Welcome to the FifeServe Project
The Spiral of Recession
I'm guessing regular visitors to this web site have been wondering why this issue is so late and who so little seems to have changed. By way of apology, I can merely remind you how this website is a voluntary effort updated whenever possible and where other commitments take priority. It's actually annoying to me and my friends that we've been so inundated with pressing work issues excluding an update until now and knowing so little can be included at this time. Having said that, we've just received new material from a number of new writers and had fully planned to include this by now. Hopefully, the text below will explain the delays and much more.
seems to have changed this month. In truth, we had planned to have quite a lot of new stuff in here but events as described below may help you realise that we've been busy and not always for the best of reasons. In the text below, this writer will outline events of the past few traumatic weeks and more.A couple of years ago, and not long after this website began, I was talking with a businessman and who had read the earliest version of the 'global history zone' and had especially noted the chapters about the twentieth century and increasingly dire performance of British companies in the post war period. Having recently retired on grounds of ill health, he agreed that many modern businesses had indeed largely retreated to more specialised or local markets as international competition strengthened. Twenty years ago, he told me, his company sold high technology products to almost every populated continent on the planet although admittedly less so in Asia where a Japanese competitor often got the orders. At that time, he had nearly two hundred employees of which a sizeable number were employed to write software, build electronic systems and design new products. Almost a third of their output were commonly shipped out abroad.
In time though, trying to sell abroad with the inflated value of sterling and on account of North Sea Oil, became virtually impossible and although the home market had remained fairly buoyant, there had been a marked reduction of turnover and profit. It was, he told me, like a vicious spiral in which 'trade offs' were inevitable unless one was ready to ditch the whole enterprise and move to foreign lands and start again using elements like cheaper labour or more favourable costs in general. He mentioned several prominent companies who had adopted this approach but felt less sure whether his company would make such a transfer easily without experience of the past and feared support for existing products might become virtually useless and obsolete while reflecting badly upon the company. In this respect, he had deliberately selected 'core' staff in each section and sought to retain them with good salaries and while realising the prospect of developing entirely new products wasn't viable given the costs of manufacture in the UK. Within a year, much of the electronics was sub-contracted to the Far East and new product development halted in its tracks. What software development remained was ultimately influenced by the electronics imported from abroad, and in time, even this work became outsourced to a 'software house' based in England.
In heartfelt tones, he related how his former pioneering company and former global player had been reduced to 'retailer status' within a more limited market and where it was easier for competitors to emulate the products and systems on offer. Support for older products were now handled by a few long serving employees but it was obvious that support for the newer products was limited on account of being made elsewhere. The 'outsourced software development' decision turned to rubble when the software company went bankrupt overnight. In an instant, a very crucial arm of their unique selling proposition had been lost and my friend was in no fit state to tackle the situation. He ended by saying how he'd sold the company to a former competitor of Far Eastern origin and where he had been unable to secure guarantees as regards continuence within the UK or future employment for the workforce. Today, I'm told the workforce numbers thirty-eight and while the company does still export a small quantity of its output; the volume is a tiny fraction of what went before and is still reliant on outsourcing in key areas. With sadness, this author attended the funeral of this businessman on a bitterly cold morning in January of this year yet intimately knowing he would have given consent to publication of our meeting here or elsewhere. Already, I and others miss his acute observance, peculiar and sometimes strange wit, experience and knowledge.
The Domino Effect Of Recession
There was a time when anyone in need of a particular service walked into the appropriate retail outlet and everything was handled entirely within the same building. Tailors cut cloth to exacting needs while bakers baked bread and cakes while the butcher cut off precise portions of meat to meet customer requirements on a local scale. In a similar way, Internet web designers could theoretically install web server equipment in an unused room of their house and offer hosting facilities at very attractive prices and despite the obvious limitations provided by a single line to their premises. In practice though, it has always made better sense for web designer companies like Advision to employ external services to aid management of domains and hosting and in much the same way as described above. , the results would be pretty mundane and frankly impractical. By way of demonstration; can you imagine an Internet Server based in Orkney and connected to the mainland by means of a microwave link? It might be ok for telephony but in fog, that's another matter! An essential part of the overall web design package relates to where the data is stored and how it is distributed. In the UK, Canary Wharf in London is a highly favoured spot but there are other places like Nottinghan and even the Isle of Mann whose connectivity with the US may fare better. host many web sites but in truth, the limitations decided upon a different strategy. The first decision involved electronics manufacture. While eighty per cent of the equipment was standardised, the remaining twenty per cent was custom built.
Back when I was a laddie; a good long time ago I freely confess, we worked far longer hours and for pay levels that bought far less than it does today. Buying a television, for instance, represented a major investment costing the equivilent of several months wages providing you could ignore essential things like eating and all the usual bills. A working week of fifty hours plus was normal and the weekend meant a portion of Saturday afternoon and a full day of rest on Sunday. Wages came in the form of cash in preprinted brown envelopes with a little chart describing deductions like tax and the final figure enclosed in the envelope. These pay packets were made up by the employer and banks had little say in the matter. Banking was for businessmen and about loans to buy a car or house. Getting a loan almost meant proving you didn't need it in the first place and cautious bankers would suggest opening a savings account first to see how the potential borrower was apt to budget and save before making an offer. In short; the science of banking at that time made sense and there was far less random speculation about how things 'might' go in the future. Bank managers who loaned money at that time felt more confident in making such loans while seeing the potential for a profitable return on investment in a medium to longer term environment. With due diligence and care, they protected the investor and borrower and in most cases, everything worked out fine. I think this is what Prime Minister Gordon Brown was referring to when calling for a return to 'old fashioned' forms of banking.
In the 1970s, employers were encouraged to have wages paid into bank accounts and on a monthly rather than a weekly basis. At the time, the task of making up wage packets must have seemed laborious and the idea of banks removing that task in exchange for a nominal fee must have seemed like 'manna from heaven'and it was a good deal for the banks too. Suddenly, employees needed to have bank accounts too even if they didn't want one and this represented a massive expansion of the banking system and which provided opportunities to sell a range of expanded banking services to more people than ever before including Life Insurance, Home Insurance, Car Insurance, Credit Cards, Mortgages and a new breed of loan packages with far better returns on investment than previously and often geared to shorter spans of time. Buoyant Interest Rates for both investor and borrower during the 1970s and 1980s were key components of the cash generator with the percentage points between each representing profit for the bank. Charges for administration also made upa significant part of bank earnings but in recent times, these charges have become unrealistic and some employers have returned to the 'old fashioned' way of paying wages using pen, paper, calculator and brown paper bags with cash inside.
Even before the current recession; the issue of banking charges had attracted the attention of the Office of Fair Trading (OFT) and who launched a legal challenge in 2007 and which was upheld in the High Court. Within weeks, thousands of claims demanding refunds had been received by banks and several claimants received substantial sums. In some cases and perhaps in a fit of pique, claimants accounts were subsequently closed with the bank refusing no further part of their custom. Obviously, the banks appealed and perhaps realised how the outcome of this case could be a potential 'Pandora's Box' with major implications and meaning refunds of bilions of pounds to millions of customers. At the end of February, 2009, the Court of Appeal dismissed their case and upheld the original ruling. Did the banks accept the ruling? Not a bit of it! They now plan to present their case before the House of Lords meaning no resolution before 2010 and while many thousands of refund claims remain on hold.
The bottom line is that banks need the income from existing loans and where interest and charges are met on a regular basis. If everyone in debt were now to repay what they owe then many banking institutions would go bust or else compelled to charge fees for every transaction to pay the costs of administration and which includes maintainance of local branches and investment in computer and communications technology like cash dispensers and online banking. In such circumstances; the bank needs these borrowers more than the borrowers need the bank; a fact worthy of rememberance; since a good track record of payment may entice competitors to attract such business and steal the profit from such loans for themselves!
Not all banks are equal in this respect with some entering the vicious cycle at a later stage than others and where some competitors with lesser debt may emerge in better shape, with greater capability, profitability and far more able to challenge former larger rivals. Northern Rock, for example, was one of the first to crash and endure the first run on a British Bank in one hundred and fifty years! The government response of a 'rescue bail out' still raises many questions in some circles but it's fair to say the bank has restructured and repaid much of the debt back to taxpayers since that time. HSBC has seen profits narrow by a large factor yet remaining the black and in need of cash injection from the shareholders. RBS, once proudly regarded as the third largest bank in Europe, with ownership of Churchill Insurance underwriting many others, has had the worst publicity ride of all and largely of its own making; posting the worst catalogue of disasters since the ill-fated Darien Adventure of circa 1695 and yet still determined to meet contractural obligations involving bonus payments to regular staff and luxurious pensions for some senior board members who led the bank into this critical situation in the first place. Luckily, I don't bank with RBS but I'd be calling for blood and life if I did in the wake of recent press releases; and especially if I'd been hit by unjustifiable bank charges!
The current recession won't last forever and as brighter times lie ahead; memories will last longer, be more sharpened and more focused upon the adverse experiences of this period. People will vividly remember how they were treated during hard and difficult times; knowing those who stood firm and provided help and advice when it mattered most and remember those whose smug complacency and unjustified charges brought hardship, emotional distress and worry to the kitchen table! In time, such memories and experiences will deliver fairness, justice and maybe even a different pecking order between the relative size and power of banks!
