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Uk Plc Doing Well, But Why?

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NET INCOME FLOWS:

Back in early 2005 I cited the fact UK plc invests heavily abroad as a key plank to future sucess given the trickle down effect of reciepts that result from these foreign investments by industry. Some posters felt me naive given the decline of native based manufacturing and the flight of service sectors to India. The bearish retort usually went "we dont make anything to sell the world, so we're doomed". I used to point out we were major owners of manufacturing capability abroad so in fact our manufacturing sector was not only healthy but headed on a safe course given the need to reduce cocsts.

Today in "Business News" a key reason for continued sucess of UK plc is revealed: Net Income Flows (I cant find the web address).

It explains that we have run a balance of payments deficit for years, yet this is well outweighed by net income flows (money recieved from investments minus money out on liabilities).

It reads "over the last 10 years, a period remember when the total value of our investment should have been shrinking in comparison to the total value of our liabilities, the UK's net income flow (NIF) has been soaring".

In the last 3 years NIF has been a stunning 23% of GDP.

So whilst borrowing has gone up, the capital flowing out has been in the form of investment which in turn generates income reciepts and future capital reciepts (say when a factory abroad is sold by us).

2005 saw investment flows going the wrong way with the likes of Santander buying Abbey, but overall the trend for investments abroad has been rising and I might add, UK individuals are investing more heavily than ever in foreign property.

The positive position in direct investment is now of the order of £500bn - a nice cushion.

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I see so all that money that left the country to be “invested” in Spanish property is now paying a hansom return ?

Does it not tell you something about the country if business is moving abroad and do you think the £500bn will cover the national deficit we currently have.

Blair and Brown has stuffed bushiness just like they have FTB’s and the working class people of the UK, Conservative will do no better as they are both one and the same.

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I see so all that money that left the country to be “invested” in Spanish property is now paying a hansom return ?

Does it not tell you something about the country if business is moving abroad and do you think the £500bn will cover the national deficit we currently have.

Blair and Brown has stuffed bushiness just like they have FTB’s and the working class people of the UK, Conservative will do no better as they are both one and the same.

UK manufacturing would be doing a lot worse and selling a lote less had it not established capacity in low cost nations.

Those companies now proper as a result of brave investment decisions and we all enjoy the Tax receipts and income reciepts.

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you're right that investing abroad yields our companies good returns but it cannot make up for not having a solid economy here........as no country could ever hope to live off overseas earnings.....

TO get a return of £10000 per person in the UK....we'd have to invest say £200k per person...or £12000 billion!...which is the equivalent of 12 years' GDP

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NET INCOME FLOWS:

Back in early 2005 I cited the fact UK plc invests heavily abroad as a key plank to future sucess given the trickle down effect of reciepts that result from these foreign investments by industry. Some posters felt me naive given the decline of native based manufacturing and the flight of service sectors to India. The bearish retort usually went "we dont make anything to sell the world, so we're doomed". I used to point out we were major owners of manufacturing capability abroad so in fact our manufacturing sector was not only healthy but headed on a safe course given the need to reduce cocsts.

Today in "Business News" a key reason for continued sucess of UK plc is revealed: Net Income Flows (I cant find the web address).

It explains that we have run a balance of payments deficit for years, yet this is well outweighed by net income flows (money recieved from investments minus money out on liabilities).

It reads "over the last 10 years, a period remember when the total value of our investment should have been shrinking in comparison to the total value of our liabilities, the UK's net income flow (NIF) has been soaring".

In the last 3 years NIF has been a stunning 23% of GDP.

So whilst borrowing has gone up, the capital flowing out has been in the form of investment which in turn generates income reciepts and future capital reciepts (say when a factory abroad is sold by us).

2005 saw investment flows going the wrong way with the likes of Santander buying Abbey, but overall the trend for investments abroad has been rising and I might add, UK individuals are investing more heavily than ever in foreign property.

The positive position in direct investment is now of the order of £500bn - a nice cushion.

The big problem with this is local employment.

It might benefit the tax coffers and the rich, but it does not benefit the local communities where jobs become more scarce. And when unemployment climbs due to the work being done elsewhere the tax coffers suffer anyway due to the increased unemployment benefits claims.... this only benefits the rich who own the large companies.

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you're right that investing abroad yields our companies good returns but it cannot make up for not having a solid economy here........as no country could ever hope to live off overseas earnings.....

TO get a return of £10000 per person in the UK....we'd have to invest say £200k per person...or £12000 billion!...which is the equivalent of 12 years' GDP

But there is no alternative, foreign outsourcing is the only way we can survive in a fierce global economy.

We built this country's wealth on foriegn investment via Empire. No reason we cant do it again.

The big problem with this is local employment.

It might benefit the tax coffers and the rich, but it does not benefit the local communities where jobs become more scarce. And when unemployment climbs due to the work being done elsewhere the tax coffers suffer anyway due to the increased unemployment benefits claims.... this only benefits the rich who own the large companies.

The income reciepts are spent in the UK econmy on services etc so we all benefit.

Also dont forget its not just outsourcing that creates these income reciepts its also the buying - up of foreign firms.

You cant argue with the figures.

If it werent for these net income inflows we really would be up a creek

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i'm not disagreeing with you in principle ....just emphasising that foreign investment returns are no substitute

for real employment-creating investment at home......The benefits are tiny in comparison but I agree that this may be the only option for companies to maximise profits..

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I posted this because for years bears have been announcing the impending recession.

All I ask is those of the more pessimistic persuasion when it comes to UK plc need to take a step back, see the whole picture and recognise we wont all just lie down and dissolve in a fierce global enviroment.

Although I sympathise with thier view and could image a recession, I always come back to the fact we are an ingenous surviving race, and despite a fierce economic globalised economy we will find a way to prosperity.

Ive always argued strongly that our building investments and capacity abroad would be one of the reason we will continue to prosper in a rapidly expanding global economy.

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You cant argue with the figures.

Oh yes we can - because we don't know where you've got them from.

At end 2005, the UK's International Investment Position showed net liabilities of £215.8 billion, or some 17.8% of GDP. This is £69.5 billion worse than a year earlier.

It's true that the UK currently has an income surplus, and in 2005 this was £27.4 billion (2004 = £26.4 billion). As with the US, this suggests that the UK is getting a better return on its investments abroad than foreigners are getting here.

BUT...to suggest these overseas investments will enable us all to live comfortably off investment income doesn't stack up. For a start the surplus is too small (and is likely to deteriorate if we persist with our present current account deficit). Furthermore, much of the investment earnings flow to multinational corporations based in the UK. These companies are increasingly owned by foreign investors, and in any case they're free to domicile elsewhere if they wish, taking their earnings with them.

What we're witnessing in the UK (same is happening in the US) is a huge transfer of wealth from the middle classes to an elite of wealthy shareholders/property owners, corporate executives, and politicians.

Such is the reality of globalisation.

UK Balance of Payments

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I posted this because for years bears have been announcing the impending recession.

All I ask is those of the more pessimistic persuasion when it comes to UK plc need to take a step back, see the whole picture and recognise we wont all just lie down and dissolve in a fierce global enviroment.

Although I sympathise with thier view and could image a recession, I always come back to the fact we are an ingenous surviving race, and despite a fierce economic globalised economy we will find a way to prosperity.

Ive always argued strongly that our building investments and capacity abroad would be one of the reason we will continue to prosper in a rapidly expanding global economy.

it will help keep the stockmarket up alright.......just like in the early 90s recesssion. when stock prices rose as the economy floundered...but doesn't bode well for the domestic economy

Edited by Michael

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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