<![CDATA[Business]]> <![CDATA[New perceptions]]> Transport Secretary Patrick McLoughlin must be thanking his lucky stars that he took up office at such a promising time for British infrastructure. Back in the depths of the financial downturn, just a few short years ago, his predecessors could scarcely have dreamt of presiding over such a potential upturn in the nation’s transport system.

Today, plans for HS2 are steaming ahead and the coalition government is putting together an Infrastructure Act to kickstart major projects amounting to £36bn. Innovative forms of project finance are expected, which should attract significant funding from overseas investors.

While I share Mr McLoughlin’s general optimism, there are, however, some big questions that may be easily overlooked in the broader public debate about Britain’s hoped-for transport renaissance.

First, how committed is the government to taking a more long-term approach to infrastructure planning? Can it escape the understandable short-term demands of party politics? We will hopefully hear more about the government’s broader approach in the forthcoming Infrastructure Act, or indeed in the 2014 Autumn Statement, expected in early December.

Second, and of equal importance, where are we going to find the army of highly qualified British engineers needed to build all these ambitious projects? The challenges of long-term infrastructure development go far beyond transport policy. Both phases of HS2 are unlikely to be completed before the early 2030s, for example, and if ministers are looking at projects with outcomes measured in decades, it is critical that we address an education system that is apparently failing to interest young people in engineering.

The UK faces a growing shortage of suitably qualified graduates. And the skills shortfall will continue to deteriorate, with an estimated 2.2 million entrants to the industry needed nationally over the next five to ten years. That is what it will take to satisfy a projected 40 per cent growth rate in a sector that already makes up nearly a fifth of the total UK workforce.

Slim chance, however, that our schools are well positioned to meet this demand when, according to industry surveys, only half of 11 to 14-year-olds would consider engineering as a career, and only around 7 per cent aspire to join the profession.

Efforts, admittedly, are being made, through initiatives such as Tomorrow’s Engineers, which seeks to incorporate engineering into school curricula. Yet the challenge goes, perhaps, far deeper than education policy. It touches the entire way in which the profession is viewed by the general public. Astonishingly, around 60 per cent of Britain’s engineers believe that the term “engineer” is not properly understood in the wider world. It is hard to imagine doctors or lawyers feeling the same level of misunderstanding.

Changing such deep-rooted perceptions will be no easy task. But such an important issue surely merits a reappraisal of our approach to education if Britain is to fully exploit the job-creating potential of long-term infrastructure projects. And that needs to start in the classroom. Initiatives to promote engineering ought to be considered as a core plank of curriculum planning, backed up by a campaign of mentoring and special financial incentives to promote interest in degrees.

As a first step, I’d call for a dedicated steering group of industry figures, education leaders and relevant government figures to tackle this important challenge.

Perhaps such a proposal could be integrated into the kind of independent commission on infrastructure proposed by Sir John Armitt, the chairman of the Olympic Delivery Authority and former chief executive of Network Rail? In many respects, Sir John’s thinking helps address my concern about Britain’s ability to benefit from all the advantages of a growing transport infrastructure. I support his proposals to focus our strategic thinking on transport requirements over the next 25 to 30 years, in a way which transcends party political boundaries.

As things stand, there is a risk of investment priorities being chopped and changed with every new government. Hence, how then can the big engineering employers plan for the future? How can the dependent supply chains look for any sustainable long-term revenue growth, recruiting to their fullest with real confidence that the demand for new jobs will be maintained?

With these uncertainties, one begins to see why engineering is struggling to win over potential recruits.

Unless steps are taken to shore up the long-term sustainability of the industry, the nation’s talented youngsters will continue to choose more reliable careers.

I have no doubt that our Transport Secretary can contribute much to this debate. But cross-party consensus is vital if we are to build a deep-rooted infrastructure policy that is truly fit for the future.

Tom Bishop is executive chairman for Europe, Middle East and India at URS

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<![CDATA[The site of the world’s tallest skyscraper is currently a melon patch]]> Sky City, a skyscraper in Changsha, China, was meant to be the tallest building in the world by now. Construction began on 20 July last year; it was originally meant to be finished by April.

In a startling display of optimism, its builders, Broad Group, claimed it could construct all 838m of the skyscraper’s frame in just 90 days, using a technique whereby steel parts are made individually and then stacked together. This is not quite as crazy as it sounds: the firm has successfully used the same technique to construct at 30-storey hotel in just 15 days.

Needless to say, 90 days has come and gone, and SkyCity has yet to reach the heavens. In fact, National Business Daily, a Shanghai newspaper, reported this week that the 20-30 per cent of the 100 acre site is now covered in water; the rest has been planted with watermelons and corn. That’s hard to visualise, so here’s a breakdown:

Construction on the site actually halted less than a month after it started. At the time Zhang Yue, the Broad Group’s chairman, told the New York Times that, despite the hiccup, he expected to finish the building in June or July 2014. He did, however, hint that all was not well, saying: "Ordinary people do not know the challenges and issues I face every single day. There are so many issues. 24 hours in a day are not enough for me to deal with all of them." 

One of these challenges must be keeping him up at night even now. The National Business Daily also quoted officials from a “local communal administrative committee”, who said that, a year on, Broad Group still lacks the permits it needs to continue building.

If Sky City is ever completed, it will stand 8.2m higher than Dubai’s Burj Khalifa, which is currently the tallest skyscraper in the world. The Kingdom Tower in Saudi Arabia is expected to stretch to 1000m, but that won’t be completed until 2019.

So Broad Group could still snatch the “world’s tallest” crown. Just give them 90 days. 

This is a preview of our new sister publication, CityMetric. We'll be launching its website soon - in the meantime, you can follow it on Twitter and Facebook.

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<![CDATA[A 3D printer is building a canalhouse in Amsterdam ]]> Building a house is quite the production. There’s the time, the expense, the dust, and the leftover building materials that hang around in the garden for years after the builders clear off.

Unless, that is, you print it. From its home in a Dutch shipping container, a giant 3D printer, the KamerMaker (“room builder”), is currently spurting out globs of molten bioplastic to form walls. The honeycomb-esque design leaves room for pipes and wiring to be installed later.

KamerMaker is the brainchild of Amsterdam-based DUS Architects, which is using it to build a 15m high, 6m wide house on the banks of a canal in the city. The house’s 13 rooms will be printed individually and slotted together to form each floor; the floors will then be stacked on top of each other to create the final building. The whole thing’s a bit like giant, inhabitable lego. Construction kicked off on 1 March, and the house should be finished in, er, three years’ time. You can see their rendering of the finished building above – just don't ask us what the weird ghost buildings on either side are about. 

So, if the process is still so slow, what exactly are the advantages of printing a house? For a start, there’s no waste, as the printer uses raw materials and only prints what’s needed; plastic waste from other industries can be recycled as “ink”. As long as a house can be printed near its final location, transport costs are low. And this prototype has no foundation, so that’ll cut down on costs, too. (Although a team is currently on the problem of how to stop it toppling into the canal once it’s constructed; the current plan is to fix it in place with long metal poles.) When it’s no longer needed, the building can be shredded and its materials reused.

Hans Vemeulen, the project’s co-founder, told UrbanLand magazine that he was inspired by our need for ever-faster building strategies: “We need a rapid building technique to keep pace with the growth of megacities.” This seems a little improbable given that this first project will take three years to complete, but Vemeulen claims rooms could be printed on the printer and installed in the space of 24 hours. The project’s website also claims that we’ll soon be downloading and personalising designs for our dream house, then sending them to a KarmerMaker contractor to print and construct.

DUS aren’t the first company to print out properties. Win Sun, a Chinese firm, claimed back in April to have printed 10 buildings in one day using concrete and waste materials, although local building regulations prohibit printing structures of more than one storey. Technologies like this could certainly be of use in constructing shelters after natural disasters, or during refugee crises. Whether the rest of us will ever be happy to live in a plastic house, however good the view of the canal, remains to be seen.

This is a preview of our new sister publication, CityMetric. We'll be launching its website soon - in the meantime, you can follow it on Twitter and Facebook.

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<![CDATA[Biz Stone: the Californian who flew the Twitter nest]]> The Google buses that circle San Francisco usually pick up employees to take to their Silicon Valley HQ, but in December they were held up in a series of protests by citizens disgruntled at the elite separatism they embodied. Naturally, the Google employees tweeted about their desperation. This, I imagine, was a problem for Biz Stone.

One of Twitter’s co-founders, Stone makes a strong case in his recent book, Things a Little Bird Told Me, for a “new definition of capitalism”, one in which money is made and consumers pleased but that also has “a positive impact on the world”. For Twitter to be used as the medium of the oppressor, even a Google-bound techie one, must have made his conscience prickle.

When I talk to him on the phone about the rise of social inequality, he seems resigned to it: the split “seems to be happening in a concentrated form around here [San Francisco] and then in a more diluted form across the US and potentially the world, and that may just be systemic, the way that we pursue our lives, the way that business works now”. Stone has played his own small role in this trend. Just before he left Twitter in 2011 he moved the company into a rundown part of San Francisco; the regeneration has been good for the area, but expensive, too – rents have flown up and Twitter got a $56m local tax break to do it.

Stone’s attitude doesn’t quite chime with the optimism of his book, in which he talks about how he learned from all his childhood knocks to become the bold innovator he portrays today. Growing up in shabby-genteel poverty in Massachusetts – he recalls the government-issued cheese his mother gave him – his first strike against the system was his no homework policy, which to him was productively rebellious but was no doubt tiresome to both classmates and teachers. The book moves on like this: seen in another light, what Stone thinks of as assertive could be coloured obnoxious.

After joining Evan Williams at Google, the pair left for the company that would eventually produce Twitter. Stone’s concrete contribution to Twitter beyond the “Follow” button and the site’s initial designs is unclear. The idea and technology were Jack Dorsey’s and the money Williams’s; Stone seems to have been a frontman-cum-guru, infusing the project with West Coast vibes, hence the book’s reach-for-the-stars tone.

Yet Stone clearly left some libertarian coding in Twitter’s DNA. Following Edward Snowden’s revelations about the National Security Agency’s Prism surveillance programme, a comprehensive trawl for personal data and communications, Twitter could proudly say that it had not co-operated. Stone clearly prized this response. “It’s very important,” he says, “that companies like Twitter continue to make it difficult for any government to request something that doesn’t belong to them.” Yet when he talks about how the rules of the internet are still being formed – “all of us are pushing on it and pulling on it and tying to figure out where it breaks and where it bends” – he seems to concede that we should expect more government interference.

As Stone is rushed off the call, I slip in a final question about whether we need to be worried about the diminution of freedom in the name of security. “Some of us should be. I’m just saying that I don’t worry about it every day because I focus on different things, but some of us should be, yes.” For someone whose book makes such play of his love of liberty, his equivocation seems #lame.

Josh Spero is the editor of Spear’s magazine

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<![CDATA[Get the frack off my land: reform of trespass laws explained]]> The government gave fracking companies the green light in the Queen’s speech this week, crucially removing the requirement for firms to gain permission from home-owners to drill under their land.

Although ministers claimed a final decision would depend on the outcome of a recently-launched public consultation, they signalled their firm intention to smooth the path for firms to exploit Britain’s shale gas reserve.

Much has been made of this permission waiver, which was first floated by the government in January, and which is likely to be included in an Infrastructure Bill during this Parliament.

The trespass exemption for fracking firms sits uncomfortably with most people’s intuitive interpretation of land ownership, but also their legal understanding of the matter too.

After all, the most common definition of land rights and a central principle of property law, states: “cuius est solum, eius est usque ad coelum et ad inferos”. 

Or, for non-Latinists, this translates roughly* as: “he who owns soil does so up to the heavens and down to the centre of the earth”.

Well, up to a point. Admittedly, the legal principle, which entered common law during the reign of Edward I, is still accepted in limited form today in modern law.

But there are many exceptions, including airspace, water, trees, plants and flowers, wild animals, and, crucially, mines and minerals.

So the implication, frequently appealed to in the current furore over fracking, that horizontal drilling under a private owner’s land is a unique exception to, or transgression against, the owner’s legal land rights is misleading.

That said, it is true that up until now, current laws of trespass have required fracking firms to gain permission from land owners to drill under their land. Drilling can extend up to 3km horizontally underground from a central well pad.

This has held true for all historical landward oil and gas exploration in the UK. Companies seeking conventional energy sources on land require a license from the Department of Business, Innovation and Skills, which grants exclusive rights to explore for and exploit onshore oil and gas.

The license has never included any rights of access, however, nor does it waive the need for the company to gain planning permission and any other consent needed under current legislation.

Further complications arise if a company wants to drill through a coal seam in search of gas – they need the permission of the Coal Authority, which has been the rights holder of all British coal since the valuable sedimentary rock was nationalised in 1994.

Which brings us to the other question of ownership of minerals in the UK. Firstly, to define minerals. According to the Town and Country Planning legislation, minerals are “all substances in or under land of a kind ordinarily worked for removal by underground or surface working, except that it does not include peat cut for purposes other than for sale.”

Essentially, a home- or land-owner holds the rights (which should be registered in the Land Registry along with details of surface land rights) to all the minerals in their land, with the important exceptions of gold, silver, coal, oil and gas.

Land-owners would still require planning permission, however, from a mineral planning authority to extract any of these minerals that they technically own from their land.

As for the ownership of oil and gas, the Petroleum (Production) Act 1934 granted all onshore rights to the Crown. A different act presides over rights in the UK Continental Shelf outside UK territorial waters, but again these are vested in the Crown.

So, the fact that the state owns any shale gas that might under your land is not out of keeping with rights to conventional fuels.  And while the proposed reform of trespass laws charts new territory for land-owners' legal rights, there are many other exemptions to these rights as they stand.

The nub of it is that fracking firms can already drill under your land without your permission. The new legislation will only make the process easier.

As Energy Minister Michael Fallon pointed out this week: “At the moment, a developer can apply to the courts for permission to drill a horizontal pipe a mile down underneath your house and needs to go to the Secretary of State to get that permission. We've got a solution that we think simplifies that."

 

 

* Four years reading for a classics degree well spent then

 

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<![CDATA[The bizarre secret of London’s buried diggers]]> I’ve made a discovery about what is buried under the swimming pools and basement conversions of wealthy west London. This booty is worth about £5m. More revealing, however, is another fact: this £5m was tossed away like small change tipped into a busker’s hat. It is not Nazi art, or plutonium that has been used to kill the enemies of Russian oligarchs. It is a fleet of diggers.

Beginning in the 1990s, buyers of London’s most expensive addresses began to feel a little hemmed in, even claustrophobic, inside their houses. Where could one take a swim, for example? Or watch a film on a cinema-size screen? Obviously, the idea of leaving the house to pursue such pastimes – and thus engaging with the human colour and spectacle that were once considered inextricably bound up with living in a city – was too ghastly to countenance. No, all pleasures had to be brought within the boundaries of one’s house, thus protecting the owner from the dangers of face-to-face interaction with normal civilians.

So, many of the squares of the capital’s super-prime real estate, from Belgravia and Chelsea to Mayfair and Notting Hill, have been reconfigured house by house. Given that London’s strict planning rules restrict building upwards, digging downwards has been the solution for owners who want to expand their property’s square-footage.

The challenge of adding new subterranean floors to London houses has become a highly lucrative business. The heavy lifting – or, in this case, the heavy digging – is usually contracted out to basement-conversion specialists. These firms discovered that it was reasonably easy to get a small digger (occasionally two) into the rear garden of a house on an exclusive 19th-century square. Sometimes they simply knock a hole in the wall and drive the diggers straight through the house. In other cases, the windows are so large that a digger can squeeze through without dismantling the bricks and mortar.

The difficulty is in getting the digger out again. To construct a no-expense-spared new basement, the digger has to go so deep into the London earth that it is unable to drive out again. What could be done?

Initially, the developers would often use a large crane to scoop up the digger, which was by now nestled almost out of sight at the bottom of a deep hole. Then they began to calculate the cost-benefit equation of this procedure. First, a crane would have to be hired; second, the entire street would need to be closed for a day while the crane was manoeuvred into place. Both of these stages were very expensive, not to mention unpopular among the distinguished local residents.

A new solution emerged: simply bury the digger in its own hole. Given the exceptional profits of London property development, why bother with the expense and hassle of retrieving a used digger – worth only £5,000 or £6,000 – from the back of a house that would soon be sold for several million? The time and money expended on rescuing a digger were better spent moving on to the next big deal.

The new method, now considered standard operating practice, is to cover the digger with “hardcore”, a mixture of sand and gravel. Then a layer of concrete is simply poured over the top. Digger? What digger? The digger has literally dug its own grave – just as the boring machines that excavated the Channel Tunnel were abandoned beneath the passage they had just created.

How many of these once perfectly functioning and possibly still serviceable diggers are petrified underneath central London, like those Romans preserved cowering in the corners of houses in Pompeii? Estimates vary. One property developer I asked reckoned at least 1,000; another put the figure at more like 500. In some of London’s newest luxury conversions, “sub-basements” are being tucked beneath the existing basement conversions. But developers are stumbling on a new kind of obstacle as they burrow deeper still: abandoned diggers from the last round of improvements.

On one level, the series of calculations that ends with hundreds of vehicles concreted underneath basements is entirely rational. On another level, it is a postcard from the front line of one of the craziest stories of our age: the global struggle to own elite London property.

In 1985, Michael Wood presented In Search of the Trojan War for the BBC. For many of us brought up in the 1980s, this was our first taste of archaeology. At times, the methodology seemed intriguing. Wandering around classical Asia Minor, the irrepressibly enthusiastic Wood would pick up a coin or trinket, or perhaps stumble on what might have been a foundation stone. He would then stare deeply into the camera and suggest something like, “Here, surely, lies the inner sanctum, the very essence of the seventh great Trojan civilisation.”

Three millennia from now, when Wood’s successors are excavating the dazzling ruins of west London, they will surely decipher a correlation between London’s richest corners and the presence of these buried diggers. The atrium of the British Museum, around 5000AD, will feature a digger prominently as the central icon of elite, 21st-century living.

What will the explanatory caption say? “Situated immediately adjacent to the heated underground swimming pool and cinema at the back of the house, no superior London address was complete without one of these highly desirable icons, sometimes nicknamed ‘the Compact Cat’. This metallic icon was a special sacrificial gesture, a symbol of deep thanks to the most discussed, revered and pre-eminent god of the age, worshipped around the world: London Property.” 

Ed Smith’s latest book is “Luck: a Fresh Look at Fortune” (Bloomsbury, £8.99)

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<![CDATA[With so many measures and initiatives, why is boardroom diversity taking so long?]]> There has been plenty of talk about the need for greater board diversity in recent years. With so many measures and initiatives being touted, why is it all happening so slowly?

Diversity should be an attribute of a balanced and capable board and, in itself, is not a new concept. However, calls for more diverse boards have grown louder in the wake of the 2008 financial crisis. Against a backdrop of bank failures and bail-outs, concerns about executive pay and aggressive tax planning, the public have looked at company boards and taken the view that their shortcomings might be connected to a lack of diversity in board membership. And it is not just companies. Other bodies, including governments, have faced similar scrutiny. Board diversity has become an issue for mainstream governance.

But how does diversity improve a board, or company's, performance? Corporate governance has historically emphasised the need for a balance between executives and non-executives to ensure that boards have the skills, experience, independence and knowledge required to enable them to carry out their responsibilities effectively. This might not be enough. To achieve long-term business success, companies have to take a wider view on how they interact with the markets in which they operate, and meet a range of sometimes conflicting responsibilities. They have to achieve a business purpose, behave in a way that is acceptable; meet legal and regulatory requirements and be accountable for their activities. Having a diverse boardroom can help.

For example, it helps for the company to be in tune with its key internal and external stakeholders, and see business opportunities and threats through their eyes. Board diversity can help boards understand their customer, supplier, employer and other relevant perspectives better. As companies become more international, this adds another dimension.

In order to behave in a socially acceptable way, the board may wish to consider the message they send about their company - if members look like each other rather than like society, for example, this can undermine people's confidence. Furthermore, diversity encourages rigour in the boardroom. Although a tightly knit group of like-minded people, with common experiences can take decisions quickly and efficiently, there is always the risk of groupthink. The problems here are well documented. An over-riding objective of sticking together may also mean that common limitations and biases go unchallenged. Better decisions are made by a board with members who are prepared to consider a wider range of alternatives.

This is easier said than done. We know that there are practical challenges. A board cannot accommodate an endless number of people representing different stakeholder groups in order to mirror society at large. Also, having a diverse board does not automatically mean that diverse viewpoints will shape company behaviour and decisions. Board members need to work hard to enable a robust process that allows different views to be expressed, heard and considered. They will still need to work as a team, serving the interests of the company and sharing responsibility for its decisions. It will take effort and commitment by board members to develop a mutual respect for each other and to recognise the value of an open exchange of diverse views.

The pipeline issue is also receiving more attention today. Building a pool of diverse and talented individuals across an organisation is important and often more difficult than introducing diversity through board appointments. Some challenges have deeper roots in institutions and society more generally, and cannot be resolved by a company alone. For example, if certain groups are fundamentally disadvantaged within the education system, it will be difficult in the short term for companies to identify suitable members of those groups for board positions, or to make sure that they are properly represented in the company's talent pipeline. But then again, the diversity debate is giving us an opportunity to raise public awareness of such issues.

There is no one-size-fits-all answer to the question of board diversity, and a company needs to reflect on its business purpose, the society where it operates and the stage of development it has reached. It will also take a lot of effort for companies to find ways to take account of many different perspectives, while keeping the board a practicable size. Diversity in substance, not just in appearance, brings benefits to boards.

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<![CDATA[Quids in: how Poundland conquered the British high street]]>

Pile 'em high, sell 'em low: the chain's winning formula stems from knowing exactly what we need. Photo: Amit Lennon

At the very back of the shop, far behind the stacks of Fairy Liquid and Dettol in the window, and the rows of pet food, confectionery and Tupperware, is Poundland’s book section: a couple of narrow shelves on which a few copies of a Kingsley Amis biography are strategically wedged between The Official Ollie Murs 2014 Annual and a self-help book on coping with childlessness.

In its early years, the whole of Poundland was as weird and wonderful as its bookshelves. But now, although it can still be relied on to stock some odd products (my recent finds include a lime-green bottle of aftershave called “The Edge” and a bag of “man flu” lozenges – the perfect passive-aggressive gift) it increasingly resembles a more conventional grocery or supermarket. The aisles are arranged logically, there’s a small fridge filled with drinks and snacks near the tills, most of the brands are recognisable and twice a shop assistant comes over to ask if he can help me with anything.

Poundland has smartened up its act. Its founder, Steve Smith, who opened the first shop in Burton-on-Trent in 1990 with a £50,000 loan from his father, likes to refer to the chain’s ISE, its “irresistible shopping experience”. You might snigger at the jargon but Poundland’s growth has been impressive. The firm trades through 517 shops across the country, and it plans to expand the number to 1,000. It sold £997.8m of goods in the year to April 2014 and on 12 March began trading on the London Stock Exchange, floating at £750m. How did a budget store in Burton-on-Trent selling (let’s face it) a lot of cheap junk grow so big?

Fixed-price shops and discount retailers have been the winners of the downturn. While sales at the big supermarkets are falling, the German budget stores Aldi and Lidl increased their sales by one-third and 14 per cent, respectively, in the third quarter of last year. Their success is triggering a price war on the high street: in March, Morrisons announced that it would invest £1bn in price cuts over the next three years, and Tesco and Asda quickly followed suit.

In 2008 the likes of Poundworld, 99p Stores and Poundland filled the gap in the market after Woolworths collapsed – and did so often literally, by taking over old Woolworths shops. My local Poundland, on Seven Sisters Road in Holloway, north London, occupies a familiar if depressing landscape, surrounded by empty lots, pawnbrokers and betting shops and standing opposite the distinctly scruffier MightyPound. (I went into MightyPound with the intention of interviewing a few customers for this article, but when I tried to snap a picture of a plastic handbag emblazoned with the friendly slogan “Keep calm and f*** off”, lying next to some furry toilet seat covers, a shop assistant barked, “No photos!” and ejected me.)

I can’t imagine this kind of customer service at Poundland. One intriguing aspect of the chain’s growth has been its success in attracting more affluent, middle-class shoppers. A friend of mine, a secondary school teacher, is obsessed with the place. “Guess where I got this?” she’ll say gleefully, waving a spiky plastic ball designed to stop clothes sticking together in the tumble dryer. The company boasts that a quarter of its shoppers are from the AB social group, broadly defined as those working in administrative and professional roles, or in mid-level management and above. Its most profitable stores are located in wealthier towns, such as Cambridge, Stratford-upon-Avon, Guildford and Bath.

We’re all becoming much less snobby about discount retailers. According to the research group Kantar, half of Britain now shops at Aldi and Lidl. They’re deliberately catering to middle-class tastes: at Christmas, Aldi sold lobsters for £5.99, award-winning champagne for £10 and cheap Serrano ham. With standards of living still below 2008 levels, middle-class shoppers are being more open-minded about where they buy.

Poundland doesn’t sell any £1 lobster or champagne – which is probably a good thing (I was not convinced by its faux-European champagne truffles) – but it has fought doggedly to gain social acceptance, among shoppers and mainstream brands alike, as Steve Smith tells me when we speak on the phone. His original business idea was inspired by his memories of helping out on his father’s market stall. His father kept a box on the stall for products with damaged packaging, all priced at 10p, and often that box made more money than anything else. This insight into the psychological power of fixed-price retail, married with the launch of the new £1 coin and his father’s decision to sell his cash-and-carry business and move to Majorca, lies behind his move in April 1990 to set up Poundland. When the first shop opened eight months later, it made £13,000 on the first day of trading. But Smith understood that these sales could be maintained only if he could encourage big brands to supply him with the goods to stock his shelves.

Smith says he faithfully attended buying shows for three years, but the sales representatives for major brands refused to meet him: they weren’t interested in filling the shelves of somewhere as low-market as Poundland. Eventually, he recalls, he “got a bit mad” at the stand for WD-40, the lubricant oil, and found himself agreeing to a price so high that Poundland would lose 3p on every can of the product sold. It flew off the shelves, and when WD-40 realised that Poundland had grown into one of its largest global retailers Smith was able to bargain down the price. He went on to strike a deal with Cadbury, and soon other big brands followed.

Poundland’s stock buyers are shrewd negotiators: not only are they able to bargain down prices, but they frequently talk companies into selling their product in odd-sized packages to keep the retail price under £1. While loaves of Warburtons bread sell at Tesco and Sainsbury’s in either 400 gram or 800 gram packages, Poundland stocks 600 gram loaves. Mainstream supermarkets sell Walkers crisps in multipacks of six or 12 but Poundland sells five-packs.

It also helps that these deals are seen as a useful way for companies to shift excess stock, which explains some of Poundland’s more unusual products: Smith cites among his victories the time he sold £1 golf clubs and a £1 six-foot desk. You might not think there’s much room for profit if you’re pricing everything for a pound, but Poundland makes bigger margins on its goods than higher-cost supermarkets. According to Kantar’s figures, Poundland averages a 36.9 per cent margin on its goods, compared to 25.7 per cent at Tesco and 24.5 per cent at both Sainsbury’s and Morrisons. “They negotiate really hard . . . they are ruthless,” says Simon Johnstone, an analyst at Kantar. No matter how great a bargain you think you’ve found on its shelves, the chances are that Poundland struck a bigger one.

Smith has benefited from the firm’s tough negotiating. He sold his business to the private equity firm Advent for £50m in 2002 (another private equity firm, Warburg Pincus, bought a majority share eight years later for £200m). Today, the 52-year-old, who has the broad physique and close-cut crop of a club bouncer, owns a 50-acre estate in Shropshire, complete with helipad and pet llamas. Does he still shop at Poundland? There’s a pause. “Yes, of course.” What does he buy there? Another pause. “Batteries . . . my wife bought some batteries there the other day.” Even Britney Spears shops at Poundland, he reminds me: she apparently visited the shop in October to stock up on matches. “They’re, like, the tiniest matches you’ve ever seen . . . they’re so cute,” the pop star told the chat-show host Alan Carr.

Discount retail in the UK is a profitable business: of the 1,000 people on the 2014 Sunday Times Rich List, those who made a fortune in this sector include Galen and Hilary Weston (who ran discount stores before buying up Selfridges in the UK, and are now worth £5.75bn); the Sports Direct founder, Mike Ashley (£3.75bn); and the Home Bargains founder, Tom Morris (£2bn). Many of them, like Smith, built their business from nothing and so have first-hand understanding of their cash-conscious customer base. Chris Edwards, who founded Poundworld, started out working on his parents’ market stall. The Lalanis, who launched 99p Stores, are first-generation Asian immigrants from Tanzania who moved to London in the 1970s after running a cash-and-carry near Lake Victoria. Even the current chief executive of Poundland is a self-made man. Jim McCarthy is the son of a window cleaner. He grew up in a council house in a Warwickshire mining village and rose through the ranks after joining Dillons Newsagents as a retail trainee aged 17.

McCarthy and the rest of the senior management at Poundland own 25 per cent of the firm, so they will have profited considerably from the flotation. What the sale of shares will mean for its shareholders and customers is a little harder to pin down. Was the decision by Warburg Pincus (which owned 75 per cent of the company) to take it public motivated by a desire to cash out while Poundland profits are at their peak? When the economy recovers, will middle-class shoppers retreat to the genteel, clutter-free aisles of Waitrose?

Weathering an economic recovery is, perversely, the first of Poundland’s three big challenges. The second is how to keep its products under £1, as each year of inflation puts more pressure on pricing. Finally it needs to compete in an increasingly crowded discount market: how much should Poundland fear Aldi, Lidl and even the 99p and 98p shops?

Unsurprisingly, the press team at Poundland brushed off my suggestion that shoppers might turn away as the economy improves. Perhaps they are right: all those Guardian articles promoting thrift, with their generous use of irritating terms such as “recessionista” and “credit crunch chic”, might have helped make it cool to be cheap. Hipsters now wear their charity shop purchases with pride, and self-consciously trendy restaurants serve foraged food and promote “head-to-tail” dining. Even the UK’s historic luxury stores want in on the trend. Fortnum & Mason, the London department store known for its overpriced preserves, fine wines and teas in Victoriana packaging, holds an annual Food and Drink Awards; last year it offered a special judges’ prize to Jack Monroe, who launched a popular food blog by posting low-cost, healthy recipes while struggling to feed her family on benefits.

Poundland declined an interview but agreed to answer questions by email, saying that consumer habits are “sticky and once customers experience the value on offer they are likely to keep coming back, even as the economy improves”. Perhaps, however, thriftiness will prove a fad. Simon Johnstone at Kantar said that, to hedge against a rise in disposable incomes, Poundland was investing in better-looking outlets and a wider range of groceries.

Alongside new lines of Poundland sandwiches and milk, you can expect more unusual packaging as the company struggles with changes in the economic climate. “Looking at the market in the United States, where the single-price dollar stores have been growing profitably for the past 60 years, we are confident that we can continue to manage inflationary pressures effectively for decades to come,” the company said in its statement. And yet, if you do cast your gaze on America, this year both McDonald’s and the fast-food chain Wendy’s have dropped their dollar menu, and a number of dollar stores have scrapped their fixed-price policy. At some point Poundland, too, will have to reconsider its “Yes! Everything’s £1!” slogan – or else sell single digestive biscuits and thimbles of Fairy Liquid.

But undoubtedly the biggest challenge will be to keep up with the competition. Determined bargain-hunters have never had more choice. A 2012 Channel 4 Dispatches documentary, Secrets of Poundland, exposed how the size of the firm’s packaging has shrunk over the years, how packets are labelled with offers such as “50% extra free” to convince shoppers they are getting value for money, and how some of its own-brand goods are of poor quality – yet the creative labelling appears to have had little effect on sales.

Many Poundland shoppers are too canny to be hoodwinked by the £1 label. The shoppers I chatted to at Poundland in Holloway weren’t mindlessly filling up their baskets with junk. Some, like Paul, who has been out of work for several years with a “gammy leg”, meticulously research the offers at their local discount shops. He recited the prices for two litres of milk from five local supermarkets (perhaps it’s not enough now to ask politicians to state the price of a pint of milk; a surer sign of the common touch would be an MP being able to recite the price of milk from several stores) and told me that today he’d buy his dog food at Poundland but milk at Morrisons. Robin, a retired former Tube driver, had visited all of his local pound shops in the past few days. “That’s what the government is telling us to do, to shop around,” he said. Poundland doesn’t only have to contend with price-cutting competitors, it needs to retain customers with little sense of brand loyalty who are willing to hunt around for a bargain.

As well as colonising the high street, pound shops are moving online. In February, Steve Smith launched his latest venture, in partnership with his former rival Poundworld, called poundshop.com – a garish orange website selling anything from £1 bras to baby rattles. He says the website is so popular that when it launched it crashed because of the high volume of web traffic. Within hours, 30,000 people had registered to use the site and Smith had made sales of £12,000. Once he begins reading out emails he has received from grateful online shoppers (“Thank God, we can’t carry all that stuff back on the bus, now we can!”) he is temporarily unstoppable. A week earlier, hereforapound.com also launched. It remains to be seen how well they do on the web in the long term – you’re less likely to impulse-buy an armful of cheap things when you’re sitting at your laptop – but the move suggests that they are increasingly catering to everyday shoppers rather than the bottom of the market.

Pound shops might be an eyesore on Britain’s high streets, yet unlike betting shops or pawnbrokers, their expansion could be a good thing for consumers: never before has the discount market been quite so intensely competitive. And although that bizarre bookshelf in Holloway seems a relic of the old Poundland, before private equity funding helped turn its quirky, cluttered stores into a relatively sleek operation, it also reflects the range of customers the shop now attracts.

Which means that even though Poundland is becoming increasingly common on high streets, it remains an unusual place. Where else will you find the long-term unemployed and overworked management consultants, fashion students and science teachers, diehard bargain-hunters and curious yummy mummies rubbing shoulders as they jostle for that final out-of-season chocolate Santa, ten-pack of Space Raiders or giant pot of penny sweets?

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<![CDATA[Do women really need extra help managing their money?]]> A picture has been recently circulating online of a bearded, tattooed man wearing nothing but a white vest. With one hand he pulls the front of the vest down to expose his hairy cleavage, with the other he tugs a triangle of white cotton over his crotch. He is mouth hangs open, his expression is slightly vacant, and needless to say he looks ridiculous. The image is a parody by the Bondi Hipsters of a GQ shoot with the Australian model Miranda Kerr, and it provided a neat, internet-friendly comment on the way in which women are used to sell men’s glossies.

Sometimes an easy way to expose sexism is to flip the genders round. This, at least, is why the Bondi Hipsters image sprung to mind when a new book by the Financial Times columnist Mrs Moneypenny landed on my desk. It’s called Financial Advice for Independent Women. No one would write a book of Financial Advice for Independent Men – the assumption is that adult men are inherently independent. Apparently only some women are, and they should buy a special book on finance illustrated with an old fashioned old lady's purse and with chapter titles like “Your Financial Goals (or Money is Not Boring)”.

But ignoring the unfortunate title, is Mrs Moneypenny right, do women need different financial advice from men? She gives a few sensible reasons why they might. For a start, women live longer than men – the average woman in the UK will live 2.8 years longer than the average man. Women are also more likely to be caring for dependents, whether they are children or older relatives. And globally they earn less than men:  in the UK the gender pay gap is 18.2 per cent (check out this interactive on how the UK compares internationally.) 70 per cent of the world’s poor are women.

Considered as a general group, women are under more financial strain than men – they have to support more people with less money – which suggests perhaps they do need different advice from most men. At the same time, in the UK only 11 per cent of senior managers in banking are women – and a male-dominated banking sector is less likely to be sensitive to the specific needs of women customers, whether they are single mothers, caring for older relatives, or simply struggling along on four-fifths of the salary of their male colleague. 

Mrs Moneypenny then gives an entirely ludicrous reason for offering women separate financial advice: they “lack confidence” and so “in the areas of finance – so set about by jargon and idiosyncrasies – it’s all too easy to become intimidated” – a sentiment that sounds dangerously close to suggesting that women are scared by long words. (If this isn't patronising enough, check out Mrs Moneypenny's advice on how to read a newspaper.) 

It’s become quite fashionable recently to point out women’s lack of confidence – it’s a running theme in Facebook COO Sheryl Sandberg’s Lean In, and in a new book called The Confidence Code by Katty Kay and Claire Shipman.  It might be true that a (rational and socially enforced) lack of confidence can prevent woman from successfully negotiating pay rises and climbing the greasy corporate pole, but that doesn’t mean they are less financially astute than men.

There's plenty of evidence to suggest that – even if they lack "financial literacy" (another popular buzzword at the moment) - women are better than men at managing money, and are reliable customers for banks. Charities and microfinance institutions often find it’s more effective to give loans or cash grants to women, because they are more likely to pay back the money and less likely to squander it.

Despite this, in the US, women are consistently charged higher interest on their credit cards than men. And although a UK government review of women and banking concluded in 2013 that there was no evidence of banks discriminating against women when it comes to accessing credit (refuting an earlier IPPR report), it did suggest banks need to do more to engage women. A lack of discrimination doesn't mean that the UK banking sector is attuned to women's specific financial needs.

Yet perhaps the gender divide in finance reflects a bigger, and more important point: financial advice is usually least available to those who need it most, whatever their gender. It’s more expensive to access cash if you’re poor in the UK, because more than 300,000 of the UK’s poorest live more than 1km away from a free-to-use cash machine.

The UK’s wealthiest have access to private bankers who can give them personalised advice, but the poorest have to make do with mainstream banking services with a box-ticking attitude towards giving out loans and with little time to consider individual circumstanes. Campaigners like Faisel Rahman of the UK-based microfinance institution Fair Finance believe the least well-off need the same personal attention as the wealthiest. His organisation lends to those who have been excluded by mainstream banks, and by assessing each individual’s finances on a case-by-case basis he can make loans that are affordable and life-changing for his customers.

Given that women are disproportionately more likely to live in poverty, a banking sector that is more responsive to the needs of the least-well off will also disproportionately benefit women. Confidence and jargon has very little to do with it. 

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<![CDATA[HFT: the latest scam devised by Wall Street and the City]]> Flash Boys, the new book by Michael Lewis, America’s explainer- in-chief of all things financial, is an account of “high-frequency trading” (HFT) – a technique developed by financial firms that deploys vast computing power to trade electronically on the world’s stock exchanges at extreme speed.

That may sound pretty esoteric. However, the book is generating an enormous amount of attention because it argues that HFT is the latest in the litany of scams that Wall Street and the City have devised to relieve unwitting investors of their money.

Whenever you hit Enter to buy shares through an online brokerage, Lewis shows, your order does not go straight to the stock exchange as you might think. Instead, HFT firms get a look-in first – and they use their superior speed to “front-run” your order by buying the shares ahead of time and then offloading them into the market at a marginally higher price. The resulting profits are tiny on any individual order but they run into the billions when you add them up. And they are made at your expense. Given how many people have a stake in the stock market these days with their Isas and their Sipps, this is certainly a disturbing revelation. Lewis deserves all the praise he is getting for exposing it.

Yet, to my mind, Flash Boys is even more important than this. For it exposes HFT as a prime example of one of the major problems of our age: the unintended consequences of technological innovation. Technologists, regardless of their political bent, tend to be idealists – it probably requires a healthy dose of idealism to take the risks required to innovate. But all too often, idealism can slip into naivety. The unstated assumption is that if new technology can be used to better the lot of the individual, it will. Everything will be OK so long as you “don’t be evil”.

Unfortunately, it doesn’t always work like that in the real world. The new technologies developed by well-intentioned young geeks in Silicon Valley and Old Street get grafted on to an economy that is still dominated by big, profit-seeking corporations run by shrewd old-economy dinosaurs. Innovation is driven by the admirable belief that new technology is a tool for the emancipation of human creativity and self-fulfilment. Less thought is given to what might happen after, say, News International buys your app.

The point is more general than just the compromises that come with commercialisation by big business. What the technologists are missing is the crucial importance of the social context in which new technology is deployed and, above all, the role of that most reliable of social scientific regularities, the law of unintended consequences.

The canonical problem is that we design some new technology to solve a problem but in doing so we make a crucial assumption: that everything else will remain unchanged and in particular the way that people interact, the social context, will be unaltered. What happens is that behaviour adapts. The technology succeeds – the old problem is eliminated – but new problems arise.

An example that is almost guaranteed to have infuriated anyone reading this at some time or other is the computerisation of personal credit scoring. Companies such as Experian or Equifax apply information technology to the problem of deciding who should and should not get loans.

In an economy where mortgages and mobile-phone contracts are considered essentials, the decisions that their computers churn out are important. Their claim is that their algorithms are not just cheaper than the Captain Mainwaring-style bank manager of old but also more objective and therefore fairer.

If it were true that people’s behaviour had remained constant after the introduction of computerised credit scoring systems, that might be the case. But in reality, people game the system. Personal finance articles and chatrooms warn them that cappuccinos and city breaks flag them for a downgrade, so they take a breather for three months before applying for a mortgage – and then they start up again as soon as the ink on the contract is dry.

It is no different from the snag that the Soviet Union discovered with a planned economy. You could solve the problem of low productivity – at least as the bean-counters captured it – with more demanding targets. The underlying disease of demotivation proved more resilient, however. As an aphorism of the period had it: “They pretend to pay us and we pretend to work.”

The story that Lewis tells of HFT is a perfect example of the law of unintended consequences at work in the technological transformation of the stock market, one of the most basic institutions of our capitalist economies. The computerisation of stock exchanges that began in 1986 promised to make them simpler and more efficient. The world of barrow-boy traders bellowing at one another in the pit and the old-boys network of City stockbrokers was abolished in favour of anonymous electronic trading on a virtual exchange.

The intention was to stop investors being ripped off by an uncompetitive industry. However, this assumed that behaviour would not adapt. The stockbrokers and pit traders did hang up their red braces and garish blazers but a new generation of rent-seekers emerged in their place. As Flash Boys documents, the fixed commissions levied by the stockbrokers of yesterday were replaced by the cuts taken by the HFT firms of today.

So, what is the lesson to be learned from Lewis’s latest blockbuster? Well: this past week, the government’s ambassador for digital industries announced that schoolchildren should learn less French and more code. Maybe. But the lesson of the burgeoning HFT scandal is that the naive application of technology can be a uniquely dangerous force. We should be teaching our budding technologists not just code – but the law of unintended consequences.

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<![CDATA[New employment data suggests an approaching uplift for the UK economy]]> The wisdom of the Bank of England’s decision to move the goalposts on forward guidance, away from the single metric of the ILO 3-monthly average unemployment rate to a more holistic range of economic indicators, has been brought into stark relief by the latest employment data, released on 16 April.

The headline rate fell unexpectedly to 6.9 per cent, its lowest level since Feb 2009, from 7.2 per cent last month, and well below the expectated 7.1 per cent. The more contemporaneous Claimant Count Rate, fell to 3.4 per cent in March from 3.5 per cent in February, presaging further falls in the ILO rate next month and taking this measure to its lowest level since November 2008 - the pit of the financial crisis.

The unemployment rate for the single month of February was 6.6 per cent, meaning that the decline since November’s 7.4 per cent was the largest 3 month fall since 1992, and an unemployment rate of 6.6 per cent is getting uncomfortably close to the Bank of England’s own NAIRU estimate of 6 to 6.5 per cent, so that one of her new favoured indicators, the amount of labour slack in the economy, may be disappearing rather quickly.

The last BOE Quarterly Inflation Report, in February, forecast unemployment at 6.9 per cent at the end of Q1. Well, we’re already there and sure to be below that if March’s single month reading stays below 7.0 per cent.

However, there are pockets of less impressive news buried within the report. Average Weekly Earnings for February, now very closely watched by the BOE as a leading indicator for inflation, disappointed a little at 1.7 per cent, up against an expectated 1.8 per cent, but were still up 1.4 per cent in January - and I would expect further increases over the coming months; for the first time in nearly six years, weekly earnings have finally overtaken inflation. There is still some way to go however; as at Q4 real wages were still 6.5 per cent below their pre-crisis peak. The average work week fell, somewhat inexplicably, from 32.2 hours to 32.0, which won’t impress the Monetary Policy Committee.

Finally, although the rise in employment, at 239k, and in the participation rate, from 63.6 per cent to 63.8 per cent, both looked like great news, one can pick holes and point to the composition of the 239k gain; only 45k were full-time employee jobs and self-employment grew by 146K in the three months to February. However, it looks like number of people working part-time because they could not get a full-time job has peaked, which is very healthy.

All-in-all, these statistics alone, nor the recent raft of other encouraging indicators such as house prices, PMI’s, Industrial Production and Retail Sales, will not yet be enough to break the MPC’s unanimity when it comes to keeping rates at 0.5 per cent, but if the trend continues - with annualized growth approaching 4 per cent, then the minutes of June or July’s MPC meeting could make very interesting reading.

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<![CDATA[Job vacancy: Staff writer, Progressive Media data project]]>  

Staff writer, Progressive Media Data Project

 

Progressive Media, the parent company of the New Statesman, is launching a spin-off website. 

We are looking for a staff writer for the project who can find stories in proprietary data and bring them to life for our readers. This role would suit a recent graduate or someone looking for their first or second job in journalism.

The right candidate will be:

  • Highly numerate and not afraid of statistics
  • Able to write clear, concise and engaging copy
  • Interested in exploring and explaining how things work
  • Comfortable with the idea of using data visualisation tools

Experience using web content management systems is preferred but not essential.

This role will be online-only, and will not involve writing for the New Statesman magazine or about Westminster politics.

If you are interested in applying, please send an email to helen@newstatesman.co.uk with the subject line “Data project – application”. Please include a covering letter detailing:

  1. A brief biography with any relevant experience, or a fuller CV if you prefer (as a PDF or Word document)
  2. 250 words on what data-driven stories you have enjoyed recently, and how the statistics and text elements worked together

Please do not include any other attachments (eg cuttings); everything should be in the body text of your email.

The deadline for applications is 12 noon on 6 May. The role is a paid full-time position based in our office in Blackfriars, reporting to the project’s editor, Jonn Elledge. Salary dependent on experience.

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<![CDATA[Start-up finance and the Brazilian favelas]]> Parked under a tree in a cul-de-sac off the gleaming Avenida Brigadeiro Faria Lima in São Paulo, the strip that is home to Google’s new Brazilian headquarters, Deocleciano Tolentino sets out his wares, popping open the boot of his car to reveal a spread of cheeses, salamis, nuts, home-made jam and bottles of honey and cachaça. The epitome of a microempreendedor (micro-entrepreneur), Tolentino is one of a generation of Brazilians whose small businesses in the informal economy were regularised in a programme of tax reforms that began in 2003.

Twenty yards down the road stands a building whose beanbag-lined hallways and ping-pong table mark it out as an archetypal start-up HQ. Mansão Startup (“the start-up mansion”) was co-founded in September 2012 by Florian Hagenbuch of the online print-on-demand service Printi.

Hagenbuch, a 27-year-old German brought up in Brazil, left his job as a financial analyst in New York to set up in business in São Paulo in 2012. Printi was one of a wave of Latin American start-ups in the early-2010s which brought an influx of young, foreign would-be entrepreneurs into Argentina, Chile, Mexico and Brazil in particular. Hagenbuch is predictably upbeat about the opportunities for businesses like his, particularly given the enthusiasm with which Brazil has embraced e-commerce.

Yet it is not easy to infuse an emerging economy with start-up culture. Brazil’s formidable bureaucracy can make sorting even basic documentation expensive, time-consuming and unpredictable. As Hagenbuch says, “In places like London, you just start work. Here, it takes around six months to get going legally.” Most daunting of all is the labour legislation. “No matter how careful you are, if there’s a problem, people can sue,” he says. “The risks are huge and you are personally liable.”

Start-Up Brasil, the federal programme launched last year, shows how fragile new firms can be. A fifth of the 62 companies chosen in the second round of selections in December 2013 have already dropped out. The reported reasons include demands for 20 per cent of a company’s equity in return for investment.

Such statistics explain why some micro-entrepreneurs are “bootstrapping” – rejecting outside finance. Since Bruna Figueiredo launched her jewellery firm in 2010, she has held back from seeking external investment. She is targeting what is often referred to as Brazil’s “new middle class” but might be more accurately described as a growing, newly solvent, formally employed working class. “Our customers come from all walks of life,” she says. “Some of them are living in semi-favelas: we can tell from the addresses.” Her jewellery starts at R$200 (£53) for tiny, wafer-thin religious pendants in 18-carat gold – “We have all the saints, even the really obscure ones” – and goes up to R$5,000 (£1,300) for diamond bracelets and earrings. “They can pay in instalments, and it’s e-commerce,” says Figueiredo. “People don’t need to feel intimidated by a fancy storefront.”

Unexpectedly, the biggest-name foreign start-up in recent months is MoneyGuru, modelled on Britain’s MoneySuperMarket and backed by George Mountbatten, the Marquess of Milford Haven.

Hagenbuch confirms that despite the rise of a new, richer working class in Brazil, the tech scene is still dominated by people with wealth. “Creating a start-up has become a real career alternative,” he says. “They used to dream of being bankers.” 

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<![CDATA[UK businesses have plenty of cash to spare, and they're spending it on the young]]> Companies are awash with cash. They’ve been hoarding a war chest since the financial crisis hit in 2008. It has achieved ridiculous proportions; in the US and UK corporate bank balances have doubled in size, Japan has recently seen a spike while Europe has also built a buffer, if not to the extent of other regions. However the signs are that companies are beginning to deploy this money – especially in the UK.

There are the obvious things like share buy-backs, and mergers and acquisitions, that you can do with excess corporate money, but more encouragingly companies are beginning to think in a new way about the next generation of people working in their businesses. Increasingly, a new form of sponsorship is emerging. In moves not seen for a generation, companies such as the accountants Deloittes are hiring young people into their businesses as an alternative to going to university. Business is beginning to invest in young people, filling the gap left by universities that offer courses of doubtful relevance at prices that are just too high.

The general public is smart enough to detect the whiff of corporate insincerity in any charm offensive – tokenistic community-based projects will be seen through as box ticking Corporate Responsibility initiatives that offer little lasting relevance. Businesses will only truly “put something back” if given the right incentive to do so and there is nothing like the profit and cost motive to do that especially in the new era of shareholder activism. The Labour Party’s newly announced policy to “tax the bankers” to provide youth training schemes in that respect, once more, misses the mark. It misses the mood of the day, that there is a new dynamic at work that will see companies investing in young people because it makes business sense.

Sadly, the negativity towards business identified in The Trust Deficit: After the Crash by the research group Populus for the legal firm DLA Piper, is reinforced by mainstream economists like David Blanchflower and politicians like Ed Miliband. Writing in The Independent this week Blanchflower indulges himself in yet another populist diatribe which offers little except the tired observation that some people have more money than others and because of the way unemployment in this downturn has hit the non-graduate pay grades, the income gap between them and graduates has increased in the past five years.

What Miliband and Blanchflower both miss is that if pay structures in certain parts of the economy aren’t sustainable or aren’t valued then they won’t last – they will wither and die of their own accord. It does not need a tax – it does not need a law for that to happen. Besides, with the economy picking up, they are starting to sound somewhat behind the evidence. We don’t have an incomes policy and we don’t, thank goodness, have a limit on what any individual can earn in our country and long may that last. Treating the lawful activity of whoever it is in society who earns super-normal money (which in turn feeds the Exchequer) whether that is a footballer, pop star, entertainer, private company director, public company director or, yes I’m going to say it, a “banker” as immoral is an otiose argument which only has currency at the trough of the economic cycle. That moment has passed.

In a capitalist system, like ours, you will always have cycles. Capitalism is, in that sense, inherently unstable and liable to peaks and troughs – Karl Marx appreciated that. This requires the existence of a safety net to catch people when they fall. That is the implicit social contract we are involved in. But in this downswing a new part of the safety net has emerged – one which protects talented young people from the penalty of government education policies. It is one which will see companies deploying their cash reserves, taking on a positive role in shaping the next generation of workers by helping them over barriers to entry into higher earnings via education no matter their background. Getting the administration – and opposition – of the day to cooperate with and praise that idea is much more useful than replaying tired class war ideas that send the wrong messages to our young people about the possibilities of work and what business contributes to society.

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<![CDATA[Sponsored post: Creative ingenuity, the building block for entrepreneurial success]]> History shows us that the Schumpeterian winds of creative destruction lay waste to the old and present opportunities for the new. It is creativity that sees opportunity, enterprise that exploits opportunity, and business ingenuity that delivers innovation to customers. Creativity is therefore an essential but often overlooked key ingredient in the recipe of improving economic advantage.

In the UK, the tough economic conditions have illustrated an increasing propensity for us, as a nation, to be more enterprising. Business formations are up, with currently 4.9 million private sector businesses, an increase of around 1.5 million since 2000. 4.7 million of these businesses are micro; started by both innovation-focussed entrepreneurs – developing new products and services, and necessity entrepreneurs – those which attempt to create wealth through unfavourable personal economic conditions. Also, an encouraging trend is the growing number of enterprises ran by female entrepreneurs, with around 40% of SMEs led or jointly led by women. Systemically, we are not quite as enterprising as our US counterparts, but it illustrates an increasing capacity for entrepreneurship through economic adversity, certainly beyond many European countries. In fact, in the UK’s North West we have seen an increasing appetite for business formation, as the only region to have double-digit growth in the number of businesses formed between 2012-13.

Supporting and sustaining a more enterprising culture is essential to our long-term economic prosperity, and universities have a key role in this arena. Mirroring a growing enterprise culture in the UK, over the last two years Salford Business School has seen around a 45% growth in enquiries, support, and knowledge exchange projects that focus on SMEs, including charities and social enterprises – numbering some 3,500 p.a. This is coupled with graduates increasingly seeing start-ups or local SMEs as attractive employers – offering a diverse range of projects and responsibilities. More than 40% of our students go on to work for SMEs, which also illustrates a growing receptiveness for SMEs to shape the skills and attributes of graduates, when historically this used to be the preserve of larger businesses. This requires universities to adapt their educational content to deliver the right technical, and often specialist knowledge, but also develop distinctive competencies in students that are valued by employers – enabling graduates to make a more immediate contribution to an SME’s success.

At Salford Business School we have taken several steps to support this. One, which is proving particularly attractive to businesses, are our student projects, in which a student (or group of students) work on a pressing issue where a company wants a fresh perspective, with the aim of yielding interesting insights. With the support of an academic in an appropriate field, the student explores creative solutions – something they are naturally good at. Students are also strong in basic research, having the time and techniques to mine data, with the aim of seeking patterns or making connections beyond what may be immediately obvious. However, the bootstrapped nature of SMEs requires some ingenuity – finding a solution that can be implemented with very limited funding or investment. The Business School has many examples of projects which have brought a wholly different solution to a company’s issues. Examples include a media campaign for Morson Group Ltd, which achieved over 100,000 views on their YouTube channel for 22 video clips produced. ENER-G PLC, ran an internal awareness campaign, culminating in a training video featuring a Johnny Depp lookalike.

Salford Business School works with companies both in the UK and overseas for student projects. If you are an SME, or indeed a large company, and would like a fresh perspective to your businesses challenges, then please see www.salford.ac.uk/business-school/business-services

Dr Kurt Allman,  Associate Dean Enterprise & Engagement

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