The Uk In Post Recession Europe - 2

           

         

A Closer Look at the United Kingdom in Post Recession Europe - 2          

               

   

 

 

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  A CLOSER LOOK AT THE UK IN POST RECESSION EUROPE

Following on from ‘The UK in Post Recession Europe’ it seems worth the while to take a slightly closer look at the UK within the concept of Europe, be it at the supposed tail end of a recession and the possibilities in post recession. Although most of the comments are UK related, they may reflect European issues, such as employment and manufacturing. Labour: What is striking about the UK labour market is that it is dependent on a declining manufacturing basis and for all of the schemes about putting the UK back to work, from any political party or other organisation, there are four points that stand out that should be answered by these political parties and organisations. 1. Although some recovery in the manufacturing sector can be expected, there is simply not enough space within a recovering manufacturing sector to be able to supply the number of work places required and this is likely to be the case for many years. And, what is it that we can make that can compete with the Asian and oriental markets? 2. Experience from developing countries, where unemployment rates are fairly high, those without work have simply learned to get by without officially paid labour and no longer see the need to compete for work and this seems to be gathering favour within the UK and UK citizens have the advantage that they can receive state support, whilst out of work. 3. The UK manufacturing sector is not competitive within Europe and the UK needs new industries and yet, the UK government, being deeply in debt, cannot afford to invest in new technology, assuming we know what that would be and the increasing competition from Asia and the Orient adds to the problems of restructuring the UK’s manufacturing sector. 4. If the formal employment sector cannot supply the needs for the number of unemployed, this raises the point that the informal employment sector (or black economy) will increase and that as this occurs, the government (of whatever colour) will lose greater amounts of revenue from employment taxes and insurances and thus, will have even less to invest in order to support a re-growth in official employment opportunity. How many involved within the informal employment sector would also might be claiming financial support from government whilst officially ‘unemployed’ is a worrying factor. It is a noted experience that with rising unemployment, that alongside a growth in unemployment there is a growth in small scale illegal activities. Gambling increases, petty theft increases, illegal substance abuse increases and alcohol abuse increases. It is also probable that petty violence increases and all of these have worrying social consequences. It has been noted in developing countries that impoverished families tend to have more children and this stems from the traditional need for large families in order that the whole may survive because of the number of potential earners in a family. Will this also happen in the UK, even given that the increase in immigrants does inevitably cause a rise in the birth rate; will UK citizens also add to this? An interesting point is that an increase in prostitution has often been noted in developing countries amongst the unemployed and impoverished. Therefore, society becomes more risk taking in order to make one large gain, as is probably supported by the great increase of high street and internet gambling. Economics: With a general election due in 2010, it must be interesting to raise the point that does any political party really want to win the next election, given that whoever is in charge, the economy is broke and will take many years (even a decade or two) to recover and this in the face of strong competition from the rest of Europe, Asia and the Orient? With the large push to invest in electrically driven vehicles must come the reality that these are very expensive to purchase and although cheap to run; in a time where the UK’s capacity to generate electricity is already under stress, where is all of this power to be generated and at what cost? India, China and now Russia already have the ability to produce cheap electric cars and the UK simply cannot compete with these and that the alternative of public transport is not an option because there is not enough of it and it is

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expensive to use. At best, most ‘green’ cars are dependent on fossil fuels or a mixture of fossil fuels and other fuel types and manage only 60 to 70 miles when run on electricity only and where will the hundreds of thousands of electric cars envisaged be charged? A look along many streets will show most parking spaces are occupied and do we envisage running extension cords from house to cars to charge overnight and what fun the near-do-wells will have with this? Is it not better to envisage a standard battery that can be exchanged at a normal petrol station, your flat battery for one fully charged? However, the battery is the most pressing problem, as these are bulky items, expensive and although research and development is underway to produce a cheap and easily charged battery, the technology depends very much on lithium becoming readily available and the world’s sources of these are hard to extract and already subject to strong competition from China, India, Russia and America and it is likely that should lithium based batteries become available, they will be manufactured by just one or two countries; as is expected in Bolivia, who have stated that they will produce and process their own lithium batteries. There is also the point that it is in the interest of the oil extraction, processing and distribution companies to maintain a dependence on fossil fuel oils and as many economies are dependent on oil production and consumption. Do we envisage electrically powered aeroplanes flying around the world; I think not? Thus, there must be continued research and development in other and cheaper forms of power generation for the purposes of transportation. It is in the interest of the oil producing, processing and distribution companies to maintain a dependence on fossil oils.

Consequently, it is simply not possible to envisage a situation whereby the majority of vehicles will be powered by alternative means and it may be one hundred years before these problems are solved and thus we stay within the realm of science fiction for our transport. In the meantime, it seems that nuclear power is the most viable short term option for producing the electricity that we all depend on. Given that pundits are forecasting power failures becoming more prevalent from 2015 and the prediction that investment in nuclear power if started now, would not be available until 2020 or beyond and that governments do not have the financial capacity to invest at this time it seems obvious that electrical powered transport is not a runner, as even domestic supplies are at risk. There are many who assume that once the global recovery from recession shows signs of stability, the UK will again regain its position within both the global and European economies and yet, there are very few that can give substance to this assumption. From ‘The UK in Post Recession Europe’

The High Street: As we see, there are fewer of the small independent stores in the high streets and we also see many stores closed down and this recession has added many more, leaving (mostly) the well known large stores and the high streets are beginning to look the same, wherever we go. As more small stores join Woollies, the streets start to take on an abandoned look, although a few spaces are refilled with yet more charity and betting shops and surprisingly, estate agents. All of these closures direct more trade to the supermarkets that compete for our trade by offering lower costs on some items, also in competition with the cut price supermarkets that have sprung up all over the country adding to the benefits of the general consumer. Add in the benefits of the cut price commodity stores where many items are below £1, it all seems as if the general consumer has control of the competitive market and yet, it confirms the general trend of dependency on chain stores taking over our lives. Governments everywhere have handed over the responsibility of food availability to the supermarket conglomerates and have failed to note the steep decline in local food security. From: ‘The UK in Post Recession Europe’

As much as the government has handed over responsibility of food supplies to the conglomerate supermarkets, it is probable that the private sector is more capable than government in managing food supplies, but the dominant chain store private sector has squeezed out the ‘local’ food production and retailing capability. As we see more and more, the farmers markets are becoming increasing popular; showing that shoppers enjoy a selection of local produce available and also appreciate the freshness and it

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is only the recession that has restricted the potential for growth in these markets. Perhaps the owners of empty high street stores might consider leasing these out at low rents to bring the farmers into the heart of the urban areas once again. Of great sadness must be the decline in opportunities for the young entrepreneurs to be able to experience a fair chance of advancement through business and yet, the owners insist on rentals based on the last housing boom and councils, the high rates of business taxes that deter the entrepreneurs. Because of the high rentals, high local taxes and loss of financial support through the banking system, the streets of the UK are slowly dying and are unlikely to recover to a position where commercial competition is at the heart of this economy. And now, to add to the dominance, the supermarket chains are opening more and more local ‘convenience’ stores; further eradicating the competition from the small retailers. The Urban and Sub-urban Side Streets: Taking a look down many streets shows just how depressing it is for those that wish to own property and how the real effect of depression not only knocks back the confidence of many would be home owners, but also alarmingly shows that even in a post recession recovery, the hopes of owning property will still be denied to many, as lack of finances and some despondency in the employment market further erodes the once apparent confidence. For all of the many opportunities for those that have some cash available to purchase property at low prices, many of the properties available are already empty, having been repossessed and there is, in the probability that in the light of a depressed labour market, that more properties will become empty and many of these are the small family homes. A further look around many of the urban areas shows also the number of properties ‘to let’ and how, even this sector of the housing market, is reaching saturation. As usual, in any business enterprise market gaps are seen and then over-subscribed and although the ‘buy to let’ market is said to be a risky business for those seeking to invest some savings in property, the wholesale branch of this market has taken advantage of the low prices of small family residences and have created large portfolios for themselves. This, in the belief that as and when the housing market recovers, the properties being let on short leases at this time will then be sold.

The UK’s love affair with house ownership may be in decline with rental becoming more  popular, leaving couples with more disposable income and more mobile.  If the labour market is to be depressed, say for five years, it also becomes apparent that the house ownership market will remain depressed and that low cost rentable housing will continue and any recovery in the house ownership market will probably lag behind the recovery in the labour market by two years. This, on its own, may depress other markets, such as furnishings and white goods; continuing the ripple effect on a manufacturing economy trying to recover. However, due to many lessons possibly learned from the recession, the rising number of young couples seeking to start up on their own, may remain in the rental market and this may also set a growing trend whereby couple no longer seek to purchase property, at least until approaching their mid 30s to 40s, leaving them with sustainable budgets, disposable income and also gaining mobility, to take advantage of employment opportunities outside of their home area. These couple will maintain a reasonable lifestyle and yet may become the catalyst for a sustainable manufacturing base. Because they will have no expectation in the early years of being a couple of owning property and being tied to mortgages, their lifestyle will enable purchases of vehicles, white goods, entertainment goods etc. This will be a direct effect of a recession and will be a reason why a recession takes longer to recover, but may also be a reason why the economy may stabilise, sustain a local manufacturing economy and boost sales high street retail outlets. The rapid growth of estate agents moving into the rental market supports the theory that they also believe that the property rental market will increase and this in the view of the facts that there is a housing shortage and that the house building industry has slowed dramatically. Houses for sale will still be a major part of the property market, although it is very unlikely that property prices will again reach high values until the recession is over, manufacturing output reduces the unemployment level below 5% and government borrowing is down and this is unlikely to be after 2015 at the earliest or 2017.

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Immigration - Migration: Using the same map as background (Europe Migration 2007), it could be argued that as the economy and employment opportunities decline in the UK, that the UK will note less immigrants from Europe and that it may be that the opportunities in the eastern European countries improve, many of those that immigrated to the UK in the recent past, may now take the opportunity to ‘return home’ given that these economies may improve at a faster rate than the UK and that more social services may be available in these countries. Many from eastern Europe have stated that they will return to their home countries when the time comes to educate their children and this makes a point about the perceived level of education in the UK. It may be that some of those that leave the UK will be replaced by migrants from commonwealth countries and as the map below shows, the general trend in global migration is towards European countries and the UK seems to be the central target for migrants from many countries. The availability of social services and employment opportunity may well be deciding factors for governments allowing the number of migrants that seek access to countries within the European Union and it may be that the UK is at the bottom of the list in being able to supply these resources, although the UK is still the major target for many migrants. The government, of whatever colour, will have no choice but to provide the social services required to educate, provide health cover for and the services and finances required for unemployment and this in the face of increases in an aging population, requiring state pensions. However, a UK government may well cut the number of immigrants allowed to these shores.

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Opinion: The UK’s manufacturing base is not going to fully recover and government and the populace will have to come to terms with this. Competition will force down the cost of labour but not sufficiently enough to compete with Asia and eastern Europe. Unemployment will remain above the usual level and government will have to look for other means by which to raise the revenue that it needs. Government will have to put in regulations that control the movement of derivatives to better ensure that the derivative markets no longer control the money markets. Banks will be forced to put in place measures to reduce easy access to credit and will also, along with the mortgage companies have to implement higher standards for property loans. The populace will slowly realise that mobility will be an important factor in employment opportunity and individual house ownership will decline. Government will opt for an increase in ‘pay as you go’ taxes and may look towards 20% for added value taxes, although exempting some items that will ease some of the burden on the less well off. Government may be tempted (prior to an election) to join the Euro if the Pound Sterling maintains parity with the Euro. Without major reductions in expenditure and increases in taxes (especially VAT), no government will be able to see much reduction in the national debt and without improving the social structure, no government will get the support of the majority of the populace and this is an important factor. This leaves room for the minority parties to weaken civil; society through their aggressive attitudes. Although the next government will know to keep sufficient support for health, education and essential social services, this government will have to make very tough decisions regarding support for the armed services, infrastructure and environmental projects; as the needs for cuts will be high, although these industries are major employers. Additionally, the next few years must see some physical response to climate change and this adds to the burden of the next government, as some decisions can no longer be delayed and with so much reliance on fossil fuel taxes the next government will have to be brave to take these on. That the UK may be heading for a further breakdown in society and this is a worrying factor, with: 1. Strong competition from the rest of Europe, Asia and the Orient for consumers, keeping the manufacturing base weakened. 2. Increases in unemployment over the next twelve to eighteen months. 3. Low employment rates that may remain for three to five years. 4. Further declines in the civil culture that further isolates the disadvantaged. 5. Continued difficulties raising venture capital. The next government may have to make adjustments to overseas projects in developing countries in order to restrict spending. The majority of the population is becoming blasé about politics and with the several bad examples of politicians behaviour, this is not surprising adding in the assumed ‘political’ mess that the populace now sees. The populace may see a ‘strawberries and cream’ politics meant to keep the majority happy whilst political parties lose their identities and seemingly morph into one main party, with only the so called far right or far left wing parties taking headlines and this becomes attractive for those who want something (or anything) different. It is hoped that debate will abound and that the UK governments of whatever belief will not only be seen to paper over the apparent cracks, but also address the needs of a population that should know more than it does. It is also hoped that academia will participate in more applied sciences and reduce their involvement in ‘think tanks’ where debate becomes inconclusive. However, it is accepted that the UK society does not seem to want to know more and are content to keep their heads in the sand; global warming may drown a few of these.

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A Passing Comment on Social Unease: One of the greatest changes that has crept slowly into the UK society is the physical and perceived signs of dramatic change in culture, whereby violence and intimidation are becoming part of the background. The youth are always angry and so they should be, in some way, and yet, the physical appearance of this anger is intimidating and although some of it may just be ‘fashion’, behind it is a deep anger as often also portrayed in the music. No one should interfere with the youths’ experimentations with culture and this is their right, as it has been for generations. However, the ease at which alcohol and drugs are available is a worrying factor and the ease of access to entertainment on the internet must be a contributing factor to some of the ills within the youth culture. The volatility of the youth in day-to-day interactions within the general society is of concern, from the very young showing deep aggression in schools through to increases in the unpredictability of people on the streets and roads. Where is this going? On other issues; Have you walked through the streets of the UK lately and experienced some fear at the number of people walking around drinking from cans of beer, bottles of cider or bottles of wine. Many who seem to be dependent on alcohol? Have you also noticed the number of people that are heavily tattooed and with body piercings? and Have you noticed the number of those with ‘decorated’ bodies that are involved in public drinking?

There are many that have noticed the above and are intimidated by what they see and yet few are able to see a way out of this situation without society becoming a police state. ASBOs seem to have become a badge of honour amongst some and the legal system seems to be powerless to be able to counteract the rise in what we see daily on our streets. Have you also seen the number of adults that are too frightened to ride their bicycles on the roads and have to use the pavements? And what about those adults that speed along on skateboards? And, now we see people speeding along on skateboards with cans of beer in their hands and although we must applaud their sense of balance to be able to quaff beer as they speed along on their boards, it takes a safe area away from pedestrians. In this time of recession, adding in the decline of work opportunity for the youth is it of little wonder that the youth are seeking the extremes of lifestyle, to distant themselves from ‘normal’, whatever that may be. What on earth has happened? It cannot necessarily be all the fault of the youth and although they are easy to blame; is it not the older generations and governments that have set the scene for this to have happened? A society where alcohol is so cheap and easily available and gives a buzz, cannot be a sane society and yet, the authorities seem to ignore the macro problem and is there a potential for a civil rights case against a government for allowing this to happen; where many people are intimidated by the scenes around them and this intimidation, in turn, creating fear. Where governments have taken such a role in the daily lives of its population, creating safety rules, insisting in being involved within the household, with the myriad of social guidelines and such extremes within the ranks of schoolchildren, where the computer and television have replaced parenting, it seems that all of the social ideas have gone badly wrong and add in the behaviour of some politicians, it is of little wonder that there is a lot of disillusionment amongst the populace. Within and following on from a recession, these daily scenes can only become more commonplace and a further deterioration in civil society will not assist in any recovery and should the unions add to the general civil unrest, who knows what may remain as a standard afterwards. The civil authority charged with maintaining the UK’s laws are grossly undermanned and within the present relaxed legal system, have little chance to make a worthwhile contribution to improving the social status of the population. It is hoped that the UK’s security system does not degenerate into the same position as many in Asia and Africa, whereby private security has replaced many of the civil security support systems. With many immigrants in the UK putting pressure on employment opportunities and social services, there is an increasing risk that civil security problems will rise, given the backlash against ethnic groups and religious tenets. Politically and socially, an increase in civil unrest against ethnic and religious groups is of

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most concern, as inevitably, the whole population will become involved and in times of economic pressure this is dangerous.

twofer

– October 2009 

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