What could those public sector job losses add up to for the economy?

I’ve been delving into a few economic numbers and issues over the weekend. I’m a spod, it fascinates me, and some of the numbers will help us understand what’s going during an unhelpfully febrile political period.
Some sectors of the economy have now clearly moved on from the crunch. They’re dealing now with those difficulties which crop up as an economy comes out of recession.
Others are still dealing with problems which quite definitely have their origins in the property collapse, notably construction. It got knocked for six by a collapse in private sector work which followed the catastrophic fall in asset values which pole-axed the banks.
Here we are, four years on, and it is now dealing with a second wave of failures, brought on by a sharp fall in public sector work. While the current cutbacks aren’t helping, the pipeline of council/NHS contracts actually started to dry up early last year when the public sector realised it was in for a pasting whoever won the election.
In some areas of construction it is a pretty poisonous climate right now – below-cost tendering simply to gain cash flow, disputes over work and payment, reopening contract negotiations. And clients watching to make sure a cheap tender doesn’t lead to corners being cut.
In property, occupiers want shorter leases, introductory incentives, better break clauses. All of which makes property investment difficult unless you’ve got a solid business you trust paying the rent.
Other parts of the economy are bobbing up and down quarter-on-quarter as businesses who delayed replacing stock or equipment decide they need to keep the show on the road. But their spending is about cyclical replacement, not building up resources to make the most of growth. In other words, once they’ve replaced that knackered old machine they shut the wallet again.
That’s typical of the immediate aftermath of recession – people and business spend only what’s necessary until they’re confident of the way ahead.
To my eyes, the debate about whether the economy is growing properly or not has run ahead of itself. People – politicians especially – seem to have forgotten that our economy suffered the equivalent of a devastating physical injury which left it in intensive care for months after October 2008.
When you suffer one of the worst financial shocks in living memory and a predictably deep recession in its wake, no one should be surprised that the economy is taking time to get back into gear. You don’t suffer a devastating physical injury without pain, serious surgery and lengthy rehabilitation. The same is true for the economy.
Don’t forget, either, that what the economy is going through at the moment is not mainly the result of government policy inputs right now – they may affect current confidence and nudge quarterly numbers up or down a fraction, but the broad direction UK plc is taking is still a reaction to severe recession, weak credit conditions, and the policy inputs of 6-18 months ago.
Of course, we’ve yet to see the impact of the VAT rise, April’s National Insurance increase and the public sector cutbacks. The consensus here is that they will hold back growth but are unlikely to send it plummeting back into the depths of recession.
This may surprise some who think the public sector cutbacks in particular will be a hammer blow to the economy. They’ll hurt anyone who loses their job, of course, but bear in mind that the public sector workforce accounts for just under 20 per cent of those in employment in the UK. The job losses will account for a small percentage of that percentage.
The estimates for the total number of public sector job losses have ranged from 600,000 (the Office of Budgetary Responsibility) to 725,000 (the Chartered Institute of Personnel and Development). Whichever figure you favour, these are big numbers, but they need putting in proportion. The jobs will be lost over a period of at least five years, they are smaller than the public sector job reductions of the early 1990s (when, says the CIPD, 800,000 jobs went).
But what do the numbers actually mean? Accoding to the Office for National Statistics, the public sector workforce is just over six million people, so the losses on the basis of the CIPD’s worst case scenario amount to around 11 per cent of public employees over five years. In other words, it’s a small proportion of a part of the economy over a period of time.
The NHS is the biggest public sector employer, providing jobs for just over 1.6 million people according to Government statistics from September 2010 – 27 per cent of the publicly-funded workforce.
Education is another 23 per cent of the public sector total, at 1.4 million.
Large-scale job losses in health or education are not on the agenda, though below-inflation increases in funding mean some jobs may be lost and employment growth is unlikely.
Public administration – which takes in national and local government – accounts for 20 per cent of the public sector or roughly 1.2 million people. It’s here where most of the noise about job losses has been.
This all sounds like a pretty sub-human way of analysing people’s livelihoods, but I hope it illustrates that whether you agree with these cuts and/or the way they’re being done they’re unlikely in themselves to pitch us back into recession – especially when they’re spread over a number of years.
This is only an economic assessment, of course. There are other concerns about the impact these cuts will have on the people who need these services, questions over whether the private sector is capable of balancing quality and profit in an equitable manner if it takes over services, and the issue of what happens to long-standing public sector workers who suddenly find themselves looking for work in what may appear to be almost a foreign environment.
As I said, you don’t suffer a severe economic shock without severe consequences. But at a time when the economy is still bumping along the bottom these consequences will not be easy to absorb.

The economy according to White Van Man

Yet more ‘shock’ news about the UK economy today.
Except, as usual, it isn’t.
The Office for National Statistics said last month that the UK economy contracted by 0.5 per cent in the last three months of 2010 – in other words, we contracted a smidgeon more than we grew.
The chief economist at the ONS, Joe Grice, said then that 0.5 per cent of the figure could be accounted for by the impact of the big freeze from November until Christmas. So without that the economy was at a standstill.
Today, the ONS has revised the figure because more data has come in. It now says the latest estimate is that the economy contracted by 0.6 per cent, not 0.5 per cent in the last quarter of 2010.
But Mr Grice says that 0.1 per cent is within the margin for statistical error.
So, today’s analysis is probably not a shock at all, and may not even be accurate. But if you’re out there looking for doom and gloom I’m sure that’s what you’ll see.
What’s underneath the slowdown in the economy towards the end of last year can only be conjecture until a definitive analysis is done. However, you can put a cyclical spin on it – if you want to.
At least some of the growth the economy enjoyed last year will be down to companies stocking up on those goods and services they delayed spending on during recession.
I was chatting to Trevor Finn, the chief executive of the car dealer group Pendragon (which owns the Evans Halshaw and Stratstone chains), earlier this week and he was taking me through the way the car and commercial vehicle market has been operating.
He flagged up the re-emergence of White Van Man – an increase in businesses buying light commercial vehicles, which is usually a sure sign that growth is coming back again.
But he cautioned that at least some of this was a cyclical increase in sales brought on by people who had hung on to their Transits longer than normal because of recession. Now recession is over – and don’t forget we’ve been out of it for more than a year – they need to replace some seriously knackered vans.
If there’s no further growth in the economy sales could easily drop back down again.
You can’t draw absolute conclusions about the economy from one quarter of figures, whatever they say. It’s far too soon to conclude that the UK economy has gone into reverse, and what is happening to the economy now will largely be the result of economic events and inputs which happened anywhere between six and 18 months ago (something which a few headline-hungry politicians might care to remember).
As I’ve said before, an economy yo-yoing up and down is classic post-recession behaviour. Any van driver can tell you that.

Oil: a crude assessment?

It was Supermac, the 1950s Tory Prime Minister Harold Macmillan, who famously said it was “events, dear boy, events” which could blow people off course.
What’s happened in Libya during the past few days has certainly blown my theories about the impact of oil on inflation off course.
While rising oil prices were fingered several times as the culprit in the last UK inflation figures, I’d read that the Saudis had quietly been increasing production to help take the sting out rising prices. Hence my blog ‘Oil’s well with inflation’.
Well, for the moment you can forget that idea. Fuel prices are going up again, at least partly because of the decision to shut down some of the oil wells in beleaguered Libya.
This has set hares running about the possibility that prices will rise so much that we are in for an ‘oil shock’, a spike in the price which is so pronounced that it sucks the life out of economic recovery.
This would be scary stuff. The price of oil has already been rising because of massive demand among fast-growing economies like China, and an additional spike would be felt right in the pockets of people and businesses.
An excellent analysis by Gavyn Davies in the Financial Times suggests that is, if you’ll pardon the pun, a crude assessment.
He gives some useful facts. Libya’s oil production is less than two per cent of the world’s total, the International Energy Agency estimates there’s enough oil in reserve to supply more than double Libya’s output every day for more than a year, while the other OPEC countries have spare production capacity which exceeds even that. Indeed, Saudi Arabia is already in talks about increasing production again to try to take the heat out of any spike.
But the spike in oil prices is not just about a tap being turned off in one corner of the market. It’s also sparked by fears about what will happen to bigger oil states in the wake of overthrow and disorder in Tunisia, Egypt, Bahrain and Libya. How Saudi Arabia handles pressures for greater democracy is the one to watch: like Communist China, the kingdom has tried to keep its people happy by spreading the wealth (in a way which the one-eyed rulers of Tunisia, Egypt and Libya didn’t).
Gavyn Davies’ conclusion is that a short-term spike in oil prices is something people can live with – if you look back at short-term economic ‘events’ of the past, people usually find a way of muddling through, dipping into savings here, cutting back on spending there. Libya’s oil production is unlikely to be lost permanently, whatever happens to Gaddafi.
Those of you with long memories (or grey hairs) might recall the oil crisis of 1973-74. Then, the decision of the US to keep arming Israel in its conflict with Egypt saw Arab oil producers hit back with an embargo on oil production. Prices rocketed overnight and economic growth fell over. The UK government even went as far as printing and issuing petrol vouchers, though they never came into use.
We are not in that kind of territory, and oil would have to rise far above its current price and stay there for sometime for it to knock the stuffing out of global economic growth.
The immediate challenge for the UK economy is what the Bank of England does about rising inflation, which could well tick up again because of a short-term rise in oil prices.
Does it put up interest rates to try to rein in all this inflation, or leave them where they are as business and consumers struggle in a weak economy with rising prices?
That’s an event to keep an eye on.

A retail numbers game deciphered

Taken at first glance, the Local Data Company’s assessment of Nottingham’s retail health seemed pretty dire.
Here was one of the top retail destinations in the UK, and nearly a quarter of its shops were standing empty.
I know credit crunch and recession have been bad, but how on earth did that happen?
Well, I’m not sure it did.
We got hold of LDC’s data more than a week ago, but it has taken me several days to get to the bottom of the methodology underneath its shocking headline. On that basis, I decided not to proceed with a story based on the headline statistics alone because something about the numbers didn’t ring true.
So, how did LDC arrive at a figure which says that 23.6 per cent of Nottingham’s shops are standing empty?
Here are the answers. First of all, LDC didn’t do a specific survey about shop vacancies. It is a business which specialises in compiling data about property occupation in its widest form, which it then supplies in whole or part to clients which range from Google to Yell to Experian. They use it as the basis for their own socio-economic analysis and advice on targeting service or products.
So the LDC Shop Vacancy report is actually an analysis of only part of a wider set of data.
Crucially, there are also two other key differences between this and an examination of how many shop units are empty or occupied in what we might understand as Shoppingham.
One is that LDC’s definition of the city centre goes beyond the major shopping locations to take in what are known to the property industry as secondary and tertiary locations. It includes, for example, Alfreton Road and Derby Road, the railway station, Sneinton, Huntingdon Street and parts of Mansfield Road.
There are a lot of empty units there, and that’s because they are not part of the retail core, have weak footfall and sometimes poor trading environments. They will struggle at the best of times and in a post-recessionary climate they’ll be in particular difficulty.
Secondly, LDC’s data doesn’t count all shops – it only looks at those used for comparison shopping (like fashion), service retail (like shoe repairs) and convenience stores. It doesn’t include anything occupied by coffee shops, bars and restaurants.
Retail property agents I know were scathing about this decision in particular. Their view is that having a wide selection coffee shops and restaurants is an essential part of the mix for visitors to any major retail destination – in other words, the fact that units are occupied by Costa Coffee rather than a fashion shop is a good thing, not a bad thing.
The agents also said that the data (which was compiled in September last year) had been put together at a time when units in and around Broadmarsh in particular were beginning to empty ahead of a £40m revamp. Others, they insisted, were between lettings – something LDC’s surveyors would not have known.
When I eventually spoke to Matthew Hopkinson, who drew up the report, he said that taking out the vacancies around Broadmarsh would probably have knocked only a single digit off the number. Buit putting leisure uses back into the data would have knocked nearly four per cent off the vacancy rate.
To my eyes, 19-20 per cent vacant is still a high figure, but it probably reflects the decision to include those fringe areas which major retailers would never go near.
Mr Hopkinson (who does know Nottingham, by the way) admitted that at least some of the criticisms may have been valid. FHP, probably the major agency for retail lettings in Nottingham, estimates the true figure for what we know as Shoppingham is somewhere between 11 and 14 per cent.
The statistical discrepancies don’t mean some of the points made by LDC are not relevant. Major chains are constantly looking for bigger shop units so that they can properly display their ranges and exploit the click-and-collect trend – research and ordering of goods online, followed by touch, feel advice and collection in store. The city doesn't have enough big units.
In a weak consumer climate in particular, well-known brands remain vulnerable to discounters – whether it’s Tesco or Poundland, a bottle of Head & Shoulders is the same there as it is in Boots. But it might be cheaper. The supermarkets are also becoming big players in home electricals, and only first-rate service from very knowledgeable staff will stop people buying on price alone.
The city centre also has its problem areas. Flying Horse Walk (or the FH Mall, as it became) has never fulfilled its potential, the streets around the Market Square are surprisingly downmarket for a wonderful meeting place in the shadow of civic grandeur, and the supposed independent retail quarter in Hockley still feels like the poor relation.
Indeed, there are some massive opportunities in the centre for brave retailers and developers. We call it the Council House, but what I see is a great location for iconic brands like Harvey Nichols or Betty’s. Who knows…
Finally – as Mr Hopkinson correctly observed – a city that regards itself as a retail destination must make sure there is a steady stream of events and themed occasions to keep people entertained on a day out.
So, Nottingham is clearly not in the kind of trouble LDC’s numbers might suggest. The best part of £300m is about to be invested in expanding or improving the Victoria Centre and Broadmarsh and I know some major retail names are still waiting to come here.
But there’s still plenty for the newly-formed Retail Business Improvement District to get its teeth into.

The short and long of a Big Society

One of the immediate causes of the banking industry collapse was its long-established practice of borrowing short to lend long – agreeing a 25-year mortgage with a customer but financing it by borrowing money from wholesale markets which would have to be repaid every few months and then borrowing again.
What are wholesale money markets? They don’t exist in a physical sense, but they are well-developed financial arrangements where major businesses, organisations and institutions who routinely hold large amounts of money can lend some of it out to earn interest. Banks, pension funds, multinationals, national and local government all put money through wholesale markets, sometimes on terms lasting a few years, sometimes for as little as a few days.
Wholesale cash can be used to smooth out gaps in capital outflows and inflows and for conventional borrowing products like mortgages and bank loans. Banks routinely use significant proportions of wholesale cash to fund loans, and it’s standard practice to refinance every 30, 60 or 90 days.
‘Rotating’ the money underneath a loan has been the norm for a long time. It’s one of the ways modern-day finance has allowed economies to expand faster, using and reusing capital on short-term inter-bank deals to help generate an increased level of economic activity. Granted, there’s a lot of plate-spinning in there, but financial and accounting software packages can keep this show on the road quite comfortably…as long as the money is available.
The crunch showed that the short-long principle has one potentially fatal flaw: if wholesale funding markets closed, banks would be left holding ‘rotating’ loans which their own reserves were far too small to refinance.
This is why Northern Rock, whose entire business was built on borrowing short to lend long, had to go running to the Bank of England. It had a book full of loans it could not refinance and cash in its own reserves which wouldn’t have come within a country mile of covering them. Arguably, it was insolvent.
Northern Rock was also a major player in the securitisation market – agreeing mortgages with homebuyers but selling the mortgages on in packages to investors. Again, fine in theory but a huge problem if the market for buying securities dried up – which, of course, it did, leaving Northern Rock with a book full of assets whose loan-to-value ratios were crumbling by the day.
Wouldn’t it be safer to abandon these practices altogether? While banker-bashing has become a popular political sport, few people fully understand the consequences of stopping financial institutions engaging in what seems like complex and risky behaviour with our money.
Put simply, our economy would be far smaller, with fewer businesses, fewer jobs, fewer luxuries and far slower growth if we banned practices like short-for-long lending. So let’s put the issue another way: would you still agree with banning complex financial instruments if it meant you couldn’t move house, buy a better car or take out a loan to buy new equipment for your business?
Not if you wanted the economy to grow again.
So, what regulators have been focusing on instead is forcing banks to hold more cash in reserve and to build more stress-tests and warning signs into the relationships between complex financial instruments and the markets which fund them. Banks themselves have already started pricing risk into their loans and avoiding some of the riskier lending altogether.
That in itself has already slowed the global economy.
In the end, there is only so far a set of rules can go. On a very basic level it makes no sense whatsoever to borrow more than you can afford to pay back. But huge numbers of people did just that during an era when there seemed to be an expectation that if the State didn’t provide then your credit card would.
We’ve just lived through what some commentators have already dubbed the Age of Entitlement, when conspicuous wealth and consumption almost encouraged people to think they were only a credit card swipe away from that celebrity lifestyle.
It’s been popular to scoff at David Cameron’s Big Society initiative because it coincides with a period when some charities are seeing government funding dwindle (and because the slogan seems all-too reminiscent of some of the wearying initiativitis beloved of governments past).
It’s not for me to make a judgement on the politics of it (other than to say that the current government sometimes seems as cack-handed as its predecessor). But after 10 years of easy money at least one of part of the implications behind Big Society – that charity begins at home – may take a while to sink in.
But it’s an important implication, and begs a question about a different kind of short-for-long: whether short-term volunteering can make up for a long-term hole in the economy. If few people knew what a rotating loan was, I bet even fewer could imagine the credit crunch coming back round as do-it-yourself society.

Retail vacancies: When is a shop not a shop?

You may have heard some numbers flying around today suggesting that nearly a quarter of Nottingham’s shops are now empty.
I’ll be having a look at this over the next couple of days, but a word of warning: the figures are not what they seem.
They have been compiled by an organisation called the Local Data Company, and they differ from other surveys about the comparative health of the retail sector in different cities.
Most property agents will tend to lump retail and leisure – such as restaurants and cafes – together when assessing the vitality of a town or city centre, since they feed of each other in creating an attractive environment for city visitors.
LDC’s data only counts shops in the purest sense – that is, those which sell comparison goods (fashion, for example), along with convenience stores and service outlets (such as shoe repairs).
So LDC’s data won’t cover units occupied by, for example, coffee shops, bars and restaurants.
I understand it did its fieldwork in Nottingham back in September last year, and that it also included the Broadmarsh Centre – where units were emptying ahead of the £40m revamp due to be carried out this year by Westfield.
The fieldwork includes a visual check of a shop to see if it is empty or occupied and a check against local authority rate data. What it may miss out on, though, is local market knowledge: while you and me might have seen an empty unit where the retailer Game used to be on Lister Gate late last year, an agent would have told you it had already been re-let to Costa Coffee, which had yet to do its fit-out.
This isn’t to suggest that parts of the economic bigger picture painted by LDC aren’t valid - retail is bound to suffer during and after recession. But its headline figure – that more than 23 per cent of Nottingham’s shops are empty – doesn’t tell the whole story.
LDC suggests the situation is even worse in Birmingham. What I suspect this points to is the fact that, in crude terms, there is simply more space in the bigger cities – some of which was probably not doing well even before recession struck.
Against the background of a structural deficit (i.e., permanently lost activity) in our economy, you have to wonder whether there will now be a structural deficit in retail, which is heavily exposed to the impact of credit conditions.
My take is that if there is it is more likely to be felt in marginal retail locations like towns than it is in naturally vibrant cities. We’ll see.

Walk up and smell the coffee

So we’ve got a Jamie’s Italian. There’s even a Carluccio’s And that’s on top of some heavyweight restaurant chains and fine dining establishments like Hart’s and World Service.

I’ll leave the reviews of Jamie’s and Carluccio’s to the acknowledged gourmands of the Nottingham blogosphere (that’s you, messrs Garratt and Lyle).

Instead, my own personal Christmas has come in the shape of a medio cappuccino from Costa Coffee on Lister Gate. It is the first sign that the coffee shop desert that extends all the way from Wheeler Gate down to the railway station has finally found its own oasis.

I’ve never quite understood how it was that an industry notorious for what some critics have described as carpet bombing (opening so many establishments that your rivals go out of business) has managed to ignore an entire quarter of the city centre.

Starbucks used to be on Lister Gate, but they bailed out and headed to a bigger (and less convivial) unit on the edge of the Market Square. It was, quite obviously, a numbers-driven calculation which ignored the absence of any rival outlet near Broadmarsh. So more fool them.

Anyway, enough of the silliness of a numbers-only strategy which ignores reality on the ground. Costa’s announcement that it was moving into a unit on the run down to Broadmarsh was greeted with unalloyed pleasure in the Post newsroom. So much so, that there was near despair when a fire broke out while they were ripping out the old tenant’s fittings.

But it’s open now and it’s a whopper. Two floors, 170 seats, and enough room to have a discreet meeting upstairs. The staff are finding their feet in a location which was bound to get hellishly busy at lunchtime, but there’s no need to worry for the thousands of workers around our base at Castle Wharf who are now within walking distance of a warm brew.

Personally, I don’t think the war’s over. I’ve yet to understand why my manor, a stretch where thousands of workers from the Revenue, Gala Coral, Castle Wharf and the courts rub shoulders with an immense bus and rail footfall, doesn’t deserve its own coffee shop.

But Costa is at least a start. For now, I can walk up and smell the coffee.

Happy days are here again...not

So billions of pounds' more money is going to be thrown at business - with £76bn of it reserved for smaller firms! Yippee, all our problems are over, eh?

Afraid not. I was chatting to George Cowcher, the chief executive of Derbyshire and Notitnghamshire Chamber a few minutes ago and he says it isn't the amount of money that's the problem - it's the interest rate you have to pay on it.

But surely interest rates are on the deck, aren't they? Base rates are, yes - these are the rates on which the Bank of England is willing to lend. Then there's the inter-bank rate, which is the margin when cash shifts between financial institutions. Then there's the rates ordinary joes in business and on the street pay.

Right now, they are a long way north of that pitifully low base rate. Borrowing at a commercial rate is very expensive.

So, banks are still acting like a load of money-grabbing vultures, then? Sorry, but that isn't a fair picture either.
Banks are making a proper commercial assessment of the ability of lenders to pay back loans. In the current economic climate the risk of default is bound to be higher (as the insolvency and business failure rates continue to show).

So a prudently-run financial institution will put a higher price on the loan to make sure the risk of loss is overcome earlier in the loan's life.

As Cowcher points out, this is what banks didn't do before the credit crunch. And look where that got us - banks still have billions of rotten loans sitting on their books to this day (and many of these distressed loans will probably be terminated this year).

Only if the government was willing to underwrite some of this business lending is it likely that the amount handed over would increase significantly. A government grappling with deficit and debt - and politically committed to so-called 'sound' money - is unlikely to do that.

So, we are where we are and George Osborne's statement today doesn't change that.

That doesn't mean businesses are necessarily caught in a financial Catch-22. There are plenty of small and medium-sized firms out thdere - particularly older, family-owned enterprises - who never over-borrowed in the good times because their cultural outlook says it's wrong to 'work for the bank'.

They have money sitting in the bank, where it's probably not doing much for them. If they are in manufacturing, this year may well be the year when they do invest in prudent expansion.

And many will do it without borrowing a penny.

Fools, buffoons and inward investment

For those of you who look the other way when hot air gets spewed out, there’s been an ongoing spat between Nottingham City Council and the Government over the council's refusal to comply with guidelines saying local authorities should publish online details of all expenditure over £500
The principles have been well and truly buried underneath a playground-level scrap between Jon Collins, the leader of the council, and Grant Shapps, a junior minister.
An innocent victim of this dignified debate (so dignified that the words ‘buffoon’ and ‘foolish’ have been used in official press statements) has been the Nottingham property industry’s attendance at the biggest property and investment show in Europe, MIPIM.
In years past, the Team Nottingham delegation has combined property professionals like surveyors, civil engineers and architects, with representatives from the city council, its inward investment wing and the city’s public-private regeneration company.
The delegation has been based in a large motor yacht in the harbour at Cannes, the French coastal resort where MIPIM takes place. It has been funded by a mix of council money and private sponsorship.
Last year, that council money amounted to around £30,000. To put it in perspective, it is less than one-tenth of the money spent by city councils like Birmingham.
According to Grant Shapps, Nottingham’s £30k amounted to the public’s money being used to fund a council ‘jolly’ to the South of France.
I have news for Mr Shapps: the council is going to Cannes again in around a month’s time.
It won’t be paying a penny, though. The presence of its widely-respected inward investment head, Lorraine Baggs, is being wholly funded by the private sector.
What does this tell us? Let’s cut to the chase: the ‘debate’ about whether or not Nottingham should go to MIPIM is almost wilfully naive. The real question underneath the Little Englander nit-picking is this: do you want your city to attract new investment which will bring jobs and money? Or not?
Now, Nottingham does have some basic economic advantages over its main regional rivals. One of the reasons why, all other things being equal, it is always more likely to attract inward investment is that it’s bigger – bigger physically, bigger catchment, bigger talent pool, bigger universities, bigger professional support, bigger range of corporates, bigger local authorities, bigger experience.
In bigger cities there is a greater possibility of a business being able to satisfy its requirements than there is in smaller locations.
(To put that into perspective, Birmingham has exactly the same advantage over Nottingham that Nottingham has over Derby. It’s all relative.)
But Nottingham is not alone in having a certain economic heft. Sheffield does. Bristol does. Leeds does. Newcastle does. Manchester and Liverpool are bigger still. And if there are cities of a certain size in the UK, multiply ten-fold on the continent.
It should be obvious by now that the idea that you can simply sit in the Market Square and wait for the next inward investment to turn up is barking mad. You have to get out there and make the best pitch that you can.
Which is what developers and property professionals do. But they cannot – and should not – be doing it on their own. The first question a big inward investor is going to ask any developer or property agent touting a site in Nottingham is: Have you got the backing of the council?
Why? For one thing, major development takes time, time is money, a delay because the council doesn’t like the idea means wasted professional fees on a large scale. So if council planners don’t like it, the inward investor’s choice is to either fight a battle or go elsewhere.
But having a council on board doesn’t just mean it is willing to advise on the best ways to solve planning dilemmas. Its inward investment team will also offer advice and information about the local workforce, travel, relocation, useful contacts and what it’s like to live in Nottingham.
While agents and developers can show an inward investor sites and buildings, the council fleshes out the picture of what it will be like to actually do business here.
It should be obvious by now that private and public sector have to act as a team in this intensely competitive field.
They are doing so at this very moment in the hope of attracting a very big inward investment into Nottingham. They will be doing the same at MIPIM.
And they really don’t need a playground scrap.

The University of the Midlands?

Big news this morning from the University of Nottingham, which has announced what it calls a “new framework for collaboration” with the University of Birmingham.
Behind that marketing-speak lies a deal between two huge academic institutions to cooperate on everything from the appointments of professors to research work and international opportunities.
Prof David Greenaway, Nottingham’s vice chancellor, said this morning that the agreement is not a merger.
But that in itself is an acknowledgement of the sheer scale of the collaboration.
The University of Nottingham is a massive asset to Nottingham – to its economy, to its future development, to its international profile and reputation. It attracts tens of millions in research funding (which is a measure of its track record), has produced a significant number of spin-out businesses, and was the first in China to build its own campus. Its Jubilee Campus (pictured) has become an icon of high-tech progress.
It’s no exagerration to say that without the university's contribution, Nottingham would be a smaller place in every sense.
Now, there is clearly a recognition in this deal that even at the top of the academic tree money is now significantly harder to come by – one area of collaboration is on management and administration, usually a euphemism for cost saving.
This is about making sure that even in tough times the two universities between them have the momentum to continue making waves on a national and international scale and to attract the kind of backing that keeps their research work in the international big league.
The two universities already work together on other initiatives – notably the Energy Technology Institute – and while Nottingham has a big presence in South East Asia, Birmingham has a bigger footprint in North America.
They certainly won’t call it the University of the Midlands. But it may still become the dominant force in the academic scene across the region.

Business enterprise: set phasers to stun

I blogged last week about a major speech given by Sir Richard Lambert in which the departing CBI leader gave a penetrating insight into where the economy is now and what government must do to move it along.
It looks like there’s a groundswell building behind this, with Derbyshire & Nottinghamshire Chamber of Commerce launching their own wish-list of things the government should do to help the private sector build the economic recovery which it says it wants to see.
To be fair to the Chamber, it is not jumping on a bandwagon here. At the end of December last year, its chief executive, George Cowcher, called on government to make 2011 a year for growth.
The Chamber – the third biggest in the country, remember, and a fairly big player round here – has now put some flesh on the bones of that wish-list.
So far, it is less specific than the measures set out by Sir Richard, but what is interesting is that it sings to that age-old business torch song, less is more.
In other words, one of the biggest contributions government might make to the economy is to stop thinking it can solve every problem under the sun by passing a new law.
A fair few business people are of the view that the ‘initiativitis’ which afflicted the last government meant it did rather too much of that, almost to the point where it was trying to codify common sense.
John Dowson, the Chamber’s imposing policy director, told me yesterday that while there are some signs that the coalition is trying to strip out some of the nonsenses, others are still slipping through.
So the biggest difference government could make is to adopt what he called an ‘enterprise state-of-mind’ – understanding the entrepreneur in everything it does and perhaps designing regulations with an approach based on the principle of ‘how easy will this rule be to comply with’.
That’s a tough ask – not least because there are those in government who genuinely believe they already do this…
Nevertheless, the detail of what the Chamber is asking for does contain some interesting suggestions.
It wants a simpler planning regime for what are obviously business or industrial sites so that they can expand more easily. So provided a change to a building falls within clear guidelines it just gets nodded through rather than going through the often long-winded planning cycle.
It wants government and agencies like UK Trade & Investment to put a whole lot more effort into making it easier for small firms to export. One of the big issues here is Export Credit Guarantees, which have been criticised for focusing too much on big businesses.
This mirrors Sir Richard Lambert’s concern that government policy for business and industry has an unfortunate habit of locking on to the activities of sectors and businesses which are already doing well – of picking winners rather than identifying entrepreneurial growth potential.
My understanding is that government – led by Vince Cable – is hard at work on some kind of business growth initiative which will be unveiled in March. You don’t need to be a political analyst to work out that the main theme in the Budget will be that now the cutbacks have been identified, Government will now take steps to assist growth.
It has some catching up to do on two fronts. While it’s said the right things about a business-led recovery, those measures which do affect firms have been cack-handed – think LEPs and the immigration cap. That betrays a disjointed approach.
Secondly, if the March growth strategy is to work it should take an enterprising approach which recognises that government is best assisting, not doing, and that it is small to medium entrepreneurial Britain that holds the key to long-term growth, not the usual corporate titans.
To borrow from the Starship Enterprise, if it isn’t going to lose the economic argument then it needs to set those policy phasers to stun.