Britain must look beyond London and put faith in manufacturing

Redressing the balance of wealth to benefit the regions beyond the south-east is a big challenge – but one that must be met

This month has seen further confirmation of Britain's economic recovery and an indictment of that recovery's composition. If 2013 has brought some form of revival, then we must wish that 2014 brings balance to it.

The evidence that this country's return to growth is out of kilter was threefold. First, never-before-seen data showed that south-west London had more mortgage debt than all of Wales. The capital is at the centre of a housing market revival that is powering the recovery, while the rest of the UK trails in its wake.

Indeed, 44% of all mortgage debt in the country is held by people in London and the south-east, areas which account for nearly 40% of British GDP.

Redressing the issues thrown up by those statistics is a long-term challenge, one that involves tilting Britain's centre of economic gravity away from financial services and London towards other sectors and other regions. Manufacturing, for instance, shares its wealth much more evenly across the UK than banking. But while the aspiration to spread the growth may be admirable, and is unlikely to draw much opposition from politicians of any stripe (barring the more fervent supporters of the City in the Conservative party), it is difficult to achieve.

Which brings us to the second piece of evidence. This month saw confirmation that the country's current-account deficit with the rest of the world has soared to its highest level since 1989. This means that we are consuming too much and not exporting enough. According to the Office for National Statistics, the gap in value between imports and exports widened to £21bn in the three months to September from £6bn in the previous quarter. There was positive news in the data too, with an upward revision of the annualised growth rate to 1.9% from 1.5% – which only shows that the British economy is accelerating along a rutted path that we have travelled before.

An economy where manufacturing plays a leading role would benefit the UK not only because what industrial base we have is more evenly distributed than the financial services sector but also because, as a country that spends too much and manufactures too little, reversing that state of affairs will go some way to reducing our deficit in a way that is less painful than spending cuts or tax increases.

The third piece of evidence underlines the difficulty of transforming this wishful thinking into reality. BAE Systems, Britain's largest manufacturing employer, announced nearly two weeks ago that it had failed to secure a £6bn order for Typhoon fighter jets from the United Arab Emirates, despite the enthusiastic backing of David Cameron for a deal. With the decline of the British state as a buyer of BAE's equipment – hence the 1,775 job losses at Portsmouth and Glasgow – the company has been forced to seek new markets that can afford products with multibillion-pound price tags. It is a small market and one that is crowded with western competitors – such as France's Dassault – that are also scrabbling for deals from the defence ministries of emerging countries.

BAE's news showed that even our manufacturing base is unbalanced, dependent as it is on a single customer that will be in a sustained period of fiscal retrenchment regardless of which party gains power in 2015.

So, a wish for 2014 is for balance: a recognition among business and political leaders that economic growth is not an unalloyed good if it repeats the historical errors of stoking debt, consumption and estate agents' fees. A balanced economy requires focus on education, targeted state support of industry, a functioning banking system to fund supply-chain businesses, a government procurement machine that is sympathetic to British companies, a system that encourages innovation by universities and then allows the private sector to monetise it, and decent infrastructure.

None of the above will come to fruition in 2014, of course: but for the picture to change in even a decade's time, the work has to start now.

O'Leary takes a seat at the back of the plane

Were we to name one exec to watch in 2014, Michael O'Leary would rather it wasn't him: the Ryanair chief has pledged to be a lot quieter.

The most successful aviation boss of the past decade has decided to remove himself from the public frontline in 2014, after admitting: "I'm getting in the way." O'Leary's decision to become the airline world's Greta Garbo, unlikely as that sounds for a serial attention-grabber, followed a startling admission that the airline had to change its ways and "stop unnecessarily pissing people off".

Instead of O'Leary's regular press conferences, which tipped reams of newsworthy quotes into journalists' laps, the public face of Europe's largest short-haul airline will be a new director of sales and marketing. This addition is unlikely to advocate shooting environmentalists or introducing in-flight pornography. As corporate cultural changes go, it's a start.

But withdrawing from press conferences is not the same as changing an entire company's approach to customer service and marketing. Ryanair is bringing in a welter of changes, including less draconian baggage rules, lower penalties for lost boarding cards, more tolerance of booking errors and getting rid of the inflight fanfare that marks every punctual journey.

This is more substantial but can a company as aggressive as Ryanair truly overhaul its culture while such an overpowering personality as O'Leary is at the helm? Ryanair's bludgeoning approach to short-haul flying transformed European aviation, and it was driven by the zero-sum approach of its chief executive. To make Ryanair a friendlier company, O'Leary will need to do more than step back from the press conferences. He might need to give greater sway to others internally, such as the new customer services boss. Ryanair is part of the aviation establishment now and O'Leary has never pretended to be an establishment figure.

So O'Leary is, in a way, a person to watch out for in 2014. But if we see his name in the headlines, it will probably be signalling the end of an era.

Forget turkey: the best festive game is high street chicken

There is only one winner in the annual game of Christmas chicken between the consumer and retailers. Each autumn, high streets get stocked-up and festively decked-out stores. A small fortune is spent trying to persuade the public to shop early, because this is the time when full prices can be charged and profit margins fattened. Every year, consumers blow a big raspberry to this idea and make retailers sweat.

A fortnight before Christmas, stores go into panic mode, worrying that they will be left with masses of unsold stock. Prices are slashed and consumers start to spend. This trend has been accentuated in recent years by the protracted squeeze on real incomes, which has made consumers even hungrier for a bargain. But it is likely to continue even when living standards start to rise again. Consumers are too canny: they know how to play the Christmas game.

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