Archives September 2022

This episode reflects on recent economic policy changes by the UK Government in its recent mini budget. Market reaction has been critical and this has resulted in lowering the value of the currency. Has the UK taken a big gamble with their economic policies? Is it one spin of the roulette wheel to go for growth? Markets think it looks like this given their response. The International Monetary Fund has also been critical of the UK economic policies. It is unusual for the IMF to rebuke a G7 economy. Listen to find out more.

• Fiscal v Monetary Policy Conflict
• Fall in pound against the dollar and other currencies making imports more expensive
• Inflationary pressures increased through fiscal policy
• Central Bank pushing interest rates higher increase cost for everyone
• Increasing Government Debt
• Higher earners have tax reduced which was unexpected while not giving targeted support for those with the greatest need
• IMF Rebuke

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Government policies often follow a fiscal approach to manage demand and monetary policies through interest rates to attack inflation. These are not the only tools available but they are widely used. In this episode Tony Hines takes listeners through these choices before considering supply side economics and what that can achieve. Interest rates until very recently have been historically low. This has encouraged investment. They are now beginning to rise as inflation bites. As borrowing costs increase servicing debt becomes more expensive and investment may be reduced. This is of concern for governments that have to create conditions that are conducive to business. Supply side economics was a strategy adopted in the 1980s by President Reagan and Prime Minister Thatcher. The UK economy has returned to supply side economics to fight inflation. So how will this impact business and supply chains?

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This edition takes a look at the UK Mini Budget which is called a strategy for growth. Government policies shape the environment in which businesses operate.  The policies enacted give rise to conditions that governments hope are conducive to achieving growth. The newly formed government in the UK has taken a path to achieve growth in an uncertain world economy. An economy ravaged by disruptions from Covid 19 for the past three years and Putin's war in Ukraine spiking energy prices adding to already inflationary pressures. This is the environment that businesses have to contend with as they search for ways to source, produce and sell their outputs in world markets. If we take a look at the UK's attempt to achieve growth it is ambitious but will it make the cut?

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 Resilience is more than risk management. It is a capability to get to the future by limiting the impact of disruptions. Risk management is necessary to manage particular supply chains as well as the supply chain system. Anticipating risks from disruption is an important skill. Assessing risk and assigning probabilities to manage risk are parts of any risk management system. Beyond the immediate supply chain risks there are risks that threaten the total supply system. It is necessary to take a systems view of risk if you want to build resilience across the total system. An example would be energy supply chains which are made up of entity supply chains (e.g.extractors, refiners, generating companies) linked to buying organizations (re-sellers, business and consumer suppliers) which are linked to business supply chains and consumers at some point in the chain. The total supply system would consider risk at each node from source to consumption. This means not simply managing risk in the organization supply chain it means managing the risk in the system which has many supply chains. Resilience requires steps to manage beyond the immediate supply chain, beyond intra and  interorganizational supply chains linked in the total system. Resilience capabilities have to be developed to manage systemic risk. 

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All things impacting global supply chains this week.
Microchips, Inflation, Gazprom stops European supply and the G7 places a price cap on Russian oil supply.

• NVidia ordered to stop exports of advanced chips to China
• Moscow and Brussels raise the stakes
• Gas back in fashion from shale fracking as new investments take shape
• Energy is a dangerous business in Russia as six industry leaders have died in unusual circumstances this year
• Oil prices ease on fears of recession
• Inflation rises in the Eurozone as energy price rises drive it up
• Spain suffers from extreme weather conditions as olive oil crops fail
• EV battery investment in Liberty North in North Carolina by Toyota
• Strikes in the UK including rail, postal services and at ports
• Amazon warehouse strike in Coventry
• Amazon Warehouse and Distribution a new service for sellers
• New Prime Minister unveiled in the UK next week
• Energy cost, inflation and the winter of discontent are just some of the challenges the new PM faces
• Exchange rates fall in the UK 
• Asian nations benefit from discounted oil prices from Russia
• OS 35 runs aground off Gibralta
• Liverpool port strikes begin on 19th September

Next week a special edition on Europe's Gas Supply

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Europe has a short to medium term gas supply problem that it is trying to fix. This has been caused by Russia's reduced output to Europe which has not simply caused problems for European customers but it has pushed up the world market price for everyone. As always in such situations where supply and demand are mismatched there are winners and losers. In this episode Tony Hines explores how this might play out.

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