By Richard Pickering, Head of Futures Strategy
Italexit? With potentially radical outcomes in the Dutch and French elections avoided, and Merkel’s coalition forming in Germany, it would be easy to think that the political position in Europe was stabilising. However, in Italy there has been some papering over of the cracks since the inconclusive election in March, which is now looking a little thin. Wavering confidence in the ability to form a stable government is impacting on Italian bond spreads (highest for 4 years), in turn increasing the cost of government debt (which is the greatest in the eurozone) and supporting a downward spiral of economic health. Among the Eurosceptics, who now hold sway in the Italian parliament, there are renewed calls to leave the euro. This still feels unlikely – at least from a rational perspective – Italy continues to trade well, takes significant benefits from its eurozone membership, and neither major party campaigned on an Italexit ticket. However, as we have seen in recent years, political decisions around the world are increasingly being made for ideological rather than economic reasons and with further elections in Autumn now almost certain, there is an opportunity to amplify populist sentiment.
Readiness for the Future of Production The World Economic Forum has released a new paper analysing the readiness of nations around the world for a new era of production. Key findings included: (1) 70% of robotics sales are to just 5 countries, (2) the most ‘ready’ countries (led by Japan) are still only in the early stages of transformation, (3) specific industry footprints might shift between nations over the coming years, (4) the case for reshoring of manufacturing is building, but inertia in large global supply chains is a barrier. The report hypothesises that the most important drivers of readiness are: Technology, Human Capital, Institutional Framework and Global Trade. Further, scale is not a prerequisite for future readiness – playing to complex competitive advantages is more important. The UK scores well both on the existing structure of production (#13/100) and perhaps more importantly on the future drivers of production (#4), noting our potential in aerospace and pharmaceuticals as factors.
Coffee and conveniences Customers of Lloyds’ Coffee House, which opened in 1648, didn’t go there for the coffee; they went to connect with other customers and to hear shipping news. Realising this, Lloyd’s subsequently ran an auction, published a newspaper and eventually hosted an insurance market. The rest as they say is history. Wind forward 350 years and whilst the players have changed, the principles remains the same. For many, Starbucks has become a second office; the rent for which is buying at least one coffee per hour. This also buys you access to the wifi and the customer toilet. However, following the backlash to the incident in their Philadelphia store, Starbucks has now made these ‘rent’ free. An alternative model is the Ziferblat café in Shoreditch. Here, you pay £2.40 per hour (similar to the price of a coffee) to use the internet, but in doing so you get the food and beverages for free. As the lines between payment for space, services and sustenance continue to blur, giving away things like toilet access needs to come with a quid pro quo. Footfall and reputation is not a bad start, but how does Starbucks now leverage that?
National Parks A common concern of those contemplating a move to the country is whether the field adjacent to their property will one day become a housing estate. Mainly for this reason, owning property within a National Park, an Area of Outstanding Natural Beauty, the Green Belt, or even in a Conservation Area, can have a positive effect on value, which more than offsets the negative impact of stricter development controls over one’s own property. Last week the Government announced a review and potential expansion of the National Parks. In Wales these account for c.20% of all land, whereas the South East of England only gained its first National Park this decade (South Downs). National Parks are different to AONBs in that they have their own authorities and planning powers. They also have a greater focus on public access rather than just conversation. And a key factor in this review should surely be access. With houses in conserved areas carrying a price premium and typically high commute costs, it is precisely these areas that are least accessible to those on lower income, who might well live in urban areas with no gardens, and more likely reliant on public transport. Creating better connections between sparse populations with typically low levels of social amenity (e.g. local shop / doctors / school), would also be welcomed by many.
Renting and regulation One of the key technological trends over the past decade has been the explosion of online platforms which facilitate peer-to-peer trading and sharing. One is Airbnb, which allows home owners to rent their properties for short terms in competition with hoteliers. The advantage of Airbnb is that it gives owners access to a larger pool of potential renters and keeps transaction costs relatively low. In markets where short term demand is high (e.g. areas of tourism) it therefore allows the market to clear at the higher price points associated with this additional demand. The problem for in-demand cities is that this can often be at the expense of the local longer-term renters, in turn creating social imbalances. Some cities are starting to clamp down. Madrid for instance is limiting tourist rents to 90 days per year (similar to London), and requires separate (non-communal) entrances for such properties. Valencia meanwhile is limiting holiday rentals to ground and first floors only. Here is an example of technology facilitating change and creating efficiency in markets, whilst highlighting the catch-up role of regulation, where such efficiencies breed undesirable outcomes.
Flying, rolling and kayaking Today marked the second powered flight of Virgin Galactic’s VSS Unity; a key milestone in the journey to commercial space flights. Richard Branson hopes to be up in space himself within months and have customers signed up by early next year. However, in evidence of the different paces of change within the world, a new speed record has been set much closer to home. Over the weekend, Chris Anderson of Gloucestershire rolled 200 yards down Cooper’s Hill quickest to claim an 8lb wheel of cheese in the annual cheese rolling event; in the process breaking the ‘world’ record for the number of successful wins. Meanwhile, we at C&W are hoping to break records of our own in an equally arduous task. In a couple of weeks’ time 100 colleagues will be kayaking 13 miles down fetid canals and impenetrably dark tunnels in support of two charities which mean a lot to us: XLP (creating positive futures for people growing up in deprived inner-city estates) and Back-Up (inspiring people affected by spinal cord injury to get the most out of life). I know that we all have personal charities to support and receive a number of sponsorship requests each year. If you feel inspired by this blog and want to support us, or just want to find out more about the charities, we’d really appreciate you clicking the link below.