This double-dip looks like a trade problem

Britain is importing more and exporting less, and that's where the recession stems from.

A lot of people – myself included  – were surprised by the economic contraction announced today. There had been lots of positive noises from the various surveys and data releases since the New Year, and the expectation was for positive (if meagre) growth. Retail spending has increased strongly in the new year, employment has picked up slightly, and the various surveys of businesses all suggested that the economy was growing slightly.

But there was one big problem: trade. It was export growth that propped up the UK economy during 2011 – without exports, the economy would have shrunk by 0.8 per cent over the year. However, UK exports slipped back at the start of 2012, and this may have been enough to tip the economy into recession.

Exports are key to the UK’s economic recovery, because conditions in the domestic economy are so strained. Consumer spending, which underpinned economic growth during the goods years, is being suppressed by falling incomes and stifling household debts. Add in the cuts in public spending, and the banks’ failure to lend money to the real economy, and it’s clear that the domestic economy is unlikely to lead us into recovery. Business investment, another potential route out of the crisis, is being crippled by a lack of confidence and weak demand. The UK economy is caught in a demand trap, and the only easy way out of it is to look overseas.

This export-led approach is at the heart of the government’s economic strategy. The government’s fiscal plan has enabled the Bank of England to keep interest rates low, and pump more money in through quantitative easing. These low interest rates have not been enough to boost consumer spending or investment, but they do have one very helpful side effect – they keep the pound weak, which boosts exports. In principle, this is a decent strategy, but the latest figures suggest it may be unravelling.

The latest ONS trade stats show that the UK’s trade deficit worsened dramatically in January and February, after having improved through 2011. Rather than helping to prop up the economy, trade has started to act as a drag this year, as imports grow and exports shrink. As a result, some of the contraction in the economy came mostly from the production sector, which tends to export more. And perhaps this trade problem shouldn’t come as a surprise, because the pound has been steadily appreciating over recent months. This makes exports more expensive, and imports cheaper – and suggests that the government’s efforts to keep the pound weak are no longer working.

This trade problem may also help to explain how the economy could shrink if retail sales grew. As it turns out, an awful lot of what we buy in the shops is imported, whether its clothes from East Asia or cars from Germany. If the increase in retail spending has helped fuel a rise in imports (or if the imports, such as petrol, have become more expensive), this will not help the economy grow. That isn’t just bad in the short term – it suggests our economy is heading in the wrong direction altogether, and certainly not re-balancing. We will have to hope that this trade problem turns itself around, or it will be even harder to get out of the economic slump.

There is one more point to address: the biggest factor in the GDP contraction was construction. But this should surprise no-one – we already knew that domestic spending was going to be weak, that the government is cutting back investment, and that there are questions over how reliable construction figures are anyway. The problem is that, up until now, these domestic weaknesses have been compensated for by export growth. If that stops being the case, the economy could be in even more trouble, and there will be even more onus on the government to come up with another economic strategy.

Cranes help build the Bishopsgate Tower in London, but construction has fallen flat nationwide. Photograph: Getty Images

Andrew Sissons is a researcher at the Big Innovation Centre based at the Work Foundation.

Photo: Will Ireland
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Rock solid-arity: how fans and bands helped save Team Rock's music magazines

“It was purely helping out friends in a time of need.”

A little over 25 years ago, a journalist friend let me in on the secret of publishing success. He cut his teeth in the Sixties as an editor in the Yippie underground press, wrote for Rolling Stone, Associated Press and the Chicago Sun-Times, then went on to teach at one of America’s most prestigious journalism schools.

The big secret, he had concluded, was community. No more, no less. Get to know your community and serve it well.

A quarter of a century on, it’s sometimes hard to remember what community looks like in newspapers and magazines. Carefully crafted pages have been obscured by a haze of clickbait, engineered to sucker everyone and anyone into donating a drive-by page view for ads. Community has given way to commodity.

But occasionally, there are glimpses of hope. Six months ago, TeamRock.com, built around a group of specialist music magazines including Classic Rock, Metal Hammer and Prog, went into administration.

The Christmas closure came brutally quickly. The Scottish Sun reported that stunned staff in the company’s Lanarkshire headquarters were told they had been made redundant “as a joiner changed the locks on their offices”. In total, 73 staff were laid off; nearly 30 in Scotland and more than 40 in London.

At the close of 2016, the future for the Team Rock brand and its stable of magazine titles was bleaker than a Black Sabbath album. But last month, in an extraordinary reversal of fortunes, TeamRock.com was named the most influential rock music website in the world.

Bargain-basement buy back

Just a fortnight after its shock closure, the brand was bought by former owners Future Plc. In a no-brainer deal, the Bath-based publisher re-acquired the three magazines it had sold to Team Rock’s founders in 2013. It bought back assets sold for £10m at the knockdown price of £800,000 with the bonus of TeamRock.com and Team Rock Radio. The deal rescued large parts of the Team Rock operation – but its soul was saved by the rock and metal community.

Oblivious to any discussions going on to rescue the magazines, readers, music fans and bands came together in a stunning display of loyalty. Hearing that Team Rock staff wouldn’t be getting paid their Christmas wage they took to social media to pledge their support and raised almost £90,000 for redundant staff.

Ben Ward, the organiser of the crowdfunding campaign and frontman for heavy metal band Orange Goblin said he started the appeal with no thought for the business. “It was purely helping out friends in a time of need,” he explained.

He had read all three Team Rock magazines for years, socialised with their staff and promoted his own and other bands in their pages. “To think of a world without any of those magazines – it was devastating,” he said.

The response to the campaign brought him some cheer, with members of bands such as Queen, Rush and Avenged Sevenfold all posting about it on their social media pages. He added: “The whole Christmas period, my phone just wouldn't stop beeping with notifications for another donation.”

Show of solidarity

Though the fundraiser blew up all Ward's expectations, beating his initial target by more than 400 per cent, he didn't seem completely surprised by the scale of the response.

“Heavy metal and hard rock, people that are into that sort of music, we've always been sort of looked down upon. We know it's not commercially the done thing, we know it's not the norm to walk around with long hair and tattoos and dirty leather jackets. But when you see a fellow metal head in the supermarket, you always give them an approving nod. There's a kind of solidarity.”

While favourable capitalist arithmetic has kept the presses rolling – and the online servers going – for Team Rock, it was the music community – empowered by social media – who delivered the real resurrection. With a combined Facebook following of more than 3.5million and a total social media audience of almost five million, it was no surprise TeamRock.com was soon number one in its field.

“What's brilliant about this is that it's based on what music fans share with each other,” explains editor-in-chief Scott Rowley.

TeamRock.com became the most influential rock site based on social media sharing, and came fifth in the top 100 sites across all music genres. The site above it is a hip-hop title, again featured for the strength of its community, according to Rowley. “Those people really know what they're talking about, they want very specific content, and they're not getting served it elsewhere,” he said. “When they get it, they love it and they share it and talk about it and that's their world.”

Responsiblity

Following the outpouring of support for the rock magazines, Rowley now feels a heightened sense of responsibility to do “the right thing” and steer clear of cynical decisions to get clicks or put certain bands on the cover just to sell copies. He believes future success will come down to trust. “Sometimes that feels precarious, but equally I think we're in good hands,” he explains. “We're a business, we've got to make money, but we know what smells fake and where the limits are.”

Zillah Byng-Thorne, CEO of owner Future, recognises the need to balance the realities of running a listed company with the authenticity needed to maintain trust. “What Future is interested in is the passion that underpins specialist media,” she says. “I don't really mind what your passion is, what's important is that it's a passion.”

“No one is sitting around thinking, 'I wonder what bands sound like Thin Lizzy?',” says Rowley. “We're much more a part of their lifestyle, interrupting their day to tell them someone’s just released an album or announced a tour.”

“But it doesn't have to always be about fishing for clicks,” he adds. “I remember [Classic Rock online editor] Fraser Lewry saying, 'Sometimes on social we should just be being social'.”

Being social. Listening. Contributing to the conversation. Sharing the passion. That old-fashioned notion of serving the community. It seems Ward would agree, as he offers the new owners of the magazines he helped to save some advice: “Don't make the same mistakes, investing in things that weren't really necessary from the magazine’s point of view. I'm in no position to tell anyone how to run their business, but on behalf of the rock and metal community…keep it interesting, keep it relevant.”