Just left the Bank of England, where Mervyn King called for ‘higher net exports’ and on my way to Kew Bridge to see how those exports work in action, at the Brompton folding bike company - a rare manufacturing success story in the depths of recession.
A decade ago, during the dotcom boom, then Science Minister Lord Sainsbury extolled the virtues of Lara Croft, the videogame character, as a symbol of Britain’s dominance in high value added ‘weightless’ industries.
It can be no coincidence that last month Lord Mandelson was spotted with his own trusty Brompton.
The Bank gave out slightly conflicting messages today. On the one hand, in his choice of words Mervyn King emphasised the long hard road ahead, a prolonged period lasting years of adjustment to lower levels of public and private debt.
On the other hand, the charts underpinning his inflation forecast suggested that economic growth could top 4 per cent in just over a year’s time (remember that economic growth is yet to restart in the UK).
The Bank’s quarterly health check is suggesting signs of life in the patient.
But the Bank does not want this to be interpreted by the markets as a sign that it will put up interest rates or withdraw QE money creation anytime soon.
In many ways that judgement on the timing of rate rises, which may plunge Britain back into trouble, will be the most controversial and politically impactful decision made by the independent Bank of England.
Commentsoldest first
I guess the nice chaps at Brompton are thinking “well it’s taken long enough”…they have been around for quite a while but are pretty nifty pieces of engineering.
Having said that, as a cyclist on a “proper” bike, I am most annoyed when someone on a Brompton catches me off guard and overtakes. It’s just not cricket.
Aren’t Bromptons the poor man’s Moulton? Not that I can afford either, but still… the world’s best designed bike, or one that looks a bit like it without the essential suspension etc.
No a Brompton is not a poor man’s anything. A Moulton is a wonderful eccentric bike of high quality and unconventional construction, strictly for enthusiasts. A Brompton is the most perfect compromise of performance and easy of folding up so you can whizz to the station, wheel the bike to the right door of the train and fold it up in 12 seconds while waiting for the door to open. It’s very high quality, can be eye-wateringly expensive if you go for all the options but mainly it’s perfect multi-mode fun transport. People ride them around town but some take them all over the world and use them for ambitious cycle-touring.
Whoopee!! Mervyn’s team forecast rapid growth in GDP starting this winter and accelerating throughout next year, peaking around 4% growth a year from now. That’s far in excess of the record growth we achieved in the last ten years. Moreover, he says inflation should stay low as we’ve loads of spare capacity.
Hold on! Mervyn’s also warned that the forecast is uncertain and he’s keen to dampen any irrational exuberance. This is no call for asset price bubbles.
Along with record cash withdrawals from banks, tightening house markets and (above all) a rapid slowing of growth in unemployment, this is welcome news.
What Mervyn King warned, is not reading too much into GDP statistics of just plus or minus 0.2%. “What matters”, he observed “is that actual output figures are still down ..”. And about the level the Bank forecast last Spring. Maybe at least some of the stimulii are working as predicted back then?
Which is good news for people worried about their employer’s and their own prospects. And it looks as if Ad revenues will rise this pre-Xmas season, and that extra staff will be needed in shops to cope with the crowds. Shop early! That’s the message.
Does Mervyn King mean the economy must rise because of the dramatic revaluation of the currency downwards making our exports that much cheaper on the world market? He makes no attempt to suggest there will be new industries setting up , nor explain how we cover the loss of jobs in those that have gone.The big danger , which he will be aware of is rising interest rates , a strengthening pound damping down any recovery.His forcast seems to suggest he sees the currency falling even further
The person who comes up with bike which doesn’t have a damaging effect on backs and knees is on an even bigger winner.
Sounds a bit motorised doesn’t it mmmmmm perhaps a combination?
A moped.. wow what an invention.!
From minus to 4%, does not sound like a normal end of recession in an unbalanced economy overloaded with debt, are you sure there has not been some political interference?
I suggest that the thing I am most confident about is an election is going to happen, the second is that it is quite easy to get models to tell you what you want to hear, you just have to make the parameters ‘reasonable’. Elections have ways of hiding problems and then flushing them out.
If we are going to have real growth then there needs to be significant numbers of companies and sectors having a boom. A solitary bicycle factory hardly counts and inflating asset prices is not the same as creating production.
I suggest it is just as likely the economy over inflates just after the election, interest rates go up to a normal level, asset prices fall, and we go into an uncompetitive devaluation driven stagflation.
I fully expect the publicity about the folding bike to flood the market with budget Asian product in about ten minutes. Maybe we can compete with Taiwanese and Chinese bikes after all, or there again perhaps it is not something to base an economy on.
so we are supposed to all start exporting push bikes?!? is this some kind of joke? come on, give some intelligible reporting
Leave a comment
* Required field.