It's no good owning a company if you're bad at management

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The Independent Online

So there are more than 60 million people in the UK for the first time ever - and nearly 50.5 million in England. The new estimates of Britain's population, published last week by the Office for National Statistics (ONS), coincided with the furore over inward migration, particularly from the new European Union member states, and concern about the impact of EU enlargement to Romania and Bulgaria. Since these numbers were estimated for the middle of last year, by now the UK will be up to 60.5 million.

Unsurprisingly, the two themes became enmeshed in controversy. On the one hand, there is the clear benefit to the economy, for to some extent the new migrants offset the tendency for the country's population to age: roughly 80 per cent of the new entrants are working people between the ages of 18 and 35. On the other hand, some existing residents are disadvantaged, for they face greater job competition. More generally, there is the concern about space: in populist terms, how can this "tiny, crowded island" fit everyone in?

When opinions run hot and strong, the wisest thing to do is look at some facts. According to the ONS, our population is growing by 375,000 people a year, partly because of inward migration but also because more people are being born than are dying. There has only been one year in recent times, 1976, when there were fewer births than deaths. Nevertheless, the balance of the population is ageing. The pyramid in the left-hand graph above shows a big bulge of people now aged around 40, the result of the 1960s baby boom, plus a little boomlet of people aged around 60, who were born immediately after the Second World War. Since then, the annual cohorts are smaller, though in the past couple of years the numbers seem to be rising again. (The ONS has chopped the over-85s from the top of the graph for reasons that are unclear.)

The basic point here is that this is an age profile that is good for the economy. There are lots of people in their early middle age supporting not too many children and as yet not that many retirees. But as that middle band moves upwards and retires, there will be fewer people in the next generation to pay their pensions. The median age of the population now is 39, compared with 34 back in 1971. Mind you, we are not as old as Japan (median age 43) or Germany and Italy (over 42). So we are getting older, but not as fast as many other developed countries.

The question is the extent to which migration can change this further. The middle graph shows how inward migration has risen over the past 15 years. The natural increase in the population has been eclipsed by the movement from there being no net inward migration in the early 1990s to the present surge. But will the surge be sustained?

I think you have to see this as a one-off. Yes, the EU will take in Romania and Bulgaria, but it will be a long time before any other large countries join. So ageing happens despite some continued inward migration. The only thing that would change this would be a rise in the fertility rate.

Maybe that is starting to happen. The third graph begins with the plunge in the total fertility rate in the UK (the number of children born per woman) in the 1960s. This has crept up to an average of 1.79 children per family, the highest since 1992. While still well below replacement rate at 2.1 babies per mum, there are indications that there may be some momentum in this increase.

That seems to be happening in France, too, while the US is very close to replacement rate at the moment. It is just plausible that the UK will reach it in the next few years, though I have not seen any formal projection of this happening.

However, one of the key lessons of this recent wave of immigration is that the UK economy can absorb a lot of labour. It is creating around 250,000 jobs a year. We have been able to carry on growing because there are the people to sustain the growth, or, to look at it the other way round, we have been able to get people into jobs because there has been enough growth to support them.

So we may have some tough choices ahead. If the economy is to carry on growing reasonably swiftly - more swiftly than the eurozone, as it has for the past five years - we will have to find a way of coping with that growth. This is particularly a problem for London and the South-east, but also for hotspots around the UK.

There is an extreme example of both the benefits and the costs of rapid growth in Ireland, where the population has risen from 2.8 million in the 1960s to some four million now. Proportionately, Ireland has attracted more new EU migrants even than the UK. The Dublin agglomeration has become a glitzy European capital able to offer good jobs for its young people, but it has also suffered from a creaking infrastructure and very expensive property prices. Do you cope with growth or do you try and turn it away? Ireland has, of course, chosen the former path. It appears increasingly as though that will be the choice the UK has to make, too.

My own instinct is to welcome growth. It is much easier to cope with success than with failure. Anyone who can remember the 1970s - when the UK suffered from serious outward middle-class migration and columnists wrote of absolute decline, not just relative decline - will say aye to that. By and large, the effects of the new EU migrants have been tremendously positive, for there has been very little social unease when you consider the scale of the movement.

But growth needs to be managed and supported. It needs investment in housing and in transport. It needs a well-educated workforce and that means spending more on education. It needs sensitive planning rather than bureaucratic blockages. (It takes three times as long to get a housing scheme approved now than it did 25 years ago.) Contrary to the "tiny, crowded island" view, even the South-east of England has densities that are quite low compared with other favoured locations. For example, London is less dense than Paris.

It is possible that the UK's present growth run will end in tears. We know how to do failure. But on the assumption that failure is not round the corner and that a combination of migration and a higher birth rate will continue to push up our numbers, then we had better start considering how we create a pleasant environment for our present and future citizens.

What matters most - owning a company, managing it or simply knowing where to invest? If you are struggling through a BAA airport this weekend, console yourself with the fact that the company is now no longer British-owned, having been taken over by the Spanish construction group Ferrovial.

While the success and security of British airports is important,it doesn't matter from the narrower perspective of British investors . It has been sold. Deal done. Their worry.

Now consider another big story of last week: the future of Jaguar and Land Rover. Both are owned by Ford, which has piled in huge amounts of money with little reward. So it is rumoured that they might be bought by a team led by Jacques Nasser, a former chief at Ford, or that Jaguar at least might be bought by Sir Anthony Bamford at JCB. For all its resources, Ford has failed to manage Jaguar successfully and is struggling with Land Rover.

Several observations flow from this. One is the familiar one that Britain is unusually open to international investment. But more pertinent, surely, is the conclusion that ownership does not convey quite the power you might think. Owning Land Rover and Jaguar has been greatly to Ford's disadvantage. What matters is management: whoever can manage the companies best, be it Jacques Nasser, Sir Anthony or whoever, will win the prizes.

The same applies to BAA. If the Spaniards can manage it well, then all will be fine. But if they make a mess of it, the group will be split up and sold again. My guess is that it will be split up anyway, and it is intriguing to see customers such as British Airways and Ryanair now calling for it to be broken up.

But if management matters so too does international investment. The annual "Pink Book" study of the British balance of payments reminds us of the big picture: that we cover most of our trade deficit by exporting services. But did you know that our direct investments abroad bring in nearly £80bn a year while foreign investments here pay out only £35bn. Clever inter- national investment helpscover our appetite for foreign goodies.

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