skyscrapers and subsequent financial crashes.’ A look around London certainly could lead you to believe this is absolute fact. Still, Ed loves skyscrapers all the same. Especially this one.

THE BIG PRICE FLOP…..As it’s already been labelled by many City analysts, Tesco’s discounting programme seems to be the main lightning rod for at least the short-term woes of Britain’s biggest supermarket. A £5bn puff of smoke for their shares in one day is certainly not to be sniffed at, but what was far more extraordinary was the candid disclosure by the chain’s CEO, Philip Clarke, about the longer-term problems the retailer has battled since at least 2008 – in a nutshell, diminishing numbers of customer-facing staff in stores, which has led to a poorer ’shopping experience’. Extraordinary that is because Mr Clarke only took over nine months ago, and before that Tesco was run by the previously bullet-proof retail granddaddy, Sir Terry Leahy. In a stroke, his legacy has now become questionable.

As an interesting aside to this tale, it’s worth noting what looks like it might be a PR effort by Tesco to focus the media’s attention ahead of their results on the company’s expansion into India (witness the features on their Indian shops in both The Times and Mail today) – certainly very timely given the recent opening-up of the Indian market to foreign companies, and also a clever way to maintain focus on the Tesco success story. Alas, when your CEO issues a huge profit warning for the year ahead, not even a jolly to India can disguise it.

THE MITTS ARE OFF…..Mitt Romney’s campaign to become the Republican candidate to take on Obama appears to be gathering momentum. However, the former Governor of Massachusetts’ past has come into focus in recent weeks for his role as CEO of Bain Capital, the private equity firm. On this side of the Atlantic, we are regularly being reminded about the problem of career politicians and their lack of business or broader life experience.  We imagine similar criticisms are levelled at those in power in the US.

Romney has the opposite problem. As a man who regularly restructured companies and hired and fired, critics are on the hunt for examples of Romney wielding the axe over the average American. Of course, political debate often operates in a world where normal logic is turned on its head (as this video where his dog is brought in the equation demonstrates) and whatever the truth of the matter Romney is now the man in the spotlight.

GOOD WEEK/BAD WEEK…..Hedge Funds. Loved by few and loathed by many, especially the many who don’t work in them. This week has been something of a mixed bag for them but there appear to be signs of support emerging for the sector which is why they qualify for our Good Week award (hey, it’s been a lean week all round otherwise). On the negative side, The Economist ripped into them for posting fairly average, if not poor returns for investors over the long term. Then again, low returns aren’t exactly a phenomenon confined to hedgies over the past few years. On the plus side however, today’s FT features a compelling argument in favour of retaining and encouraging hedgies in light of RBS’ investment banking demise. The argument is simple – finance is never going to be a stable system, and hence it’s far better to contain the inherent instability in small institutions that aren’t too big to fail i.e. hedge funds. Have a read, and see if you’re convinced.

City Gent David Buik joined Twitter this week

On the Bad Week side, spare a thought for one dieing aspect of the City. According to Reuters, the accelerating change in the social background of the City’s foreign exchange traders and the march of technology is threatening to kill off traditional cockney rhyming slang in the Square Mile. It almost makes you pine for the old days, which is why we’re also celebrating the arrival of veteran City Gent, David Buik, on Twitter this week. We’ll leave you then, with some examples of cockney trader slang at its finest:

‘A prickly’ – the number 2 (as in ‘a prickly pear’)

‘A Lady Godiva’ – the number 5 (rhymes with fiver)

‘An Ayrton’ – the number 10 (Senna rhymes with tenner)

‘A Bully’ – the number 50 (from the bullseye on a dartboard)

‘Bill and Ben’ – Japan’s currency, the Yen

‘The Stokkie’ – Sweden’s currency, the Swedish Crown

‘The Nokkie’ – Norway’s currency, the Norwegian Crown

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FPS’ Friday Fiver Fri, 09 Sep 2011 17:17:04 +0000 David Chambers Happy Friday peeps! Here is our fiver with a definite sporty feel to it this week. Thanks to KB, DC, CC and newby Sallie Bale, who writes about life as a fresh graduate, for this week’s contributions.

A new virtual team member….First of all, a quick welcome to our new virtual team member, DR DOOM, who we anticipate making more appearances on this blog over the coming months. We may yet recruit an alternative superhero breeding confidence into our markets, but for the time being we provide you with a depressing reminder that:

  • German, Italian and French markets were all down this week
  • Gold is reached a record value of $1,900/oz
  • And the all important services sector recorded its weakest growth in a year this August according to the Markit and our client CIPS’ (Chartered Institute of Purchasing and Supply) services index this week

International Paralympics Day….This week all eyes have been on the Paralympics with a huge event being held in Trafalgar Square to mark the occasion of International Paralympic Day yesterday. The event drew an impressive crowd, unsurprising considering there was a lot on offer: David Cameron and Boris Johnson taking on a (rather competitive looking) friendly doubles tennis match and Paralympic stars such as Oscar Pistorius and Ellie Simmonds were also in attendance.

Boris and Dave faced off over the net this week - it could be a sign of things to come (Image: Daily Mail)

The event took place ahead of Paralympic tickets going on sale this morning at 9am – so now all that remains to be seen is how much demand there will be for the Paralympic events. Organisers have been working hard to raise the profile of the Paralympics and ensure full stadiums during Games time, so fingers crossed all this activity pays off and our athletes – both Olympic and Paralympic – will have plenty of support and cheers from the crowds when competing in 2012.

The hottest ticket in town?….The Rugby World Cup is off to a great start for the hosts, New Zealand, as they commence their bid to lift the William Webb Ellis Cup again for the first time in 24 years. The big question is whether all the stadia will be full in the world’s most rugby obsessed country?

According to press reports, only three of the tournament’s games have sold out so far. Earlier this week organisers claimed that 63% of available tickets had been sold, with some 100,000 tickets being sold in the past three days. Yet fears persist about whether teams will be playing in front of less than capacity crowds in scenes reminiscent of the 2007 Cricket World Cup. Some commentators have claimed that tickets prices are too high which is impeding sales – and New Zealand’s sole source of income from the tournament.

Whilst a spike in sales is anticipated once the tournament begins, it does make you wonder why countries take on these sporting events given the risks involved, be they financial, reputational or security related. Perhaps the joy of the game outweigh the risks and the prospect of being World Cup winners. We shall see.

Uni blues….Having just returned from my graduation ceremony it is sad to see even more headlines shouting about people being put off university by the hike in tuition fees and the cuts in funding for low income families. I do think everyone should have the chance to enjoy three years of study (and fun) that I have had, and especially the chance to don the age old cap and gown for the ceremony.

But I think it is about expectation setting. Most of the people in my class were able to afford a pretty decent standard of living whilst at university. Long gone are the days of baked beans and re-heated microwave meals. Most went out 2/3 times a week, ate out for lunch at least as many times and had an iPod or smartphone and laptop; of course with varying levels of funding from various sources. But all (except one) had a part time job, and none of whom received a lower final grade than they expected.

So please if you are reading this and considering going to university, don’t be put off by higher tuition fees or lower funding. If you want to make it happen you will be able to. And you won’t regret it.

Good Week/Bad Week….Undoubtedly a star of the media week has been Alastair Darling. Hot on the heels of Blair, Brown and Mandelson, Ally D added his memories of time in Downing Street to the ever growing list of 21st century political memoirs. As Chancellor at the time of the financial crisis, it’s certainly sure to make an interesting read. He learnt a trick or two off Mandelson as well, offering the Sunday Times the chance to serialise the book ahead of publication. Or at least that was the plan, until someone leaked a draft to political website Labour Uncut.

Gordon Brown's death ray super stare is likely to intensify after Alastair Darling's revelations this week

Still, the former Chancellor had a fine week enjoying his moment in the spotlight. The same can’t be said for just about everyone mentioned in his book though. His former boss and once close friend, Gordon Brown got it. Mervyn King got it. Bankers got it (although they’re pretty used to it). And as Steve Richards pointed out, Ed Miliband might get it in the future.

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FPS’ Friday Fiver Fri, 12 Aug 2011 13:36:06 +0000 David Chambers Another week and one in which unsurprisingly, UK media attention focused primarily on the England riots (Peter Oborne’s piece today captured the wider issue rather well I believe). That’s not to say things haven’t been happening elsewhere though, particularly in the financial world.

With that in mind, here’s a round-up of the key stories from all aspects of this week. Thanks to Jonathan, Ross, new writer Claire Scott, and also our MD, Ben – his article is second up and attempts to add some perspective to events.

Zut alors…..Another week, another country but the issue, namely financial stability, remains the same. Early in the week one of the world’s best known fund managers, Bill Miller, published a response to S&P’s downgrade of US government debt. The articleA precipitate, wrong and dangerous decision ran in the FT and is well worth a read.

There was a lot of this going on this week, as markets behaved in wild fashion

By Wednesday however, the bottle had stopped spinning yet again and this time it was the turn of France and its credit worthiness to come under scrutiny. With speculation about the health of some of the country’s largest banks and the ability of the nation to underwrite possible further bailouts in southern Europe giving investors sweaty palms.

Sovereign debt has become synonymous with Western governments but in today’s FT, Jamil Anderlini provides an alternative perspective arguing that the disparity between China’s official and actual debt levels deserve further scrutiny.

Putting perspective on this week…..The riots captured the UK media’s attention, and were clearly unacceptable. They raise all sorts of questions about society, as well as being highly damaging for London and the UK’s image with the Olympics round the corner. At the same time though, there are bigger and potentially more threatening global economic issues at play at the moment. While you can understand the rolling news channels’ focus on the riots, with all due respect they are a catastrophe on a much smaller scale than what is going on in Europe and the financial markets.

That’s not to downplay the riots in anyway but if things go the way they look they might (and I know of European bankers who fear the worst), and in the continued absence of any discernible leadership from Europe, frankly, a minority bent on destroying the businesses that support their communities, could, disturbingly, have far less long term impact on the wider UK population that what is happening on the continent.

The domino effect of Eurozone countries coming under immense market pressure shows no sign of slowing, market sentiment has gone haywire, and growth prospects across the West are tumbling. It’s time to wake up, smell the coffee and look beyond our own borders for signs of an even greater potential trouble.

Sound advice from Twitter given events this week

Boris rising, Dave declining…..The Blair/Brown tussle is one of negative memories from Labour’s 13 years in power. Blair admitted in his memoirs that Brown’s constant hounding for a stand down date and need for backing caused distraction and hindered progress. Jonathan Powell, Blair’s Chief of Staff, is even more damning of Brown in his recent book The New Machiavelli. If David Cameron thought his Premiership was to be without such challenges and unwanted burdens, surely he must now think again.

Boris Johnson is becoming a thorn in Cameron’s side. With speculation already rising that the future of the Conservative Party lies with either George Osborne or Johnson, it’s the latter that is fighting his corner more rigorously. This was evident this week when Johnson went against the Party line stating that budget cuts for the Met were wrong – swiftly rebuffed by Cameron yesterday when he said police budget cuts were non-negotiable.

How much of an eye does Boris have on the PM's job? (Image:

Johnson has also openly challenged Osborne as well – he recently called for a cut in taxes to boost economic recovery and entrepreneurship. This was delivered at a time of sensitivity for the Chancellor after the recent less than stellar GDP figures were announced and when he faced similar attacks from his nemesis, Ed Balls. Boris’ willingness to openly challenge the Party leaders must be taken seriously, even if he is not. At a time when the Government faces colossal challenges, such distractions are doubly unwelcome. It is up to Cameron to nip this in the bud and not let the future of the Party overrun the present.

It was Sarko's turn to feel the pressure of the markets this week

Good Week/Bad Week…..A tale of three men with O’s in their names this week. For Silvio Berlusconi, it was pretty much as expected – another tough week spent herding away the hounds at the door as investors continued to murmur about Italy being on the verge of downgrade/default/bailout (delete as appropriate, or not perhaps). Some relief for Silvio came on Thursday though, as the focus shifted to the hitherto tranquil setting of France, giving Mr Berlusconi’s neighbour, Nicolas Sarkozy, a rude awakening.

Sitting pretty watching all of this was our own ‘O’, George Osborne, who had a comparatively good week. Gilt yields are at rock-bottom, which the Chancellor swiftly proclaimed as proof of the UK’s position as a “safe haven” for investors, and an endorsement of his deficit reduction plans. Not everyone’s convinced though, and he also had to contend with the Bank of England downgrading growth forecasts – again. Still, compared to others, a relatively good week for George.

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FPS’ Friday Fiver Fri, 27 May 2011 19:49:23 +0000 Edward Jones In case you missed it, President Obama was in the UK this week to talk essential relationships, cyber crime and have a barbeque in the Number 10 Rose Garden. In honour, of his visit this weeks’ fiver looks at the visit and the UK’s special essential relationship with the US.  Thanks to Dave, Clare, Rachel and Melanie for contributions.

Essentially …

Whilst Foreign Policy and the six point plan, were the main items on the agenda, surely the most interesting aspect of Obama’s visit was the upgrading of the UK’s ‘Special Relationship’ with America to an ‘Essential Relationship.’ Essential. Never mind our credit rating, we have an essential relationship with America! As Matthew D’Ancona pointed out earlier this week, it has a certain ring of indispensability to it. I’m less sure Obama’s deficit reduction plan can be described as Osbornian, as D’Ancona suggested, but you have to hand it to Cameron he pulled the rabbit out of the hat with that one.

Deficit indifference

Governments should “live within their means” but also sustain growth by investing in education, and the pace of deficit reduction “may end up being different”. Uncritical certainly from the President, but hardly the ringing endorsement David Cameron and George Osborne were hoping for with regards to their economic strategy.

They were probably also hoping for better revised Q1 GDP figures from the ONS than the ones that materialised this week at roughly the same time as the meat was cooking on the barbie. Traditionally, the revised figures show an increase in GDP for the quarter over the first, partial set of figures released. That didn’t happen this time, with growth remaining at 0.5%. More worryingly, household spending contracted 0.6% and business investment practically hid in the corner shivering, as it shrank 7.1%.

The Government remains committed to cutting hard and fast in order to shrink the deficit and get the country back on track without a large credit card bill hanging over it. Judging by the economic data and reaction to it, the jury is still out on whether this will work or not – which is perhaps why the President hedged his words to such effect.

Inspiring relationships

Michelle Obama re-affirmed her own ‘essential relationship’ with old friends during the visit when she was re-acquainted with girls from Elizabeth Garrett Anderson School. The EGA girls were visiting Oxford University as part of a programme to encourage them to aim high. Mrs Obama, herself a graduate of Princeton and Harvard, encouraged them to not “be afraid to take risks, ask questions, ask stupid questions, don’t be afraid to trip, fall and don’t be afraid to get back up.”

Wise words indeed from the First Lady and something all of us can take heart from. Media coverage of the meeting praised her as an inspiring role model for these young girls. But do our young people need to wait for a visit from a foreign leader’s wife to feel inspired? It strikes me that inspiration comes in all sorts of guises from dignitaries to teachers, to a school system and society that encourages successes achieved on merit. I cannot help thinking that more of our young girls would be inspired if the education system were fairer and society willed them on.

However, today’s announcement that under radical changes to admissions, some secondary schools will be able to select pupils on the basis of family income fills me with dread. If we want to inspire our young people, there has to be a better way than judging them on their parents’ finances.

Right all along?

Photo: Jacob Whittaker

There was a time when being British was all about keeping a stiff upper lip through adversity.  We were a bit stuffy, grumpy, and proud of it (with the exception of Ken Dodd). But if this week’s stats from the OECD are to be believed the old stereotype has been blown out of the water – we’re actually much happier than most of our European neighbours, including those where the weather is supposedly much nicer.

Of course our BFFs across the pond are way ahead, with the ‘pursuit of happiness’ in their constitution, but recent events have given them a run for their money (Will & Kate, less than a year to go to the Olympics, plus some cracking Aviva (client) sponsored ITV dramas on the telly).  Even Obama seemed to be using his visit to the UK to give a PR boost to the start of his election campaign, after all the yanks did seem to love the Royal Wedding more than we did.

Cheeriness is starting to look like part of a new national character, even a driver of government policy with the government launch of a new way of measuring it earlier this year.  Yet whilst the OECD’s figures do seem to suggest that money doesn’t necessarily make you happy, it will be interesting to see whether the next GDP figures show it can work the other way around.

Obama and the ostrich generation

When all the fanfare and noise from the military 41 gun salute to welcome Obama’s visit abates, we hope that the two leading western premiers might spare a thought for the lot of their respective domestic pensioners. They don’t need to look hard or delve deeply to find incontrovertible evidence of the pensions malaise and bleak future that faces many prospective pensioners in the UK and US and indeed across most Western economies.

The worrying statistics roll in on an almost daily basis. According to an international survey released by HSBC this week six in ten Britons have no financial plan for their retirement – due to a “cycle of dependency” and suffer from an equally self-deluded belief that they will enjoy a comfortable retirement.

Across the Atlantic, prospects are equally stark in the US. New findings from the American Association of Retired Persons (AARP) latest public policy institute report reveals that many older Americans, employed and unemployed, may never recover financially from this latest recession, although here, half of them do actually realise that they won’t have enough money to live on in retirement.

This dearth of planning contrasts with upcoming economies in the East, where a class of “prosperous pensioners” is merging. The respective expectations on annual growth showing  further downward revision for the UK economy (now a paltry 1.4%, with the US at only 2.6), is in stark contrast to buoyant growth rates in Asia’s flagship economies – China 9.2%, India 8.5%.

Worrying indeed.

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FPS’ Friday Fiver Fri, 06 May 2011 13:22:55 +0000 David Chambers Yes, it’s back. After a break for the Easter holiday, some glorious weather and that dress, we return with the Financial and Professional Services team’s Friday Fiver. We also have a fresh contributor this week, our new regulatory and government expert, Melanie Worthy. Other pieces this week come from regulars Ed Jones, Ross G, Karen and myself.

Crunch time for RBS and the FSA…The Treasury Select Committee and the FSA announced this week that they’ve asked City heavyweight Sir David Walker and lawyer Bill Knight to conduct an independent review of the report the FSA is producing into the failure of RBS. They will examine whether the report fairly reflects the findings of the FSA’s investigation of RBS, as well as analysis of its own regulatory activities.

Sir David Walker - charged with reviewing the demise of RBS (image from

Walker’s unique attributes of being both a credible City figure plus a trusted Government adviser make him an obvious choice for the role. His track record helps too – he has headed Government enquiries, such as in 2009 when he examined governance at the big UK banks.

Just as well then, as he’s going to have his work cut out. However “complex” the issues were, as the FSA cites somewhat reluctantly, there will be strong media interest and expectation for answers as to the causes of RBS’ demise; the excessive cost to the public purse from bailout; and the wider malaise that played out across the banking sector as the financial crisis ensued.  Whilst Walker and Knight tread through a minefield to avoid the legal conflicts to RBS employees, they’ll be mindful of the need to show teeth and forensic review on both sides of the regulatory fence.

Nick Clegg – Stick or Bust…Most observers of the Westminster Village Ed’s spoken to in recent months have agreed on one thing: May 5th and the outcome of the AV referendum will determine the fate of the Coalition Government. As we’ve said previously, the fates of Nick Clegg and Ed Miliband appear eerily interlinked, with success for one leading to failure for the other. It seems neither will come out of this episode particularly favourably though.

It's not been a vintage week for Nick Clegg

Judging by Chris Huhne’s recent outbursts, it would seem to look more terminal for Nick Clegg, and Ben Brogan was on to something this week when he said Nick Clegg’s body language in PMQs was ominous.

Cameron, demonstrating his exceptional political judgement, was keen to move the story on and talk up the other important work the Coalition has set out. But where can it realistically go from here? If Lords reform is offered as a carrot to the Lib Dems to carry on, it’s highly likely a similar demoralising defeat will occur on it. On the flip side, Lord Knight’s suggestion that an early election to deliver the Conservative’s a majority is intriguing, but given the barriers against this, difficulties over NHS reform and the current state of the economy, this would appear wide of the mark.

Where else can the Lib Dems look?…Given the loss of 300 council seats and a probable resounding no to AV, what will be telling in the coming days is how the Lib Dem rank and file respond to defeat. Paddy Ashdown has already launched an attack at David Cameron, and Clegg may well be hoping that this and other attacks distract party members from aiming their wrath at him.

Clearly, Clegg is going to have to secure some tangible wins for the Lib Dems in order to quell the growing frustration. With this in mind, he may seek to increase the fight for a greater say on health reforms. The Health and Social Care Bill should allow for greater private provider provision of health care, but the extent to which the Tories have wanted to pursue this has caused unease amongst many Lib Dems.

The current pause in the process of passing the Bill and now the increased chance of Lib Dems demanding changes means that private equity firms are going to be increasingly turned off due to the levels of uncertainty around private provision. If the Lib Dems decide to really dig their heels in, private equity firms could lose out on what previously looked like a sure investment.

Exchange-Traded Funds – the current big thing?…Earlier this week, we enjoyed a fantastic training session with David Yates from Finance Talking. One of things he focused on was the growth of ETFs in recent years. Financial News picked up on this point earlier this week as well, noting the recenty outflow of money from four of the five largest asset managers and into ETFs – the magazine claimed $41.4bn of new money was poured into ETFs in Q1 2011 according to Blackrock.

Not everyone seems convinced though. In today’s FT, Gillian Tett examined the boom in this market, and argued that concerns are building amongst regulators about it. While not as inherently dangerous as the pre-2007 fad for ‘CDOs’, she did note that there are some striking parallels here. Clearly, others are still a big fan of them though, as FT Alchemy notes today.

This week's Big Bite was all about the future

Learning about the future…The exciting guest for this week’s FPS Big Bite was Patrick Harris from The Futures Company. He gave us some great insights into the world of futures and left us with an interesting and thought provoking debate.  As Patrick pointed out ‘the future is all around us, it’s just not evenly distributed’. We hope that gets you all thinking as much as it did our team!

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FPS’ Friday Fiver Fri, 08 Apr 2011 14:49:27 +0000 David Chambers Hello All and welcome to a very sunny Friday afternoon. Before you all rush out of the door to enjoy a much earned drink, here’s our recap of five of the top financial and political stories of the week. Thanks to Jonathan, Ed, Daisy and Ross for their contributions this week.

National destiny…Two weeks ago, Portugal’s outgoing prime minister ruled out the possibility of asking the European Union for financial assistance. On Wednesday, under mounting pressure, a bailout of €80 billion was however requested. What is telling about the run of events is that to a large extent it is not governments that have the ultimate say over their financial destiny but international debt markets, a feeling reflected by Portuguese media, with the newspaper Jornal de Noticias declaring “Yesterday our country succumbed not only to the pressure of the hated markets but to itself”.

Europe's tangled web - a snapshot by the NY Times

For an indication of just how grim things are, note that the sale of short term Portuguese debt issued on April first required a yield of almost six per cent compared to just over four per cent a month earlier. Also on the continent this week, the ECB increased interest rates by 0.25% to 1.25%. Fiscal tightening has begun and the Bank of England will need to consider whether the UK needs to take similar measures in the coming months.

A weak week in Westminster…Earlier in the week Ed opined:

Probably a fair summation of what was going on, and indeed, after Tuesday it only got worse. Nick Clegg, it transpired, had a former intern who was eager to but the boot in. Oliver Letwin, the Cabinet Office Minister no less, hot on the heels of saying he didn’t “want families from Sheffield flying away on cheap holidays” went one better by apparently confirming that the Government would “run out of ideas by 2012“.

Andrew Lansley meanwhile, diligently trying to regain momentum for NHS reform (which has undertaken a “natural pause“) was helped out in the shooting yourself (or colleague) in the foot stakes by Work and Pensions Secretary, Iain Duncan Smith, who admitted that NHS waiting times have soared under his Government.

Unable to keep the lid on IDS or use the brolly on Olly, SamCam appeared to have the blues…

Cheer up Cams - it can't possibly be as bad next week

The savings industry can breathe again…And so it’s over for another 12 months. The great savings rush ahead of the end of year tax deadline has now passed, which means financial advisers, accountants and business owners can afford to breathe a little easier. Many in the personal finance media will probably be looking forward to writing something a little different as well, after four weeks of ISA coverage.

The ISA rush is over for another year

The big issue on the table for savers remains though – the high rate of inflation, which erodes the value of money stored away. It’s proving a real problem, as the Standard argued on Tuesday, though as the Mail notes, there are still good products out there, being driven in part by the desire to retain as well as recruit savers according to some. One other problem remains however – take-up of ISAs remains low amongst the population; something that the newly relaunched Money Advice Service could help address.

What next for Andrew Lansley?…As we mentioned above, the government has taken a pause on NHS reform while it considers its next move. In a statement to the House of Commons, Health Secretary Andrew Lansley promised to “pause, listen and engage” rather than force through the health and social care bill at breakneck speed.

What this week’s climbdown demonstrates is that whenever an organisation tries to redefine, reorganise or change itself, it invariably encounters resistance. That resistance only dissipates when it can be proven beyond doubt that change will benefit those who protest. As Machiavelli said in The Prince “there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.”

The NHS is regularly praised, but also regularly damned, often in the same newspaper article. The challenge for Lansley and co will be to convince people how these changes will benefit them. Otherwise the result could be “pause, listen and disengage”.

The new state pension…Finally, a quick look at the plans unveiled this week by Pensions Minister Steve Webb. Even for those of us who work in this area, the state pension is a fiendishly complicated beast with different levels of benefit paid depending on your work history, level of other retirement income and marital status. In an effort to simplify things, the government has proposed a new, flat-rate pension of £155.

Or have they? Despite a lot of media coverage and hype in the build-up to the announcement, the government’s green paper actually lays out several potential options, only one of which would take this course. The proposal is now open to consultation – expect it to be feisty.

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