Should capital expenditure be the first corporate cut or the last thing to go? Investment in plant or buildings is the basis for tomorrow’s profits, but delaying it is an easy way to boost today’s cashflow.
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This is an old-style financial crisis but not all the old answers will work. Freezing the pay of doctors and judges may have worked for the Wilson and Heath governments but it has little impact when inflation is negligible or negative.
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Just as Britain comes out of recession, swine flu threatens to crush the green shoots. Even if it kills few, it will mean millions being away from work.
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The debate now is not whether to cut pay but how to do it. British Airways asked its staff to work for no pay; now the CBI is proposing people are paid for doing no work.
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The Marks & Spencer (LON:MKS) chairman’s agreement to forego £1m of bonus doesn’t simply show a fear of shareholders rejecting the company’s remuneration report, it reflects overgenerous rewards agreed in less critical times.
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This blog was bearish while others still basked in the boom and turned bullish this year when others said Britain was bust. But beware: the optimists are in danger of getting ahead of themselves: recoveries have a self-correcting mechanism.
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Amid the row over Britain’s new 50p income tax rate, no one is asking the basic question. Why do we have tax incomes at all?
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Good news: things are getting worse more slowly. That’s not the same as getting better however, nevermind getting back to where they were or where they should be.
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Most people would probably prefer Bernie Madoff to look after their investment than expect HM Government to pick shares. Yet a million employees will soon be asking the state to manage their investments.
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The UK economy clearly can’t rely on financial services in the future so we’d better roll up our sleeves and go back to manufacturing. After rescuing the banks, a £5m government loan to LDV Vans thus seems a cheap option.
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