Jeremy Warner's Outlook: Uncertain economic outlook spells scattered thunderstorms for world equity markets

Spending more time away from family; Economic benefits of immigration; Myners bags Land Secs. There's a thing
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Good news. Manufacturers are predicting their biggest surge in export orders in more than a decade. Bad news. We've not done nearly as well as everyone else from the export boom and it probably won't last.

British policymakers have for ages been hoping for a rebalancing of the UK economy away from consumption and towards trade and investment. Recent evidence is that this is finally beginning to occur, with a greater proportion of the country's GDP growth being accounted for by capital spending and exports.

Unfortunately, what rebalancing there has been is not yet particularly marked. Indeed, Britain's performance in export markets can only really be described as poor given the boom in the world economy that has been going on these past three or four years. Relative to others, particularly Germany and Japan, it has been dismal.

This is only in part explained by the continued strength of the pound. Germany and Japan have struggled with strong currencies too. Nor is it entirely explained by the fact that our manufacturing sector has become so shrunken, though this plainly doesn't help. The bottom line is that we are still far too dependent on consumption for our economic prosperity than is comfortable.

If this is so in Britain, it is even more so in the US, which has many of the same characteristics of the UK economy but writ much larger. Both economies have also experienced a quite alarming uptick in inflation, which considerably limits the ability of policymakers to react to lower consumption by cutting interest rates. That slowdown is already well under way in the US. The possibility of an outright crash in US house prices as the effect of higher interest rates kicks in has led to growing fears in the capital markets of a hard landing, which policymakers may be powerless to prevent.

All that said, there has been some recovery in equity markets since the jitters of May and June. In Britain and the US, more than half the correction has already been clawed back, in part fuelled by a frenzy of deal making. It's anyone's call, but personally I continue to take the view that we are not yet at the end of the cycle, notwithstanding the deflationary effect of the high oil price.

Yes, there's bound to be a slowdown, and possibly a big one. Indeed there has to be after the breakneck pace of growth in recent years. But no, I doubt there will be outright recession, at least for the next two years. That particular treat can be saved until after the Beijing Olympics and the US presidential election in 2008. The outlook for equity markets? Like the weather, hot, uncomfortable and sticky with occasional thunderstorms.

Spending more time away from family

Tony Potter, chief executive of Millennium & Copthorne Hotels, is the latest corporate boss to resign for "family reasons". Earlier this week, one of Vodafone's most senior executives resigned so as to return to California, to keep his marriage together.

Last week it was the boss of Dairy Crest, Drummond Hall, who decided to take early retirement, in his case so as to watch his daughter grow up. Time was when the phrase "to spend more time with his family" was code for the man's been fired for incompetence. It seems that the words must now be taken literally.

Not that Mr Potter is quitting so as to spend more time with his family. Indeed, he seems to be going so as to get away from them altogether. With the children grown up and flown the nest, there's now the opportunity "to relocate outside the UK", and that's what he's intending to do. All these chief executives just desperate to jump ship. Peter Sutherland must be wondering what he did that he hasn't got the same problem round at BP.

Economic benefits of immigration

Employers are rightly horrified by this week's proposals - as part of a wider package of measures to crack down on immigration - to fine, disqualify and seize the assets of directors who, even unwittingly, hire illegal immigrants. For an employee to dupe the employer into believing he is legal is as easy as shelling peas. The problem lies not with rogue employers, but in the almost total breakdown of the country's immigration controls.

This week's proposals are part of a pattern in public policy to load responsibility for what should be the Government's own work on to private business. They make a mockery of ministers' stated determination to reduce the burden of red tape. The checks and procedures required to ensure an employee is legal are a potentially massive extra workload.

As things stand, it is still only a relatively small proportion of immigration that is illegal, though it is a segment that is plainly growing fast. In the round, this unprecedented flood of immigrant labour, legal and illegal, is a boon to the UK economy, although admittedly this may not be apparent to incumbent workers whose jobs and wages are undermined by it.

Furthermore, because Eastern European migrants are, to put it bluntly, predominantly white and Christian, their arrival here is proving less socially divisive than many previous waves of immigration. The mongrel race is finding it culturally easier to absorb the slavs than was perhaps the case with other post-war surges in immigration.

Widescale labour migration is widely seen as part of the downside of globalisation, though thankfully, outsourcing and the wonders of modern communications technology are making it less acute a problem than it might have been. Proportionately, it may also be no worse a problem today than during other periods of rapid economic development and change.

Since time immemorial, Britons have been complaining about "the bloody foreigners", particularly in London, which from its origins more than 2,000 years ago has always been a melting pot of different races and tongues. London is a trading city, and to trade you need the participation of lots of different nations. Within a couple of generations, each new wave seems wholly to forget that they were once immigrants too. My grandfather, a Yorkshireman, used to claim he was "pure Viking". At least he took pride in his supposed origins.

None of this is to belittle the scale of the challenge that now faces these already over-crowded islands. Because we are open, economically successful and politically stable, we act as a magnate for those hoping to make a better life for themselves.

The solution lies not in closing our doors, still less in hauling directors up before the beak for employing illegal immigrants. Rather it lies in ensuring that eventually all nations are as prosperous as us. This week's collapse amid continuing recriminations in the trade talks is another regrettable set back in this endeavour.

Myners bags Land Secs. There's a thing

Nice to see that boardroom nepotism is alive and well and living at Land Securities. Forcibly retired by the corporate governance police as chairman of Marks & Spencer, Paul Myners has stepped straight into the same role at Britain's largest quoted property company.

He was chosen, it transpires, by a two-man nominations committee headed by his old friend, Stuart Rose, chief executive of Marks & Spencer. Mr Rose was a big supporter of Mr Myners' attempt to stay on as chairman of M&S, as well he might be given that he was recruited by Mr Myners.

All very cosy. I was about the only City editor who unambiguously backed their stance in facing down the retail entrepreneur, Sir Philip Green, so I'm expecting the call from headhunters at any moment.

j.warner@independent.co.uk

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