UK
The thoughts of behavioural economist Roger Martin-Fagg made the audience sit up and take notice at the Textile Services Association (TSA) 2024 National Congress, 1 February, at the Titanic Hotel in Liverpool. Those comments were, as the speaker himself announced, out of left field. Martin-Fagg has consulted for a wide range of the country's biggest companies, and is renowned for his ability to explain complex economic concepts in a way that helps businesses to understand how they affect them. He began by looking at how global systems perform and how we perform in the UK.
“Which means, out of left field. Bit odd. Most mainstream economists don’t accept what I am going to talk about. They assume we will most of the time behave rationally. That is fundamentally wrong. Research shows we do that 20 %of the time, the rest is based on instinct and then we rationalise the decision. When data doesn’t support our perception, we challenge the data.”
Does it matter what these economists say anyway, because: “All our forecasts will be precisely wrong,” he said.
Martin-Fagg explained that the UK is where it is right now because of five unique circumstances, the first being the continuing effects of Brexit and the second the negative effect of five different prime ministers in seven years. “Imagine that the person running your business changes every 18 months and they have all got a different approach. Result? Chaos,” he said.
Add to that, the country is also experiencing a permanent shortage of labour as a result of demographics, plus chronic underinvestment as a result of political uncertainty we come on to the fifth factor: “Most importantly, our global reputation is pretty lousy right now,” he said, “globally we have a diminished brand value. We will be back.”
He said that at the end of Covid there was a big gap between supply and demand and what happened then is that inflation filled the gap. The cumulative effect of all this is that prices rose. However, said Martin-Fagg: “The cost of shipping is back to normal. In nominal terms it is back to 2001 price levels. This is because vessels have got so much bigger. Figures from a week ago [beginning of the last week of January] the Panama Canal and Red Sea problems have not impacted – not yet anyway.
“Gas is still above pre-Ukraine war level. I don’t think it will come down much. We have moved away from Russian gas and are now using from areas it is more expensive to ship from. Oil will be back to 2014 levels,” he said.
According to Martin-Fagg interest rates won’t fall much before the end of the year. “We will see the 3-5 year mortgage rate creeping down. Because they have to. Bet it goes down 1%. The housing market might do quite well too.”
What should a new Government do to get productivity up? “The Government has not been spending on core infrastructure…there is no way you will get tax reductions. As for investment by the private sector, it needs to broaden out to software, training – anything productivity enhancing. Taxation becomes irrelevant.
“Bring back technical colleges, this will allow business to develop youngsters while still giving them work experience. It was a big mistake to close tech schools and colleges and encourage all to get degrees. Moneyed entrepreneurs sent kids to schools to gentrify them. Intellectuality has become more important than pragmatism. It is a cultural issue,” he said.
“The UK is exceptionally good at original design concepts. Then when it is time to make it – that’s boring, let’s design the next thing.”
As for the upcoming election, he said: “Labour has been listening to business much better…it now has 10 business advisors – although nobody from textile services. They are still fishing in an elitist pond.”
Martin-Fagg reckons that TSA’s David Stevens is doing a good job of talking to Government but he deplored the fact that the civil service works on an annual budget. “So outdated. Change that, new Government! Our democratic system forces elected representatives to duck and dive according to the latest social media pin. This needs to change. There is no announced strategic 30-year business plan [from any party].
“The Government needs to look at continuity. It needs to do the grunt work. The next Government might be the most boring Government in history,” he said, adding that Rishi Sunak has indicated a preference for an end of year election “so expect it in May”.
Other gems from Martin Fagg included:
• “Brexit!!!People who like it are comfortably retired. If they were still running businesses they would not like it,” he declared.
• “We are right at the bottom of the OEICD economies…Italy is doing better than us.”
• “Since 2012 British ‘Big Corps’ have been using profits to buy back shares thereby boosting share price.”
• “Political instability kills investment. Italy is doing better than us.”
• On those disappointing pre-Christmas High Street retail figures: “People don’t go shopping when it is pissing with rain…”.
• Martin-Fagg believes every school leaver should read “Politics from the inside” by Rory Stewart.
Photo: Chris Whittam Photography
