Outlook: Despite its battering, the US economy keeps motoring

Digital death throes; Wembley/WestLB  
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By unhappy coincidence, Britain tends to announce its figures for economic growth on the same day as the United States, and so it was yesterday. Soaraway growth of 5.8 per cent in the US for the first quarter compares with a miserable 0.1 per cent in the UK. Coming after the marginal contraction in the UK economy recorded for the fourth quarter of last year, this puts Britain perilously close to the official definition of recession - two successive quarters of declining growth.

Most economists think the latest UK figure too downbeat, and are confident that eventually it will be revised upwards. Even so, the contrast between performance in the US, whose economy has many more excuses for having ground to a halt than ours, is hard to ignore. After a brief slowdown, the US economy seems to be firing on all cylinders again. It survived the bursting of the technology bubble, a veritable collapse in corporate profits, multiple bankruptcies from Enron to Kmart, and it survived the destruction of the World Trade Centre as well. Its position as the world's most flexible, resilient and dynamic economy remains unchallenged.

OK, so quite a bit of the surge in first quarter growth is down to an inventory bounce. Having run stocks down to a bare minimum in anticipation of tougher times ahead, US industry has been forced quickly to restock. It is unlikely the second quarter will see anything like the same level of growth. All the same, it's a remarkable achievement that leaves all those predictions of doom and gloom looking pretty silly. The US economy still has big balance sheet problems. Personal and corporate debt remains high by historic standards, the trade deficit is still unbelievably big, and the economy gets more reliant on foreign capital to finance consumption by the day. But it continues to defy predictions of a bust.

By contrast, the situation in the UK is starting to look much more problematic. The Chancellor, Gordon Brown, needs a sharp rebound in growth for the second quarter for his upward revision in the growth forecast to look realistic. If things remain sluggish, then the Budget arithmetic for the public finances will seem seriously over optimistic, and although he still has some room for manoeuvre, Mr Brown would be forced to consider either more tax rises or cuts in public expenditure plans.

Business confidence is rising and manufacturing is growing again, while higher public spending should in itself be a fillip to growth. Against that comes the dampening effect of tax rises, both for business and consumers. The boom in the housing market may have been the only thing standing between Britain and outright recession in the six months to the end of March. It's hard to believe it can keep going for much longer, and it is equally hard to see what might take up the running once it's gone.

It is often said that the UK economy is more closely related to that of the US than our European neighbours. On the evidence of these figures, that's far from true. Indeed, the economic case for staying out of the euro seems almost wholly to have disappeared this past year. With our sluggish growth rate and rising tax burden, we seem to have more in common with Europe than the US. But then that's not what the Chancellor wants to hear. He thinks Britain is on the verge of a US-style productivity miracle. He'd be unwise to count on it.

Digital death throes

To believe Tessa Jowell, the Culture Secretary, the buyers are queuing round the block to buy ITV Digital. Unfortunately, an expression of interest is not the same thing as a serious purchaser, and the great bulk of these "buyers" are like that breed of house seeker, whose only real interest is in seeing the inside of other people's homes.

The manner of the sale is a mess made infinitely worse by the Independent Television Commission's warning that it will take six or more weeks to approve any purchaser of the licences. In the meantime, there are no funds left to keep the service running and the business's only real assets, its subscribers, are signing off in droves.

In such circumstances it is hard to see who might be serious about continuing to run the business as a pay TV proposition other than Britain's other two suppliers of pay TV, BSkyB and cable. The latter of these would much rather see the company close than buy it. Sky says it is not interested, but don't be so sure. It would give Rupert Murdoch huge satisfaction for the government to come cap in hand, begging him to buy a business he was originally barred from participating in, and in any case, he may be the only player capable of making it work.

ITV has heaped derision on itself in its attempt to drop the dead monkey. Investors have already paid with their shirts. It's time for top executives to share the pain.


Donner und blitzen. First they steal our football anthem and now they want to rebuild our national soccer stadium. WestLB, the state-controlled German investment bank, is seen by many in the City as little more than a publicity-seeking tart, having dated so many no-hope deals over the past two years that it is hard to keep count. Few of them have come to anything. Has Robin Saunders, WestLB's American born head of principle finance, bitten off more than she can chew this time?

It may be a beautiful game but the history of this ill-fated project to rebuild the national football stadium is as ugly as they come. In the six years since the Government decided that the venue should remain at Wembley and not be moved to Birmingham, the cost has spiralled from £220m to £715m. The old stadium, which could have been bringing in a useful stream of revenue while the politicians, sports bodies and sponsors argued the toss, has been gutted and closed down. The ridiculous upshot is that next month's all London FA Cup Final will be played in Cardiff.

Despite the soaring costs, the project's backers, an offshoot of the Football Association called Wembley National Stadium Limited, have failed to find a way of retaining the twin towers, the best feature of the old Wembley. Lord Foster's original design envisaged four 137m masts instead but these have now been airbrushed out in favour of a giant triumphal arch.

So too, by the looks of it, has Barclays, sponsors of the Premier League and, until the Germans arrived on the scene, favourites to finance the new stadium. What scant details have emerged from the WestLB dressing room suggest that it intends to shoulder all the construction costs itself – about £400m in total – and then cover the interest payments by securitising the future revenue streams.

A football stadium is not like the businesses WestLB is used to financing, such as water companies and TV rental businesses, with their steady, predictable revenues. Wembley's income is lumpy and the stadium is only used 29 times a year. Unlike the premier clubs, the FA will not have to worry about paying player's wages. But it will have to earn top dollar from the 16,500 "premium seats" the plan envisages to keep the bankers happy. Still, it's a funny old game. The list of WestLB's failures is easily as long as its successes and Wembley could yet prove to be another fixture too far.