Co-determination has served Germany well since the war

Ursula Weidenfeld paints a one-sided and negative picture of co-determination (“Beware of imitating the German model, Mrs May”, July 13). As an essential part of the social market economy model, it has served Germany incredibly well after the war and is supported overwhelmingly by business.

This letter appeared in the Financial Times on July 14 2016 

Sir,

Ursula Weidenfeld paints a one-sided and negative picture of co-determination (“Beware of imitating the German model, Mrs May”, July 13). As an essential part of the social market economy model, it has served Germany incredibly well after the war and is supported overwhelmingly by business. In particular, Ms Weidenfeld’s assertion that it hinders innovation couldn’t be further from the truth — just look at Siemens, Bosch or the car industry, and the leading position Germany holds with patent applications.

Apart from the obvious advantage of communicating with your workforce, co-determination also acts as a safeguard against the kind of takeovers that are for the benefit of shareholders and management only. It forces companies into long-term thinking and more concern for market share than for short-term profit maximisation, with the survival and wellbeing of the company being paramount goals.

Clearly Theresa May will have huge opposition to backing something like a stakeholder model, as Tony Blair experienced when he made his famous speech in Singapore in January 1996. Rupert Murdoch stopped him in his tracks. The first salvos have already been fired.

Bob Bischof
London SW1, UK
Vice-President, German British Chamber of Industry & Commerce; Chairman, German British Forum

Is English Glory Foreign-Made?

Exploring parallels between English football and the economic and political landscape of the country.

This article was published in The Globalist on 5 July 2016

England has without doubt the most expensive and internationally most followed football league in the world. Many Premiership clubs are owned by Americans, Russians, Saudis, Iranians, Thais and Chinese.

The global element shaping the sport in England doesn’t end there: Out of the top 12 clubs in the 2015/16 season, 11 were trained by Italians, Spanish, French, Dutch, a Chilean, a Croat and a German.

In the pool of players signed by all Premiership teams, 59 foreign nationalities are represented, accounting for 67% of all players in the league. Of the remaining 33% — the English players — not even half get to play every weekend.

The English press regularly proudly reports the Barclays Premier League as the richest, best and most successful league in the world.

It also elevates the English team before every international tournament like the World Cup in Brazil in 2014 and the current European championship to semi-favourite status.

Soccer, just like the economy

The English are without doubt the champions in self-promotion. The meeting with reality is quite harsh, though. Consider that Spanish club teams made a clean sweep of trophies in European club competitions this season, with the English clubs all knocked out early.

The early exit of the national team in Brazil in 2014 and now in 2016 against Iceland shows up the fundamental weaknesses of the overall approach.

The sport is played for profit only, with little regard for the development of home grown talent on or off the field. That money-based approach has an obvious impact on the national team, which has underperformed badly yet again.

This soccer saga has all the hallmarks of the overall British economic and political malaise. In politics, the bragging about the greatest league translates into “We are the fifth-largest economy in the world” and “We are the fastest growing country in the G8.”

This self-boosting rhetoric has been peddled by Cameron and Osborne over the last few years and featured hugely in the British press. However, once the pair decided to campaign for remaining in the EU, it came to haunt them.

Harsh economic reality

The two slogans were effectively used by the Leave campaign by simply claiming, “we can stand alone, we don’t need Europe.” Neither Cameron nor Osborne could admit that both claims were untrue for fear of being accused of “talking the country down.

As David Smith, the Economics Editor of the Sunday Times, pointed out, economic reality is not as kind. The UK, by Purchasing Power Parity (PPP), is the tenth largest economy.

And in the first quarter of 2016, Britain’s economy grew at less than half the pace of the Eurozone – 0.3% versus 0.7%. Moreover, it was forecast to lag behind for the full year without the Brexit disaster.

But not only that – the country’s fiscal deficit is also going up. The current account deficit is at record high with 7% of GDP, this under a presumably strict Conservative government.

Private household debt hit a new record way above the pre-crisis level of 2008, with credit card debt rising at double-digit rates. The much talked about National Health Service is under water, to the tune of £2.5b billion.

The underfunded company pension schemes – like those of Tata Steel and BHS – amount to £92 billion, much of that shortfall will have to be covered through the government guarantee scheme.

Public pension deficits look even worse.

Sterling under pressure

All of it is totally unsustainable, even without the shock of Brexit. Theresa May, the leading contender for the prime ministership, announced simultaneously with Chancellor Osborne the abandonment of the fiscal target for this parliament. It makes sense, but doesn’t solve the problem.

Britain’s current account deficit is of particular concern. The trade balance has always been negative, but services made up for the gap in the past.

No longer so. Britain has lived for decades on the proceeds of selling assets to shore up the current account deficit and the exchange rate. Ports, airports, the energy sector, huge numbers of industrial businesses have been sold to foreign investors.

Unsurprisingly, the UK’s once considerable earnings flow from overseas investment has reversed. It means that Sterling would have come under pressure before any Brexit-related effects.

Overseas investment

The car industry, once the perpetual laggard, is now thriving. It is almost completely under foreign ownership and management. These firms have trained their workforce well, for example, by re-introducing German-style apprenticeship systems and taking a long view.

The Brits treat this as a great success story. But working for so many foreign employers has another side to it. There is a deep psychological problem here, too.

Having foreign bosses and even being paid well by them is one thing. Liking that situation is quite another matter altogether.

Accordingly, there is a growing feeling of alienation in the country because of these developments. The migration crisis, which made the timing of the referendum so awful, has of course magnified this feeling.

We want our country back” seems also a cry of despair about what has happened – and blaming others like Brussels was just so easy to exploit by the populists on the right and left.

Need for home-grown talent

What gets lost amidst all this is that what still makes Britain great these days is that it attracts so many skilled professionals in all sorts of fields, not just soccer; however, more home reliance is clearly necessary.

German and many other clubs on the European continent are owned by their members. Of course, German clubs also import players, but they are serious about developing their own young players – always with an eye on the national game, too.

Unless Britain develops more home-grown talent in all walks of life, changes the overall approach from short to long-term thinking and stops kidding, if not deluding itself, it will not succeed — on or off the field.

British Have Been Fed Misinformation by the Rightwing Press for Years

I don’t think the British people per se are anti-Europe but they have been fed misinformation for years by the puppet masters of the rightwing British press, which has such a huge circulation advantage over the liberal press. To make out that they are doing this for the working class people of Britain is the con of the century.

This letter was published in the Financial Times on June 22nd 2016, the day before the EU referendum. It was a response to a Martin Wolf article on the previous day, and ran alongside ‘Fleet Street’s European bite remains sharp’ by John Gapper – see below and click to read the full item. 

Sir,

As a German who has lived and worked happily in the UK for more than 40 years, I can only underline Martin Wolf’s arguments for staying in (“Why I believe Britain belongs in Europe”, June 21). Two small additional comments, however.

The Brexit supporters constantly mention that Britain can easily stand alone, being the fifth largest and fastest-growing economy among the Group of Eight countries.

First, as David Smith, the fiercely independent economics editor of The Sunday Times has pointed out, Britain is by purchase power parity (PPP) the 10th largest; and as for gross domestic product growth, the much maligned eurozone grew by 0.7 per cent in the first quarter of 2016 against 0.3 per cent in the UK and is forecast to be ahead over the full year. Naturally, David Cameron can’t mention this fact, as he would be accused of talking the country down.

My second point is that I don’t think the British people per se are anti-Europe but they have been fed misinformation for years by the puppet masters of the rightwing British press, which has such a huge circulation advantage over the liberal press. To make out that they are doing this for the working class people of Britain is the con of the century. I only hope that enough people will see through this and that the famous British common sense will prevail.

Bob Bischof
London SW1, UK
Vice-President, German British Chamber of Industry & Commerce; Chairman, German British Forum

Read with:

Fleet Street's European bite remains sharp

Why Brexit is So Likely (auf Deutsch)

Bob Bischof speaks about the inevitability of the ‘Brexit’ with his German-British perspective. Read the transcript here.

This is the transcript for a speech given at the prestigious Kapitalmarkt Forum of Commerzbank AG in Hamburg, October 2015. Read the English version here.

Ladies and Gentlemen, meine Damen und Herren

Es gibt eine Reihe von Gruenden dafuer, dass die Briten den Exit vorziehen koennten bzw ich moechte darstellen, wie hoch der Berg ist, den die Briten ueberwinden muesssen, um sich fuer Europa zu entscheiden oder gar zu begeistern – dann koennen Sie selbst entscheiden, wie hoch die Wahrscheinlichkeit ist.

Dazu muss man die folgenden Scenarien verstehen

  1. Das Inselparadies ist bereits uebervoelkert und ueberfremdet in vieler Briten Augen. Die Einwanderung aus den ehemaligen Kolonien wie Indien, Pakistan, Afrika und dem Karibik Raum begann schon vor Jahrzehnten und viele der Immigranten sind wenig integriert und leben in bestimmten Ballungsrauemen. Die neue Immigration aus Europa wurde zunaechst begruesst – polnische Klempner waren begehrte Fachkraefte waerend des grossen Haeuserbooms in der Vor-Rezessionszeit. Als danach die Arbeitsosigkeit und ebenfalls die Europafeindlichkeit stieg begannen Politiker wie Adolf Farage sorry der heisst Nigel mit Vornamen mit simplen Parolen wie „die nehmen uns die Arbeit weg und sind fuer die hohen Hauspreise verantwortlich“ Schlagzeilen zu machen und die Regierung unter Druck zu setzen. Seine UK Indepence Party (UKIP) gewann die Europa Wahl und Prime Minister Cameron musste sich unter Druck seines rechten, ausserordentlich euroskeptischen Fluegels auf das Referendum einlassen.

Die Immigration ist tatsaechlich ein heisses Thema besonders weil UK

– wie ich im naechsten Teil darstellen werde, ein Land ist, dass total unterstrukturiert ist – wie Deutschland vielleicht ueberstruckturiert ist. Da es keine Personalausweise –identity cards – gibt und niemand weder Fahrzeugpapiere noch einen Fuehrerschein bei sich haben muss, weiss man nicht wie viele ueberhaupt im Lande sind. Hinzu kommt, dass es nur Grenzkontrollen bei der Einreise, aber nicht bei der Ausreise gibt. Studenten kommen mit Visa nach GB und keiner kontrolliert, wann sie wieder abreisen. Great Britain ist deswegen ein bevorzugtes Einwanderland und auch weil die ganze Welt zumindest gebrochenes Englisch spricht und wie spaeter erklaert, es unskilled (ungelernte) Jobs in Huelle und Fuelle gibt.

  1. Regeln, Strukturen und Vorschriften liegen den Englaendern nicht

a. Es geht mit der Sprache los. Die Sprache hat kaum Regeln und die Grammatik besteht im wesentlichen aus Ausnahmen. Daher ist sie leicht zu lernen aber unendlich schwer zu perfektionieren. Man drueckt sich auch ungern klar aus, wie Anthropologin Kate Fox in ihrem Buch „Watching the English“ so gut beschreibt. Very interesting heisst total rubbish etc Henning Wehn, der deutsche Komiker, der in England Furore macht, beshreibt das herrlich

b. Es gibt weder eine geschriebene Konsitution noch ein BGB oder HGB – alles ist auf case law aufgebaut und damit interpretierbar – Beispiel die sogenannten „Pay Day Loans“ mit 4stelligen Zinssaetzen waeren auf dem Kontinent unmoeglich, da es Wuchergesaetze oder aehnliches gibt

c. Main Freund Prof Thomas Killinger, Korrespondent der Welt in UK hat das vortrefflich in seinem Buch „Crossroads and Roundabouts“ beschrieben – alles ist staendig im Fluss

Meine Damen und Herren – stellen Sie sich vor, was sich da abspielt, wenn so eine Gesellschaft von unseren EU Freunden in Bruessel mit Regelungen und Vorschriften ueber alles und jedes beglueckt wird…..Das passt wie die Faust aufs Auge.

  1. In der Wirtschaft steht die Flexibility im Vordergrund und Arbeiter-und Angestellten Schutzgesetze (Employment Law) passen da ueberhaupt nicht hin. Wir in Europa sind an diese Dinge wie Mitbestimmung gewoehnt, fuer die englische Wirtschaft ist das alles ein rotes Tuch. Es gibt in UK etwa 2 millionen Zero-hour contracts, bei McDonald allein etwa 100.000, d.h. man wird nur bezahlt, wenn Arbeit da ist.

Als Ausbildung wird in der Regel das „on-the-job“ training als ausreichend angesehen. Im Service Sektor ist das auch oft ausreichend im Herstellbereich nicht – aber der schrunft sich schon seit Jahren gesund und liegt inzwischen bei knapp 10% vom GDP

  1. Die Presse ist ueberwaeltigend rechts, zum Teil rechts von Tchingis Khan

a. Allen voran die Murdoch Presse mit eienm Zeitungs- und TV Empire, dass euroskeptisch ist und mit grossem Misstrauen den Kontinent betrachtet. Murdoch’s Einfluss ist so gross, das Blair und Brown jede Idee von einem Stakeholder Model a la Soziale Marktwirschaft aufgeben mussten. Am 8.1.1996 hielt Blair eine Rede in Singapore ueber die Vorteile des Stakeholder Models. Drei Wochen spaeter mussten Blair und Brown bei Murdoch antreten – das Wort stakeholder wurde danach aus jedem Labour Program gestrichen. Fast wie zu Stalin’s Zeiten, wenn ein General oder Politiker ausradiert wurde.

b. Die Daily Mail, Daily Express und Daily Telegraph sowie und ihre lokalen Ableger sind noch extremer eurofeindlich mit fast taeglichen Attacken auf Bruessel oder auch Deutschland und Frankreich

c. Man darf nicht uebersehen, wie hoch die Auflagen der Zeitungen in UK sind – etwa das zehnfache der deutschen… Die Leser werden in allen Zeitungen mit 20-40 Seiten Sportberichten gefuettert. Wie im alten Rom – Brot (minimum wage) und Spiele. Vorne eine paar Schlagzeilen, harte Kommentare wobei Information oft hinter Meinungsmache zurueckbleibt

d. Guardian und Mirror auf der linken Seite haben wenig Chancen sind aber auch klar tendenzioes ausgereichtet – nur nach links.

  1. Die Exit Befuerworter haben die simpleren Messages a. Ohne Mitglied des Euro Clubs zu sein, ist UK ohne wirkliches Mitspracherecht im Kreis der Grossen und braucht eine Sonderstellung bzw ist besser gleich draussen b. Sprachlich, politisch und kulturell ist UK naeher an USA als an Europa und muss im Zweiferlsfalle immer Amerika folgenc. Den Europaern allen voran den Franzosen kann man nicht trauend. Europa ohne Grenzen ueberschwemmt das Land mit Fremden
  1. Die City hat einen ebenso grossen Anteil am GDP wie der Manufacturing Sektor; die einen brauchen Volatility die anderen Stabilitaet. Vorschriften aus Bruessel werden oft als Unterwanderungsabsicht der Kontinentaleuropaer gegen die Vormachtstellung der City in allen Finanzangelegenheiten dargestellt. Freiwillige Ueberwachung hat zwar in der Vergangenheit nicht funktioniert aber wir nach wie vor bevorzugt. Die Meinung in der City ist jedoch sehr geteilt was das Referendum angeht, aber ueberwiegend pro EU Verbeib – allerdings sie war immer anti Euro, da der Euro bedeutet, dass man nicht mehr mit Waehrungen von 19 Laendern spielen kann, sondern nur noch mit dem Euro.
  1. Was sagt die verarbeitende Wirtschaft dazu?

Ueberwaeltigend dafuer in der EU zu bleiben, aber moeglichst mit einer „reformierten EU“ – weniger Regeln, mehr Subsidiarity, Einspruchsrecht (Veto) im Arbeitsrecht und Finanz- und Steuerangelegenheiten etc

Als Deutscher moechte ich die Briten klar in der EU behalten – mit meinem englischen Hut auf, sehe ich das allerdings nicht unbedingt so eindeutig.

Nebenbei, je mehr sich die deutschen Politiker um UK bemuehen, um sie in der EU zu halten, desto mehr erscheint es den Insulanern, dass die Europaer das nur aus Eigennutz befuerworten zum Nachteil der Englaender. Es bedarf also grosses politisches Fingerspitzengefuehl, hier den rechten Ton zu finden. Sentimentalitaet ist wenig angebracht oder gefragt. Die Anglos waren schon immer von Mars und die Europaer eher von Venus (selbst die Deutschen zur allgemeinen Verwirrung neuerdings).

Mae West Zitat – “When she was good, she was very very good, but when she was bad, she was …. magnificent”. Leicht abgewandelt auf Deutschland bezogen wuerde das heissen

When the Germans are bad, they are awful, but when they are good …. they are even more annoying.

Ce la vie!

Werden die Briten austreten? Die Schotten waren nahe daran, die UK zu verlassen und ein sozial-demokatisches Land zu bilden und haben geschworen, dass wenn Grossbritannien insgesamt mit „out“ waehlt und die Schotten mit „in“, dann wird es ein neues Referendum in Schottland geben und die Schotten wuerden die UK eventuell dann verlassen. Die Scottish National Party, die eine grosse Mehrheit hat, ist nebenbei am weitesten links (im englischen Sinne) – sie nennt sich „progressiv“ und befuerwortet das Model der sozialen Marktwirtschaft a la Germany.

Die neue Labour Opposition unter Jeremy Corbyn ist ein natuerlicher Verbuendeter der SNP, steht allerdings auf sehr fragwuerdigen politischen Positionen wie Verstaatlichung der Bahn und Energiewirtschaft, ist allerdings pro-Europa.

Vieles haengt natuerlich davon ab, wie Europa sich bis zum Wahltag darstellt. Falls die Eurozone sich positiv entwickelt, ist den Austretern schon ein wenig Wind aus den Segeln genommen. Falls nicht und falls sich das Immigrationsthema noch schlimmer entwickelt, wollen viele Englaender den Tunnel wieder zuschuetten …

Bob Bischof – September 2015

Eurozone Membership

This letter was published 24 July 2015 in the Financial Times here

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

Sir,

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

R3 Business Recovery Conference 2015

R3 Conference 2015 - The Winds of Change
Click to see the conference introduction

Bob Bischof was a speaker at the R3 conference 2015.

Here is an extract from the programme:

The insolvency and restructuring profession must overcome significant challenges as we face up to the threat of unprecedented change.
new legislation in the UK, the drive for ‘harmonisation’ in Europe, the perceived attraction of US style Chapter 11 concepts, and much decreased levels of formal insolvency present the profession with real and present challenges. The nature of insolvency inherently dictates that the insolvency profession is frequently ‘under the spotlight’.

Although our profession is highly regulated, and the UK’s regime is one of the best in the world, we need always to bear in mind that we are under constant scrutiny from politicians, press and the public. The UK insolvency profession does an excellent job in delivering the best results for creditors and debtors, and we have got much better at communicating our value to those all-important stakeholders.

But there is more we can do. To achieve the status of a trusted profession we must demonstrate integrity in all we do. Adherence to the principles behind the rules is as important as adhering to the rules themselves. In the same way that company directors’ responsibilities have widened, insolvency practitioners should always remember that trust and confidence in the insolvency profession depends on their actions and behaviour, passing continually higher tests of performance.

All of these issues and much more will be discussed at the r3 annual conference
Phillip Sykes, Baker Tilly
r3 President (April 2015)

Sterling at €1.34 is a threat: Britain, the EU and the price of independence

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.

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.

OMFIF

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 www.omfif.org and www.twitter.com/OMFIF.

Bob Bischof is a member of the OMFIF Advisory Board.

Foreign Takeovers and Nationalism – BBC World Service

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

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: http://www.bbc.co.uk/programmes/p01y0sb9

 

Britain Could and Should Do Better

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.

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.