Like many, the first thing I saw of Northern Ireland as I flew into the city airport, was the two huge yellow cranes adorning the skyline.  The Harland and Wolff cranes stand testament to Northern Ireland’s entrepreneurial past which once boasted the largest shipyard in the world and the first aircraft manufacturer in the world.

As post-conflict Northern Ireland attempts to move its economy from public sector driven to private sector driven, or, from a wealth burden to wealth creation, we look for an economic model to enable this.

One such model seems to be the venture capital driven valley model.

But is this good for us?

Firstly, I would say that this model requires a culture where entrepreneurialism is encouraged and failure seen as learning.  Sadly, I would say that the culture of Northern Ireland does not encourage risk taking.  Civil service and the “professions” (read – people who charge you for stuff you don’t want done – accountants, lawyers, medical etc.) remain the safe heavens of preference.

Secondly, I believe this model requires access to large local markets to succeed. 

One of the first, some argue the first,  business computers was manufactured by a British company.  The LEO computer. Many say one of the main reasons that they failed to gain global dominance was that the domestic economy was simply not big enough for more than a few sales whereas,  shortly after IBM entered the US market and sold hundreds.  As a result they became big enough to be able to globally market and sell their product.

So, whilst building global product is desirable, it is difficult to achieve without first building local product where learning your market is much cheaper. 

So what is the German model?

I am writing this from the West of Ireland – a heaven from the intrusion of the internet.  Here in my Leitrim farmhouse I have no phone – I don’t just mean a weak signal on the mobile – I mean not even a land line, no internet, two TV channels, electricity that dims when the oven is turned, water pumped from my own well, even my own sewage works – known as a septic tank.

I do have a radio.

I have always found Irish business programmes to be excellent.  In Northern Ireland business coverage is a couple of 10 minute slots from Eddie O'Gorman on Radio Ulster, or some national coverage from Radio 4.  The Irish, however, seem to take there business much more seriously with programmes such as today FM’s “The Last Word” and The Sunday Business Show giving extensive business review and comment.

As I listen this morning I began to despair.  The state of the Irish economy has made listening to theses programmes rather like the funeral of a revered celebrity.

Then I remembered the glass is still nearly full.

UK GDP Growth from the Office for National Statistics

Yes the economy has shrunk over the last 3 years – but over 90% of it is still there!  Some sectors of the economy, mainly construction related, have contracted much more sharply but for those of us not directly involved in these or able to sell to other sectors we should remain focussed on profitable and growth areas of our business.

In my ‘O’ level in economics there are broadly are two causes of inflation – Cost-push inflation and Demand-pull inflation.

These are pretty self explanatory – cost-push being increased prices of raw materials and demand-pull being increases in demand allowing the market to set a higher price.

The MPC has interest rates as a tool to keep inflation in check.  Interest rates affect consumer spending and so put a kerb on consumer demand hence mitigating demand-pull inflation.

However, it is fairly plain to me that we are not suffering demand-pull inflation – the UK retail sector is not exactly in rapid growth.  According to the office of national statistics -

“Over the period February 2011 to March 2011 the retail sales volumes increased by 0.2 per cent and the value of retail sales increased by 0.1 per cent.”

Our current inflationary woes seem to be caused mainly by high oil and commodity prices and historically weak sterling.  Raising interest rates at this point would, in my opinion:

1. Stifle the current recovery – particularly in weaker UK regions such as Northern Ireland which are not yet out of recession,
2. May strengthen sterling leading to decreased competitiveness of UK exports,
3. Not reduce inflation which currently seems to be mainly cost-push

So far I’ve not mentioned the other influencer – monetary policy.

Monetary policy is about how much money is in circulation.  By putting more money in circulation through “Quantitative Easing” (QE), the Bank of England made the pound in our pocket worth a bit less – result – inflation.

Now that QE has stopped, I would expect the value of the pound in our pocked to stabilise.

So, on balance, the decision for the MPC on 4’th and 5’th of May should be simple, hold firm on interest rates.  I would expect this to remain the case until we see significant demand-pull inflation.

I would also expect inflation to continue to fall away over the coming months as cost-push inflation falls as commodity and oil prices stabilise or fall.

The new coalition Government – what will it mean for SMEs?

In these revolutionary times for British politics, the eyes of every business have been turned to Westminster and our new coalition Government in anticipation of how future policy will affect the lifeblood of Britain – the small to medium enterprise business sector.

Without a single clear political party in rule, it’s been unclear since those ballot results came in as to what this will really mean to the way we run our businesses and as to whether this will create a true end to the recession – or whether uncertainty will extend financial insecurity. These are questions which won’t be answered quickly:- and it’s the role of every business owner and manager to keep a close eye on political development over the next few months to assess how changes will impact upon their particular business sector and region.More...

OK, let’s start by clarifying that an ‘A’ level in economics does not make me an economist and I hardly consider myself an expert in globalisation but if there is one thing that the recent crisis has solidified in my mind it is the importance of maintaining an independent currency.

I’m not a Euro Sceptic, although I’m sure like most people I would like to see Europe become less bureaucratic and expensive and more democratic, but, seeing as few of us bother to vote or take an interest in Europe then we’ve only ourselves to blame on that front”.More...