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Forecasting is a mug’s game – but I was right about the economic revival

Plus: A golden generation of British car executives, sympathy for Tony O’Reilly, and good news amid Tesco’s woes

26 July 2014

9:00 AM

26 July 2014

9:00 AM

‘Perhaps I should shift my prediction to 23 July 2014,’ I wrote in April 2012. ‘That’s the opening of the Commonwealth Games in Glasgow, and we must all start thinking positively about it.’ I was talking about the moment when the nation would at last shake off its economic gloom, which I had previously pinned to the opening of the London Olympics. But that spring we fell back into negative GDP territory (avoiding a technical two-quarter ‘double dip’ only when the first-quarter result was revised upwards to zero) and I felt obliged to ‘elasticate my timetable’. Since the beginning of last year we have had 18 months of robust growth — but pundits less cheerful than me have continued to report a persistent absence of feelgood.

Well, this week’s news nails the gloomsters at last, and right on cue: a respected forecaster called the EY Item Club (perhaps more respected than me) tells us that economic output has climbed back to pass its 2008 peak, so that ‘not only is the recession over but the recovery is technically over and we’re now moving into a period of expansion’. What’s more, the average asking price for UK houses fell by 0.8 per cent in June, indicating a cooling of the risk factor most likely to knock the expansion off course.

So my Glasgow marker turns out to have been spot on — and I shall quietly forget a brief later wobble (provoked by arch–pessimist Mervyn King’s remark that his ‘estimate of how long it will take to recover is expanding all the time’) when I reached for the Rio Olympics in August 2016 and even hedged that bet with ‘Anyone for 2020?’ The real moral, as Mervyn also remarked, is that forecasting is ‘a mug’s game’.

Automotive talent

Sir Nick Scheele was the suave, multilingual Ford executive who began the revival of Jaguar in the mid-1990s that has continued so emphatically under the marque’s subsequent owner, Tata of India. His death aged 70 — following that of Derby-born Karl Slym of Tata Motors in January — illuminates the irony that the British auto industry, which seemed to be dying a painful death in the 1970s and early 1980s, was in fact nurturing a remarkable generation of talent. Sir Ian Gibson, another Ford alumnus who became the first boss of the renowned Nissan factory on Wearside, recently recited to me a list of his juniors who have gone on to top jobs around the world.

And not all the rising stars are men, even in a milieu dominated by petrolheads: the chief executive of Citroën in France is Linda Jackson, a West Midlands girl who began her career as a 19-year-old trainee at failing, strike-torn British Leyland in 1977. There’s an example for all the youngsters who are so prone — despite the new expansion — to whingeing about their prospects today.

Fallen Irish hero

Tony O’Reilly was a hero from a time when Ireland was short of heroes. The billionaire former British Lions rugby star, creator of Kerrygold and chairman of H.J. Heinz turned newspaper tycoon, was a Gatsby-like figure, entertaining everyone who was anyone at his princely estate outside Dublin. If he ran into flak for his power over the Irish press, his tax arrangements and his acceptance of a knighthood in 2001 (long before the Queen became so popular over there), no one has ever confused him with the later generation of chancers who brought ruin and shame on the Irish economy.

And his fall — he lost a chunk of his fortune trying to rescue the glass and china maker Waterford Wedgwood, and another trying to keep control of Independent Newspapers — has provoked a surprising wave of national sympathy. When Allied Irish Banks took him to court last month for personal debts of €23 million, former rivals were swift to speak in his support: the most respected, Michael Smurfit, called him ‘a giant… one of the creators of modern Ireland’. The case has rebounded badly on AIB, which stands accused of excessive zeal in trying to make a public example of O’Reilly.  At least that’s the way the local media, and even the FT, has portrayed it — making me wonder whether this old master, now 78, has orchestrated a brilliant PR campaign on his own behalf. So I checked it with my well-connected man in Dublin, who assures me the slant of the coverage has little to do with spin.

If anything, he says, O’Reilly’s standing has been enhanced by his reversal of fortune: ‘Right now, after a string of disgraced politicians, clergy and speculators, Ireland needs its heroes, and maybe it’s because he has fallen that people identify with him. For a man who was always acutely conscious of his standing in Ireland, it must be ironic that his years of accumulating wealth and power were less successful in securing popular esteem than being the victim of a big bad bank that has tried to humiliate him.’

Everything to lose

I really wouldn’t want to be chief executive of Tesco, I wrote in January, because the ‘too big, too dull, too dominant’ supermarket giant, besieged by discounters, has become ‘a business-school case study of a brand that has lost all positive emotional connection to its customers’; the incumbent Philip Clarke, a Tesco lifer with scant hope of measuring up to his predecessor Sir Terry Leahy, had ‘everything to lose’. Well, now he’s lost it — to be replaced by Dave Lewis, a Unilever executive who knows how to turn dull products into sexy brands, Dove soap and Lynx deodorant being two of his triumphs.

If Clarke’s departure, after only three years in post, looked as inevitable as that of David Moyes from Manchester United — or what’s to come for England cricket captain Alastair Cook — the more significant story from Tesco this week was actually the other one, about its plan to develop 4,000 homes on some of the 300 sites in its land bank. Sainsbury’s has similar schemes in hand, we’re told. More houses and no new superstores are just what Britain needs, so there’s another bit of good news.

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  • Sean Grainger

    On forecasting, I was clearing out my ‘archives’ recently and came across two FT The Long Views by Barry Riley and Anthony Harris on the housing market in the Eighties and early Nineties. Fascinating.

  • Archibald Heatherington

    We don’t need more houses, we need fewer people.