To: Enron, sorry Chancellor
From: An Entreprenuer
Subject: Please don’t give me the blues, Brown
You keep telling me and my mates that we are a very successful economy - the 4th biggest in the world - and that Britain has reached new heights in entrepreneurship. That’s funny Brownie, it sure doesn’t look like that to me from where I am standing, sweating grease, covered in spots, serving the 100th double cheese burger today. Many people pop in here after working late, and usually leave their newspapers behind. When it’s quiet here I usually read them, and I have learnt a lot about you and your ways.
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I have noticed, that spurred on by you and your propagandists in the organized media, it has become fashionable to disparage the Continental economies about their macroeconomic indicators. You keep pointing out how bad things are for the Germans, like their unemployment rates, tax policy and interest rates. However, I have also noticed that the UK economy is getting hot under the collar with that consumer spending binge, no doubt greased with extra mayo and cheap imports financed by re-mortgages with low interest rates.
Meanwhile the continental economies have been focusing on microeconomic stuff like productivity, capital formation/investment, research & development, innovation, focused entrepreneurship support and targeted deregulation. I understand this, as I have an honours degree in entrepreneurship & business studies from Watford University. My mum, who works at the local hotel as a cleaner, recommended it. She said that she heard you on the radio, saying that graduates would become very rich, if they took this course. No matter what, I still love my mum, despite that.
As you are doubtless aware, they are now talking about a new economic growth model, that does not rely on traditional macroeconomic stuff like budget deficits, current account, inflation, tax policies or government debt - all the stuff that has been talked about in the business pages. Instead, it relies on microeconomic things, like the amount of R & D expenditure and the number of start-ups, releasing the pent-up entrepreneurial potential in all the different communities with real action and financial backing. Better that than all the empty rhetoric and recycled, numerical mumbo-jumbo, which is giving me and my friends big headaches. They just don’t fit in with the formulae and theory we were taught by our economics gurus.
When it comes to microeconomic indices, the UK positively looks like a sweat shop, with people putting in long hours, working away to an early death. I suppose that’s one way of solving the National Health Service and pensions funding crises. Can you explain to me why, if we in the UK work long hours, do we produce 20% less than the Germans per hour and 30% less than the French? In a sweat economy, the only careers to be had are available in burger bars, retail shops and now 24-hour binge bars (we have quite a lot of them in Watford, so the local economy will generate enough revenue to support a new alcohol poisoning care unit in the hospital), but can we build a national economy on the back of such outlets? I know you cannot outsource these types of places and jobs, but will it make up for cheap goods and services from Asia? Please explain to my mum why it’s good for the economy, yet she cannot get her supervisor to buy her a new broom.
I think it will be good if we start fixing R & D expenditure, (see R & D doldrums), public procurement for SMEs (see SBIR get support), University spinouts, funding and the market failure in early-stage funding, otherwise we will have to take more jibes from that portly American executive who always orders extra-large double fries with his quadruple cheeseburger with onions, lettuce, but no tomatoes. He says that we had better stick to being an old theme park with a few shopping malls, although we should have been told before, as we didn’t go to university for that. He suggested that we could compete with Malaysia and Indonesia to manufacture branded sportswear.
He says the UK has had a decline in private sector job creation, an increase in government bureaucracy, confusion and competition between different government support agencies, wasting scarce public funds, with confusing programmes and priorities.
I am going to ask you for something (but I think Santa may be more likely to deliver) - can we just have one person in charge who will be accountable for all of this?
While you are waiting to become Prime Minister, perhaps you would want to volunteer for this job, so at least I could look forward to quitting my day job and starting my new software business?
This is of course assuming that you will eventually fix the capital access problem as you have promised many, many times before. Otherwise, I will have to seriously consider quitting the country, like many of my friends, and go work in Asia or America.
According to the guy from Germany (who always has a salad for his lunch), Germany has been more honest about its true unemployment figures and has also become the world’s number one exporter, even surpassing the US - can you really believe that? Can you ask your guys why we were never told this? Now, how do you explain that for an old European economy? You do remember ‘old Europe’, don’t you? He says that their R & D expenditure is higher, their education system produces better engineers and technicians, feeding their export machine and infrastructure. Try driving on their autobahns, and compare it to the M1 or visit one of their hospitals.
We are now in an era, where our education system is producing graduates who cannot think, calculate/use spreadsheets or communicate, coz they are having to work long hours in bars and restaurants to pay their fees and debts. Increasingly, we rely on our foreign friends (avatars) to do all our assignments via the internet - they even scramble the words and sentences into typical (not formal) UK English, if you pay them extra. Even the lecturers won’t be able to trace them, and besides, the university has to hit it’s targets, so why should they care? Think about the numbers who will achieve 1st rate degrees, which of course meet your artificially-set social targets.
I see that the UK’s deficit on goods and services has ballooned from £13bn in 1992 to £60bn in 2004. For the US, the deficit has gone from $97bn in 1992 to $700bn in 2004. Although a few big ticket items, like several Boeing 787 DreamLiners will overcome some of their deficit, the UK has no such big ticket industry - remember they were all sold or closed down.
It has been argued that it doesn’t matter if cheap Chinese goods or Indian services are imported to garner bigger margins for the retail or banking sectors. Unfortunately, these sectors are not well known for their innovation, productivity gains or R & D expenditure and as a matter of fact, they rely on cheap labour and can hardly keep their branches open. It would not be a big issue if the service sector was producing more high paying jobs, so we could pay higher taxes and exports. The rise in service exports is lower than the decline of manufacturing exports and as any A-level student knows (well, one from the 1980s rather than the 1990s), we are heading for some serious economic turbulence. I think we have some serious problems, Houston – I mean Brownie.
My Uncle tells me that knowledge transfer from old to new was easy when there was a stable industrial structure. But when a large portion of the engineering- and technology-based sectors are shut down, we lose all that knowledge and experience. That is why governments in Switzerland, Germany and France, fight tooth and nail to protect their industrial base. Knowledge transfer cannot take place with lots of holes in the structure, as they will leak out and die (he asked me to remind you, if you have difficulty grasping this, to think of what happened to all that knowledge we had in Ferranti, Marconi, Plessey and Rover).
When it comes to competitiveness, the UK is heading in the wrong direction and yet, I have noticed, that there is not a single week where bored politicians introduce one regulation after another, followed by new initiatives, that clog up any remaining creative intelligence capital, that we have. I think what matters is not some artificially engineered unemployment figure, but the number of people of working age, who are actively engaged and working in the economy, and the portion of those who are engineers, scientists, entrepreneurs and creatives, that are engaged in high-productivity sectors. You will find the UK’s record on that front is pitiful, especially when compared to the Continent.
When it comes to access to start-up and seed capital, we still haven’t fixed the market failure, which virtually everyone has acknowledged. This is a big problem for us - the new entrepreneurs wanting to start new high-tech businesses. Please don’t quote the BVCA figure at me, as the vast majority of that is targeted at leveraged buyouts and they definitely don’t need your help there. The VCT money that was supposed to help solve this problem, for which, let me see, you are giving away £220 million in tax relief this year, is going towards deals that will not help me or your productivity challenge. Funny how we both have the same objectives, but different vantage points. As Chancellor, you have a birds-eye view, while I am down below, dodging bird mess. Let me elaborate. VCT money is going into wood-fired pizzerias, empty minerals mines in Greece and illegal, offshore gambling houses. I take it that this is not exactly what you intended? To prove my point here are some recent quotes from some VCT managers in a popular Business magazine. My comments are in brackets and you will understand why I feel enraged. Here we go!
“We rarely back private companies …the best way to approach us is consider floating” (I cannot start my business because of funding, so I am not going to float, am I, but then the rules may have changed, so maybe you should float, then start a business?)
“We are looking for businesses that are profitable, with little debt, that are cash generative” (Who isn’t?)
“We are not a big fan of early-stage companies…we rarely back start-ups, what we do is NOT, strictly speaking “Venture Capital“, but “Development Capital” (so calling yourselves Venture Capitalists and getting tax benefits is an ethical transgression that you can live with?)
Now you tell me why we are giving these hoods, £350 million of taxpayers money next year. In France, their VCT money can only be invested in SME Companies and only in those companies, that have a high portion of their expenditure in R & D. Maybe it’s time we started to give the French some credit.
Can you also please stop wasting money on your old University friends - they are spending most of it on some dodgy research, trips to America, the best vintage port and conference junkets in their penguin suits. They seriously need some adult supervision. Can you send in some new faces, so that they learn, how to respect public funds? Also let those old academics know that they will never become entrepreneurs - that’s why they chose to become academics in the first place (you ever heard of George Bernard Shaw’s saying? ‘Those that can do, and those that can’t…’). By the way, what happened to all those University challenge funds? I heard it was a nice champagne party, and while you and your chums are still waltzing around, the orchestra has stopped playing.
If you would be kind enough to focus on these problems, then I can tell my mum that things are looking better and I will eventually start that software business, before it becomes obsolete. She spent a lot of money on my education and she has told all her friends that I would be starting a business of my own, and there is no way I intend to break her heart.
PS: a gentle word of advice. Stop lecturing and patronizing those Europeans. They give us hell when they come for their lunch. They are doing some things right. Sure, they need to change a few things, but they don’t need the total makeover that we do.
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