I recently attended a major conference for mid-sized UK companies. The theme: Global business – a future vision. The audience: 300 high-quality UK firms, many with an international focus. I met a privately owned Yorkshire ice cream maker, the CEO of a Cheshire oil and gas services business, quite a lot of bankers, and some major-league economic commentators. This was world-class insight into the deep undercurrents shaping our world. Many are uncomfortable; all are important.
Here are some highlights:
- Europe is a patchwork of worryingly diverse economies. While Portugal joins Ireland and Greece in seeking an EU bail-out, Germany is reaping the dividends of supporting its manufacturing sector through the financial crisis. (The government propped up skilled employment, not institutions.) The fabled German Mittlelstand, still well financed and innovative, is now obsessed with opportunities in China and is gearing up production to meet the demand of the world’s future number-one economy.
- The next likely emerging markets will be: Mexico, Turkey, Indonesia, Egypt, Malaysia, Thailand, Colombia, Venezuela.
- You’ve heard it before, but it cannot be repeated enough: the post-financial crisis world is seeing a structural shift in the sources of economic growth from west to east.
- Brazil ticks every box as an emerging nation. As well as massive natural resources, it has 250m people.
- Poland has had a good financial crisis, with positive GDP growth throughout. Today, with a young, well educated population, it’s an increasingly attractive and competitive market.
- Mid-sized firms will increasingly need to wean themselves off traditional bank debt to finance growth. International capital markets are becoming an option – via instruments such as convertible and hybrid bonds.
- Best also not to rely on single banks; or single financial instruments. Diversify your funding sources.
- UK firms have to step up on international business. UK trade with Ireland is greater than with China. Nul points. Also, trade alone isn’t enough; UK firms must have the courage to invest in fast-growing, “emerging” markets. The Commonwealth may offer the chance to reverse Britain’s pretty abysmal international trading performance (outside the EU).
- The US is behaving like 16th-century Spain in attempting to devalue its way out of trouble. But, by attempting to shift its debt burden from west to east, it’s abusing its reserve currency status. It’s also enabling emerging Asian nations to become increasingly sophisticated producers, rather than simply low-cost manufacturers.
- With huge demand for commodities from high-growth countries, and instability in the Middle East, inflation looks set in for the long haul.
- Bahrain is the big story in the Middle East, just miles from the Shia-controlled oil fields of Saudi Arabia.
- The important trade-flows of the future will not be the traditional ones. Instead, focus on Asia-Latin America; Middle East to Asia; Asia to sub-Saharan Africa.
- The “paradox of globalisation” is that inequality is rising as global GDP rises.
- China itself wants to transform into a consumer society over the next 30 years, so is moving low-cost manufacturing to countries such as Vietnam and Bangladesh. Increasingly, it will focus on investments and industries that give China a technological advantage.
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