The key macro-economic, personal finance and property stories from today’s papers, read by Wriglesworth Junior Account Manager Dan Pike.
The US Treasury Secretary urged Europe’s leaders to follow through on their promises “whatever it takes” to save the Euro, as he and the German Finance Minister expressed confidence at states in eurozone countries attempts to reform their finances. Investors expect Draghi & the ECB to announce fresh measures aimed at Spain’s high bond yields, as the country saw its economy contract by 0.4% in Q2. Overall, business confidence in the Eurozone is at a 34 month low, according to European Commission data. City AM, p.4; Times, p.31; Telegraph, p.22
Falling mortgage fears are fuelling fears for the housing market. The number of mortgages approved in June fell to an 18 month low, in figures announced yesterday by the Bank of England. In part, this has been down to the ongoing retreat from lending from public-owned lenders. The FT notes that part-nationalised banks shed £19bn of lending in the second half of 2011, reducing lending in the top 20 banks by £3bn. At the same time, rates are climbing higher. The average SVR rose to 4.22%, the highest since Feb 2009. FT, p.4; City AM, p.4
The Government has paid out over £1m in rewards for information on tax cheats since the financial crisis began. Last year alone the HMRC paid out £400,000 as bounty payments for those reporting tax evasion. Typically, informants are ex-business partners and ex-spouses. Independent, p.20
Recruitment / Employment
In City AM today, Allister Heath focuses on McKinsey research that might explain why productivity could be falling. 28% of a worker’s week is spent emailing – 650 hours over the year. The research suggests that just 39% of the average work week is actually spent on work-specific tasks. The consultancy argues that by focussing on internal social media and improving internal communications technology productivity could increase 25%, equivalent to saving $900bn – $1.3tn. City AM, p.2
People’s views on networking events tends to polarise opinions. For some, the thought of attending a networking function can produce the cold sweats normally associated with the ‘I’m Naked!’ dream. But at the other end of the scale, networking can be seen as an excuse for Pinot Grigio at someone else’s expense.
Whatever your outlook, the fact of the matter is that networking is an increasingly important business tool. It creates new business opportunities while allowing you to PR your company’s key messages and values.
To ensure you reap all of the benefits out of networking there are a few key rules to remember:
1) Preparation is the difference between a piece of new business or key contact and a waste of your precious time. If you don’t know exactly what you want to achieve, then you will never know if you have succeeded.
Although you never usually know exactly who you are going to meet at these events, it is always a good idea to try and find out as much as possible. That way you have a targeted list of people who you would like to talk to. Sure, it is a little odd to carry the photo biographies of new business acquaintances in your bag, but the benefits far outweigh any of those uncomfortable ‘stalker’ feelings.
2) Go Big or Go Home. Sometimes networking events require 5am starts or 2am finishes, and at these points in the day it is difficult to be polite, let alone on-the-ball and sociable. But being memorable doesn’t need to involve a juggling unicycle act. As the ambassador for your company a polished introduction and intelligent conversation with key decision makers is brilliant PR for your company.
3) Remember me? It is one thing to come away with a stack of business cards but it is quite another to build on those connections and turn them into new contracts or lasting relationships. It is vital to follow up with the people you have met, even if it is just a quick email. LinkedIn is also a great way to maintain contact and keep up-to-date with people, but good, old-fashioned face-to-face contact is worth a thousand emails.
Whether it is an overseas conference or a breakfast event before work, networking opportunities of all shapes and sizes are tried and tested places to do business. It might feel like a huge amount of effort for minimal reward, but with the right preparation and attitude, it can be a brilliant and cost effective way to grow your business and raise your company’s profile.
Taking advantage of these can raise profile with your target markets and build relationships with the media who thrive on strong opinions and comment.
It still requires a great deal of calculation and words need to be chosen extremely carefully but it can pay to be contrary. A current example is the financial crisis and the impact on mortgage lending, specifically so-called sub-prime lending. People have been commenting for so long now about the perils of sub-prime and its role in the financial crisis that the sector has become anathema to lenders. There are no products out there and no-one would launch – or necessarily be allowed to launch – a sub-prime mortgage. The imagined media storm is enough to make most baulk at even suggesting it, but what would actually happen if someone started to call for a return to sub-prime? If it was rationally argued, with facts to back it up then it would be hard to dismiss and almost guaranteed to generate headlines.
So how would you go about constructing a contrary view such as this? Well, in this situation the facts speak for themselves – the outlook for the UK is looking bleak at the moment. We’ve slipped back into recession. Various venerable high street lending institutions have become involved in crises and scandals of their own making. And in the background, the eurozone crisis lurches on, dragging the markets down and damaging confidence.
Various answers have been tried and none have worked. In the UK, the economy is still spluttering; to date we’ve had £375bn worth of Quantitative Easing, but this has not filtered down into lending in real terms. And lenders are only participating in the ‘safest’ lending.
Everyone understands that only with a ready supply of new entrants will the market return to growth and give lenders more confidence that house prices will rise. But how they differ is how to achieve it.
The headline grabbing PR slant would be to suggest we need is a return to sub-prime and 100% loan-to-value (LTV) mortgage lending – products based on risk-pricing.
The argument to support this is that without a return to risk-pricing in the UK the housing market will never recover.
Start by taking the argument away from the naysayers. Yes, the financial crisis first emerged as the ‘credit crunch’ when it grew out of the US as a consequence of high-risk mortgage lending. But while a lot of the activities shared the name of ‘sub-prime’ lending with the UK, the lending practices were light-years apart. Lenders in the UK were much more cautious about whom they would lend to and more importantly it was priced for risk.
The issue in the UK was not sub-prime lending per se but the fact that global investors panicked and wouldn’t touch any securitised debt or trust those who held it, whether or not it had been solely originated in UK.
Then move onto why it could work. So, in the present low-interest rate environment of sub-5% mortgage rates many people can afford a mortgage loan of 6X income, so why can’t lenders offer a first-time buyer a 100% LTV mortgage? The insurance industry is based on risk-based pricing and that market is still very much open for business. If there is a greater risk, charge a greater premium.
Next point out any examples that support your argument. So at the height of the previous recession in 1991 there were less than 100,000 repossessions and two million people in negative equity (due to falls in house prices) but lenders were still lending at 3.5X income when interest rates were at 13%. And it was still possible to find 100% LTV products with cashbacks in what was a much more uncertain interest rate environment.
And finally, repeat the main argument in that a ‘normal’ lending market requires a healthy level of first-time buyers and also a healthy sub-prime lending market. The demand is there and therefore there are people out there who will support the argument that people with credit impairments deserve to have the chance to be able to borrow too, albeit at higher rates which take into account their personal circumstances.
Admittedly, this is not a strategy that can be overused, and it should be employed sparingly and in the right circumstances, but if you build your case so it is defendable and logical it will spark debate and more than likely generate coverage.
When it comes to social media, engagement is the name of the game. twitter – not to mention Facebook, Pinterest and LinkedIn – has revolutionised the way that companies can interact with their customer base, in real-time.
While twitter can serve as a platform to boost awareness of a product, service or brand, in times of crisis, this real-time interaction can become an even more impressive tool in the PR armoury.
Companies quickly disseminate information to thousands of followers simultaneously, reassuring customers or quickly kiboshing any erroneous speculation. But some of the most effective use comes from interacting directly with individuals, responding to feedback instantly, an approach that demonstrates and highlights attentive customer services.
O2’s recent social media reaction to customers’ loss of signal for 24 hours stands as a recent case in point. After acknowledging the problem, O2’s twitter account was subject to an outpouring of grievances – and abuse – from frustrated customers. However, not only did O2 engage directly with customers, accepting responsibility and apologising where appropriate, but it responded with good humour and a deftness of touch to the more colourful phrases aimed at the brand. The responses served to humanise the company, and take the sting out of the abuse. In fact, so deft was the response that the social media response generated positive coverage in its own right, despite the severity of the crisis.
But twitter is a double edged sword. And like any double edged sword, it can do serious self-harm if handled without aplomb. A lack of expertise, forethought or understanding of a follower base can create a crisis as well as alleviate one.
Clarity of message is vital. In 140 characters, it can be all too easy for a misunderstanding to take place. For instance, Starbucks’ recent tweet apologising to Argentineans for having to provide its customers with locally sourced blank cups, rather than their imported branded versions, certainly hit a bum note. Argentineans took the tweet as an insult that their local products were deemed worthy of an apology, and criticism quickly became viral. Given Starbucks aims to expand its business in Latin America, accidentally antagonising Argentinean consumers could prove to be an expensive misstep.
But just avoiding twitter can be as damaging as tweeting the wrong content.
Silence can be a tempting option during a crisis, and while sometimes appropriate, it runs the risk of inflaming the situation. Silence may indicate a brand doesn’t care, isn’t aware of what’s going on, or isn’t willing to address concerns their customers have, especially when a company is receiving direct feedback. Without both a general update and deft individual responses, the resultant sentiment on twitter against O2 would have been all the more negative.
Creating an ongoing dialogue – where appropriate – can serve to mitigate some of the damage. By taking ownership of the problem and illustrating positive remedial action, brands can build trust – or stop it deteriorating further.
The key macro-economic, personal finance, property and recruitment stories from today’s papers, read by Junior Account Executive Flora Spens.
Economy: Triple-dip fears emerge as firms urge Osbourne to cut interest rates to zero. Official figures last week showed Britain remained in recession in the second quarter after the economy shrunk by 0.7% but the Bank’s Monetary Policy Committee will probably wait until November before churning more stimulus into the economy. British manufacturing shrank for a third month in July amid weak demand at home and abroad. Businesses are holding back on investing, still nervous about the future. Falling inflation is easing the squeeze on consumer spending, but fears about the economy are holding back expenditure on big ticket items. Business confidence has deteriorated despite export growth holding up – businesses expected to increase capital spending by 1% during the coming year, but it forecast 3.6% growth in exports during the next year. (Telegraph, FT)
Property: House prices have fallen for the first time in seven months according to the figures published today which revealed prices fell by 0.1% in July. Growing concern increases as the figures are thought to reflect the UK’s economy and the worsening Eurozone crisis. The gap between supply and demand widened last month, with the number of homes going on the market outstripping potential buyers. Activity in London and South East, which has been supporting the market and keeping the average prices up, slowed. London was the only region where house prices rose in July, but the rate of growth slowed to only 0.1% on the back of 2.4% fall – higher than the national average in the number of new buyers registering with estate agents. The seasonal slowdown has started earlier and developed more rapidly. (FT, Guardian, Daily Mail)
Personal Finance: Homeowners could save at least £400 a year if interest rates are cut to 0.25% this week according to economists. They also want Bank of England to slash the base rate to zero to kick start the economy, a move which would lead to the possibility of interest free mortgages. A zero % interest rate would be the first since the Bank was founded in 1694. A new report released last night by the Fair pensions campaign group claimed more must be done to protect savers as they argue most employees will have no say over where the money is invested when a new retirement fund system comes into force later this year. There’s potential for an oversight deficit at each link of the chain of intermediaries running the scheme, and millions of people with contract based pensions are thought to need better safeguards – it’s believed workers are in danger of losing control of their pension investments. Bosses will be forced to sign up millions of workers aged over 22 to an automatic scheme if they lack a retirement fun or workplace pension. Although, the Association of British Insurers insisted plenty of protection would be in place and the Fairpensions report was said to be limited. (FT, Daily Express)
Recruitment: Latest reports of a big drop in women working in top Whitehall roles has caused concern from within the Institute for Government think tank, who highlight the reversal of women’s fortunes following recent changes among the civil service’s senior posts. Despite a drive in recruitment, the proportion of government departments headed by females has fallen from about half to about a quarter since last year, leaving the top of the service ‘maler and paler’ than it has been for a while.`(Independent)
News headlines for 28 July
Fund managers and insurers are on the verge of being forced to disclose their fees, which typically knock a third off the value of investments. John Kay’s report into the UK equity market argues in favour of the comprehensive disclosure of backing and has the backing of Ed Miliband. Tom McPhail says the question is not if but when. Mark Atherton investigates the impact on investments in more detail. (David Budworth, Times)
France and Germany issued a joint statement pledging to do everything they can to protect the eurozone, amid reports that Spain had enquired about a 300m euro bailout – despite its denials. The statement followed a similar undertaking from the European Central Bank on Thursday. (David Charter, Times p52, Russell Lynch, The Independent, p44, Larry Tremlett, The Guardian p29)
Italians are moving their euros into London property after viewing them on Skype. Property adviser EA Shaw said enquiries from Italians had increased in the last three months with around 20 million euros pouring in from Italy in this period, representing a fifth of homes sold by the company. The company said it is more noticeable because at the dame time last year no homes were sold to Italians. (Deirdre Hipwell, The Times p52)
Academies will no longer be recruited to hire formally qualified educators to take jobs in some state schools, after a regulatory changes which brings them in lone with the private sector. It is part of the programme to reform the labour market for teachers which includes abolishing national pay grades. (Chris Cook, Financial Times p4)