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Germany’s economy is crashing – but its fall may help save us

13 April 2019

9:00 AM

13 April 2019

9:00 AM

This is no time for schadenfreude — but take comfort from the fact that the UK isn’t built like Germany. Being a world-leading exporter of manufactured goods — which they are and we’re not — is all very well until orders from China fade, Donald Trump adds you to his list of trade foes, your flagship car industry goes into spasm, and even the mystic waters of the Rhine get in on the act by falling to levels that impede the movement of cargo. Now the German economy is close to recession, with falling factory orders and a Purchasing Managers’ Index for manufacturing (in which results below 50 indicate contraction) of 44.7, its lowest since 2012. Consensus 2019 growth forecasts have dropped to 1 per cent, and some pundits expect much worse.

Since Germany accounts for three tenths of eurozone economic activity, none of this will help demand for UK goods and services under whatever cross-Channel tariff regime may soon apply. But at least German business recognises our value as a trade partner, the UK economy being equal to the 19 smallest EU members put together — as does the eurosceptic AfD party, whose leader Alice Weidel recently told the Bundestag: ‘This Brexit will be costly for the EU which means costly for German taxpayers… It is clearly in Germany’s interest that trade and investment continue unhindered.’ If at one minute to midnight a renegotiation based on German economic self-defence were to prevail over the French urge to punish us, perhaps something sensible might be salvaged from the Brexit wreckage.

Book a table

Trade associations are even better journalistic sources than talkative taxi drivers. If you want to know what’s happening in the economy of physical goods, consult a conclave of forklift truck operators; for a barometer of optimism among middle-class homeowners, mingle with managers of the nation’s garden centres. And if you want to feel the true pulse of discretionary spending, try suppliers of catering equipment. Invited to address a meeting of the latter on the inevitable topic (‘How the hell did we get into this Brexit mess?’ was my brief), I’m certain I learned more from them than they did from me.


‘Crisis in casual dining’ makes a less eye-catching headline that ‘bloodbath on the high street’ but the problems afflicting chain restaurants are almost as acute as those of retailers such as Debenhams. First came a post-recession surfeit of new eateries, fuelled by private equity competing to back scalable formats. Then came rent and business rate reviews, the fall of the pound affecting costs, reduced availability of European staff, minimum-wage rises and pickier consumers. Lately we’ve seen the likes of Giraffe, Byron, Polpo and Jamie’s Italian closing outlets, renegotiating leases and resorting to ‘company voluntary arrangements’ to hold creditors at bay — not to mention the strange collapse of Patisserie Valerie.

Many more are likely to follow; the failure last year, after big rent rises, of the once thriving Villandry ‘grand cafés’ in Great Portland Street, St James’s and Bicester Village was quoted as an example of how the tide turns; one serial restaurant entrepreneur spoke of a shift from ‘peacetime to wartime’ in the way he runs his businesses. The fear is that as shops and banks continue to close, fewer and fewer consumers will choose to spend their diminished spare cash eating out in desolate town centres. Instead, we’ll be slumped at home texting Deliveroo and watching interminable bulletins from Peston and Kuenssberg. That’s such a dismal picture that I can only urge you to buck the trend and book a table today.

Saga shipwreck

It’s fortunate that no reader proposed Saga as a constituent stock for our UK Optimist Fund portfolio, on which I’ll report shortly. Shares in the purveyor of insurance and holidays for over-50s have fallen more than a third in the past week following a £135 million loss for the year to January (compared with £181 million profit the previous year) and a warning that current profits will also be dented by turnaround costs on the insurance side, where problems include sharper competition through price comparison sites as well as regulatory changes.

As for holidays, bookings have been hit by Brexit uncertainty and by the current cliché that ‘50 is the new 40’. Couples reaching Saga’s target age group don’t want to be told they’re old, or closeted on holiday with those who are. And I surmise another reason for the brand’s sudden dip: demographically, a Saga cruise is highly likely to be packed with Brexiteers banging on about the failings of Theresa May and the garlic-scented treacheries of Macron and Barnier. Shipwreck would be preferable, and that’s what seems to have happened to the shares.

Beware of banter

Lloyd’s of London has introduced a new code of conduct barring anyone under the influence of alcohol or drugs from entering its building and clamping down on the ‘deep-seated culture of sexual harassment’ that was spotlighted by Bloomberg Businessweek last month. Symbolically, the in-house bar is turning into a coffee shop — a neat reversion, since the market began at Edward Lloyd’s coffee house in 1686, when men were men and serving wenches had their haunches slapped.

Not any more: apart from the bad PR, Lloyd’s firms are reportedly finding it difficult to recruit and keep bright millennials, who are repelled by their elders’ boozy breath and wandering hands. One large-lunching veteran defended Lloyd’s to me this week as having long since become robustly meritocratic, in gender terms, for those who can endure a coarseness of humour no worse than any other City milieu. On the other hand, codes of conduct are everywhere these days and one I’ve been asked to review warns that ‘forms of harassment can include… jokes, banter and gossip’. This column must tread more carefully.

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