The Skoda Files Part II

Take a high-efficiency turbocharged petrol engine, a'trick' automatic gearbox that's more economical than a manual, mix it with matt black and almost painfully discreet styling and what have you got? Anything from a Seat to an Audi, really.

In this case what we're talking about is a Skoda Octavia, which is what I shelled out on when this blog came back to life a few months ago. Its arrival marked the end of a long association with that middle class cliche the Volvo V70 and the start of life with a badge which - along with Lada, Wartburg and Trabant - used to be the butt of all joke about east European technology.

Not anymore. As the standard kit-list suggests, Skoda today is a confection picked from the Volkswagen Group parts bin, which it became part of a few years back. So while it's still built in the Czech Republic, its design and engineering are very much based on VW's bid for world domination (for which read 'attempt to dominate the market for mainstream cars').

So if you can get over the badge what you are basically buying is the extendable chassis system also found underneath VW's Golf and Passat, Audi's A3 and TT and the Seat Leon. Ditto the 1.4 TSi turbo petrol engine and the seven-speed DSG twin-clutch auto gearbox. It's the same story inside, with upmarket plastics, familiar displays and switchgear and and information/entertainment system which clearly shares its interface with VWs and Audis.

Having squinted at the Passat and goggled at its price, I got over the Skoda badge and went for an Octavia, a car which offers nearly all the refinement you get from its upmarket sibling but at a daft price. It's a sizeable car and while it falls short of a V70's seats-down boot space, it has noticeably more interior space.

More to the point, it's far more economical to run. My 2.5 turbo petrol Volvo struggled to get much more than 25mpg, and got a ritual thumping when time came to pay the car tax, which was edging up to £300 a year when I cried enough. The Octavia? Its light weight, muscular engine and remarkable gearbox mean it just about matches the Volvo's pace but thrashes it for economy: 3,000 miles in, I'm averaging 46mpg.

And I'm not paying any car tax, either, the Octavia qualifying for zero in its first year, £30 a year after than. Or it did until George Osborne realised new car buyers weren't giving him anything and announced that more "realistic" levels of car tax are on the way.

Anyway, it is a remarkable car. For what's meant to be VW's value brand, it is quiet, refined, well-equipped (climate control, multi-mode gearbox, decent in-car entertainment - they're all there) and screwed together in the way you'd expect for a VW-in-drag. The DSG gearbox is the stand-out performer, and for anyone who's not lived with this twin-clutch marvel the speed and smoothness with which it shifts gears has to be experienced to be believed.

I'm not blind to the stunt VW has pulled here. At eye level, its interior finishes are beautifully restrained and almost upmarket. Below that, where the eye doesn't wander too often, they are hard plastic. Its styling is, of necessity, less striking than a Passat. And I chose a model with the tallest possible tyre profile because the torsion-beam back axle was a cost-saving design choice which means it doesn't soak up bumps the way an Audi does.

I suspect a more sophisticated suspension system would have left even more people wondering why they'd pay a VW price. The key question is how well a value brand stands up to three years of family use. So watch out for the next instalment...

Petrol. Turbo. Automatic. And a bloke who drives like a snail.

The blog gets back into gear!

For a daily hack this is a shame-faced admission: this blog has been dormant for nearly a year.

May be it's a measure of the way the world's picked up speed in the last 18 months or so, may be it's a reflection of the competing demands of work and family life, but there's been so much other stuff going on that filling a quiet moment with yet more wordsmithery has been the last thing on my mind. I think a few other bloggers have felt the same way.

Enough of the excuses and back to business, for that's what this blog is: a mix of musings on business which don't fit the template of the day job and musings on stuff that I find interesting - my business, if you like.

So we'll get back into gear with some of the latter. Quite literally, infact, as this blog marks a farewell to the trusty old warhorse that is my Volvo. Affectionately known as Kurt (as in Wallander, the Swedish detective), it's the kind of car that conforms to the classic Volvo cliche: a big, lumbering but always dependable V70 estate. Adding further to that veneer of endearing respectability is the fact that it's also a family hand-me-down, having spent the first few years of its life ferrying my wife's aunt and uncle to and from golf clubs in Surrey.

It had got a modest 60,000 miles on the clock when I got my sticky paws on it and dragged it up to Nottinghamshire. It will be traded in a couple of weeks from now with 111,000 on the counter. It's in good nick, so I'd reckon that there's another 100k in it with some careful fettling.

Much as I've enjoyed wafting around in something that's like a pair of old slippers, it's now a car from another era. It's big, heavy, has a large turbo petrol engine and a five-speed automatic slushbox. It's been great for cruising around in...but 200bhp in a heavy car is painfully expensive to run.

How painful? Try this: urban fuel economy is 18 mpg. Car tax is closing in on £300 a year. And its age (first registered in 2001) means it's had to have new hips and kneecaps. I still love it to bits. But it's probably time to pass it on to someone who doesn't do so many miles.

And time for me to take advantage of the huge technical leaps and bounds that have taken place since my V70 first hit the road.

Just how much motoring efficiency has improved can be seen in Kurt's replacement. Its petrol turbo engine is a litre smaller and 60bhp less powerful. The car itself takes up just as much road space as the V70. But its urban fuel economy is more than 46 mpg. Its 134mph top speed is the same as the Volvo. And its emissions are such that in the first year I will hand over no car tax whatsoever to George Osborne, and only £30 a year after that. Whoopee!

That astonishing performance is partly down to the fact that the car is significantly lighter than the Volvo, but also because of a remarkable automatic gearbox known as DSG. This Double Shift Gearbox has seven speeds and not one but two clutches.

In a normal gearbox, the clutch has to disengage itself from one gear and then engage the next, which takes time and uses juice. With the DSG, the first clutch engages one gear, while the second is already lining up the next cog. Shifts happen in milliseconds and the end result is that the auto version of this car is more economical than the manual.

The car also has a few other gizmos which weren't around when my V70 first hit the tarmac. The brakes come on automatically if the car detects an impact, a fatigue sensor sounds if the car spots odd steering inputs, multimedia is controlled via touchscreen, there's even a driving mode selection which allows you to tailor climate control, engine torque, accelerator, power steering and gearbox to suit your own needs. There's also self-parking system on some models.

So, I'm obviously a lucky boy and the posh gods have smiled on me, right? Wrong. One of the biggest changes to have taken place over the past 10-15 years is that some of the badge snobbery that used to decide your pecking order in life's traffic jam has faded, replaced instead by a respect for smart choices.

In other words, this technical marvel is a Skoda.

Where does Heseltine leave our LEP?

The big question about Lord Heseltine's report into regional growth yesterday is whether it will ever become government policy.
It is a proposal to spend money on a grand scale at the grassroots of the economy, and from some angles looks suspiciously like revisiting what organisations like emda and the Government Office for the East Midlands used to do.
Fair enough, it was a government-commissioned report and Lord Heseltine would not have attached his name to it without some commitment from David Cameron and George Osborne to do something with it.
What does George Osborne, the man who holds the purse strings, want to do? Study it in depth. That could mean working out how some of it could be done without it looking like a u-turn, or it could mean kicking it into the long grass.
A sceptical jury is out on which of the two it means.
There is a lot of simple common sense in 'No Stone Unturned', the name Heseltine gave his search for a way of unlocking regional economic growth. Spending money at the grassroots of the economy is best decided at the grassroots, he suggests. But rather than exhuming old quangos and giving them another name he suggests the work could be done by existing bodies - notably the Local Enterprise Partnerships like our own Derbyshire-Nottinghamshire D2N2, and the Chambers of Commerce (which happens to operate across the same turf up here).
More ambitiously, he also suggests councils should be restructured into two tiers (a sort of city and county arrangement), and that civil servants should be reorganised to serve the economy rather than their department. He's taking on vested interest and political turf here, much of which is quite happy to serve itself.
One way or another, our LEP is heading towards a turning point. There will be a review into its future in the spring and it can't come soon enough. With next-to-no budget and a resource of borrowed time, it has failed to make an impact. While Derby has shown signs of believing it could help their economic development efforts, Nottingham has been dismissive - with a £60 million City Deal under its belt, perhaps it feels it can afford to be.
This leaves us wandering into that miserable world of political rivalry between Derby and Nottingham, a sorry turf which acts as nothing more than another bad advert for politics. It surfaced yesterday in the cool reception given to the announcement that the new LEP chair was another Derby business figure, Peter Richardson.
Put to one side the fact that Richardson is a straight-talker who has considerable respect among business across both counties. Nottingham said nothing about his appointment officially, but it is unlikely to be seen as evidence that the LEP gives an equal proportion of its time to both cities. Whether that's a fair assessment or not, it is one Richardson will have to address.
The LEP is being given just enough money by government to establish a full-time secretariat, and it has a hand in one or two major projects. Will next year's review decide how to give it a real sense of purpose? Or will it wonder whether there's any point continuing? Where government goes with the Heseltine report could play a decisive role.

A Budget blunder and the big issue of business investment

It must have been a pretty good afternoon for the Chancellor’s political advisers yesterday, and you can imagine the conversation after the Budget speech was over.
“So, how do you think it went?”
“Yeah, pretty good, I thought.”
“That’s the way I saw it, no real problems.”
“Absolutely, Labour didn’t land any real blows.”
“Job done then.”
Except it wasn’t. This morning, they will have woken up to some universally appalling headlines which transformed what had seem to be an OK performance into a cack-handed raid on a group which no sensible politician should ever willingly offend: pensioners.
Regardless of the rights or wrongs of a decision to freeze the allowances of the elderly (and the sums are far from nightmare territory for a group which tends to spend less), this was an amateurish blunder on two levels. The decision to leave it out of the Budget speech and bury it in the Treasury papers was asking for both trouble and comparisons with Gordon Brown, a past master at parliamentary sleight-of-hand.
And putting yourself in a position where you have to justify taking money off people who have no means of working to make it up leaves you painted into a corner. In PR terms, it was dumb.
The money that George Osborne was handing over by increasing the basic allowance had to come from somewhere because he was committed to not increasing borrowing . And numbers from the independent Office for Budgetary Responsibility suggest that while the economy has probably got enough momentum to avoid another recession, it hasn’t yet latched on to significant growth.
So a straight giveaway would have been politically and economically risky.
This is why many business organisations greeted the Budget with a universal “Is that it?”, with disappointment that there were few tangible measures that either removed a burden from business or gave it a chunky opportunity to pitch for.
The cut in Corporation Tax will be welcome, and raises the question of what businesses are going to do with all the money they are sitting on. In an edition built around signs of recovery in the all-important US economy, The Economist suggested that British businesses are sitting on a cumulative cash pile of around £700 billion, so there is a clear opportunity here for some substantial business investment.
So the corporation tax cut can only help give firms more comfort if they decide they are going to start spending some of the money they have stashed.
As for the decision to cut the top tax rate from 50p to 45p next year, I wonder how much difference it will make. If you have gone to the lengths of setting up a tax structure which minimises your exposure to 50p, will you drop it for 45p? There’s a political calculation at work here: the 50p rate which Labour introduced was gesture politics because few experts reckoned it would yield the revenue Labour had suggested – why pay 50p on income when you can take a dividend for less? The Treasury is betting that 45p won’t bring in any less revenue and that it improves the government’s credentials with business.
This was a transitional Budget. Next year’s will be critical because it will influence what happens to our pockets in the two-year run-up to the next election. If the economy avoids further shocks there should be some solid signs that growth is gaining momentum, in which case tax revenues will rise and the Chancellor can start talking about how he intends to use those gains – both in lower taxes and direct investment.
Budgets always come with a mix of cheers and jeers. Place your bets now that one of the biggest jeers on Budget Day in 2013 will be a measure which puts money back in the pockets of pensioners.

It IS the Budget for Growth...next year

So it’s good news for 330,000 people and good news for 24 million people. But not until next year.
The point to bear in mind about both of these headline grabbing measures is that they won’t cost George Osborne a penny in 2012-13. So he’s effectively trailed next year’s Budget.
The 24 million are the people whose personal allowance will rise substantially next year, putting their tax-free income up to more than £9,200.
The 333,000 are those liable for the 50p top rate of income tax, which will be cut to 45p from April 2013. The line from the Treasury is that the 50p rate isn’t raising any worthwhile revenue, suggesting high earners are taking some income as dividends or not taking it as income at all.
So as I said last night, 45p looks like a more ‘optimimal’ rate – low enough to encourage payment, high enough to yield some decent tax revenue.
And it’s apparently bad news for Nottingham, which didn’t get the cash it hoped for from the Super Connected Cities initiative. It had asked for a comparatively modest sum (around £8m), to fund ultra-high speed broadband embedded in the tracks of the new tram lines.
I don’t think the game is over on that one, though – I suspect the City Council will try to secure the funding from other sources, so watch this space.
The burning question, of course, is whether the headline cut in Corporation tax – which goes down to 24% more or less immediately – will help businesses to put their hands in their pockets and invest.
There’ll be more insights later.

It's the Budget for Growth...or is it?

So, it’s a Budget for growth, which maintains the focus on deficit reduction and brought forth a fairer tax system while failing to tackle unemployment, risking a double dip and missing an opportunity to invest for the future.
And that’s before it’s even been delivered.
The political interpretations of what George Osborne will say in his third Budget are well-rehearsed to the point of staleness.
The point to remember about most Budgets, particularly those delivered during any kind of downturn, is that they have to be neutral – in other words, what the Chancellor giveth, he almost certainly hath to take away.
There are three potential exceptions to this rule (though they’re more likely to surface next year, when the Budget is almost certain to be written with an election in mind).
One is better-than-expected government finances allowing some cash to be thrown at a rabbit-out-of-the-hat Budget stunt. Logic suggests this would be directed at low or middle-income people – putting money in your pocket always works. Just don’t expect much of it.
Second is internal Treasury forecasts suggesting that a pick-up in the economy will yield more tax revenue than government scenarios suggest. Cue a decision to ‘invest the proceeds of our strategy’.
Third is a financial mechanism which allows government to effectively step outside its normal financial rules. An example: the decision to take on the liability for the Post Office pension fund will give the government a one-off accounting gain of £28 billion. In this case, it’ll come straight off the deficit...but a cunning politician might view that as £28bn not needed from elsewhere.
Not this year, though?
If the Chancellor goes ahead with the plan to drop the 50% tax rate on earnings over £150,000 to 45% it will be pilloried for robbing the poor to give to the rich.
In all likelihood, he will have settled on an optimum top rate: the 50p rate has yielded hundred of millions in revenue, but an efficient income tax usually delivers billions – suggesting some entrepreneurs have chosen to take income as dividends or not taken it as income at all.
So while 45% sounds like a cut there’s the possibility it will bring similar tax revenue to 50%.
George Osborne – who is established now as a tough decision-maker who doesn’t play to the gallery – seems unlikely to go for too many stunts. The economy isn’t yet stable enough for that
There has to be a growth message in the Budget because that is the quid pro quo for continued business support of deficit cutting.
In Nottingham’s case, we will be looking for an announcement that our city is among those receiving money to invest in super high-speed broadband (to be buried in the tracks of the tram network).
We will be looking, too, for new schemes which give opportunities to bid for funds.
Government is now desperately hoping there will be no further significant economic shocks this year.
Last year, tentative signs of progress were well and truly snuffed out by the eurozone pantomime, which led instead to a focus on negative economic news.
This year, there is a desperate appetite among business to accentuate the positive. They’ve had enough of recession doom-n-gloom.
Over to you, George.

Unemployment: A look behind the numbers

Two more pieces of economic news today, which will of course be spun like mad by the respective political camps.
You can’t shy away from unemployment however you look at it. A rise to 2.67 million unemployed, or 8.4 per cent of the working population is the highest it’s been for 16 years. As I’ve blogged before, the problem area surrounds youth unemployment, which accounts for 1.04 million of the total.
Beyond the weak economy, the issue there appears to be at least partly a mismatch between what students are coming out of schools and colleges with and what employers are looking for.
It’s worth mentioning that the youth unemployment figure doesn’t mean 1.04 million young people are walking the streets – the number includes more than 307,000 who are in full-time education but registered as looking for work.
Locally, unemployment in the East Midlands bobbed up only slightly to 188,000, or a below average rate of 8.2 per cent. All of these figures are for the three months period to the end of December.
The odd thing for some people will be that the number of people in employment has gone up at the same time as the jobless rate. That isn’t a contradiction – it tells you that the economy is creating jobs, but at a slower rate than the numbers of people registered as available for work. Many of the new opportunities are part-time, though.
Another important clarification here – the rise in the numbers unemployed includes people who have lost jobs and people who are new to the jobs market. So the unemployment issue isn’t a simple conflict between people finding jobs and losing jobs..
Either way, the economy isn’t creating enough new jobs at the moment. The second piece of news suggests that while the unemployment trend isn’t likely to significantly improve in the immediate future, it is unlikely to worsen.
The Bank of England said today that it did not think the UK had fallen into recession again, and that the economy would grow 1.2 per cent this year. It has reached that conclusion on the back of a series of industrial surveys that have pointed to a slightly improving picture for business.
The Bank’s Governor, Sir Mervyn King, isn’t for one moment suggesting that we’re out of the woods and says there may still be occasional dips in activity.
What can we conclude from all this? That there are opportunities for business growth out there, but an uncertain outlook means that cautious businesses will try to exploit them within the bounds of their existing resources.
Same old story, really, and however much the politicians argue about it, it is unlikely government intervention will make a substantial difference. Nevertheless, the rising jobless figure is putting subtle pressure on George Osborne to adopt a growth agenda in next month’s Budget.

When the A453 speeds up, so will the economy

The reporting of the Chancellor’s Autumn Statement (that’s the mini Budget he said he was getting rid of) has been almost ritually gloomy
Growth worse than forecast, borrowing worse than forecast, cuts worse than forecast, unemployment worse than forecast (that’s enough worse than forecast – ed.)
There are a couple of reasons for the headline gloom-fest. For starters, this is not what George Osborne said would happen, and it lands him in a suspiciously similar position to his political opponent, Nottingham High School old boy Ed Balls. So some would say he is properly being held to account, others that it’s political schadenfreude.
The second reason is that we appear to have a fixation with news agendas:
“I think it’s grim, what do you think?”
“Well, yeah – it does sound grim, doesn’t it?”
“Terrible, pretty grim really.”
Now, it would be a brave person to stand up and suggest anaemic UK growth and the euro zone horror story signal that happy days are here again.
But I’ll try to dial in a little bit of perspective.
Besides a potential hiccup in this quarter and the next (that’s the R-word or the Double-D phrase), the economy is likely to grow a little bit over the next year.
As that’s a national average, some regions of the UK are likely to grow more than others.
The East Midlands looks like it’ll be one of them.
I says that because I saw a piece of research towards the end of last week from the Institute for Public Policy Research which analysed when employment in the regions was likely to get back up to its pre-recession peak.
Some of its research does sound, ahem, grim. Northern regions may not see employment peak again until 2018 or beyond. That’s a lost decade.
But other regions will see it return to the high by 2014. And we’re bracketed together with the south, south east and east of England in this group.
One more point of perspective. Whether it was courage, confrontation or carelessness, the Chancellor chose the day before the public sector pensions strike to announce that these workers could also look forward to pegged pay increases and more job losses.
In total, the Office for Budgetary Responsibility is now estimating that more than 710,000 public sector workers will have lost their jobs by 2017.
In isolation, that’s a huge number. But, as I’ve blogged before, it is a proportionally small part of the economy – of the UK workforce of 30 odd million, 6 million are employed in the public sector. So the job losses would amount to less than 2.5% of our total workforce, and over that length of time at least some of those jobs will be replaced by private sector growth (not as many as George Osborne would hope, though).
Besides the raft of measures aimed at encouraging lending to small and medium-sized businesses, the major headline for us was that we finally appear to have dragged the A453 widening project over the line.
After only 30 years of trying...
This single carriageway link between Nottingham, the M1, East Midlands Airport and the East Midlands Parkway railway station has accurately been described as the biggest car park in Nottingham.
Beyond the jokes, it has cost the local economy millions in delays, and Boots dropped some heavy hints in private that it regarded progress on this project as a factor in future investment – especially after the decision to turn part of its sprawling and under-utilised campus into an enterprise zone.
While we don’t have a definite start date, that project will now begin before 2015, which is earlier than expected. Turning it into a four-lane road should reduce congestion and cut journey times.
More significantly, it is also likely to open up swathes of land for residential and commercial development, and I wouldn’t be in the least bit surprised to see land transactions and planning applications start to shift in this area.
We can’t kid ourselves – it’s going to be slow progress for a while now. We could well have a situation where, when the A453 finally speeds up, so does the economy.

EZ does it: What our Enterprise Zone will offer

I blogged earlier this week about the Government’s plans to re-introduce Enterprise Zones to encourage business growth.
Sure enough, George Osborne announced in his Budget yesterday that there would be 21 of them across the country, with the first 10 including a site in the area covered by the Derbyshire and Nottinghamshire Local Enterprise Partnership.
I’d just love to tell you where it is right now, but some Very Important People are going to announce it later today and I’ve been told to keep my trap shut so they can claim all the glory.
All I’ll say is that the announcement will be of keen interest to businesses around Nottingham, and the location reflects one of the city’s industrial strengths.
What I can tell you, because the details are already out there on p33 of the Treasury’s Plan For Growth, is what the Enterprise Zone will offer:
RATES: A 100% Business Rate discount worth up to £275,000 over a five-year period for businesses moving into an EZ during this Parliament.
REINVESTMENT: All Business Rate growth in the zone for up to 25 years will be retained and shared between the local authorities in the Local Enterprise Partnership area ‘to support LEP economic priorities and ensure the returns from the EZ growth are reinvested locally’.
PLANNING: Government and local authorities to develop ‘radically simplified’ planning approaches for the EZ.
CONNECTIVITY: Government support to roll out superfast broadband throughout the EZ.
There is more. Alongside these basic rules, the government says it wants to see reduced regulations all round in the EZ, enhanced capital allowances for plant and machinery in areas where there is a manufacturing bias, the use of Tax Increment Finance, and UKTI support for inward investment into these zones or trade opportunities.
More detail will emerge later today, but these zones look likely to provide a stream of cash which Local Enterprise Partnerships had been missing. Government says it wants this money will be used to promote long-term sustainability.
So it clearly has the criticisms of the old Enterprise Zones flagged up earlier this week high in its mind.
Look out for the announcement later.

A late night with George Osborne

Some people sit back and neck decent bottle of plonk. Others watch Waterloo Road (poor souls). I launched into a 130-page document called the The Plan for Growth, produced by those nice people at HM Treasury and the Department for Business, Skills & Innovation.
More fool, me some will say. But since the alternative was the 2011 Budget Red Book, I don’t think I’ve done too badly as far as sticking matchsticks in my eyes goes.
Anyway, enough of the ritual self-pity. The Plan For Growth is one half of yesterday’s Budget, and it offers at least some of the detail which George Osborne’s headline-grabbing Budget Statement didn’t. There are some big, important measures in it, some eye-catching detail, plenty of ifs, buts and maybes. A lot of it matters to anyone who’s in business. I’ll blog separately about Enterprise Zones. So here goes, in no particular order, the rest of it:
PROPERTY DEVELOPMENT: Some public sector land is going to be auctioned off. The Homes & Communities Agency will announce the first tranche shortly, and it’s considering a ‘Build Now, Pay Later’ model in some cases.
WORKERS’ RIGHTS: A plan to extend the Right to Request Time Off for Training to firms with fewer than 250 staff is being scrapped
The Right to Request Flexible Working for parents with children under 17 is being scrapped
PUBLIC SECTOR CONTRACTS: Pre Qualification Questionnaires for firms who want to tender for public sector contracts are being scrapped for work worth less than £100,000.
The Government wants 25% of public sector contracts to go to SMEs (firms with a sub-£25m turnover).
Government also wants to cut the cost of public sector construction and infrastructure by 20% partly through standardised design and new procurement models.
BUSINESS GROWTH INVESTMENT: A Business Angel Co-Investment Fund is going to be set up, probably based around the existing Regional Growth Fund structure, pitched at backing early-stage SMEs with high growth potential. A Business Coaching for Growth service is also going out to tender, offering investment readiness training. One for those GINEM types?
INWARD INVESTMENT: UK Trade & Investment, the government’s international trade agency, will become ‘more entrepreneurial’ by using private sector expertise
There will be a ‘bespoke service’ for key inward investors giving them direct access to ministers and ‘speedy resolution of bureaucratic obstacles to investment’. New help will be given to help small firms trade internationally.
LIFE SCIENCES/SOCIAL CARE: A new Health Research Regulatory Agency will look at streamlining the regulations and cost-effectiveness of clinical trials. It will also strip out regulations ‘never meant for the social care market’ which prevent market entry and flexible services.
CONSTRUCTION: A two-year rolling programme of funding-approved public sector projects will be published to help the construction industry
TOURISM: A £100m campaign, co-funded by the industry, aims to attract 4m more visitors to the UK after 2012. Tourist boards will become smaller, industry-led partnerships with government.
There will be more, and when the Chancellor said his Budget as ‘fiscally neutral’ he was telling you from the start that he’ll take back anything he’s giving away. That's one for the Red Book.

An Enterprising dilemma for Nottingham

Back in the mid 90s I was working as a business journalist in Leeds. It was an exciting time to be there – the economy was motoring, owner-managed firms were thriving and the city had taken on a real professional gloss thanks to the drive of the Leeds Financial Services Initiative.
It wasn’t just the deal-making accountants and lawyers who saw West Yorkshire as a lucrative hunting ground, though. One morning I picked up the Yorkshire Post to find a great exclusive: its reporters had ambushed officials from the Welsh Development Agency, who were camped out at a hotel just outside the city inviting local businesses to consider leaving Yorkshire and moving to Wales.
The WDA was, quite rightly, sent packing with a flea in its ear and politicians demanding to know why public money was being used to poach businesses from one part of the UK to another when the jobs ‘created’ in Wales would simply be those lost in Yorkshire.
The answer goes to the heart of the recent debate about whether we should bring back Enterprise Zones, and we’ll find out later this week if Nottingham has been successful in getting one on our patch.
I was chatting to Graham Chapman, the deputy leader of Nottingham City Council, about this very issue on Friday. He gave a broad hint that there are a couple of sites where they’d like to give it a go, but made it clear that the terms of the Enterprise Zone were the key: it would work only if the incentives were framed in such a way that they didn’t attract businesses who were moving only to follow the money.
As the WDA fiasco illustrated, he has point. There was another example closer to home which also threw a harsh light on the inherent weakness in inward investment underpinned by financial incentives.
Back in the early 90s, Mansfield was coming to terms with the social and economic impact of the end of the mining industry. It got a sniff that an American car components company, Johnson Controls, was interested in opening a factory making car seat covers. There were 600 jobs on offer and, quite understandably, the district council pushed the boat out for them, with an incentive package which included a contribution of nearly £2m from the European Union.
Six years later the council’s economic development chief turned up to a meeting with Johnson Control executives at which they handed over a sheet comparing the costs of operating in Mansfield and the costs of operating in the Czech Republic.
Mansfield had no answer. This was a global business, with no particular links to Nottinghamshire, which had decided elsewhere that it was going to follow the lowest cost option. So off it went, taking 600 jobs with it.
Graham Chapman, who knows a lot about economic development, says that Enterprise Zones will work only if they encourage a sustainable commitment to a location – in other words, one driven by business and economic logic rather than a short-term sweetener.
Enterprise Zones can work – the Sherwood Business Park [pictured above] just off Junction 27 of the M1 is a living, breathing example of one based on an attractive site right next to a motorway junction. So its advantages went beyond financial incentives.
But they also raise questions about fair competition in business and commercial property: why would it be right for one site to have Government support and not another?
We’ll find out how – or if – George Osborne has worked out some convincing answers to these big questions later this week.

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.