The eurozone is in a mess, but then again so is the UK economy. What we need is to invest in design-led manufacturing so we earn a reputation for excellence
Beware of Greeks refusing gifts. I’ve been down in Cannes as the moussaka hit the proverbial fan and Angela Merkel and Nicolas Sarkozy rushed to stick a plaster over a haemorrhaging Greek economy, but by the time you read this you’ll know how that went.
Building is a capital intensive business and the fortunes of our professions are inextricably linked to the economy. Buildings are in the development budget, the cream at the top, of any organisation’s finances. So, when the budget gets cut by 10%, 100% of the architecture goes. When the economy catches a cold - we get pneumonia. So, I for one am an anxious observer of economic affairs, because the knock-on effect can be violent.
It’s difficult to know who to feel more sorry for: the Greeks, who have run up such a big credit card bill and who will live in penury for a generation or more, or the prudential Germans, who are going to have to spend their hard-earned profits bailing out their Mediterranean cousins, not long after they bought their eastern brother’s large and decrepit house for cash. You might remember they exchanged one junk bond-rated ostmark for one 5*-rated deutschmark in an astonishing act of familial generosity for reunification. Oh, how the Germans must miss the deutschmark. You might think that the Greeks should be grateful but nobody really likes being helped out, particularly when the help is in the form of a cure that is worse than the disease. So it should have been no surprise that beleaguered Greek prime minister George Papandreou wanted a referendum to spread the blame.
But of course while the 11 million Greeks with their €350bn debt is today’s problem, it’s actually small beer - being only the market capitalisation of a company like Apple. After all, if Apple went bust, the world would not grind to a halt. The real issue is Spain and Italy with 100 million people, €4,000bn debt along with massive unemployment (20+%) and a corrupt government respectively.
While the northern eurozone countries have the solace of being able to blame the southerners for their problems, we in the UK screwed up our economy all by ourselves and became the exception that proves the (north/south) rule. The motors of our economy, the clever banks, turned out to be so clever they did not know what they were doing.
But my money is on some cruel ironies in the not so distant future. Merkel and Sarkozy will save the euro and impose economic and fiscal disciplines that will make it a success and more like a federal state. The southern economies will be helped by these disciplines. Ambitious and visionary countries like Poland and Turkey will join the eurozone, which will be the biggest trading block in the world with some of the most advanced economies and companies as well as rich cultures. London will be the capital of the eurozone, while not being in the eurozone, by virtue of its overwhelming financial expertise, its liberal economy and its world language.
The problem for the UK will be how far the halo effect from the South-east will stretch and whether the rest of the union can find an economic role outside of the common currency. Much has been made recently of ARM, the Cambridge-based £400m-a-year chip designer (not manufacturer) that is expanding at 20% a year. Great stuff, but there are only so many people in any country that can contribute to such an intellectual powerhouse. The UK could do with a few more Jaguar Land Rovers, which was bought by (architect trained) Ratan Tata in 2008 for less than £2bn. Initial losses were £300m a year but now JLR makes £1bn profit a year and employs 17,000 people in the UK. It has done this by investing in design of premium products and close coupling design and manufacture. There is a simple formula here. You can successfully manufacture in the UK if the product is upmarket enough and that means being brilliantly designed. Think F1, Asprey, Purdey, Fortnum & Mason, Aston Martin, Bentley or Rolls-Royce.
So, raise your sights, only excellent will do.
Jack Pringle is a partner in Pringle Brandon