EU membership is crucial to Britain's growing car industry

The UK's car industry is a bright spot in the economic gloom – let's not jeopardise it by pulling out of Europe

We may have just overtaken Brazil to become the world's sixth largest economy, but the overall economic outlook for the UK remains relatively bleak. Some economists foresee a full-blown triple-dip recession, and with consumer spending and domestic investment remaining sluggishand more public spending cuts just round the corner, even minimal economic growth will be highly dependent on an increase in British exports.

Production of the electric Nissan Leaf will start in the UK next year

Despite the doom and gloom, one sector continues to provide a small glimmer of hope: the British car industry. Rapid growth in output and productivity is bucking the wider trend of relative economic decline and restoring the UK's position as a global manufacturing hub. This resurgence has been driven by a range of factors, but especially important has been an increase in foreign investment, international trade and innovation. In each of these areas, Britain's membership of the EU remains crucial.

Over the past two years, the British automotive industry received nearly £6bn of foreign investment. Just as with the Japanese companies hailed with rescuing the British car industry in the 1980s, this investment has been primarily motivated by the UK's position as a launchpad into the highly regulated EU market. And while domestic demand has grown in the past year, 80% of all vehicles produced in the UK are still sold overseas, over half of them in the EU.

If the UK were to leave the single market British-produced vehicles would face import tariffs from 10% to 22%, as well as numerous regulatory barriers. Major foreign investors such as Nissan, Ford and BMW would rapidly look elsewhere, probably to more secure EU members such as Poland or the Czech Republic. Even if the British government was able to renegotiate a unilateral free trade deal with the EU, it would be unlikely to enjoy unrestricted access to the single market and the accompanying uncertainty would make any would-be investors think twice.

Admittedly, the EU market has seen a dramatic decline since the eurozone crisis. This makes it essential to expand exports into emerging markets through free trade deals. The EU-South Korea trade agreement, signed last year, has helped bring about an 8% increase in vehicle exports from the UK. The recent trade agreement with Singapore should also give a major boost to British car exports.

Yet this will be small change compared to the breathtaking potential of EU free trade negotiations with Japan and the US, due to be launched in the coming months. While it could negatively impact the EU car industry as a whole, a deal with Japan could help boost investment in the UK and decrease the input costs of British-manufactured Japanese cars. The US on the other hand is the UK's largest export market, and currently far more British vehicles are exported to the US than vice versa. However, without the economic weight of the EU, it is unlikely the UK would be able to gain any favourable concessions in the politically sensitive American automotive sector.

Finally, EU carbon emission targets and specific incentives to produce low-emission cars have helped spur innovation in the UK automotive sector. The European Commission has also invested billions of euros in research and development funding, encouraging cross-border research projects and ensuring that Europe remains a world leader in developingsmarter and greener technologies.

The importance of this can be seen in the UK, where soaring petrol prices have encouraged consumers to switch to more fuel-efficient cars. Meanwhile sales of electric cars have more than doubled and are expected to increase further as new models become available – notably the Nissan Euro Leaf, which will start production in Sunderland next year. Outside of the EU, the UK would soon lose its competitive edge in the global transition towards more innovative, low-carbon vehicles.

Britain's car industry is a vital part of its economy, supporting 730,000 jobs and accounting for 11% of manufactured exports. It also plays a crucial role in offsetting the UK's huge trade deficit; this year Britain sold more cars abroad than it imported, for the first time since 1976. And thanks to the presence of factories and supply chains throughout all UK regions, it's an industry that helps to balance the growing north-south divide.

As a group of senior business leaders recently warned Cameron in the build-up to his much anticipated Europe speech, casting doubts over Britain's EU membership at this time risks creating a climate of "damaging uncertainty". Such uncertainty would be especially harmful for Britain's thriving car industry, and thus for the British economy as a whole.

Article source :http://www.guardian.co.uk

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook

Japanese government unveils £138bn stimulus package

Shinzo Abe, the prime minister, details how £138bn will be pumped into economy in bid to create 600,000 jobs

The Japanese cabinet has approved a fresh stimulus package of more than 20 trillion yen (£138bn/$224bn), aiming to lift the economy out of recession and create 600,000 new jobs.

The prime minister, Shinzo Abe, announced the decision at a news conference where he said the new measures were intended to add 2% toJapan's real economic growth.

Cars wait for export from Japan. Shinzo Abe is aiming to create 600,000 new jobs with a 20tn yen injection into the economy 

Abe urged the central bank to move more aggressively to encourage lending and meet a clear inflation target to break out of the economic doldrums that have plagued Japan for two decades.

Abe took office late last month after a parliamentary election victory by the Liberal Democratic party, which is touting public works spending and subsidies to strategically important sectors as part of its plan to revive the economy.

"Unfortunately the previous administration failed to work out how to boost growth and expand the economic pie," Abe said. "It is vital that we have an economic strategy that can create jobs and raise incomes to sustain growth."

Abe, who also served as prime minister in 2006-07, has vowed to make reviving the economy his top priority, promising support both to small businesses and big industries such as the auto sector.

The spending package includes 10.3tn yen in extra outlays by the central government. Abe's administration is pledging to spend 19tn yen in 2015 in support for reconstruction of the coastal areas devastated by the March 2011 disasters.

The stimulus deal, which will be the basis for a supplementary budget for the remainder of the fiscal year until 31 March, required wrangling over tax reform and other issues with the Liberal Democrats' coalition partner, the New Komeito.

It also includes a request to raise military spending by 100bn yen from the 4.6tn yen budget last year, the first such increase in a decade. The increase is partly aimed at beefing up monitoring and defences around islands in the East China Sea, known as the Senkakus in Japan and the Diaoyu islands in China. A territorial dispute over the uninhabited islands flared into anti-Japanese riots across China last autumn after Japan's central government purchased them from a private owner.

On the economic front, Abe has urged Japan's central bank to do whatever it takes to meet an inflation target of 2% to counter a persisting cycle of sinking prices and weak demand.

The change of administration has raised hopes that Abe's more aggressive approach might help Japan escape recession.

Article source : http://www.guardian.co.uk

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook

Double dose of gloom as Honda axes jobs and UK manufacturing shrinks

UK on triple-dip recession alert as Honda cuts 800 jobs at Swindon and data shows manufacturing output fell in November

Two pieces of gloomy news on Friday summed up the parlous state of British manufacturing.

The first was the news that Honda is to cut 800 jobs at its Swindon plantdue to weak demand from Europe. Given that the auto sector has been one of the few bright spots for industry, this was particularly depressing.

The second snippet came from the Office for National Statistics, which said manufacturing output contracted by 0.3% in November and was 2% lower than a year earlier. With the fourth-quarter growth figures due out in two week's time, the City was on full triple-dip recession alert.

A word of caution is needed here. Manufacturing now accounts for around 10% of gross domestic product, with the broader measure of industrial production – which includes North Sea oil and gas and domestic energy production – making up around 18% of national output.

News that Honda is cutting 800 jobs is particularly depressing given the car industry had been a bright spot for UK industry.

Construction – where there were also downbeat figures for November – makes up a further 7%. That leaves the service sector, where there is so far only data for October, making up the other three quarters of the economy.

Even so, from the data available, the signs are not that promising.

Industrial production in October and November was 2.3% lower than the average for the third quarter so unless there is a marked – and, it has to be said – unlikely spurt in December, there will be a chunky quarter-on-quarter drop in the final three months of 2012. Industrial production, which in the latest quarter was at its weakest level since 1991, could shave half a percentage point off growth.

The picture from construction is better. Although there was a drop in output in November, that followed a sharp rise in October. Output was 1.8% higher in the three months to November than in the three months to August, so it would take a drop of around 10% in December construction output to prevent the sector from providing a positive contribution to growth.

Evidence from the service sector is mixed as well as scanty. Consumer spending in October and November was nothing to write home about, although there seems to have been a last minute flurry both in the high street and online in the days just before Christmas.

Data for December will, however, be unavailable to the ONS when it makes its first stab at calculating the fourth-quarter growth figures on January 25. As things stand, the figure looks like being close to zero, with the odds slightly on a negative number.

This would not, strictly speaking, constitute a triple-dip recession – two successive quarters of falling output would be required for that – but it would certainly have David Cameron and George Osborne on tenterhooks about the GDP data for the first three months of 2013, a quarter which in the past has been at the mercy of the weather.

Article Source : http://www.guardian.co.uk

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook

Money may be tight, but 'smart aid' to developing countries can really work

Far from creating dependency, strategic assistance from the west can help developing countries to help themselves

A lot of water has passed under the bridge since Britain hosted the G8 summit at Gleneagles in July 2005. Life was sweet when the leaders of the world's most powerful western economies pledged themselves todebt relief and aid to help poor countries. Growth was strong, asset prices were rising, and the financial crisis was two years away.

In 2013 it will, once again, be Britain's turn to chair the G8, but the mood will be quite different when leaders meet at Lough Erne in Northern Ireland this summer. The talk will be of fiscal cliffs, the euro's struggle for survival, high energy prices and the struggle to ensure financial solvency. One thing is certain: there will be no repeat of the commitment to double aid within five years. Money is tight.

Back in 2005, the pressure on Tony Blair came from only one source: the Make Poverty History (MPH) coalition that saw Gleneagles as an opportunity to cajole the G8 into making binding pledges on development. David Cameron has a more difficult task this year – for in addition to the lobbying by MPH2, he is coming under fire from aid sceptics who challenge the logic of a government that is cutting public spending at home massively increasing public spending abroad.

The thrust of the argument from the anti-aid lobby is as follows: aid does not work because it traps countries in a culture of dependency. Much of it is either wasted or siphoned off by corrupt regimes, so the taxes of poor people in rich countries ends up bankrolling the lavish lifestyles of rich people in poor countries.

In Britain, lobbying by powerful and arrogant charities has led to an increase in the aid budget so big that the Department for International Development (DfID) does not know what to do with its embarrassment of riches. Aid has become a gigantic racket and should be pared back to genuine humanitarian relief. That will leave space for the private sector to power development, the only sure way for countries to escape poverty.

The anti-aid lobby is livid that Cameron, the chancellor, George Osborne, and the development secretary, Justine Greening, are making good on the promise made by the last Labour government to raise the aid budget to 0.7% of national income in 2013. Given the precarious state of the UK's public finances, the assumption was that the prime minister and his cabinet colleagues would eventually renege on the pledge. They deserve credit for not doing so.

Here's why. Firstly, the anti-aid brigade mounts what is largely a straw man argument. Nobody at DfID, Oxfam, the World Bank or any other body involved in development would ever say that aid alone is the answer to tackling poverty. It has always been seen as part of the solution, along with the right macroeconomic policies, private sector investment, boosting trade and, in Africa, encouraging regional integration.

Secondly, both sides of the aid debate would agree on the need to tackle waste and corruption. Conservative ministers here have been acutely aware of the need to maintain public support for a rising aid budget during a period of austerity, which was why Greening's predecessor, Andrew Mitchell, undertook reviews of bilateral and multilateral spending and insisted on better value for money.

Whereas Labour favoured general budget support for poor countries – giving governments more control over their own spending – the coalition has preferred to finance specific projects.

Greening has insisted that a minister must sign off spending on any development project costing more than £5m rather than the previous limit of £40m. She has announced the end of UK aid to India; stopped money for Rwanda amid evidence that it has been used to finance rebel forces in the Democratic Republic of the Congo; and has suspended all direct aid to Uganda after reports of misuse. This would appear to be the zero-tolerance approach the aid sceptics are urging. Certainly, it is hardly consistent with the lurid stories of DfID sitting idly by while taxpayers' money is being siphoned off into numerous Swiss bank accounts.

However, corruption is not going to be tackled simply by turning off the flow of official western assistance. It will also require action against tax havens, against the arms trade and against multinational companies guilty of bribery. The aid sceptics tend to be far less vociferous about these issues.

Thirdly, there is plenty of evidence to show aid is working. The charity One has compiled a list of 14 African countries – including Ethiopia, Tanzania, Malawi and Senegal – that shared some characteristics in the period after 2000: they qualified for debt relief; they weren't dependent on extractive industries; they were not embroiled in civil conflict.

On average, in these countries aid flows increased threefold between 2000 and 2010, but there was no sign that official assistance crowded out private investment. Far from it, foreign direct investment increased fourfold over the same period. Growth averaged 5.5% between 2000 and 2011, an impressive performance given the meltdown in the global economy that followed the financial crisis of 2007.

In 2002, there were 300,000 people receiving HIV/Aids medicine; today the number exceeds 8 million. As a result of international aid efforts, the number of Africans with access to a bed net has increased from 3% to 50% in a decade. Spending on vaccines, bed nets and nutrition has meant child mortality in sub-Saharan countries has dropped by 41%. Education is seen – rightly – as the key to competing in the global economy, and over the past decade 51 million more children are in primary school because of the resources provided by debt relief and aid.

DfID funds a scheme in Sierra Leone called Making it Happen, where skilled health workers from Britain share their expertise with doctors, nurses and midwives in an attempt reduce high levels of infant and child mortality.

Far from creating a dependency culture, this is an example of "smart aid": the provision of know-how and best practice that will help Sierra Leone help itself. There are similar UK government initiatives to sponsor technology transfer and to boost private sector investment in infrastructure.

Smart aid': Nigerian pupils work on computers at LEA primary school in Abuja. The school is a pilot site for the 'one laptop per child' project, which aims to provide children a means to express their potential. 

All these seem worthy uses of the 70p in every £100 of national income that the government allocates to help countries far less fortunate than our own.

It is certainly strange that the government is making life more difficult for poor people in the UK at the same time it is trying to improve the lot of even poorer people in the rest of the world. The disparity between welfare policy at home and welfare policy abroad has certainly made the attacks of the anti-aid lobby more politically potent.

But it is not coalition policy towards countries facing what Jamie Drummond co-founder of One, calls the three extremes – extreme poverty, extreme climate change and extremist ideology – that is incomprehensible. It is the rest of it.

Article source : http://www.guardian.co.uk

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook