Inflationary
expectations 1: rising with the oil price; analysing the latest Bank
of England/NOP inflation attitudes survey Jeremy Warner says that both people’s
perception of the current rate of inflation and their future perception is
at the highest since the survey began. Whilst these perceptions are 2.8 and
2.7 per cent respectively the trend has been unrelentingly upward in recent
quarters and will act as a warning to the Bank that monetary policy may still
be too loose. They certainly dash any hopes of another interest rate cut for
the foreseeable future. It is not just ever-rising fuel bills feeding people’s
inflationary expectations. House prices have yet to respond properly to the
Bank of England’s monetary medicine. And in any case the demand for
skilled labour in the City has made house prices in London and the South East
less sensitive to domestic interest rates and rising energy prices. The latest
attitudes survey is the strongest warning yet of second round inflation effects
with rising utility bill, train fares, and for that matter, getting your car
or boiler fixed. The only reason why the overall inflation rate looks as tame
as it does is because of the price deflation in goods being exported out of
a fast-industrialising Asia. The prospects on wages are more complicated.
Rising unemployment and the reining in of the public sector will be brakes
on demand for higher wages. Yet the shortage of skilled workers means that
those employees most in demand simply demand more pay, and generally they
get it too. Independent 19.04.06
Inflationary
expectations 2: dropping with the milk price; a few days after the
Bank of England survey on inflation the Office for National Statistics published
the consumer price index for the year to March which shows a price drop of
0.2 per cent inflation- the lowest figure for more than a year. The surprise
drop is largely attributed to food and beverages where prices have fallen
0.4 per cent in 12 months. A price war led by Asda has seen the average price
of a pint of milk fall by 2p compared with a year ago. Transport prices also
fell which is attributed to Easter falling in April this year compared to
March last year. These items more than offset the sharp rises in electricity
and gas prices. John Butler of HSBC said, “Inflation is back below target
despite the Bank of England’s warning to the contrary. Competitive pressures
and weaker consumer demand seem to be keeping a lid on inflation. Overall,
this number, although backward looking, is a blow to the interest rate hawks”.
However, Michael Taylor of Lombard Street Research warns that double-digit
increases in electricity and gas prices is due to be implemented between March
and May and this could lift inflation back to its target rate or slightly
above by summer. Financial Times 21.04.06
Will
unemployment keep on rising? Larry Elliott, economics editor of the
Guardian, examines why unemployment has risen for 13 of the last 14 months
and why the size of the increases is getting bigger. He says that there has
not yet been any need for officials to start coming up with sneaky ways for
getting people off the unemployment register as happened in the 1980s - although
it is worth noting that there are about 2.5m people classified as long-term
sick or disabled which is three times the level of the 1970s. He says that
the Government is comforting itself that unemployment tends to be a lagging
indicator and the current figures reflect the sluggish growth of 2005 and
that both the Bank of England and the Treasury are confident that things will
pick up in 2006. However he quotes John Butler, UK economist at HSBC, who
queries the Bank’s optimism, that recovery will be based on consumer
spending. For a start real disposable incomes are being squeezed by low wage
increases and higher taxes and there is also the prospect that much household
spending will go on non-discretionary items such as petrol and gas. John Butler
also points to the need for more of household spending to go on servicing
personal debt. Retailing, which has accounted for the lion’s share of
new jobs, is now shedding labour. The other engine of economic growth has
been the public sector but here too the boom is over. Vicky Redwood of Capital
Economics (pictured above right) says, “We expect the claimant
count to surpass 1 million this year- perhaps now as early as the summer-and
the ILO unemployment to reach 1.6m at the same time”. Guardian 17.04.06
BNP stirs mainstream politicians; Hamish McRae looks at what he deems “smouldering concerns” that there might be a sizeable anti-immigration vote in the May local elections. He says it is not just an issue for UK politicians. It is global. The world is experiencing huge movements of population both within and between countries - probably the largest in proportionate terms and certainly the largest in absolute terms that the human species has ever undertaken. As well as Europe the US is experiencing one of its periodic waves of immigration but these flows are dwarfed by what is happening in China. The driving force is economic opportunity. The Eastern European immigrants have come to the UK because, in the main, there are better job opportunities here than in Poland or the Baltic. Given the scale of these movements it would be astounding were there not extreme social pressures as a result. Research seems to show that there are unequivocal gains to the host country if the migrants are highly skilled. In the UK there is hardly any hostility to young Europeans or Americans who work in the City. The skilled Polish workers are equally welcome and there maybe as much as a million migrants from the new EU member states who have been absorbed with little friction. There is more debate about the impact of unskilled workers. Even if the effect is small there will be areas where low-skill wages are depressed by immigration. Add in a different language and resentment will increase. The good news is that it ought to be easier to manage the strains of success than the consequences of failure. Barking, an area where the BNP are hoping to make inroads in May, is part of the most successful economic growth area in Europe. McCrae advocates micro-policies that need examination. Why do parts of a successful region like the South East do better than others? What are the reasons for pockets of deprivation? What can clever town planning do to revive town centres? What has gone wrong in Barking? Independent 19.04.06
Migrants
keep down interest rate; the latest report by the Ernst & Young
Item Club says that Eastern European migrants have been responsible for keeping
interest rates half a percentage point lower and for boosting economic growth
by 0.2 per cent. Peter Spencer, the author of the report (pictured right),
claims that since the ten new members joined the EU some 300,000 of their
citizens have come to work in the UK and not only have they helped to check
inflation they have also boosted the tax return by up to £300m a year.
Unlike previous migration waves the current group are young, spread all over
the UK, and many return home after one or two years. Spencer says “As
a direct result, the UK workforce has become younger, more flexible and economical,
easing the pension burden and keeping interest rates lower than many commentators
could have expected”. Observer 23.04.06
Doctors
need help to create social enterprises; a report by the King’s
Fund warns that the private sector will “sweep unchallenged” into
primary care unless the government does more to help doctors and nurses form
not-for-profit social enterprises. As part of the NHS reforms primary care
trusts are being advised to withdraw from providing services such as community
hospitals and district nursing and concentrate on commissioning care. Staff
are to be encouraged to form not-for-profit “social enterprises”,
leaving the employment of the service, and selling their skills back, becoming
in effect independent contractors. However large, profit-making companies,
such as the US-owned United Health, Serco, Care UK and the South African-owned
Netcare, are all interested in entering the primary care market, as is Sir
Richard Branson’s Virgin Group. Dr Richard Lewis, a senior policy fellow
at the King’s Fund, says that the new social enterprises will take time
to set up, meaning doctors and nurses could be left behind. He calls on the
government to do more to support them. Financial Times 20.04.06
Fruit
& veg stalls aim to help children with maths and enterprise;
the Training and Development Agency (formerly the Teacher Training Agency)
is running a pilot scheme whereby pupils in primary schools set up fruit and
vegetable stalls in school playgrounds. They are intended to help children
with their mental maths skills and are seen as a way of boosting entrepreneurial
knowledge, as well as giving them an insight into healthy eating. Children
Now (via Times 18.04.06) 12.04.06
Government
backs down on regulation bill; following a row about the constitutional
implications the government has backed down on sweeping ministerial powers
proposed in the Legislative and Regulatory Reform Bill. Critics had pointed
out that the bill would have allowed virtually any bill to be introduced,
amended or axed without full parliamentary scrutiny. The aim of the bill is
to cut down the bureaucracy burden on business – it follows the failure
of two previous such bills in 1994 and 2001 the second of which Jim Murphy,
the cabinet office minister described as ‘by general agreement not fit
for purpose’. He said that the act had been difficult to use because
of the complex safeguards in it with the result that there had only been 27
orders to cut regulation. He said that the government’s “better
regulation agenda” had been subject to “absolutely hysterical
and ludicrous allegations” such as claims that the legislation would
allow the government to scrap the Welsh Assembly or trial by jury. However
instead of deliberately seeking a wide power in clause one of the new bill
it was now proposed to “focus that power on regulatory outcomes such
as productivity and competitiveness and reducing bureaucracy rather than replacing
legislation”. Financial Times 13.04.06
Government considered blocking foreign bid for Centrica; despite its strong criticism of what are seen as protectionist moves by France and other countries it has emerged that the British Government seriously considered changing the merger laws to stop companies such as British Gas falling into foreign hands. Documents obtained under the Freedom of Information Act show that eight separate meetings were held to discuss the issue. The alarm was caused by comments made by the Russian energy giant Gazprom that it wanted to buy a local energy supplier such as Centrica. The issue was made more sensitive by Gazprom’s part in cutting off gas supplies to Ukraine just before Christmas- an action seen as political rather than commercial. Gazprom has gone on record that it wants to provide one fifth of UK gas imports by 2015. Guardian 18.04.06
After the closure of the Ryton car plant; the Economist looks at the reasons for Peugeot’s announcement that it is closing its Ryton factory in Coventry. It says that one of the reasons is age, in that Ryton started life making aircraft engines in the Second World War and would have needed $255m to modernise it. Japanese rivals in Britain, meanwhile, are building brand-new factories built to house the latest production techniques. This is one of the reasons, why Peugeot apart, British car manufacturing is flourishing with exports of 1.2m cars last year. The problem comes at the next stage. Many experts believe that BMW’s car plant at Leipzig, which opened last year, will be the last big car-assembly plant to be built in western Europe. Significant new capacity will probably only be added in low-cost economies in eastern Europe or in developing countries like China and Brazil. The bigger question is whether the existing plants in western Europe, including Britain, will be able to compete for the new investment needed to introduce new models. Economist 22.04.06
Creative
sector accounts for 8 per cent of GDP; a report produced by the National
Endowment for Science, Technology and the Arts (Nesta) says that the creative
industries- which include music, fashion, advertising and television - are
now amongst the most powerful in the UK. Only the declining manufacturing
sector and the booming financial services employ more. Creative industries
are responsible for 8 per cent of GDP- expected to grow to 10 per cent by
the end of the decade. The Nesta study, Creative Growth: how the UK can
develop world-class creative businesses, shows that the creative sector
currently employs 2 million people and is responsible for 4 per cent of exports.
Observer 23.04.06
COMMUNITY AND BUSINESS AFFAIRS
US giants chase new image; the Guardian covers details of Wal-Mart’s drive to acquire a new image, whilst the FT carries news of a campaign by McDonald’s. Wal-Mart has been the subject of a lot of community pressure, mostly over its pay and benefits but also its impact on established retail centres. To counter this it is starting to stock organic food and clothing, it is aiming to halve the energy consumption of its lorries and is testing wind and solar power. Above all it is improving its employee healthcare, it is using local architects to ensure its stores blend in and it also points to what its UK subsidiary Asda is doing in recruiting 60 per cent of the staff at a new Liverpool store from the unemployed. In the UK McDonald’s is moving to counter the image of a McJob as “a low-paying, low-prestige, no-future job in the service sector (Douglas Coupland in Generation X: Tales for an Accelerated Future). It has launched a poster campaign under the slogan “Not bad for a McJob” which according to David Fairhurst, a UK vice president, aims to close what he describes as the “huge gap that exists between the external perception and the internal reality”. More than half of its senior and middle-ranking staff started work as “crew members”, flexible hours are available to care for children, the sick or the elderly, more than 80 per cent of UK staff receive above the minimum hourly wage, after three years’ service staff and their families are offered free private healthcare and eight week paid sabbaticals are available for every ten years of service. Guardian 20.04.06, Financial Times 20.04.06
The
growing power of the blogger; a report by Jupiter Research says that
bloggers and internet pundits are exerting a “disproportionately large
influence” on society. The study suggests that although “active”
web users make up only a small proportion of Europe’s online population,
they are increasingly dominating public conversations and creating business
trends. More than half of internet users in Europe are passive and do not
contribute to the web at all, while a further 23 per cent only respond when
prompted. The remainder- the activists- are generally younger and more vocal
but they are becoming increasingly important as opinion-formers and trend
setters. However they are on average better off, better educated and, more
importantly, employed. One commentator describes them as ‘influentials’-
the minority that pays attention to events outside of political and news cycles.
Although most bloggers write for small audiences, they can sometimes achieve
wider fame or become the focus of consumer campaigns. Companies like McDonalds,
lock manufacturer Kryptonite and computer firm Dell have all fallen foul of
internet buzz in recent years. Because search engines like Google can enable
grassroots campaigns to become highly visible, industry insiders agree decisions
can be shaped by a small group of activists. Guardian 18.04.06
ODPM
plans merger of regeneration bodies; a fundamental review of the
agencies sponsored by the Office of the Deputy Prime Minister has been launched.
The review, which will be conducted by Richard McCarthy, director-general
of places , planning and communities, will last six to ten weeks. It is intended
that any recommendations will be incorporated into the legislative programme
for next year. However some of the work will be fed into the local government
white paper due to be published in June. One likely merger is between English
Partnerships and the Housing Corporation to create a “new land development,
housing and regeneration vehicle”. Currently English Partnerships has
a remit to deliver regeneration, with a particular focus on new housing, while
the Housing Corporation regulates and funds the construction of social housing.
A later edition of Regeneration says that the review will also look at whether
parts of the ODPM itself, such as neighbourhood renewal and housing renewal,
should come under the new super agency. It also reports concern from agencies
outside the South East that the new body will be too orientated towards London
and the South East. Regeneration 14.03.06, 21.04.06
White Paper may force councils to collaborate; Regeneration
says that a senior source in the ODPM has claimed that in order to promote
city-regions ministers are considering using the forthcoming local government
white paper to make councils work together in return for financial incentives.
Although ministers would prefer to use the carrot rather than the stick approach
to city regions, legislation coupled with financial incentives may be used.
Equally they would prefer not to have to fiddle with boundaries although this
has not been ruled out. Regeneration 14.04.06
Northern
cities should get most EU cash; the Institute for Public Policy and
Research (IPPR) is arguing that the UK’s declining pot of European regional
funding should be devoted to the Northern cities of Newcastle, Leeds, Manchester,
Birmingham and Glasgow. The UK’s share is due to go down from £11.5bn
in 2000-2006 to £6.5bn for 2007-2013 as a result of EU enlargement.
Only Cornwall and the Isles of Scilly, West Wales and the Valleys, and Scotland’s
Highlands and Islands qualify for Objective 1 status from 2007. Merseyside
and South Yorkshire, which both lose their Objective 1 status, will receive
ring-fenced funding of £310m and £275m respectively. Greater Manchester,
Strathclyde, Tyne and Wear and the West Midlands each have dedicated funding
programmes of at least £350m and the IPPR argues that the remaining
£3.7bn should be targeted on those cities, as well as Leeds. Adam Marshall,
co-author of the report, argues that dividing the money will not have a massive
economic impact whereas concentrating it is likely to produce clear, tangible
economic benefit. Financial Times 24.04.06
Gambling
will ‘boost UK productivity’; a paper presented to the
Annual Conference of the Royal Economic Society claims that the advent of
new gambling laws together with casinos, will boost overall economic productivity.
The paper, which has been prepared by the Betting Research Unit at Nottingham
Trent University, argues that “We find consistent evidence that productivity
increased following major reforms to gambling taxation in 2001. Another key
result is that internet operations appear to be associated with higher relative
efficiency”. Professor Leighton Vaughan-Williams, director of the unit
(pictured right), told the BBC “our research suggests that
recent policies designed to deregulate the gambling industry are likely to
realise significant gains for the wider economy in terms of economic productivity”.
Gambling is one of the fastest-growing service industries, fuelled by the
rise in gambling outside traditional betting shops- over the telephone or
the Internet, including betting exchanges and interactive TV. The report argues
that the new super-casino would bring in £300m in investment and will
create 3,000 jobs. Since the announcement of the closure of the Peugeot car
factory in Coventry there has been intensive lobbying for Coventry to win
the super-casino licence. Independent 15.04.06
Crime
worst in poor areas-IPPR report; people living in the UK’s
most disadvantaged communities are most likely to be victims of crime or report
being worried about crime according to a new report from the Institute for
Public Policy Research (IPPR). Crime Share: The Unequal Impact of Crime
says that people living in the most deprived neighbourhoods are 2.5 times
more likely to be mugged and 2.5 times likely to be burgled than people living
in the least deprived neighbourhoods. Regeneration 21.04.06
Women
bear the brunt as Labour market deteriorates; unemployment rose by
31,000 in the quarter ending in February according to the Office for National
Statistics (ONS) with women accounting for the entire rise. Female unemployment
now totals 659,000 whilst male unemployment was unchanged at 900,000. The
numbers claiming unemployment benefit also rose by 12,600 to 937,000 - the
highest figure since July 2003. The jobless rate is now 5.1 per cent - the
highest level since autumn 2002. One factor is that a growing number of women
are joining the labour market but vacancies in some of the sectors that are
traditionally major employers of women, such as the retail, hotels and restaurants
sectors, fell by 13.9 per cent in the past year. However the number of people
with a job has risen by 76,000 to 28.84m in the quarter. Economists are also
attributing the rise in the working population to increased numbers of migrant
workers and a drop in the numbers of the economically inactive. Financial
Times 13.04.06
Older workers take most new jobs; more than half the new
jobs created in the past year have been filled by people above the state pension
age according to the Office for National Statistics. The rise is being seen
as reflecting the pressures created by pension shortfalls as well as increasing
willingness by employers to take on older staff. The employment rate for pensionable
workers has risen from between 7.5 and 8 per cent for most of the 1990s to
10.4 per cent during the three months to the end of January. The total number
of people of pensionable age in employment in February was 1.13m- a rise of
85,000 on the corresponding period 12 months ago. Financial Times 13.04.06.
Peugeot revives debate about the French social model; the
planned closure of Peugeot’s Ryton car plant in Coventry with the loss
of 2,300 jobs has revived the debate about the merits of Britain’s flexible
labour market versus the French social model. The UK trade unions have commented
that the closure would have not been so easy in France and that the UK government
has to do more to protect jobs. Mike Crossan of Clifford Chance says that
he would expect the cost to Peugeot of shutting Ryton to be less than £50,000
per worker. Had the company chosen to shut a French plant instead that figure
could have been as high as £140,000. William Dawson of Simmons and Simmons
agreed that the extra time for French closure meant that the process was more
expensive than in Britain. However he said: “The flip side is that for
a company looking to invest in Britain or France, a major factor will be the
cost of pulling out if things go wrong”. Guardian 20.04.06
Keeping
the Methuselah generation happy and productive; writing in the FT
John Philpott of the Chartered Institute of Personnel and Development says
that both the Turner report on Pensions and the Department of Work and Pensions
have floated ideas on helping people to work longer as part of a national
settlement to ensure decent incomes in later life. Their ideas concentrate
on how to raise the employment rate or how to make pension provision more
affordable. However the consequences of having more older people in work go
beyond this and it is important for national prosperity that we make the most
of older workers by maximizing their productivity. Age-earnings profiles suggest
that workers become increasingly productive until around middle age, after
that some decline sets in. In occupations requiring physical strength or dexterity
the reasons are obvious but most occupations in a modern, service-based economy
are not like this. The main reason why UK workers become less productive in
their later years is because employers do less to develop their potential.
Lord Turner states that training is heavily skewed towards younger workers.
Another factor is the decline in job satisfaction amongst older workers. Financial
Times 17.04.06
German builders to seek work in UK; in a complete reversal of the comedy series Auf Wiedersen, Pet, where fictional north-east builders went to Germany to seek work German brickies and chippies are coming to the UK to seek work. The German Master Craftsmen’s Group, representing skilled building workers in North Rhine-Westphalia, has set up a number of websites to advise workers on how to get jobs in Britain. It is also running English language classes and is taking a stand at this month’s Interbuild, the construction industry trade fair, being held in Birmingham. The German construction industry is stagnating now that the World Cup 2006 projects have reached completion. Times 18.04.06
New East European jobseekers ‘expected to top 50,000’;
the Institute for Public Policy Research is forecasting that more than 50,000
Bulgarians and Romanians will seek work in the UK when their countries join
the EU next year. The IPPR says that so far more than 300,000 eastern Europeans
from the countries that joined the EU in 2004 have acquired jobs in the UK,
more than half of them Poles. Only Britain, Ireland and Sweden have so far
allowed free access from the East European member states. Although Bulgaria
and Romania are poorer than the countries that joined last time it expects
the bulk of their migrants to go to Spain and Greece. It says that the UK
Government should offer free labour market access because the inflows will
be small and it will benefit the UK economy. Less than 1 per cent of existing
Eastern European workers had applied for income-related benefits and eight
in ten had found work, often taking jobs that were hard to fill. Financial
Times 25.04.06
Closure
of Chemistry departments could hit investment; a study by the Institute
for Fiscal Studies says that the closure of university chemistry departments
is likely to blunt the UK’s success in attracting foreign-owned research
laboratories. The Institute says that the clustering of research and development
facilities close to university departments is particularly strong in the pharmaceuticals
and chemistry sectors. It attributes this clustering to university “spin-outs”
and the decision of foreign-owned companies to locate laboratories close to
high-quality research. The Royal Society of Chemistry said that the research
underlined the recent closure of university chemistry departments, such as
those at Exeter, Queen Mary College, London and King’s College, London.
Plans to close the highly-rated chemistry department at the University of
Sussex are under review. The CBI has warned of “a slow car crash”
in science and engineering education that could create severe skills problems
in 10 years’ time. Financial Times 13.04.06
Two year degrees under discussion; it has emerged that the government is looking at creating intensive two year degrees as part of a “study anytime” revolution for higher education. Long summer holidays would end for undergraduates on “compressed” degrees so that they could complete their studies a year early so that they can get on with their careers with reduced levels of debt. Others will take courses entirely at work and through online study as part of a drive to increase the number of adults with degree qualifications. They will also be given credit towards their degrees for skills learnt on training courses. A common system of US-style credit accumulation will also allow students to take study breaks and complete degrees later- possibly at different institutions. Bill Rammell, the higher education minister (pictured right), said that by 2012 half of new British jobs would require a degree qualification. However whilst the numbers entering university continued to rise it had stalled below the government target of 50 per cent. “We have to be more flexible and innovative” and higher education had to become “less supplier driven” and take more account of the needs of different customers. Times 18.04.06
Academies
are ‘high-risk’ investment; a report on the benefits
of business investment in education says that city academies are a “high-risk”
investment. New Philanthropy Capital, a think-tank that advise wealthy donors
on how best to invest their moneys, warns that the government’s flagship
schools “can and do perform badly”. There are 27 schools open
and ministers are planning for 200 by 2010. The report says that potential
backers should consider appending their money on charities that work with
children with special needs or those that tackle bullying. The report comes
at a sensitive time for the academies with the investigation into honours
and the attacks made at the teacher’s union conferences over Easter.
The government points to figures that show results for all specialist schools
improving three times faster than the national average. Nonetheless the Economist
believes that to save the policy the government will turn away from wealthy
individuals and reach out more to organizations such as churches, universities
and higher-education colleges instead. As they do, future academies might
be rolled quietly into trust schools. “Perhaps New Labour will learn
that sponsors, like school buildings, are safest when solid”. Economist
22.04.06, Guardian 25.04.06
Drive to build links with overseas universities; a new drive
to build links with overseas universities has been launched with £27m
funding from the government and the British Council as well as a number of
major firms including BP, BAE, GlaxoSmithKline and Shell who have each contributed
£1m. It is the second wave of the Prime Minister’s programme and
aims to bring another 100,000 students to the UK and to build partnerships
between universities here and abroad. The first programme covering 1999-2005
exceeded its targets by bringing in an extra 106,000 overseas students who,
unlike EU students, are unregulated and have become a crucial source of income
for universities in the UK. It is estimated that foreign students are worth
£5bn a year to the economy. However there is now increased competition
from countries such as Australia, New Zealand and the Netherlands. The private
sector sponsors, together with Tata Group of India, are also supporting a
£7.5m programme for academic and student exchanges and research collaboration
between British and Indian universities.Financial Times 19.04.06
MPs
opt for gas rather than nuclear option; the long-awaited report by
the House of Commons Environmental Audit Committee claims that there is not
enough time to wait for a new generation of nuclear power stations. Instead
the committee proposes that, with the possibility of electricity blackouts
within a decade, there should be urgent investment in energy efficiency and
more wind and gas stations. It calls for significant growth in renewables
as well as political leadership. The 16-member committee, which has a majority
of Labour MPs, says that by 2016 25 per cent of Britain’s electricity
generating capacity will have to be replaced. Even if a new generation of
nuclear reactors were agreed tomorrow, this would be too late to fill the
power gap. In any case it proposes that any decision to go nuclear should
not be rushed. “There are also serious concerns relating to safety,
the threat of terrorism, and the proliferation of nuclear power across the
world. Moreover…it is not clear whether investors will wish to commit
themselves to 70 years of nuclear generation”. It is also worried that
opting for nuclear power could stymie the advance of renewable technologies
such as solar and tidal. It is believed that they could supply 20 per cent
of the UK’s needs by 2020 but that the government did not appear to
be developing them. Guardian 17.04.06
CBI
warn that planning is holding up gas tanks; Sir Digby Jones, the
director-general of the CBI (pictured right), has warned that the
cumbersome planning system is blocking the building of vital new gas storage
facilities. He has claimed that 80 per cent of the UK’s new gas storage
is mired in the planning process and that, in any case, this would only produce
storage capacity equal to 9 per cent of total demand- half that of Germany,
France and Italy. Due to the North Sea supply being past its peak the UK is
now a net importer of gas but pipelines to Norway and Holland, along with
terminals to land liquefied natural gas, are not due for completion until
the end of this year and next respectively. The CBI backs a new generation
of nuclear reactors but not at the expense of investment in renewable energy.
Observer 23.04.06
Delays beset wind farms; the IoS says that more than half of the first phase of the UK’s wind farms will be built two years late, at the earliest. Developers are also warning that the second phase of much larger projects is unlikely to go ahead without government support. The first phase of 13 offshore wind farms, when completed, is supposed to generate 1,500MW of electricity, enough for a city one-and-a-half times the size of Birmingham. Three have been completed, one is under construction but two - the Scarweather Sands and the Solway Firth projects - have been put on hold because the developer E.ON thinks they are no longer viable. Of the remaining seven projects, Centrica say that their Lincolnshire scheme will not be completed before 2008, npower have the same date for their scheme off North Wales and Shell Flat off Lancashire will not be completed until 2009. Onshore wind farms are facing delays of up to ten years to be connected to the National Grid. On the plus side the FT says that companies are increasingly generating their own power in the face of soaring energy prices. GlaxoSmithKline, Nissan, Pirelli, Ford and BT are among companies with wind turbines at some sites. Independent on Sunday 16.04.06, Financial Times 18.04.06
MPs
attack freeze on air passenger tax; the House of Commons Treasury
Select Committee has attacked the chancellor’s failure to raise air
passenger duty in this year’s budget. The Labour-dominated committee
in its report on last month’s budget urges the government “to
re-examine whether it is making the fullest possible use of taxation instruments
as a mechanism to achieve [its] environmental targets”. It is the fifth
successive year that the Chancellor has frozen air passenger duty. Financial
Times 25.04.06
London
to cement its reputation as ‘cosmopolitan capital of commerce’;
a report on the future of financial markets produced by IBM’s Institute
for Business Value and the Economist Intelligence Unit predicts that the over
the next decade the City of London will cement its reputation as the “cosmopolitan
capital of commerce”. It will become an even greater magnet for talent
both from the US and eastern Europe even though back office work will continue
to move to eastern Europe as the funds saved will be reinvested in the UK.
The report states: “Firms won’t abandon London. Instead, they
will capitalise on the skills and the historic investment by using it as a
centre for high-value areas of operation- the engine that will propel it in
the future”. Ironically, given the debate about whether the London Stock
Exchange will be taken over or go into partnership with one of the two New
York exchanges, the report says that one of the driving forces for London
will be a US “invasion” as the restrictive regulation of the Sarbanes-Oxley
rules drive companies and executives to London. It quotes one unnamed chief
strategist: “America is taking over London. Generally speaking, the
London economy will benefit because there will be increased competition”.
On financial markets the report predicts that retail and institutional investors
will force out the middleman and take a greater share of the profits as technology
robs traders and analysts of their special role. Daily Telegraph 17.04.06
London hospital in deal with US group; University College London Hospital, one of the biggest foundation trusts in the National Health Service, has agreed a joint venture with Hospital Corporation of America (HCA) to create an international cancer centre. UCLH, which is the most overspent foundation trust in the NHS, says that the deal will provide additional income, which will be invested in NHS services. HCA will take over private patient operations on the 15th floor of the new UCLH tower in Euston Road to provide a specialist blood and bone cancer centre aimed at international and UK patients. HCA will lease the space, pay for services and split the profits with UCLH. The hospital trust is due to spell out to Monitor, the regulator of foundation hospitals, how it intends to cope with an overspend that in February stood at £32m. It has been told that it must produce plans that at least break even in 2007-8 or risk intervention. UCLH say that the overspend is largely due to the costs of the recent move and are “non-recurrent”. Financial Times 13.04.06
Woody
returns; Woody Allen has abandoned his plans to make his third European
film in Paris this summer and will return to London for a third time. The
producers realised that the budget needed for Paris was too high and despite
the fact that the film had originally meant to be based on young Americans
in the French capital it will be re-written for a London setting with Michelle
Williams in her first role since being nominated for an Oscar for Brokeback
Mountain. The first of Woody Allen’s London films was Match Point
(starring Scarlett Johansson pictured with Woody Allen), which used a
lot of London landmarks. The second, Scoop, has yet to be released.
Times 19.04.06
IOC visits London to check progress; a 17-strong inspection team from the International Olympic Committee (IOC) visited London last week to check on progress. They visited the site for the Games, the newly labelled O² Dome, which is to host the basketball, Stratford International station as well as taking the Channel Tunnel rail link between Stratford and King’s Cross. The Independent listed the problems being faced by the London organisers. It put the venues top with a public inquiry due to start soon on the proposed compulsory purchase orders placed on 200 businesses on the site, the problems over the aquatic centre as well as the continuing rows over the Stratford City development, which is to provide the Olympic Village. Other issues include the budget, where construction costs as well as the price of the land is going up, competition between various Olympic bodies for private sector sponsorship, questions about political interference as the staff goes up from 100 to 3,000 (although the cross-party support is holding firm). It emerged during the IOC tour that the Mayor had briefed them that 70 per cent of the land needed for the Olympic site was now in the organiser’s hands and that figure would be 80 per cent by the time the inquiry began. Independent 20.04.06, Financial Times 21.04.06
LDA to take out £300m loan to meet rising cost of 2012; the London Development Agency is to take out a £300m loan to help meet the rising costs of buying and preparing the site for the 2012 Games. The Agency is in the throes of obtaining the necessary permission from the Office of the Deputy Prime Minister, the Department of Trade and Industry and the Greater London Authority with a view to arranging the finance in the autumn. The LDA is charged with buying and preparing the land for the 670ha Olympic Park in east London, which it will hand over to the Olympic Delivery Authority, who will control the construction. Regeneration 14.04.06
Government needs to fund restoration of ‘cathedral of sewage’; a forecast that London could face the humiliation of staging the 2012 Games next to waterways that look and smell more like a shanty town’s open sewer than the promised 21st-century eco-park is made by an article in the Times. It says that the main cause is the Government’s failure to modernise Abbey Mills Pumping Station- the so-called “Cathedral of Sewage”- which stands less than a mile from the Olympic site. Abbey Mills produces half of the city’s total sewage overflow and the European Commission has already issued a warning that the Government is endangering public health by letting untreated sewage pour into the Thames. After a six-year inquiry into the state of the Thames the Government is expected to decide in the next few months on how best to clear it up. But any lasting solution will probably cost billions and will certainly come too late for the 2012 Games. Times 17.04.06
Olympic scheme for the unemployed; according to Regeneration,
the Learning and Skills Council plans to launch a package of job training
and employment measures to help prepare jobless Londoners to take advantage
of the opportunities presented by the 2012 Games. Three package will be launched
on July 6th - the first anniversary of the decision to grant the games to
London. Some of the initiatives will be a remodelling of current schemes,
such as Pathways to Work, but there will be new measures to help benefit claimants
into work. The scheme is being funded by £15m from the European Social
Fund and money from the London Development Agency and the London boroughs
affected by the Games. Regeneration 14.04.06
New tower in the offing for EC3? Estates Gazette reports that Investream, a Central London property specialist, is working up plans for a massive City development for an island site between Fenchurch Street and Leadenhall Street. The company has bought a group of sites in Leadenhall Street, Billiter Street and Fenchurch Street from Land Securities to add to its existing holdings. The Corporation of London owns most of the other buildings on the site and Peter Bennett, the Deputy City Surveyor, said that a tower could be feasible as the site is close to tall buildings such as British Land’s 51 Lime Street and Swiss Re’s 30 St Mary Axe. Estates Gazette 15.04.06
Battersea Park station to be revamped; Parkview International, the
developers of Battersea Power Station (interior pictured left), has
awarded a contract to upgrade Battersea Park station. The plans will include
restoring the grade II listed station hall and opening up the arches under
the platforms to create a public arcade with shops and cafes. Regeneration
14.04.06
Affordable homes in Shoreditch; the First Base scheme in Shoreditch will create almost 150 affordable and private homes and 700 sq metres of affordable workspace at Adelaide Wharf. Regeneration 14.04.06
King’s Cross jumps another hurdle; the government Office for London has announced that it will not be calling in Argent’s £2bn redevelopment scheme for King’s Cross. Estates Gazette 15.04.06
Number
of new homes the same as four years ago; London Residential Research
(LRR) says that the number of private sector housing starts in London remains
the same as they were when the London Plan was published four years ago. They
totalled 12,700 in 2004 compared to 13,400 in 2000. This is despite developers
applying to build more than twice the number of homes in the capital and councils
more than doubling residential planning consents since 2000. Indeed the Greater
London Authority is currently debating increasing the London Plan’s
housing target from 23,000 homes a year to 31,000. LRR had identified 12 major
barriers that are preventing developers from building more homes. They include
construction costs, the strength of existing values, planning requirements,
capital gains tax, a tough selling market and a lack of pre-lets in mixed-use
developments. Others include difficulties with Section 106 clauses, construction
cost inflation and funding problems. There is no evidence that landbanking
is a problem. Estates Gazette 15.04.06
Grapevine is produced twice monthly (except August and December when there is one issue) by Brian Wright on behalf of oneLondon.
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