Bank of England HQ

The rate of inflation in the UK as measured by the Consumer Price Index rose more than half a percentage point in July to 4.4%. This is more than double the target for CPI which is 2%

The Retail Price Index rose from 4.6% to 5% over the same period.

Merv King, chairman of the Bank of England will presumably be writing another letter to Prime Minister Gordon Brown explaining why they can’t fix the governments fiscal problems for them.

The obvious question now is whether the Bank of England have the guts to raise interest rates and save the currency at the possible expense of [some] of the economy.

Britain’s famous Land Rover assembly lines will not be operating tomorrow or next Thursday as workers at the Solihull plant have been told to prepare for a ‘four-day week’.

The move by Land Rover management is believed to be as a result of diminished sales due to the UK credit crunch affecting both private and corporate car buyers.

The Solihull work force has been told to report as normal but will likely stand idle as the lines are shut down to save on power and material costs. This may also serve to prevent a large stockpile of vehicles forming which would be presumably expensive to store.

Land Rover was recently bought from Ford by Indian company Tata who have stated an intent to keep Land Rover manufacturing in the UK. However, the costs of the UK operation will undoubtly be playing on the minds of the board at Tata who will know they could call on far cheaper labour and facilities at their other plants across the globe.

My guess at Land Rover’s best course of action would be to press ahead swiftly with the development of the new ‘Baby Land Rover’, making it the lightest design possible and trying to squeak-out the highest possible fuel economy. A low price point would be beneficial too but there are many constraints on this, not least the soaring cost of raw materials.

uSwitch.com, a price comparison company has conducted a “Quality of Life Index” survey of 10 Western European countries which found the UK and Ireland to have the worst quality of life.

Spain and France came out on top with long life expentancies and generally lower costs.

The uSwitch survey notes that although the British have the highest net income after tax, they also have to pay some of the highest prices in Europe for fuel and power. Coupled with low expenditure on Education, fewer holidays and a late retirement age, Britain appears to be a pretty awful place to be living as a European.

I have to admit the uSwitch survey does have a rather biased feel for example the wording of:

Emigration: 41,026 Brits fled UK in 2006, the highest number in Europe, with total
emigration increasing by 30% in the UK since 2001.

(emphasis mine)

However, I can’t for the life of me work out the rationale for the bias. Perhaps uSwitch really do want to be ‘consumer champions’ or perhaps they have an ulterior motive.

Also noted is that the CPI figure stated in the survey report was out of date by the time the report embargo lifted (report states 3.3%, actual is 3.8%)

Download uSwitch report [PDF]

I read on Bloomberg earlier that the rate of increase in unemployment in the UK last month increased at it’s fastest rate since 1992 when Britain was in the depths of it’s last major recession.

That’s not to say that the total number unemployed is as bad (yet). The number current stands at 1.68 million unemployed (but obviously increasing fast) representing 5.2% of the potential workforce.

The latest job casualties appear to be with construction and developers who had previously been working to fill the UK property asset bubble with high density housing which is now proving almost unsalable. While some may indulge in scadenfreud over this, it’s worth remembering that there are large numbers hard working labourers being put out of work who may be difficult, if not impossible to retask.

The ONS reports that the CPI figure for UK inflation has jumped from 3.3% to 3.8% between May and June this year.

The is despite a slowing economy with much of the inflation being caused by the cost of hydrocarbon fuels and food. The Bank of England who’s remit it is to control inflation by setting the base interest rate seem to now be taking the position that there is ‘nothing they can do’.

Of course, if the BoE were actually doing what they profess to do and looking ‘two years ahead’ two years ago, they would have set interest rates to prevent the economy becoming overheated and we may be in less of a mess now. Unfortunately, the BoE’s own forecasts have been off-low in the past and this doesn’t fill one with a great deal of confidence.

I’d suggest that seeing as we have to buy fuels in other currencies, the correct way to reduce the cost of purchasing fuel would be to increase the BoE baserate which would have the effect of bolstering sterling. An increase in interest rates would likely have little effect on borrowing in the UK as the banks have long since detached themselves from the unrealistic baserate for private lending.

I’m still of the opinion that the long-term outside maximum projection for UK CPI inflation by the Bank of England could well be lower than the coming reality.

Like many people, I like to go out for ‘one or two’ beers at the weekend. Only this is Britain, 2008, so ‘one or two’ beers quickly becomes ‘a few more’ beers and quite often turns into ’so many beers you can’t remember how many’ by the end of the night.

…how did I get home again?

Yes, Britain definitely seems to have a drinking problem, we do it too often, too much and often inappropriately. I’m thankful that I seem to retain the self restraint that keeps me away from the vomiting and violence seen on the old-media news but I’m still none too proud of being part of a such a stigmatised culture.

But I digress, what I really meant to say is that I’ve come to have the opinion that drinking (as the British drink) seriously impacts on productivity. Just using my blog writing as a non empirical metric, I can see that I become almost incable of getting a decent article off no just the following day but possibly for several days after ‘binge drinking’*.

I’m pretty much a wimp now when it comes to dealing with the morning-after hangovers so I do tend to stop drinking long before my friends and associates who seem to drink like there will be no tomorrow, consuming herculean ammounts, mixing their drinks and generally doing all the things your mother told you not to. With my own follow-on alcohol come-down / general malaise post binge, I can’t fathom how some of my own friends can complete a days work the following day. I’d cringe at the thought of my employees turning up to work in such a mental state, imagining all the business disasters that could befall a company staffed by people who are not firing on all cylinders.

So how would I stop this culture? Well, step one would be to avoid the methods the government employs as they clearly don’t work. The extra taxation only serves to make the population resentful. You could tax the British more and more and they’d probably just spend a larger proportion of their income on booze. You also can’t get anywhere stigmatising the general culture as the people seem to have lost their self-esteem. Britain hardly appears ‘Great’ these days on the world stage, everything that made the nation proud seems to have been taken from us.

I think the solution is, in fact, lying with the self esteem issue. Britain needs to be doing something worthwhile. The ’sevice economy’ is clearly a bad idea, in fact it appears to be going down the pan as we speak. We need some serious industry; major stuff. Right now, for example, there is a manufacturer in Germany about to start producing cars that will travel 150 miles on a gallon of fuel. We should be making a car that will go 200 miles on a gallon and cornering the world market!

I’d hope that seeing such results from British ingenuity and labor would get the British into an upward spiral of drinking less and doing more. In effect, just giving the British something really worthwile to live for. I can but dream.

*In the UK, ‘Binge Drinking’ is generally defined as drinking half of the weekly recommended allowance in one sitting ie: 11+ units for men or 9+ units for women on one occasion