Category Archives: Economy

I Don’t Like Mondays – Recession 2008 PR Industry Remix

I was talking to one of our team the other day about music and the Boomtown Rats classic song from 1979 came up. The scary thing was the person concerned had never heard of it. I played her the song – still no recognition.

And that got me thinking. Here is a song from my childhood, that I love by the way, and here is this 24 year old to whom it means nothing and to be fair why should it? She wasn’t even born until years after it came out. But what else has this child of the Eighties missed out on that it looks like she is about to experience?

Recession.

The last recession effectively ended 16 years ago when she was eight years old. She wasn’t even born when the previous one ended in the early 80’s. But to be fair this doesn’t just apply to a 24 year old. If you were born in the year IDLM was released and are therefore 29 now you would have only been 13 when the last recession ended. You may have some appreciation of that period – maybe your Mum or Dad lost their job or your house was repossessed, but I suspect a very high proportion of people in their 20’s can’t really recall what life was like living and working during an economic downturn.

So what has all this got to do with the PR Industry you ask? Well I don’t have the exact figures but I would hazard a guess that the proportion of staff working in the PR Industry who are 29 or less will be somewhere around the 60-70% mark. If my guess is right then that’s the vast majority of people working in an industry who have never known what it is like to work in a recession.

How will they respond? Positively because they won’t be laden down with feelings of inevitability? Or negatively if they don’t recognise the need to up your game big style during times like these?

Only time will tell, but in the meantime let us console ourselves with a truly great piece of music (even if the story behind it is clearly not a pleasant one). Particularly anyone for whom it is new.

£37bn, but the words aren’t worth the paper they are written on

Today’s announcement of £37bn of investment in British banks was accompanied by words from Gordon Brown at his press conference about rewarding “hard work, effort and enterprise” rather than “irresponsibility and risk taking”.

This is a sentiment I agree with wholeheartedly but one I find very strange coming from the government who only a year ago scrapped Taper Relief, effectively increasing the CGT rate for hard working and enterprising small business owners by 80% from 10% to 18%. Given the number of SME’s in the PR industry this is particularly pertinent to this sector.

At the same time they reduced the rate on speculative asset transactions e.g. share sales and buy-to-let from a maximum rate of 40% to the same new rate of 18%. The overall benefit to the Treasury? A reported “massive” £350m – small beer these days!

The government subsequently made a small gesture to the SME community by introducing entrepreneur relief on the first £1m of gains by owner managers – arguably peanuts in the scheme of things.

So at a time when the country needs, as the PM rightly points out, “hard work, effort and enterprise”, they have created a tax environment that draws no distinction between this and “irresponsibility and risk taking” in asset markets. Unless this decision is reversed in the pre-budget report I find I cannot take these messages seriously.

A £bn here a £bn there…

According to various sources the nitty gritty of the Government’s bank recapitalisation plan is going to be announced tomorrow morning. The coverage reminds me of a quote from The West Wing “A billion here a billion there. Sooner or later it starts to add up to real money.” The important point is what will our £39bn/£50bn get us? By my back of an envelope calculations, based on Friday’s closing share prices and the current rumours, taxpayers are indeed (as per ft.com) about to become the controlling shareholders in HBOS and RBS.

Royal Bank of Scotland

Market capitalisation on Friday £11.9bn.
Rumoured ordinary share investment (according to ft.com) £15bn
Post investment shareholding = 15/(15+11.9) = 56%

HBOS

Market capitalisation on Friday £6.5bn.
Rumoured ordinary share investment (according to ft.com) £9bn
Post investment shareholding = 9/(9+6.5) = 58%

Of course the HBOS situation will then be further confused by the rumoured £5bn investment in Lloyds TSB and the (apparently) still planned merger of the two.

Finally there is the issue of whether given the current investment environment we should even be investingon the basis of Friday’s closing price anyway? Shrewd investors know how to take advantage of weakness. It will be interesting to see what deal Gordon Brown will have negotiated for us as his track record isn’t the best or perhaps he is already in bed.

Lucky number 8?

There was a lot of talk during the Olympics about how the Chinese consider the number 8 to be lucky as the word for “8” sounds very similar to wealth. Well following on from my post on Tuesday about financial media language I couldn’t go home without a quick word on today’s events on the stock market. Shares have surged today with the FTSE-100 closing 8.8% up, it’s single biggest gain in a day and for once, unlike my earlier comments, any hyperbole will get no argument from me. In fact surged seems a little conservative, rocketed wouldn’t be overdoing it.

Will this “double 8″ change prove to be lucky? We can only wait and see, but I suspect we may not find out the answer to that question for quite a while yet. In the meantime we may all need to keep a thesaurus close at hand :)

A grade 3 back and sides and a trim on top

That’s what I ask for when I go to get my haircut – next one is due on Friday as it happens. Lee, who cuts my hair, understands what I mean by a “trim”. I don’t walk out looking like I’ve just been scalped – I have little enough hair as it is :)

With all the excitement yesterday over Lehman Brothers, the announcement that China was reducing interest rates got a little lost in the mix. The announcement was significant though as it represents China’s first cut in interest rates in 6 years. The cut was 0.27% from 7.47% to 7.20%; however two pieces of media coverage described this change in very different ways. The BBC described the change as a “trim“; however The Times view was that China had “slashed” rates. Now I don’t know about you, but if my bank told me that my mortgage interest payment had fallen by 3.6% (0.27%/7.47%) I wouldn’t really consider it had been slashed.

The serious point here is that in my experience the language that is used in reporting economic and financial matters can sometimes suffer from a lack of consistency. Share prices “plummet“ when the fall is a little over 1%, house prices “crash“ when they fall 2%, but oil prices only “fall“ when they reduce by 5%.

The lesson this has taught me though is if I ever need to get a haircut anywhere else I need to check first if the person about to cut my hair ever reads The Times!