Archives for category: British Business

This letter was published 24 July 2015 in the Financial Times: click here to view


Although I can go along with Ed Balls’ general comments of Britain in Europe (“The risk of fumbling the Europe poll”, July 22), I don’t agree with his and the general British public’s belief that it is such a godsend for Britain not being in the euro. It certainly isn’t for exporters!

Bob Bischof letter in the FT July 2015

The eurozone is good for exporters

Just like the other “independent minded” nations’ currencies, sterling has been revalued over the past 18 months by around 30 per cent and is nearly 40 per cent higher than at its low point in 2008-09. British exports to Europe and the rest of the world are suffering and importers are gaining market share with disastrous effects on the balance of payments, which is heading for a record deficit of about 6 per cent of gross domestic product. At the same time, the eurozone is heading for a balance of payment surplus in 2015 of about €200bn. It shows that currency markets don’t follow the real economy but interest rate expectations, and that individual countries’ currencies become a plaything for the markets.

UK manufacturers don’t just suffer from the overvalued currency, but also have to bear the cost of currency exchange and hedging. Germany and the other eurozone members can trade without the volatility and uncertainty of currencies in a market of 350m people — a huge advantage! The “March of the Manufacturers” has been blocked one more time.

Bob Bischof

Vice-President, German British Chamber of Industry & Commerce; Chairman, German British Forum

This letter appeared in the Financial Times May 29 2015

Bob Bischof Letter in the FT May 2015


This article originally appeared on OMFIF’s website here

At the heart of the British argument against closer ties with Europe has always been many UK citizens’ fear of losing control over the country’s affairs in general and in economics in particular. For many in Britain, the euro project is not a basket of former independent currencies, rather a basket case. Doubts about the wisdom of so-called ‘German-backed austerity policies’ or about the ability of Greece and others to stay in the single currency have strengthened this belief in many British minds.

The ‘in-out’ referendum on Britain’s membership of the European Union which could take place in 2017, depending on the outcome of the May general election, will further focus attention on this point. Latest opinion polls indicate a majority in favour of departing.

The big question for a relatively small country like Britain is what ‘independence’ means in a globalised world. Being on your own, in monetary affairs as well as politically, can be damaging. Against its €1.04 low point in 2009, sterling has appreciated by 30% to around €1.34. This may be good news for Britons holidaying abroad, but the pound’s rise will hammer British manufacturing exports.

Switzerland, which has just abandoned its currency peg against the euro, has a current account surplus and high-value manufacturing goods, helping the Swiss absorb the shock of the latest 20% Swiss franc revaluation. Britain, on the other hand, has a large and growing current account deficit. It desperately needs to rebalance its economy away from services to manufacturing.

Although the UK’s coalition government has declared it wishes to further the ‘march of the manufacturers’, it has made little progress. Britain’s external performance will get worse. All this spells future trouble for sterling, especially if an inconclusive May election result brings political uncertainty.

Against this sobering background, Britain’s power over monetary and fiscal policy – setting interest rates, deciding quantitative easing and calibrating fiscal expansion or contraction – is well short of being an unmitigated benefit.

Germany has been doing well within the euro area because it benefits from the weak euro for its non-European exports, and even more from the stability, or lack of volatility, that emanates from membership of a large club. Germany still runs a substantial trade surplus with the rest of the euro area, but it has fallen sharply in recent years, making up less than 25% of Germany’s overall external surplus, against 40% in 2011.

If Britain wants to be serious about rebalancing the economy, it has to give its manufacturers a solid base, particularly in foreign trade. Currency hedging is expensive, the more so when volatility is high. The euro bloc encompasses most of the UK’s largest trade partners. Every transaction to another currency – whether one is buying or selling – costs money.

With so much of British industry in foreign ownership, there is an additional danger. When the foreign owners see developments they don’t like, they will first stop investing and then look elsewhere. At the German-British Chamber of Commerce and Industry we hear many worried comments from the over 1200 German-owned companies in the UK. The grumbling is getting louder.

And it’s not confined to the Germans. British business is overwhelmingly in favour of the UK staying in the EU, as a recent poll by the EEF manufacturers association showed. Britain can hardly be expected to join the euro in the foreseeable future. But as the election approaches, the issue of UK EU membership will start increasingly to occupy business people’s minds. Some might even support Labour as a potential party of government that will not brook a referendum on the matter – and could bring a weaker currency as well.


The Official Monetary and Financial Institutions Forum is an independent research and advisory group and a platform for confidential exchanges of views between official institutions and private sector counterparties.

The overriding aim is to enable the private and public sector to learn from each other in different ways, promoting better understanding of the world economy and higher across-the-board standards.

All developments regarding OMFIF can be followed at and

Bob Bischof is a member of the OMFIF Advisory Board.

Bob Bischof on 'In the Balance'With takeovers like the AstraZeneca – Pfizer bid much in the news, Bob Bischof joins a panel of other business experts for the BBC World Service programme  ‘In the Balance‘ to discuss foreign takeovers and the national interest.

You can listen to the half-hour programme here:


This article first appeared in the Mail Online, 20 January 2014

The think tank CEBR reckons Britain will not only overtake its old rival France soon but also that the UK stands a good chance of narrowing the gap with Germany by 2020 and leaping ahead of Europe’s economic powerhouse by 2030.

Now, economic forecasting is not an exact science and it is mighty difficult to predict even a year ahead. The CEBR found that out when they finished 37th out of 40 economic forecasters for the year 2013, according to the Sunday Times’ league table.

Are the predictions about Britain v Germany any more credible? As a German living in this country, perhaps I am biased, but I think not.

The 2013 figures show Germany at $3.65trillion, France at $2.65trillion and the UK with $ 2.45trillion of output. To catch up with France within the next four years, Britain would need around $50bn in additional output per annum, or a roughly 2 per cent higher growth rate. That could be on the cards, given the woes of the French economy.

As for narrowing the gap with Germany by the year 2020 that looks a bit tougher. German GDP is 45 per cent higher than Britain’s; not surprisingly as Germany has a 33 per cent larger workforce (40m vs 30m) and productivity is more than 10 per cent higher.

The CEBR argues a weak euro will make it harder for Germany to stay ahead, though most analysts believe the opposite, as a weak currency helps the country’s thriving export industry.

Even a chronically low birth rate in Germany is unlikely to have much effect. It has always relied on an influx of Gastarbeiter, or guest workers from abroad, to bolster the labour market. It is doing so now after having successfully integrated 22m newcomers after the fall of the Berlin Wall in 1989.

Can Britain catch Germany? Can pigs fly? But why even think in these terms? It would make a lot more sense to examine ways of stopping the widening of the gap.

The danger with selling illusions about the future is that it can breed complacency among businessmen and politicians alike.

Britain could easily do better and should do so. But it has to be realistic about its position in the world and the huge effort it needs to turn around its growing balance of payments deficit, to increase business investment, to make sure its youngsters have the right education and skills, to improve its infrastructure, to raise productivity and not to rely on rising house prices to fuel another consumption-led boom.

All that needs to be tackled at a time when the Government is trying to get the deficit down, whilst Germany will have a balanced budget in 2014.

Could it be done? I believe it can, but it needs a shift towards long-term strategies in business and government.

Selling British businesses and assets for short term shareholder value and calling it “Inward Investment” is not the answer.

Mergers and acquisitions are no match for organic growth strategies; neither is paying the largest dividends as a percentage of profits of all developed economies.

The UK has an abundance of entrepreneurs but cannot emulate the Mittelstand – the small and medium businesses that are the backbone of the German economy.

All too often starved of adequate bank finance, those that make it over the first hurdles are soon driven into the arms of private equity or the stock market and too many are swallowed up and disappear.

Lord Bamford, who chairs JCB, his family firm, said to me not long ago: ‘If my Dad or I had gone to the stock market for money, we would not be here any more.’

His words should haunt British politicians. If the UK wants to reduce its dependence on the City and get properly into the international race and not with an arm tied behind its back, it should do something about growing more SMEs into JCBs. It’s the real economy, stupid.

Bob Bischof, vice president of the German British Chamber of Industry & Commerce, talks with Charles Powell, member of the U.K. House of Lords, about European trade protectionism, U.K. inward investment and growth, in an interview with Francine Lacqua and Guy Johnson on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Watch the interview here

Bob Bischof discusses European protectionism on Bloomberg TV

Bob Bischof discusses European protectionism on Bloomberg TV

This article was published in the Daily Mail on 7 August 2013

The sale of Invensys, one of the last remaining substantial engineering companies in the UK, to the French industrial giant Schneider Electric simply beggars belief.

The declared aim of this Government is to rebalance the economy towards manufacturing. In reality short-term shareholder value rules and the Brits will sell anything and everything to please the City.

As a German living in this country, I am aghast at this. Germany’s manufacturing prowess is founded on a much more long-termist approach. But Invensys is, sadly, a typical British industrial story.

The company was created out of the merger of two engineering companies Siebe and BTR in 1999. The new company was debt-laden and poorly managed, going through a £2.7billion debt restructuring exercise in 2004. In 2005 the board appointed Ulf Henriksson as chief executive, who restored the company to financial health. Enter Sir Nigel Rudd as new chairman.

Opinion in Daily Mail: Sale of InvensysIn March 2011 he fired Henriksson, an engineer, because ‘he could not see the big picture’ and replaced him with the chief financial officer Wayne Edmunds. The share price subsequently halved in 2012 because of technical problems. It only bounced back when the break-up of the company was announced and set in motion with the sale of the signalling business to Siemens.

The rest is now on its way to being swallowed by a French company for £3.4billion – well done, Sir Nigel. Does anybody get the message that these deals are a sure way to manufacturing oblivion in the UK?

My own experience bears this out. I arrived in the UK 40 years ago to set up a UK subsidiary of a German lift truck maker. Our main European rival was the British company Lansing Bagnall, based in Basingstoke. Their market share in the UK was around 45 per cent and they exported 60 per cent of their production worldwide. They were the envy of the industry.

Some 20 years later a large German industrial conglomerate bought them. A few years later they were sold on with the rest of the lift truck division to private equity, who closed the Basingstoke factory and moved the production to Germany and France.

In 1994 my company bought the last remaining British lift truck manufacturer Lancer Boss, invested huge sums for a while, but then had to give up, close the plant in Leighton Buzzard and moved the production to Germany.

One of the reasons was that they could no longer get cold-rolled steel sections for the lift masts of their trucks in the UK, as the Corus plant in the North East was ‘restructured’ – the other was that there was a cyclical downturn in the sector.

There are dozens of industries and companies where the same or similar happened. Mergers, acquisitions, de-mergers and break-ups of companies are a favourite game in the UK to enhance so-called shareholder value. It promises faster returns for shareholders and bonuses for the board members rather than following the slower path of growing their companies organically. They would rather ‘return cash to the shareholders’ by share buy-back programmes and high dividends than invest in the future of their businesses and the prosperity of UK Plc.

What is the Government doing to change this pattern? The slogan needs to change from ‘It’s the economy, stupid’ to ‘It’s the real economy, stupid.’

Daily Mail March 2013A new German word has entered the English language after ‘Rucksack’, ‘Kindergarten’ and the phrase ‘Vorsprung durch Technik’, namely Mittelstand.

It means different, yet related things – it describes a medium-sized company, but it also means doing business in a very German way.

Mittelstand companies are family owned, in 95 per cent of cases, and 85 per cent are owner-managed. They are oriented towards customers, employees and communities rather than just obsessed with shareholder value.

They are typically embedded into a region, where they take their responsibilities seriously. Often, they are strong exporters, world leaders in their chosen field of operation like Brita Water Filters, which has raked up around £7billion annual turnover in 2012 from very humble beginnings.

Although the official definition of a Mittelstand company is up to €50million turnover and 500 employees, many have outgrown these numbers by far – including my former company, the €2.2billion turnover fork-lift truck maker Jungheinrich AG. But culturally, they retain the Mittelstand outlook.

Staying with the narrower definition, Germany has 3.5 million Mittelstand companies, representing 52 per cent of total economic output, 61 per cent of employment and €200billion of exports from Germany. Of these, 1,300 rank as so-called ‘hidden champions’ – world market leaders in their niche, against 67 in the UK and 366 in the US.

These companies are regarded as the backbone of German manufacturing, giving it a resilience that has stood the economy in good stead in the economic turmoil.

That leads to an inevitable question. Why can’t the UK create a Mittelstand of its own? Britain has brilliant inventors and entrepreneurs, but is not so successful at evolving their ideas into the creation of sustainable businesses, which can grow in to the world-leaders of tomorrow. The likes of Sir James Dyson and the Bamford family of JCB fame are the exception, not the rule.

The talent is there, but it seems to be driven too early into the wrong direction. 
Entrepreneurs cash in, either through a trade sale, to private equity, or by floating on the stock market. It may bring personal rewards, but getting into the short-term profit race can be detrimental to developing new products and markets.

I believe that the key difference between our two countries lies largely in the financing of these companies, and the role of banks.

Typically, Mittelstand firms finance themselves from retained profits, with bank debt and equity funding playing a smaller role. Germany has around 3,000 independent banks with excellent regional coverage, while the UK has not even a dozen business banks. Although they have many branches, they no longer have bank managers who can make local lending decisions based on a thorough knowledge of customers.

The manager of a small or medium-sized regional Sparkasse, Volksbank or Raiffeisenbank in Bavaria or Lower Saxony knows the businesses in his area and probably plays tennis or golf with the owners. Their kids attend the same school. During their last few years at school children make frequent trips to companies in the area and the companies make presentations to get the best candidates for apprenticeships.

Universities and colleges also work closely with the companies in their region.

Here, we have an opportunity right under our nose. Around 1,000 branches of Lloyds and RBS are up for sale. Rather than selling them to a City conglomerate which no doubt would offer a similar centralised structure, they should be offered in small clusters to regional institutions or individuals with the right background.

In co-operation with the Local Enterprise Partnerships they could be part of the ‘business bank’ structure for small and medium firms, which the Government is trying to get off the ground. Lord Heseltine has pointed the way in this direction.

The UK could make a start in following this model and building a unique and successful Brit-elstand right now.

This article was published in the Daily Mail, 24 March 2013

This is an extract of an article published on January 13th 2013. It can be read in full on the Daily Mail website here.

Article Daily Mail January 2013The Obama administration has voiced its concern about Britain’s future in Europe. Some prominent business leaders are getting nervous that political posturing could result in the UK sleepwalking out of the European Union. Prime Minister David Cameron is under pressure from his right wing and the rising UKIP vote to renegotiate the treaty and hold a referendum on EU membership.

The key question in this increasingly heated debate is whether the UK could become a Switzerland or Norway with a trading agreement with the Union.

During the past two decades Britain has looked mainly west towards America for political and economic inspiration rather than east towards Europe. As the headlong rush into globalisation emasculated the unions and kept real wages low, demand had to be stimulated in new ways.

Under the last Labour government, Gordon Brown and Ed Balls took their guidance from Federal Reserve supremo Alan Greenspan and Wall Street.

Following the US example, wage increases were replaced by increased limits on credit cards and rising mortgages on the back of the asset bubble.

When Margaret Thatcher came to office in 1979, private household debt stood at around £60billion. When Labour got into office in 1997 it had risen to £750billion and when the Coalition took over, it had reached £1.45trillion.

Instead of government debt being reduced during the boom years, the opposite happened, with the rescue of the banking sector completing the disaster.

Taking the lead from the US in economic strategy has been an unmitigated disaster not only for Britain, but left other countries such as Ireland, Spain, Portugal and Greece. It even influenced such countries as Switzerland, France and Germany, as their banks were trying to become global players, pay their managers Wall Street salaries and adopt the casino culture.

Fortunately, in the northern European countries the excesses were not quite as pronounced, but they now have the unenviable task of bailing out their profligate southern neighbours. Following the US lead during the past decade has not been a great success and no wonder open-minded people all over Europe are looking for alternatives.

A lot of my German business colleagues regret, as I do, that Germany and Britain did not get together as leaders of Europe, as Helmut Schmidt and other German chancellors had hoped.

Britain is approaching the crossroads and my hope is that leaders will look at the alternatives carefully and not be influenced by political expediency.

This letter appeared in the Financial Times Monday 26 November 2012

With his assertion (Letters, November 22), that APR calculations are meaningless and that banks charge even more on occasions, Errol Damelin, chief executive of Wonga, is trying once again to defend the indefensible. May I remind your readers why Wonga and the other 50 pay-day loan companies are not operating on the continent – very simple, Mr Damelin and his peers would likely be in prison under usury laws, if they plied their trade in Switzerland, Austria, Germany, Netherlands or the Nordic countries. Contracts that bear exploitative interest rates, generally above 15-20 per cent cannot be enforced in law. Repeat offenders, who try it, get a prison sentence. Maybe it is no coincidence that the above countries are the so-called creditor nations in Europe.

Usury laws protect the socially weak, uneducated, desolate and weak-willed from predators. There seem plenty of those around in the UK to feed this market. It is high time that the government acts against them, and at least they are prevented from advertising – their products are more socially corrosive than cigarettes or alcohol.

Letter in the Financial Times regarding payday loans by Bob Bischof

Steve Mann's reply in the Financial Times

Steve Mann’s reply in the Financial Times


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