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This week's reduction in unemployment was hailed as a sure sign of the green shoots of recovery. But to grow them, households have to keep spending, writes Alan Shipman. 

After the longest convalescence since (recorded) recessions began, the UK economy is showing clear recovery signs. Year-on-year national output (GDP) growth doubled to 0.6% in the second quarter, according to estimates by the widely respected National Institute of Economic and Social Research.  The International Monetary Fund has upgraded its full-year growth forecast to almost 1% while downgrading the rest of the EU. On top of this, the Office of National Statistics recently revised its national output data to show that the widely lamented ‘double dip’ recession never actually occurred. 

Even more remarkably, the recovery is being led by consumer spending. Households that shunned the shops after 2008, to cope with falling real incomes and reduced credit options, are starting to splash out again. Although strong second-quarter retail sales growth helped online channels more than embattled High Streets, upbeat buyer-intention surveys suggest it will be more than a warm-day wonder. 

This isn’t quite the promised ‘rebalancing’ recovery, which was meant to be driven by exports and investment. Businesses are still refusing to invest despite large cash piles and record low interest rates, and the current-account deficit is at its widest for almost 25 years as consumer spending draws in imports with which UK producers still can’t compete. But whatever is driving it, this change of fortune should be celebrated. When debts are too high in relation to national income, growing the income is a better route out than unlashing inflation to shrink the debt. 

More than a baby boom?
New royal arrivals and sporting heroes have done something to revive the ‘feelgood factor’. But there are more objective reasons for thinking that a corner has now been turned. After house- and share-prices crashed in 2008, households responded by paying down debt and building up savings. More loans were paid off, and many fewer were taken out.  As a result, the UK’s household debt has dropped back down to pre-recession levels as a proportion of household income. The government can claim to have helped this improvement with pro-poor measures, including a rise in tax-allowances that raised post-tax income for some of those most heavily in debt.

Although households’ debt-to-income ratio is still above 120%, compared to less than 80% when the long boom began in the late 1990s, other changes may mean they can sustain this and still spend again. In particular, the recovery in share prices and (over the past year) house prices means households have more assets to offset those liabilities. Their ‘net worth’ (the difference between the two) is back to healthier pre-2002 levels on some counts. And while debt is still higher, the cost of serving it has been brought down by low base lending rates, which new Bank of England governor Mark Carney won’t want to abandon any time soon.

Inevitably, some economists don’t see this as a solid foundation for recovery. Although falling, the household debt ratio is much higher (over 140%) on measures that use a tighter definition of post-tax income. Because real incomes have fallen since 2008 (as prices rose faster than average wages), leaving them no higher than a decade ago, all the improvement has been due to debt reduction, which gets harder as refinancing and consolidation options are exhausted.  Present low mortgage costs can’t last for ever – and when interest rates rise, many households will find their debts are still too large to handle, as a new Resolution Foundation study reveals. Some are already struggling, and sinking further into high-cost debt through the use of payday lenders, whose rapid expansion is, like that of food banks, one of the gloomier contributors to that rising GDP.
Any reversal of the house-price recovery could, likewise, push many households back into negative equity (meaning negative net worth for some) despite their lower debts. And further price rises for fuel and other essential goods and services – which could result from a weakening of the pound made necessary to revive exports – would undermine the still fragile revival of disposable income. On this basis, some economists believe belt-tightening must continue until household debt drops below 120% of income, which could mean the recession has several more years to run. 

A deeper problem is that, while UK households may have reduced their debts (or de-leveraged, as the jargon goes), the UK as a whole has not. Continued borrowing by government and banks means that total UK debt has gone on rising since 2008, despite many large businesses also boosting national saving by sitting on large cash piles. This contrasts with overall debt reduction in the US and most other parts of Europe, and means the UK now vies with Japan as the world’s most-indebted large economy.  Many economists doubt that this is a solid foundation for recovery, especially as some banks may still be too weak to absorb a widespread write-off of household and business debts that have become unrepayable. But with the government desperate to reduce its own debt, and main Eurozone markets still sinking, the better alternative – an investment-led recovery – is unlikely to happen unless households can somehow keep spending. 
Alan Shipman 19 July 2013 

Alan Shipman is a lecturer in Economics at the Open University. He is responsible for the modules You and your money:personal finance in context and Personal investment in an uncertain world,  part of the foundation degree in Financial Services.

The views expressed in this post, as in all posts on Society Matters, are the views of the author, not The Open University.

Cartoon by Catherine Pain

The most far-reaching and comprehensive leadership development portfolio the NHS has ever developed was launched on 1 May. It recognises that improving compassion, and the quality of patient care, starts with leadership.

The leadership development programmes, one of which the OU and Hay Group were appointed to design and deliver, are the first set of national programmes to combine successful leadership strategies from international healthcare, private sector organisations and academic expert content. They are available to everyone in health and NHS funded care and provide a single, national approach to leadership development in order to support the next generation of leaders.

Who are the programmes for?

There is a programme for each level of leadership responsibility, providing targeted development for people from all backgrounds and experience levels who have what it takes to create a more capable and compassionate healthcare system.

So, if you are looking to develop the knowledge, skills, expertise, attitudes and behaviours to support the next steps in your personal leadership journey, then one of the academy programmes will be for you.

The OU and Hay Group were appointed to design and deliver the Mary Seacole programme – Leading care 1. It is aimed at people wanting to move into their first recognised leadership role and develop leadership skills that reflect the values of the NHS. The programme leads to an NHS Leadership Academy award in Healthcare Leadership and an accredited Postgraduate Certificate.

To find out about the full range of programmes being offered visit the NHS leadership academy website.
 

Posted 4 June 2013

The fourth event in the Business Perspectives series  is taking place on 11 July 2013 in London.

Entitled ‘Putting it into practice: the acid test of strategic change’ the change management masterclass will be led by David Wilson, Professor in Organisation Studies and Associate Dean for Research and Scholarship at the OU Business School (OUBS).  The event will explore change implementation and what brings about the best and worst from individual and organisational performance, during periods of alteration.

Joining David will be Phil Smith, CEO of Cisco UK & Ireland who will share his professional expertise and outlook on change management. Also contributing will be Dr Ben Hardy, Lecturer in Management at the OUBS, and  we’ll hear from other inspiring speakers from industry who will share real and relevant business insights into this topic.

The masterclass will blend presentations with group activities and Q&A sessions enabling participants to take practical tools and techniques back to their own professional environments and to improve their own change management processes and abilities.

The full programme will be announced in the coming weeks, however, to register your interest or to book a place please click here.

Visit the Business Perspectives blog for the latest insights and for further information from the previous Business Perspectives events.

Posted on 24 May 2013
 

 

Chris Lima, Managing Director of Simon Hegele Logistics, has won the Institute of Directors regional Chairman’s Award for Leadership in Corporate Responsibility.

He talks about how humbling it felt to win an award from such a prestigious organisation and the impact his MBA, the OUBS and alumni have had on the business: “The OU Business School and its alumni have been a major influence on the turnaround of the business primarily through the application of principles learnt during my MBA.”

Leadership in Corporate Responsibility
The award recognises the efforts made by Simon Hegele Logistics to engage with its local community. All the employees are able to take an extra day holiday each year to work with a charity, school or community organisation of their choice. The company has engaged with local schools and colleges, supporting students with learning difficulties by running workshops and supporting A level students in applying theory into practice as well as organising events to raise funds for charities.

Chris said, “We are a small company with only 64 employees. So our ethos, in regards to engagement with social activities, is like dropping a pebble into water, we try and generate the maximum effect with the few resources we have. We recognise the need to balance financial profit with social profit and contribute to our local community where we can. Winning the award from such a prestige organisation was a very humbling experience for me, but great recognition and a proud moment for our HR manager and all the other staff that have contributed to the company’s CSR efforts.”

Applying MBA principles
Chris joined Simon Hegele Logistics in 2007 following the successful completion of his MBA. Chris recalls that when he arrived at Simon Helege he was greeted with an unhappy customer banging on the table, a failed quality audit, a high turnover of staff and a loss making business.

The business today looks very different and Chris attributes a lot of this to the OU Business School, as he explains, “The OU Business School and its alumni has been a major influence on the turnaround of the business primarily through the application of principles learnt during my MBA. But also through the development of skills learnt by attending regular alumni events, bringing my team along to OU workshops as part of their development and further developing my own education with an accounting for strategy course.”

Having left school at 16 with a few CSEs Chris decided to join the army. Twelve years later after serving in the Falkland Islands, Northern Ireland, the first gulf war and Bosnia, he left the military but stayed in Germany and got a job with a German company.

“It was whilst I was working with this German company I recognised that my civilian career would benefit from some formal qualifications. After carrying out substantial research into different providers of management training, both German and English, I started studying with the OU in 2001. The OU was a clear choice both from the quality of their presentation, the materials and the accreditations and reputation that came with OU qualifications.”

As a regional winner Chris will go forward to represent London and South East in the UK Director of the Year Finals, taking place in October 2013.

(Chris Lima is pictured above with the awards' host Gyles Brandreth (left))

For more information:

Study with the OU Business School
Institute of Directors Awards

Posted on 16 May 2013

Further to the recent successful Leadership Masterclass, the OUBS are hosting an online webinar as part of their Business Perspectives series. This webinar, on Tuesday 14 May 19.00 – 20.00, will include all the highlights from the recent event, drawing on the contributions of our excellent speakers and inviting contributions from our online panellists.

The hour long webinar will introduce video highlights from the event and invite delegates to participate in Q & A and interactive polls to develop learning and understanding from the masterclass which focused on ‘Leadership in Tough Times: Confronting Complexity and Inspiring Hope’. Hear what our speakers had to say about the role of leadership in transforming complex organisations, leading growth against the odds, and inspiring optimism and wellbeing while the chips are down.

Our webinar panellists include Professor Jean Hartley, Professor of Public Leadership, OUBS; Dr Caroline Ramsey, Senior Lecturer in Management Practice, OUBS; and Richard Byford, Director, ForeVu Ltd. Facilitating this virtual event is Peter Wainwright, host of our two previous Business Perspectives webinars.

We’ll draw on the contributions from our masterclass and further develop these discussion points during the webinar, and we invite you to contribute via our live online polls and Q&A forums.

Register through our event link to save your place. 

Keep up to date with leadership as well as the business perspectives programme and join the community in the continuing discussions on the Business Perspectives blog. You can also see what delegates had to say about the event by following us on Twitter@OUBSchool

Posted on 1 May 2013

Around the world there are a number of professions in high demand. The BBC Business website has compiled a list of the top 20 most wanted professions internationally, and the countries that want them.

The list includes psychologists, physiotherapists and chefs, and there are case studies.

Is your profession there? Check it out on Global migrants: Which is the most wanted profession?

Children in Britain are more exposed to alcohol marketing than adults are, according to the OU's Professor of Social Marketing Gerard Hastings.

He calls for urgent changes to Britain's 'flawed' drinks advertising regulations in an editorial in the British Medical Journal, which is published to coincide with a major report calling for all alcohol advertising to be banned.

The editorial cites research by the Rand Corporation for the European Commission which shows that 10-15 year olds in the UK see 10% more alcohol advertising on TV than their parents do. When it comes to alcopops, they see 50% more.

And the situation is set to worsen as advertisers increasingly spread their messages via digital media, say Gerard Hastings and co-author Nich Sheron, clinical hepatologist at the University of Southampton.

Their comments coincide with the publication of Health First: an evidence-based alcohol strategy for the UK, a report which calls for a ban on all alcohol advertising, and minimum alcohol pricing. Gerard Hastings is a member of the strategy group which compiled the report.

To see Gerard Hastings discussing the proposed strategy with Professor Linda Bauld, University of Stirling, go to this link. 

Further information

Professor Gerard Hastings is a member of The Open University's Centre for Strategy and Marketing. He is founder/director of the Institute for Social Marketing and Centre for Tobacco Control Research based at Stirling University and The Open University. He is currently leading APISE, a major study of the effectiveness of alcohol control policies.

The British Medical Journal editorial Alcohol Marketing: Grooming the Next Generation was published on 1 March. Current OU students can access it via the OU Library using their Open University Computer Username (OUCU) and password. Its reference is BMJ 2013;346:f1227. For help in accessing electronic journals through the OU Library database go to How can I get access to a particular journal on the Library website.

Posted 26 March 2013

 

Image: Thinkstock

Hear Caspar de Bono (FT) and Sue McAllister (Prison Service) discuss their approaches to leading complex teams at the latest Business Perspectives event.

Following the success of the previous Innovation and Strategy events, The Open University Business School has now launched the third event in the Business Perspectives series, which focuses on Leadership.

The Leadership Masterclass will be held on 25 April 2013 at the Hotel Russell in London, and will be led by Jean Hartley, newly appointed Professor in Public Leadership at The Open University Business School. Alongside Jean and contributing to the event will be Caspar de Bono, Managing Director B2B at the Financial Times, Sue McAllister, Director General of the Prison Service, Northern Ireland,  Lubna Haq, Director of Healthcare Consulting, Hay Group and Sir Steve Bullock, Mayor of the London Borough of Lewisham.  

The event will explore leadership in the current climate, how best to lead for growth in challenging times and manage a team through cutbacks, loss and stress. We’ll discuss how leaders can inspire a sense of direction and moving forwards in difficult contexts, drawing on the insights and experience of our speakers and participants.

More information:

• For further details and information on the event, and to book your place, click here.
• Visit our Business Perspectives blog for the latest insights and for further information from the previous Business Perspectives events.
• Professor Jean Hartley

Posted 21 March 2013