Could this be another present-less Christmas for retail firms?

Coca - Cola’s classic Christmas advert always reminds me that the festive season is fast approaching, its less than 2 months away. Christmas is a very important time young children along with retail based firms as they over 40% of their annual profits in the 3 month period before and after the 25^th December. Many people are optimistic that the increased spending and festive cheer would be the perfect remedy to get the sick UK economy back into action. The chief executive of Next, Lord Wolfson said "I suspect it [Christmas] will be much the same as the rest of the year. I cannot see why the consumer economy should be any different.” Like Lord Wolfson I am sceptical of Christmas’ possible effects on the UK economy as this year is a very unusual one, therefore shouldn't be compared directly with the winter success in previous years.

A research from Ebay has showed that the UK is losing up to £120 million in mobile phone revenue due to the lack of Universal 4g services. Money is being lost as many more consumers are using the web to shop for Christmas gifts via Amazon and Play.com, it is expected that 55% of consumers will use their mobile phones to buy much needed gifts for their love ones. However these consumers are currently being restricted by slow connection speeds. The main barriers are network reliability and payments timing out, the 4g coverage is built specifically to process internet more efficiently and quickly. Even though the UK acted very fasted to capitalise on 3g coverage, it has been slow to answer the calls of consumers demanding the more superior 4g coverage, which is expected to become widespread next year autumn, despite the fact that forty countries such as India and the USA are already benefiting from the new technology already. Clare Gilmartin, the vice president of eBay said “Mobile devices have become virtual stores in our pockets, giving us the ability to shop anytime, anywhere. But for consumers, it’s critical that the experience is quick, seamless and simple. While we welcomed the move by Ofcom to bring the 4G spectrum auction forward to early 2013 there’s no doubt, as this research shows that for the UK economy the cost of another Christmas without universal 4G is huge.”

In other news, a credible think tank has said that the Chancellor of the Exchequer may have to reduce public spending up untill 2018, when the new second form will eventually be leaving CH. The Institute for Fiscal Studies suggests that George Osborne has to make an extra £11 billion in spending, if he wants to continue reduced the UK’s £1 trillion deficit.  A Treasury spokesperson said: "Action taken by the government has cut the deficit by a quarter, whilst over a million new jobs have been created in the private sector, inflation is down, and the economy is healing. Britain still faces economic challenges at home and abroad but the government is taking the tough decisions needed to deal with our debts and equip our economy for the global race.

Despite having the highest consumer confidence in 15 months, sales have been slowly decreasing. The UK retail sector was one of the most effected after the 2007 crash, as consumers are unwilling to spend too much due to job uncertainty caused by the recent alarming unemployment figures of 2.5 million. Henry Enos, a consumer  expert said ”Retailers will continue to face the challenges of changing shopping habits brought about by the economic climate, but also increasing use of the internet as both a shopping and price comparison resource. The consumer is more educated due to the media society we live in”.

We’re coming to our sixth competitive Christmas is an economic downturn but this time the UK has been battling against the heavy Government cuts and high unemployment. I don’t think retail firms should expect huge demand for their products. Only time will tell, if Santa Claus can drag us of out of our deep hole along with our European neighbours.

Coca-Cola Christmas advert: http://www.youtube.com/watch?v=ogetBqMgau0

Is the UK Transport System good enough?

The transport industry is very important to the UK Economy. We need Transport to move goods and services from Firms to customers and employees have to use transport to get to work quickly. If the transport system was non-existent it would be virtually impossible to move things around the country, which would cause high unaffordable prices. Also being an island, means the UK wouldn't be able to participate in lucrative international trade. It is quite disappointing that many transport projects are being postponed by the Government, at a crucial time when vital improvements to the transport System is needed. It’s obvious that our potential economic growth is being jeopardised by the Government’s reluctance to spend, by investing into the county.

I have recently learned that of out of thirteen important, possible UK transport projects potentially less than half will actually go ahead. One of the unfunded projects includes the controversial third runway at Heathrow, which I think the Transport Minister Norman Baker, should really urge the Government to consider, as the airports expansion is imperative to meeting the ever increasing future air travel forecast. Currently Heathrow’s lack of capacity is costing the UK economy £14 Billion in lost trade every single year. It’s important that the UK’s busiest and arguably most important airport can reach a new higher capacity, which will attract investment by airlines, providing jobs for some of the 2.5 million unemployed people in the country. Norman Baker said "Making sure that the country has the transport network it needs to deliver economic growth is a top priority for us". These cutbacks contradict the Transport Minister’s plans, however in saying that, he has successfully secured funding for the high speed 2 rail routes between the UK’s major cities, London, Birmingham and Manchester.

The British chambers of commerce said “While the government has taken important steps to boost infrastructure funding and delivery since the first budget, the updated assessment shows that too many transport projects, which are crucial to business growth, are stuck in the slow lane. We need bold action from the government to improve the UK's transport infrastructure". The BCC director said "This kind of investment is insulated from global uncertainty, and it creates short-term confidence, jobs in the medium term, and improves the UK's competitiveness in the long term".

The Government really has to sought its act out and be decisive especially with the third runway at Heathrow, if it really wants to see the UK economy recover.

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UPDATED Can anyone become Oil rich?

Oil is a chemical liquid made after millions of years of seabed compression, comprising of dead “things” such as Fish and Plants. Due to Oil's high carbon content, it’s a widely used as a fuel, or in the lubricant industry. Not surprisingly, there is a very large demand for this limited good, so many countries, particularly those in the Middle East have taken advantage of this and have become "Oil Rich" in the process. However many other Oil resourceful countries have unsuccessfully attempted to mimic this success.

"Dubai's Economy was built on the back of the oil industry" (Business Week). Currently Oil production accounts for 6% of its total exports. This is a decrease from previous years since Dubai has diversified into exporting other goods and banking services, by using income from oil to make good investments. On average it produces over 40 barrels a minute and could theoretically be doing this for the next 93 years as it has one of the largest Oil reserves on the world.  Partly due to Dubai's small population, their newly acquired new wealth has been shared amongst citizens, although not equally. Famously, Citizens in Dubai don't have to pay any income Tax, which puts more money in their pockets.

On the other hand  Angola has also discovered large oil reserves on its shores, which is the 18th biggest oil reserve in the world. Currently Angola is the 17^th biggest Oil exporter in the world; however their position is under threat by other African countries such as Ghana which has recently started exporting the commodity too. Angola is a large south African country, more than five times the size of the UK. Currently, around 80% of the country’s revenue is made from the sale of Oil, which clearly shows the country’s large dependence on this sole good, even though Angola has Diamonds and Gold too.  Although it’s a major exporter of Oil, the generated revenue has been mostly misspent or stolen by Angola’s notorious, corrupt politicians. Angola’s GDP has increased by 400% since 2004 and is increasing annually by 20%. But this was probably due the political instability from the civil beforehand which meant that exporting (selling to other countries) goods became very hard and dangerous. Even though the country’s economy is growing, 70% of the citizens still live on less than £1.30 a day and Angola is widely regarded as the least developed country in the Africa. Africa’s most populous country, Nigeria, which has the 10th biggest oil reserve in the world, is in a similar position to Angola’s. 40% of Nigeria's GDP is from its Oil industry and its accounts for 80% of the Government spending. Like Angolan politicians, Nigerian politicians have been known to misspend oil revenues ever Since its oil boom in the 1960’s. So the vast oil wealth Nigeria has created hasn't benefited everyone, especially those poorest people in the country.

The general conception is that Oil entitles instant economic growth. But it doesn't. It relies mainly on transparent and efficient management from politicians. So not everyone can become “Oil rich”.

Can anyone become "oil rich"?

Oil is a chemical liquid made after millions of years seabed compression, comprising of dead matter such as Fish and Plants. Due to carbon's high carbon content, Oil is a widely used fuel. For example in the electricity, cosmetic and Lubricant industry. Not surprisingly, there is a very large demand for this finite good, so many countries, particularly in the Middle East have taken advantage of this and have become "Oil Rich" in the process. However many other Oil resourceful countries have unsuccessfully attempted to mimicking this success.

"Dubai's Economy was built on the back of the oil industry" (Business Week). Currently Oil productions accounts for 6% of its total exports. This is a decrease from previous years since Dubai has diversified into exporting other goods and banking services, by using income from oil to make investments. On average it's produces over 40 barrels a minute and could theoretically be doing this for the next 93 years as it has one of the largest Oil reserves on the world.  Partly due to Dubai's small population, their new wealth has been shared amongst citizens although not equally. Famously now Citizens don't have to pay Tax, which puts more money in pockets.

On the otherhand, Nigeria has also discovered large oil reserves on its shores, which is the 10th biggest oil reserve in the world. Subsequently 40% of Nigeria's GDP is from its Oil industry and its accounts for 80% of the governments spending. Nigeria is a large African state with a population of over 120 million,  its the 7th most populated country. Although its a major exporter much of the Oil revenue has been misspent or stolen by Nigeria's notorious politicians, so many of the country's poor inhabitants have been able to benefit from the GDP surge.


Just because you have Oil, it doesn't mean you instantly become rich. It relies mainly on transparent and efficient management from politicians.

When China met Africa

Last week Wednesday, 31st October I attended a lecture at the London School of Economics  named "When China Met Africa". The title was far too vague considering the that the film that was shown during the Lecture was entirely focused on Zambia, a small South African country with a population of 13 million people, just over 1% of China's 1.3 Billion population. The film/Documentary was made by brothers Nick and Mark Francis and it showed the political relationship between Zambia ad China by shadowing Felix Mutati, Minister for Trade and Commerce in Zambia. Whilst following the lives of Chinese farmers/Investors in Zambia and there frequent squirrels with there local workers.

These are some of the key points I gained from the film, with sprinkle of my opinions:

China win many African contracts for Roads and other Infrastructure 

Chinese in building the Tutse Road in Zambia. Skilled Chinese workers have to be brought to Zambia in for it a very costly procedure for a small project. This should've been an opportunity for the Chinese to share their construction knowledge with locals so they to can become skilled workers too.

Chinese woman owning farm in Zambia - Private Foreign a investment 

This means that much of Profits generated using Zambian resources are transferred abroad and don't actually stay in the country where I think it ought to. This occurs a lot in the Uk, where immigrant workers send much of the money they earn back home and not domestically. This reduces the multiplier effect as the leakages have increased, so there is less consumption at each successive round. This is particularly important in Zambia and other developing countries which needs as much consumption as possible to drive investment and growth.

"Need roads to become rich, like blood in the body" 

This was a quote I picked up from a Chinese manager responsible for building the Tutse road. I agree with this very much,  all the top economies have great transport infrastructures. As part of my A2 course I'm studying transport economics and it was after my first class that I realised how important transport really is, not only economically but socially too. We wouldn't be able to get anything or go anywhere. It really is a necessity.

During the film i noticed that the Language barrier problem was very apparent, many Chinese workers found it extremely hard to communicate with Zambian workers. This is very inefficient as its time consuming and therefore expensive. It's made even more expensive by the fact translators are needed frequently. Due to negative press about education in Africa, I wasn't surprised that hardly any locals spoke Chinese. Zambia has been trading with China for nearly half a century since it gained independence from the United Kingdom in 1964. Surely politicians should've realised that it would be wise to invest in labour by teaching them such languages, it would've made the country a much more desirable place for Chinese investors,. There are plenty of other African countries that are eager for foreign investment, China is set to become the biggest economy in a matter of years.

Many Zambian drivers don't have official licence, so it makes their employability for transport-related jobs very hard. So in order to get a job of the kind, employers have to test drivers, which can sometimes result in capital such as expensive imported trucks breaking if the supposed drivers aren't actually drivers. How else can employers find drivers? Also many of the workyers feel mistrusted as they are "never left alone" with Chinese equipment, causing resentment between Chinese workers and Zambian workers. On the 5th of March a Chinese miner was killed by a Zambian mob protesting for better pay. 

China is a important foreign investment, not only in Africa but worldwide.

Some Chinese put money in banks overseas as they think the country is politically unstable.

This week I'll be posting another articles relating to this one called "what does China really want with Africa". SOOO WATCH OUT FOR IT!!!!