Home' Trinidad and Tobago Guardian : December 24th 2015 Contents Inside the cavernous manufacturing
facility of Castings Technology Inter-
national, on the outskirts of Sheffield,
England, a manager is giving an ani-
mated tour of the company s latest
automated techniques. His enthusiasm
really takes wing, however, when he lifts a
dirty plastic sheet on some scaffolding outside,
because this is the site of what will be the
country s first titanium-casting furnace.
Financed largely by the government, it will
be the largest such in western Europe, making
airplane components weighing as much as
1,100 pounds. The foundry should help to
maintain Britain s strength in its aerospace
industry, the world s second-biggest after
This is the high-end, most successful sector
of British manufacturing. CTI is one of several
firms on the campus of the University of
Sheffield s Advanced Manufacturing Research
Center, which helps companies from around
the world apply new technologies to manu-
facturing processes. Here in 2011 Chancellor
of the Exchequer George Osborne announced
a compact between government and the "mak-
ers" that was supposed to carry the new, shiny
British economy aloft.
The Catapult, as the government calls the
place, has attracted big names such as Boeing
and Rolls-Royce, creating high-paying jobs.
Its success is increasingly at odds with the
gloom enveloping the rest of British manu-
facturing, however. Despite the rhetoric since
the 2008 financial crash of "rebalancing" the
economy away from finance in favor of indus-
try, manufacturing s share of the economy
has not budged, and remains low by interna-
This year has been painful. Though the
economy has grown at a decent clip, the man-
ufacturing sector probably has contracted
slightly. Output slipped by 0.4 per cent in
October compared with the previous month.
Following three quarters of decline, the sector
is technically in recession. Output is 6.0 per
cent below its pre-crisis peak.
The steel industry has suffered badly. Thai-
land s SSI is closing its Redcar works with the
loss of more than 2,000 jobs, while India s
Tata Steel is cutting production at its plants.
Rolls has had an awful year, issuing several
profit warnings and prompting speculation
that its submarine business may be nationalised
to guarantee the future of Britain s nuclear
On December 16 its new boss announced
a management shake-up. Jaguar Land Rover
saw big falls in its exports to China earlier in
the year. EEF, a manufacturers organisation,
predicts further "weakening" early next year,
particularly in export orders.
What s going wrong?
One headwind is a stronger pound, which
makes British exports less competitive in for-
eign markets, though the sterling remains
weaker than before the crisis. The steelmakers
woes have been blamed on a global glut of
steel, caused by China s slowdown, which has
caused prices to plummet. Weaker growth in
emerging markets also has hit luxury carmakers
such as Jaguar Land Rover.
There is also a headwind turning into a gale:
the plunging price of oil. Hundreds of engi-
neering companies work for the oil-and-gas
industry based in Aberdeen, and many have
seen orders canceled as the industry has con-
tracted. The price of Brent crude fell below
US$40 this month, sparking more concern
There are deeper, structural problems, the
most persistent of which is Britain s inability
to get its tens of thousands of small and medi-
um-sized manufacturers to grow into larger,
prosperous exporters, as Germany has done
with its Mittelstand. Two-thirds of the man-
ufacturing firms in Britain that employ more
than 500 people are foreign-owned, suggesting
that indigenous management is poor. Too few
of the government s initiatives to stimulate
innovation at sites such as the Sheffield Cat-
apult percolate down to smaller firms.
Accessing research funds is complicated for
In any case, they are often unaware of the
help available, said Terry Scuoler, head of EEF.
He argued that more of the London-based
bureaucracy to help businesses should be
devolved to the regions, nearer to the man-
The shortage of skilled workers is another
persistent problem. One-quarter of engineering
companies report difficulties finding recruits,
slowing their expansion. The government has
been encouraging more apprenticeships in
manufacturing, and big companies hope that
the US$4.5 billion a year soon to be levied on
them to pay for these programs really will be
used for this purpose.
As the government draws up plans to spend
billions on infrastructure projects such as a
new high-speed railway and extra airport
capacity, British manufacturers are hoping
that some of the work will come their way.
"We can still make big, dirty things in
Sheffield," said Keith Ridgway, co-founder of
the city s Catapult.
That is not in doubt. Despite everyone s
best efforts, however, those big, dirty things
are making up no larger a share of Britain s
economy than before.
@2015 The Economist Newspaper Ltd.
Distributed by the New York Times Syn-
BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 24 • 2015
Christmas tends to be the season of goodwill
and investor optimism. A December 2014 poll
of fund managers by Bank of America Merrill
Lynch found that most expected stronger eco-
nomic growth and low inflation in 2015.
Investors were enthusiastic about equities, par-
ticularly in Europe, but negative on government
The consensus is often wrong, and this was
no exception. Not every bet soured, but most
predictions went in the wrong direction. Global
economic growth has disappointed once again,
although largely thanks to a poor performance
by emerging economies, rather than developed
ones. Forecasts have been steadily revised lower.
The Organisation for Economic Cooperation
and Development s latest estimate for global
growth in 2015 is 2.9 per cent, well below the
average rate of 3.6 per cent during the past 30
When it came to predicting the best-per-
forming asset class of 2015, investors had little
doubt. Two-thirds of managers picked equities
and only 4.0 per cent government bonds. Alas,
in dollar terms, equity investors have lost money.
As of December 15 the total return from shares
in the developed world, in dollar terms, was
-1.4 per cent. Government-bond markets also
have suffered a small loss, roughly on a par
with that suffered by equities. Those who put
their money into the benchmark 10-year Treas-
ury bond actually eked out a small gain.
Investors who opted for more exotic assets
generally did badly. Emerging-market equities
did terribly, with a negative return of 17.3 per
cent, including a calamitous 32 per cent drop
in Latin America.
Those who bought high-yield bonds also
lost money. To be fair, fund managers were
pessimistic about commodities a year ago and,
boy, were they right: Gold fell by 10 per cent
on the year and the Bloomberg commodity
index dropped by 26 per cent.
European and Japanese investors had a better
time of it than their American counterparts.
Euro-zone stock markets were up in local cur-
rency terms, as were shares in Tokyo. The
decline of both the euro and the yen against
the greenback means that these markets per-
formed badly in dollar terms, but it also means
that the international portfolios of European
and Japanese investors look more profitable in
local-currency terms---less so, of course, for
those who hedged their currency exposure.
For dollar-based investors this has been a
disappointing year. Even the good news---a
sharp fall in oil prices---has not been as helpful
as might have been expected. Lower gasoline
prices have acted as a tax cut for Western con-
sumers, spurring developed economies, but
they are hardly booming. Meanwhile the weak-
ness of energy prices has put a dampener on
investment, because commodity producers
were responsible for 39 per cent of global cap-
ital-expenditure growth in 2014, and has caused
some wobbles in the corporate-bond market.
Corporate profits also have been affected.
According to Société Générale, a French bank,
fourth-quarter profits at S&P 500 companies
are likely to have fallen by 3.6 per cent year
on year and, even without financial and energy
stocks, profits would be up by only 0.1 per
In the absence of higher profits, stock markets
need higher valuations if they are to generate
positive returns---but Wall Street started 2015
on a cyclically adjusted price-earnings ratio of
26.8, compared with the historical average of
16.6. It will end the year, according to Professor
Robert Shiller of Yale University in New Haven,
Conn, on 26.6.
Investor sentiment has taken such a dent
that, so far, December has failed to produce
the traditional "Santa Claus" rally that drives
up shares in the final weeks of the year. Perhaps
the Grinch has stolen it. The much-anticipated
tightening of monetary policy by the Federal
Reserve, announced on December 16, also may
have induced caution.
The latest Merrill Lynch survey suggests
that investors are not so upbeat about 2016 as
they were about 2015. More still think the
global economy will strengthen than weaken,
and only 7.0 per cent foresee a global recession,
but China s economy is a big cause for concern,
with a net 43 per cent of fund managers expect-
ing weaker growth there. Forecasts for profits
growth are at their weakest since July 2012.
@2015 The Economist Newspaper Ltd. Dis-
tributed by the New York Times Syndicate
Naughty, not nice: Dollar-based investors get coal for Christmas
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