What will your Supply Chain look like after BREXIT?

What will your Supply Chain look like after BREXIT?

 

The first quarter GDP figure for the UK stood at 0.3% growth. This compares to 0.7% growth in the last quarter of 2016. The Bank of England had expected the figure to be 0.6% so the fall is significant. In France growth also stood at 0.3% while Spain stood at 0.8% both above forecast, whereas the US came in below forecast at 0.7%. It is likely that there are stormy waters ahead according to most economic forecasts. Disruption is a reality for modern business in the normal course of operating. However, the UK has added to its own uncertainties and increased risk following the BREXIT vote in June 2016. Here I outline some of the factors that will add to uncertainty in the months ahead and identify some likely supply chain winners and losers.

Higher inflation is expected at 3% or above by the end of 2017 (Bank of England forecast 2% for 2017), the volatility of UK currency and the decline in consumer purchasing will all have an impact on the British Economy in the months ahead. The period of instability is likely to last for the medium term as the trade terms of BREXIT are negotiated between the current EU members, the rest of the world and the United Kingdom. Nevertheless, some sectors are doing better than others so the picture is not necessarily negative. In manufacturing, textiles, machinery, transport, wood and pulp as well as electronics and other manufacturing the UK is doing relatively well. Food and drink shows a very small decline while other categories including rubber and plastics, electrical equipment and metals show larger falls. The biggest fall is in pharmaceuticals approaching -8%. The key for longer term prosperity will be how the mix and balance of exports and imports change the make-up of UK GDP. Sectors selling more than 30% of their output in export markets have seen a 2.6% increase in growth in the first quarter of 2017. These sectors include transport and machinery. This is not all due to a weakening pound since BREXIT. It is also due to an increase in world-wide market activity in the first quarter of 2017.

Between January 2017 and February 2017, export prices decreased by 0.5% and import prices decreased by 0.9%, with the value of sterling increasing by 0.8% in February 2017 compared with the January 2017 average. However, it remains 10.4% lower when compared with February 2016. (Source: ONS data).

In 2015, the UK recorded the largest current account deficit among the G7 economies at 5.4% of GDP. UK exports grew faster than world exports in 2015, for the first time since 2006. Within this the UK has seen increased trade activity in goods with non-EU countries, with their share exceeding that of EU countries in the last four years. Trade with non-EU countries continues to grow as a proportion of the total. The recent fall in the pound has seen some export categories increase trade while import costs have risen. There has been a slight rally in the pound against the dollar and the Euro since the announcement of a General Election on 8th June 2017. Most commentators opine this is due to the removal of some uncertainty regarding BREXIT. Although, the initial meeting between Prime Minister May and EU Commission President Jean-Claude Juncker at Downing Street did not go smoothly according to reports. It is unlikely to be plain sailing. It will be interesting to see what happens if there is a hung Parliament with no overall majority for any single party. Most people think this unlikely but who knows, opinion polls do not have a good track record when it comes to predicting the British electorate and choices they make. Opinion polls for BREXIT were not a good indicator for what actually happened. More indecision by any Government would increase uncertainty and risk for the British economy.

Table 1 shows the monthly change in volumes by category for imports and exports for both EU and Non EU countries. It shows that most export categories moved upwards apart from semi-manufactures and food to the EU. Consumer goods other than cars as well as chemicals were major exports to the rest of the worlds. Basic material imports with the EU fell while they increased by  23.4% with the rest of the world. It is possible that firms are already increasing forward purchasing to offset currency volatility but the data set is too limited to be sure. Other consumer goods from the rest of the world fell by 11.1%. Car imports rose by 14.4% from the rest of the world and by 2.2% with the EU.

Table 1: Shows Monthly change1 in goods commodity volume, February 2017
EU countries Exports % change Imports % change Non-EU countries Exports % change Imports % change
Food, beverages and tobacco 0.9 0.0 Food, beverages and tobacco 0.9 0.9
Basic materials 1.2 -3.2 Basic materials -7.3 23.4
Semi-manufactured goods; of which -0.9 0.0 Semi-manufactured goods; of which 0.0 -2.0
   Chemicals -4.3 -3.3    Chemicals 5.0 -9.8
Finished manufactured goods; of which 1.6 4.7 Finished manufactured goods; of which 1.0 -2.8
   Cars 2.9 2.4    Cars -7.4 14.4
   Consumer goods other than cars -1.6 4.0    Consumer goods other than cars 12.0 -11.1
   Intermediate goods -0.9 5.5    Intermediate goods 5.8 0.0
   Capital goods 1.7 0.0    Capital goods 1.0 -0.9
Source: Office for National Statistics
Notes:
1. Monthly change is February 2017 compared with January 2017.

There will likely be a turbulent few years as trade terms across categories and countries change as result of the complexity of negotiations. Supply chains will need to readjust to new trade patterns, sourcing trends and shifting economics. This is no time for complacency. If you want to stay ahead of the curve your supply chain will need to be agile.

April is the cruellest month – what about May and June?

Westminster

“April is the cruellest month” said T.S.Eliot. For me it is. As we have a cold snap I engage in that very British concern of talking about the weather with anyone who will listen. In a broader sense all of us are concerned with climate and particularly the impact that human activity has upon our environment. This week as British politicians prepare for a general election ripped untimely from the womb of Westminster, ignoring the procedure established to prevent such a caesarean breach, we witness the devious political trickery of delaying bad news that might contaminate or infect the chances of winning. It is sanitation, redaction, or plain old whitewash removing any damaging ideas to accommodate the vanity of political self-interest. The diesel car scrappage scheme raised its ugly head like Leviathan rising from the sea to create impending disaster for the party of power. It is best now to deviate, to consider the distant problems of rogue states and take the public gaze there. Meanwhile Alchemists gather in party HQs to forge base ideas on the philosopher’s stone in preparation for publication. Key phrases will be needed to text and tweet! “Brexit means …”, what does it mean? New terms imported from former colonies create colour attacking opposition leaders such as ‘Mugwump’ although I would prefer to see ‘Boris and the Wagmump’ as an addition to children’s literature.

We have now reached that time when general elections induce a news freeze for fear of damage to prospective candidates including seasoned veterans like May (note also the month after April and the one before June). Rather like an episode of BBC Radio 4’s “Just a Minute” there must be no hesitation, deviation or repetition. But this is not “Just a Minute”, it is – Wait a minute, repetition is allowed because that provides opportunity for the Prime Minister and Government Ministers to repeat endlessly what we might not have already grasped – “Brexit means Brexit”. Although no one appears to know what this means, least of all those seated around the cauldron of power, or do they know more than they wish to disclose? Is the economy about to implode? Is this why the incumbent ruling party have pulled the election card early? Well, we may not know the answer to that last question for a year or two. However, what you can be sure to observe in the next few weeks, if you can stay awake long enough to listen carefully, to the endless political debates, is devious manoeuvring. There will certainly be silence at times, mostly after difficult questions get asked. The genesis of new but soon to be broken promises will arrive on a daily basis. Political polls will inevitably be wrong as no one really understands just how accurate they are. Statistical forecasting error appears to be a concept too far for most of the political commentators. Indeed fine margins make forecasts look silly mainly because forecasts are simply that, a forecast. It is not an actual result. So even if accurate, they will be wrong. Political candidates and parties would do well to remember this notion of standard error when weighing up their odds. So too, would political commentators after all they are supposed to be providing the public with informed opinion.

Personally, I look forward to summer. Warmer weather, election ended, long-term happiness beckons, in the knowledge that politicians will look after all my future needs, only a forecast, now that they themselves feel secure in their own jobs for another five, or should that be four, or three, or even two years?

After the 2010 general election, the Cameron coalition government enacted the Fixed-term Parliaments Act 2011 which set fixed term parliaments every five years. The last general election was held on 7 May 2015, and the next due on the first Thursday in May 2020.” Of course we now have one on 8th June 2017 as 2/3rds of Members of Parliament voted to support the call by Prime Minister May on 18th April 2017 (no April fool!).

The Business of UK Fashion – Reshoring?

6145793785_9228d0ab8b_z
Westfield photo under CC license http://www.boymeetsfashion.com 

 

rpi-clothing-footwear-jan-1987100
Retail Price Index: Clothing & Footwear: Source: ONS Data

 

One reason why it may look more attractive to bring back some on shore manufacturing is the recent increase in the retail price index for clothing and footwear. Back in January 2010 after more than ten years of flat and falling retail prices the RPI was equivalent to 82 per cent of that in 1987.Five years on in May 1992 the RPI stood at 97% of what it was in 1987. Effectively meaning average prices were moving towards but had not reached what they were five years earlier. In December 2016 average retail prices stood at 1.52 times what they were in 1987.

In the late 1980’s as average retail prices fell, retail clothing and footwear buyers began to search for ways to lower their costs to remain competitive and in order to compete in a market where prices were falling. These price falls caused by changing economic circumstances, coincided with shifts in consumer tastes and fierce retail competition led them to source and produce much more of their offering offshore. The percentage of goods imported rose steadily. In the UK this initially meant moving to lower cost supplies in Portugal and North Africa. As the RPI continued to fall the search intensified for global suppliers located in lower labour cost countries able to manufacture and ship goods at cost prices that would enable retailers to maintain or improve their profit margin despite the fall in average retail prices. The graph shows a turning point in January 2010 where the RPI has steadily increased from 87.2 to 152.8 in December 2016. There has been a slight downturn in January 2017 but there is a continuing upward trend. Put this alongside the 17-20% fall in sterling exchange rates against the dollar since July 2016 making the price of imported goods and services higher it means there is scope for re-evaluating sourcing and manufacturing commitments for some clothing and footwear lines.

The economic benefits of the shifting cost base make it more attractive to develop and retain some skilled manufacturing in the UK close to market demand. This gives retailers more flexibility in terms of response times to catch fashion trends. It also creates jobs, reduces imports and benefits the balance of payments deficit in clothing and footwear.This does not mean on-shoring will replace off-shoring which has grown rapidly since the 1980s, but it does mean there is scope to change the balance of sourcing costs now that variables in the equation are shifting.

© 2017 Tony Hines

If you want to cite this article please acknowledge the author and the work as follows:
Hines,T (2017), The Business of UK Fashion, tonyhinesblog.wordpress.com

 

 

Doing the right thing for a sustainable future – 2020 vision is the new supply chain imperitive

sustainability

Poster courtesy Penn State 

Doing the Right Thing, Doing Things Right: Sustainability and Supply Chains

Effective organization requires a focus on doing the right thing. Supply chains are at the center of global trade. Efficiency has been a key focus to improve profitability across the supply chain. This requires organizations to do things right with a focus on lowering supply chain cost. This is of paramount concern to ensure that operations are as efficient as they can be. However, it is only one side of the coin. There is a corollary to this which is that organizations have to do the right things to manage their supply chain effectively. As I say in my Supply Chain Strategies book “Organizations need policies, procedures, and systems to deliver effectively. These three factors need to be sufficiently flexible to respond to the customer if they are to be effective.”[1] It is incumbent that organizations have 20:20 vision and not myopic vision when it comes to both doing things right and doing the right thing.

Those managing end to end global supply chains have an enormous responsibility to preserve and sustain natural resources for future generations. The scientific evidence informing global warming due to human intervention is convincing.

scm-book-cover“The concept of sustainable development has been debated since publication of the Brundtland Report (1987) and the Rio Declaration (1992) following on from the Earth Summit in the same city in 1989. The Brundtland Report noted that ‘critical global environmental problems were primarily the result of the enormous poverty of the South and the non- sustainable patterns of consumption and production in the North’ thus, making the distinction between the developed and developing world. It called for a strategy that united development and the environment, which is now described by the common term sustainable development (World Commission on Environment and Development, 1987).” Hines (2014:323)

Policy Measures

The Rio Declaration (1992) and the Kyoto Protocol (1998) called for action on production patterns that showed increasing toxic waste emphasising the need for renewable energy sources, recognising a growing shortage of water and calling for more sustainable public transport systems.

The largest emissions of greenhouse gasses (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) and two gases arising from these, hydrofuorocarbons and perfluorocarbons, come from emissions in the industrialised countries of the USA, EU, Russia, China, Japan and India.

The Stern Report (2007) noted that irreversible damage was being caused to the natural world and the ecosystem. It was estimated that there were 30,000 major dams preventing flooding of fertile land to sustain food production for an ever growing global population; in 1750 there were none of any consequence.  As indicated in my book:

 “Water usage has increased from around 1,000 km 3 per year in 1900 to nearly six times that quantity by 2000; fertilizer consumption has increased from a zero base to 300 million tonnes in the same time- period. There are now over 700 million motor vehicles where there were virtually none at the start of the twentieth century and CO 2 emissions have risen by 22 per cent between 1980 and 2000. Furthermore, since 2000 they have tripled over the average from 1990–99.” Hines (2014).

While governments can do much by setting a policy agenda the practice is part of everyone’s responsibility to do as much as we can by doing the right things. We do so in small ways in our domestic lives by recycling waste materials. However, if we manage organizations and especially large organizations we are able to do much more.

Practice

Interventions at every stage of the supply chain can contribute to a better world, one that is sustainable in the sense it is defined in this paper. Establishing and maintaining governance throughout each of the supply chains managed is the starting point. This ensures that partners in the network have a responsibility to be compliant in order to maintain their place in the organization supply chain. This has a dual function to educate and to raise supply chain standards that will achieve a sustainable future. The critical role of first tier suppliers has been identified as an agent of change to achieve this.[2] This may be limited by the resource availability of the lead organization, their abilities and commitment to the ‘triple bottom line’, the power they have to exert on the lower level suppliers and their alignment of the procurement and purchasing activities with sustainability.   Some have argued that it needs to go further than compliance to commitment. [3]

Sourcing strategies need to balance the twin aim of being efficient by lowering cost to ensure profitability but not at the expense of sacrificing sustainable futures if it requires doing the wrong thing. In our changing world customers and consumers are becoming more aware of the need to manage end to end supply chains effectively to be clean, green and sustainable.

Recent research has identified a supply chain position paradox [4]which effectively means that those organizations further down the supply chain that is those closer to the consumer are more likely to invest in supply chain sustainability. One important reason for this is that these organizations are more visible to consumers and are more likely to receive a backlash from them.

Sourcing and procurement strategies have a central role to play in establishing criteria for sustainability. These strategies are closely linked to ethical trading arrangements. If supplies are to be procured from countries where their governments are less concerned with environmental standards and working conditions it cannot be right for global firms to exploit this situation in pursuit of profit alone.  There is a moral obligation to do the right thing. A point made over 250 years ago by Adam Smith. [5]

  1. Hines, T., Supply Chain Strategies: Demand Driven and Customer Focused2014, New York: Routledge.
  2. Wilhelm, M.M., et al., Sustainability in multi-tier supply chains: Understanding the double agency role of the first tier supplier. Journal of Operations Management, 2016. 41: p. 42-60.
  3. Foerstl, K., et al., Drivers of supplier sustainability: Moving beyond compliance to commitment. Journal of Supply Chain Management, 2015. 51(1): p. 67-92.
  4. Schmidt, C., G., K. Foerstl, and B. Schaltenbrand, The supply chain position paradox: green practices and firm performance. Journal of Supply Chain Management, 2017. 53(1): p. 3-25.
  5. Smith, A., The theory of moral sentiments2007 [1759], New York: Cosimo.

 

That was the year that was!

That was the year that was!

The  year end is always a time for reflection.

During the past year I read my usual mix of popular books, serious books, research articles, review pieces, digital articles that captured my imagination, some poetry, novels, practical guides,magazine articles professional and otherwise. So a pretty full digest of reading activity.  I do not read narrowly as you can see.  Reading is perhaps the most rewarding activity in many respects. Epicurus might have said reading is essential to a better life.

So what made my life better for reading it? Here I pick out just a few that have. I do so in no particular order other than that they occur to me.

Healthcare Expenditure – some facts

Reading Society Now an annual magazine published by the ESRC I learned some important healthcare statistics that affect all our lives. Between 1997 and 2009 spending on healthcare per person more than doubled rising at a rate of 7.5 per cent a year on average according to the Office for National Statistics (ONS). Since then it has flattened out rising less than 1.3 per cent. In 1997 spending was under £1,000 per person by 2007 it reached £2,000 per person. It has stuck near to this level since as a consequence of the financial crisis. If you need a cataract operation now the average waiting time is above 93 days in 2013 it was just 69 days. Waiting times for operations are generally rising. Visits to Accident and Emergency are also more likely to be in excess of the four hour limit. One paradox is that the UK spent 8.1 per cent of GDP on healthcare in 2013 more than all other G7 countries. Might it be more than simply spending? Have the recent healthcare reorganizations made things better or worse? Is healthcare well managed?

In addition to reading about the many complex challenges facing healthcare it is reported in the press and backed up by personal experience that it is difficult to get GP appointments. Treatments have become somewhat of a post code lottery for some illnesses. There are significant differences across a disunited kingdom. So what can be done? Endless re-organization and increasing bureaucracy is probably not the answer. There are well qualified caring people working in healthcare. Privatizing services is probably a retrograde step and would lead to a more divisive society based on wealth. A progressive tax system can certainly fund the service but are we prepared to pay? A civilized society should take pride in the health service offered. Should someone’s misfortune be a shareholder benefit in a market system for health care? Adam Smith is often held up to justify free market choice. However, here I refer to his earlier work of moral philosophy where he states in the opening chapter “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.” I certainly do not have all the answers but reading this material made me think about the many issues needing attention beyond the inadequate rhetoric of many politicians. There is a time to do the right thing no matter how difficult.

Lost in France

During the year I was reminded of a relatively local story about  a Welsh International Goalkeeper who like many sportsmen at the time in 1914 went off to do their duty in the First World War. Leigh Roose is described as: playboy, scholar, soldier, maverick and a star footballer. This book written by Spencer Vignes is a must read not just for every person interested in football but for anyone interested in human experience. Leigh lived in Holt near Wrexham in North Wales and he was by all accounts quite an extraordinary character. It is not simply the compelling story of someone who changed the lives of most of the people who he came into contact with but it is a story of interest for the way the writer set about the task of researching his life. Dick Jenkins was the 96 year old nephew of Leigh who the author tracked down living in Shrewsbury at the time in 2000 and spent a number of years teasing the story out piecing the evidence together from multiple sources for our enjoyment and what a treat it is. Leigh also changed the part the goalkeeper played in Association Football. Every episode in Leigh’s journey from Wrexham to the Western Front is carefully presented to tell an extraordinary story of one special person renowned for his special skills as a goalkeeper and human being. I don’t want to spoil your enjoyment. I commend you to read it you will not be disappointed.

lost-in-france

Ever wondered what Moll Flanders and the Bank of England have in common?

The idea of ‘projectors’ those who engage in projects was something that stimulated my curiosity. I heard Valerie Hamilton speaking on BBC Radio 4 about the topic and followed up by tracking down her book with Martin Parker “Daniel Defoe and the Bank of England: The Dark Arts of Projectors”. This is an interesting book for many reasons.The book is written by two academics in different disciplines. One coming from an English Literature background (Valerie) and the other from Organization Studies (Martin). The book tells the story of how these two worlds overlap. Intertwined with the development of the Novel as a piece of fictional writing and the world of projectors, one of whom established the Bank of England as a project. Defoe wrote an essay on risky projects in 1697 just three years after the Bank of England was formed in 1694. Projectors were essentially entrepreneurs engaged in risky adventures and one such project was the formation of the Bank of England. It was established with the purpose of promoting the ‘public good and benefit of our people’. it did so by managing interest rates to control inflation along with managing the supply of money. These two policy instruments remain in place today. In his time Defoe was an erstwhile agent, writer and projector himself. His most famous novels are Robinson Crusoe and  Moll Flanders perhaps the first best selling novel and rollicking good read. Defoe also wrote many non fiction works including an essay on how to plan the English economy beating Adam Smith by some fifty years. The book provides and interesting detailed account of the thin line between fiction and what we regard as fact. The Bank of England was as much a work of fiction for a political end as indeed was Moll Flanders or Robinson Crusoe based on the real life of Alexander Selkirk in the latter case. I particularly liked the quote from William Wordsworth that reinforces such false distinction of categories. It is perhaps something that people would do well to heed in the modern age where alternative views of the world are shouted down by the vested interests of those in power.

“In weakness we create distinctions, then
Believe that all our puny boundaries are things
Which we percieve and not which we have made”

William Wordsworth, c.1799, cited by Hamilton and Parker 2016

Ever wondered if most of what you learned about economics is wrong?

Bad Samaritans by Ha Joon Chang was a present which I took a quick look at and began reading. I was unable to stop until I finished the whole book. I had read Chang’s later book “23 Things they Don’t Tell You about Capitalism” which is an excellent book debunking the myths of capitalism and free market economics last year. Bad Samaratins was an earlier work and probably gave Chang the confidence and intellectual frameworks from which to write the latter. Most interesting about this earlier book is the how the author’s biography and experience is woven into the episodes reported in the text. Chang was born and brought up in the Republic of Korea. He grew up near Seoul a few years after a bloody civil war had divided the nation. Two of today’s super powers and their allies were also involved in the Korean War (1950-53). Soviet troops held the peninsula north of the 38th parallel and the US held the south. In 1948 the South declared a Republic and in 1950 the North invaded. Approaching three million people died in the war. What happens after this is largely the subject matter of this book. However, it is not simply about Korea, it is a story of Globalization and failed economic policies that won’t go away. It is revealing in relation to how and why we have a world order as it is today. It explains why poor nations remain poor and why rich nations get richer. Within the narrative we witness how the lives of ordinary people are touched by economic fallacies and the mantras of the political elites. Another thing interesting about this book is in relation to what I know from studying economics and globalization over many years that many a received wisdom have a dubious basis in fact. A point that resonates strongly with the earlier read about the establishment of the Bank of England and Projectors. Defoe figures in this latter book too. This time in the guise of Robinson Crusoe oft used as the basis for many an economic lecture on trade and comparative advantage.

Chang relates his own schooldays to the economic well-being of South Korea. Starting school in 1970 he notes that there were 65 pupils in his class. They had few school books and those they were able to access were often imported, illegal copies. As he progressed through school class sizes went down and literacy rates increased. He remarks that standing in a museum with his friend and mentor George Stiglitz they were looking at pictures of a very poor South Korea after the second world-war, one that he had experienced growing up. A group of young school girls standing behind him could not believe it was Korea and remarked it looked more like Vietnam. In the hi-tech world of modern Seoul with Samsung and other leading corporations in swanky headquarters it is easy to see why.

The duplicitous world of economic policy often purports to be doing good when in fact it is doing the complete opposite is the substance of Chang’s thesis. A thesis that is well-argued with strong evidence to support the claims. Chang, recognizes that policy makers themselves are often misled by the orthodoxy of the dismal discipline as Carlyle called it. Dismal not because there is no substance as some believe but rather dismal because the consequences of economic policy often have bad outcomes.

Britain’s wish to re-balance the tea trade deficit with China ended badly in the Opium Wars. Similarly, the actions of Britain to ensure that trade policies in the colonies did not interfere with the home country’s income stream from foreign trade by denying access to higher value earnings from production beyond raw materials was yet a further example of being the bad Samaritan. The neoliberal goals of growth and increasing globalization driven by institutions such as the IMF and the World Bank established by the wealthier nations to modernise the developing economies have according to Chang simply kicked the ladder to prosperity away from them. Keynesian policies applied to stimulate developed economies in a downturn have been applied only to the wealthy countries elsewhere strict monetary controls imposed made them worse off since the 1950s. Austerity has of course seen the spread of monetary policies to the wealthy too in recent times.

One may conclude that economic policy and indeed economics itself is but one construction of the social world we inhabit. As Keynes suggested “Practical men, who believe they are quite exempt from any intellectual influence, are usually the slaves of some defunct economist” (Keynes,1936:383).

Empire of Cotton – A New History of Global Capitalism

This book by Sven Beckert is yet another stimulating read I discovered which tells the ways in which Cotton has contributed to economic wealth and power. Often at the expense of poverty for many working in the lower value added range producing cotton. Again there is a connection to Chang’s claim that the British Empire was keen to ensure that cotton was simply grown as a commodity in the Empire (India and the American Colony) they certainly did not want these nations to enter the conversion process of turning cotton from raw material into finished goods. These higher value added activities required technical skills and machinery innovation that they wanted to keep tight hold on. The production, distribution and consumption of cotton is a story of so called industrialization but it is also much more. It is a story of political intrigue and double dealing, of enterprise, of skill, and of innovation. Wars have been fought over cotton. It has also delivered great wealth to those who were able to harness and shape the political forces of the industry to their personal advantage and it has caused poverty and misery for others.”Domination and exploitation” alongside “liberation and creativity” is the way the author put it.

Cotton is still an important industry. It consumes vast amount of water in production. As a natural fibre it has often been preferred to ‘man-made fibres’ arguing that it is sustainable as a renewable natural resource. This is overlooking the damaging aspects within the growth and production of cotton textiles including water usage for growth and colouring processes later in the supply chain.

cotton-plant

John Wilkinson – King of the Ironmasters

Frank Dawson’s book gives a wonderful account of the contribution Wilkinson and Iron made to the first industrial revolution. I have read a number of books on the subject over the years and have always been intrigued at the motivation, determination, creativity, innovation and marketing skills of this greatest of all iron masters. From his roots in Cumbria to his trade apprenticeship in Liverpool to the setting up of his iron Works at Bersham, Brymbo, Willey nr Brosely, Bradley and Coalbrookdale. The book is a fascinating history of the man, his family, a nascent iron industry and the places touched by his endeavours.

It tells the story of remarkable achievement and of the relationship between John Wilkinson, Mathew Boulton and James Watt who drove much of the innovation. Bersham was purchased by James Watt to establish his new iron works. It was at Bersham that he developed the cannon that helped Nelson win the Napoleanic Sea battles. The secret being to bore the cannon rather than rivet two parts which is what the French did. Often these cannons blew apart when the rivets did not withstand the blast. This alone could sink a ship. Wilkinson later purchased Brymbo Hall a much larger site. There was a steel works on this site until 1991 when it was demolished and much of the equipment and useful bits were taken by a Chinese Steel Company numbering the pieces and rebuilding the site in China.

In his heyday Wilkinson even minted his own coins as shown in the photograph. These became know as ‘Druids’ and ‘Willy’s’. They were produced for about ten years (1787-1797) to satisfy the demand for small coins not satisfied by the state. They were used to pay workers and could be exchanged in the locations where the works were.

john-wilkinson-coin

John Wilkinson had a family feud with his younger brother William that would eventually destroy the successful business he had built. These arguments incurred heavy legal bills. So acrimonious was the fall out that William tried to destroy John’s relationship with Boulton and Watt by suggesting that the steam engines they had built were being pirated by his brother. However, this claim hurt William and his wife who was the daughter of Boulton and Watt’s agent as it transpired that it was he that had entered into arrangements to copy the engines.

When John Wilkinson died he was transported from near Bristol where he died to Castle Head in Cumbria by Horse and Cart with the iron coffin he had prepared for burial in advance of death. His carriers nearly lost the coffin to the sea near Castle Head when the tide came in rapidly and dislodged the coffin into the water. Luckily the men returned the next day to find the coffin revealed after the outgoing tide and were able to recover it for burial. On the sale of Castle Head after his death the body was reburied at Lindale Church near Cartmel.

Brymbo Hall was eventually sold to pay debts. The steel works at the site continued and the Hall itself survived until the 1980s when it too was demolished after falling into considerable disrepair. There is much more in the book. For anyone wishing to find out more about the work of Wilkinson and the foundations and development of the iron and steel industry this book is a gem.

20161018_141640

UK Inflation rises rapidly as the Consumer Price Index published today shows. CPI moved upward to 1% year on year from the August year on year figure of 0.6%. There are two main reasons underlying the upward trend. First, clothing prices have increased significantly after a period of flat-lining or decline. Second, transport costs are moving up owing to a decline in the GB pound against the US dollar impacting oil prices. Transport is the more worrying trend as this feeds into all consumer goods. Suppliers and retailers will want to pass on these costs to maintain their own profit margins.

Inflationary pressure

These inflationary pressures are likely to remain as the UK economy enters 2017. There is likely to be a call for increases in wage rates particularly by those in sectors where wages have been stagnant since the financial crash in 2008. Christmas may be more expensive for consumers this year. It might be time to reach for those personal flotation devices like the money you keep under the mattress to get those presents this year.

outerwear
Photograph by Joe Parks

Women’s outerwear contributed price rises of 6.0% between August and September 2016, compared with a rise of just 3.3% a year ago. This is much higher than usual and it is not known how much is directly attributable to Brexit and the depreciation of sterling. What is clearer is that the depreciation in sterling is likely to increase the cost of importing goods. It is also now more expensive than a year ago to outsource production which may have a positive effect on UK manufacturing.

Figure 1 Year on Year Change in Consumer price Index by Category

figure-1-contributions-to-the-cpi-12-month-rate-september-2015-and-september-2016

Source: CSO

Conclusions

It will be interesting to observe the interplay between inflation and exchange rates in the coming months. This will determine the impact on industry cost structures in the year ahead. The balancing act of how these changes impact on the economy as a whole will become clearer. Claims that the lower exchange rate will help exports have to be balanced against claims that input costs rise as imported goods become more expensive. A critical marker will be the impact on consumer spending. If consumer confidence declines then so too will economic growth fueled by that spending. Higher inflation will influence delayed expenditure on higher priced goods and less disposable income for discretionary goods such as restaurants, hotels, recreation and culture as well as some clothing categories.