There is a massive lack of confidence across pretty much the whole economy. Workers (consumers) are not confident they will still be employed next year – companies are not confident they can win new contracts for the next year – and as such everything is retrenching.

And that isn’t going to change for a while.

Low incomes are falling thanks to pay freezes, lost overtime and benefits/tax credit cuts. As we all know, people on low incomes spend proportionally more of every extra quid they get than wealthy people – so this hits the economy much harder than, say, taking the equivelent money from wealthier people who tend to save some of their additional income – and so don’t boost activity)

Likewise companies are struggling to win work as the budget cuts trickle down to the companies who actually run the state nowadays. The government doesn’t build bridges or clean hospitals. Private companies do. So goverment spending hurt the private sector. That loss of confidence and loss of income passes over into the same companies’ work in the private sector – as they can’t invest and have to lay off staff – creating further loss of confidence among workers (consumers) and so hitting other parts of the private sector.

Worst though is the stuff that has nothing to do with the recession. The degradation of business conditions that is underway in this country because the government doesn’t get business is far more damaging.

We were unambiguous leaders in games programming five years ago. Now we are among the leading nations. In five to ten years time we’ll be has-beens. This is because government policy is horrendous. Likewise energy construction is largely on hold right now because the government has delayed indefinately the electricity market reform proposals that were meant to be out early last year and will now be out… erm… dunno when actually. Eventually. Maybe.

It’s a joke.

I agree. But the reason is that the government has forgot the whole stimulation of supply side policy. We have austerity, but no stimulus to produce the growth or reduce costs for families.

Things like a new airport. We should not be having a discussion about building an airport to meet demand from developing countries. We should already be doing the building. Cutting red tape to help employers. Cutting uncompetative tax rates. Hong Kong did and they were landed with a deluge of capital.

More action. Less talk.

Anyone out there willing to do the calculations?

If the government hadn’t deliberately scared the shit out of public sector workers, benefit claimants, and private companies with significant public sector revanue streams, how much lower would the cost of welfare be? and How much more in tax would it have taken?

Planeshift

would be lovely to do the calculation – but where would one start?

Typical unemployment benfit is about £70 per week (say, £4k per week for every new unemployed person)

Council tax benefit (harder to simplify as some people in work get it too) – but assume £1k per year.

Average income before the recession was about £20k – income tax/NI on that = £6k ish.

That’s about £11k per year per job lost. A million jobs lost is thus about £11bilion.

Obviously that is a very simple starting point – and there is a lot of corporation tax not accounted for, housing benefit not accounted for, and so on – And it doesn’t begin to answer how much of an impact on the level of unemployment is a result of incompetent government that doesn’t understand business.

“We were unambiguous leaders in games programming five years ago. Now we are among the leading nations. In five to ten years time we’ll be has-beens. This is because government policy is horrendous.”

In what way, can you give examples of what the government has done that has been specifically detrimental to the games industry?

Don’t you think you’ve used the wrong graph here? According to the one you used, household incomes started to level off around Q1 2002. Can’t you find one that will blame the Tories?

EdS

Three things government has done.

1 – the scrapped the tax break for the sector that was introduced by Gordon Brown. The reason for the tax break was that because programmers are the most mobile profession in the world, the tax breaks being offered by places like Canada were draining talent and companies away. The government has since announced it will reintroduce the tax break – but a three year delay in an industry like programming is death. This isn’t banking where those who make big decisions over thousands of staff have a nice big house and kids at a good school tying them to the UK – in programming talent rises quickly and companies are mostly small.

2 – the limits on immiration are a big problem. programming is very international and tends to cluster in creative hubs (Dundee and Shorditch are strong examples in the UK) – and those hubs suck people in from around the world. With Amsterdam actively supporting immigration for the programming industry, and the UK trying to halt it – companies are just upping and moving to a hub that actually wants them to thrive and innovate – ie those not in the UK.

3 – this one isn’t specific to this government – it is just as much a problem of past governments – but basically it is the sadling of students with debts that are paid off through the tax system. The replacement of grants with loans in the 80s, and the introduction of fees in the 90s, and the raising of fees (still paid off through the tax system) to the highest in Europe is a massive problem.

This is because talent emerges and becomes apparent in programming very young. Programmers often start programming projects in their teens before going to uni – and they often start up companies at uni, or do freelance work while at uni – so by the age of 24 they have a good back-catalog of work behind them. start up costs are tiny too. Basically a good laptop with the right programmes is all you need. and as it is all on a laptop, companies and individuals are very mobile. Add in that programmers attend international events from the very start of their careers (not common in most sectors) and so build contacts in other countries – the fact the UK basically pays these young people to leave the country (take your wealth creation abroad – and you never have to pay back your uni fees or loans) and we are basically paying to get rid of the sector.

remember – this isn’t like most sectors where some one will typically be in their 30s before reaching a reasonably high level in their career – and thus will typically have kids and a home in the UK that ties them here – this is 23 and 24 year olds who earn enough to buy a house if they want, but are very comfortable buying it Vancouver instead of London.

Hope that helps to get across the damage government is doing to a sector we make fortunes out of in this country.

@7 m4e

I remember someone postulating that investment in the Western games industry suffered because people linked it in their minds to the dot-com bubble (cos it’s computers, innit). Not sure how much I’d believe that – you’d have to be pretty ignorant to think an industry as solid as computer games was equivalent to the dot-com thing – but it’s an interesting idea.

I suspect that private investment might not be forthcoming due to simple ignorance. Everyone knows about films, but people who have never played games often have very wrong-headed and out-of-date ideas of the industry (i.e. that games are either Super Mario Bros or murder simulators).

What makes you think Hong Kong model is scalable to a country the size of Britain? when everywhere is lax when it comes to “business” ie the freefloating capital of wealth accumulators, what makes you think there would be an influx of money? In reality places like HK would be city states surrounded by poverty stricken wage slaves. Just like HK now, come to think of it…

But then, hey. Look only at the glittering skyscrapers, and ignore the rotting tenements, landfill dumps and slums. After all, those glittering skyscrapers are photogenic, thrusting capitalism porn… ignore the reality for the majority.

Chaise

There’s no shortage of private investment in the games industry. It is unbelievably profitable and a lot of start ups benefit from counter-culture involvement – for exampe there are millions floating around through websites that allow individual gamers to donate to get a project under-way.

I can imagine some bankers not getting it – and so connecting games with the dotcom bust – but to be honest, I worked for a company that in 2002 had no trouble getting finance to grow because in its simpelst form – it actually produced something saleable. That it was all digits online meant nothing to investors. They were mostly smart enough to see a growing revenue stream and invest accordingly.

But the games industry in the UK gets almost no state support. only that tax break that Brown came up with and that the coalition scrapped. I would agree the coalition felt comfortable scrapping that because of perceptions about what games do to society – and hence film and theatre (literally worthless to our economy compared to programming and its various aspects – we make more money in this country doing CGI development for hollywood films than our film and theatre industries are worth – and that’s just CGI work) tend to do OK. Old people like film and theatre – they don’t like games.

Tend to agree with M4E that getting seed capital and funding to grow is not really a major problem for gaming firms if they have good ideas and realistic business plans. Banks don’t want to know but banks do not fund any kind of startups in this country unless the person borrowing has collateral, usually property. Venture capital and angel investors like the sector because the guys involved ( nearly always guys) tend to be dedicated geeks who do not mind spending 16 hours a day doing something they enjoy. Moreover, they do not burn through capital on frivolous stuff like some startups. Some recent funding for Scottish gaming firms.

http://venturebeat.com/2012/05/17/serious-parody-funding/

http://www.scotsman.com/scotland-on-sunday/business/investors-up-stakes-in-sports-bets-game-1-2222758

What gaming firms are starting to complain about are skills shortages.

http://www.scotsman.com/scotland-on-sunday/business/game-over-for-british-talent-if-digital-firms-are-forced-to-look-abroad-1-2347369

We don’t want to get into trying to pick winners or subsidise certain sectors but tax relief for an innovative and growing sector is entirely warranted. The global market for their gaming product will mean they earn more for the economy than the cost of the tax relief.

We pick winners all the time in the UK. Ahead of the EU summit the PM asks banking bosses what the country’s priorities are.

Fixing the skills problem (better immigration policy and not saddling young talent with lifelong debts that amount to a 40% basic income tax rate) would not only benefit programming. It would benefit engineering, the arts and a great deal more.

Might not make much difference to hedge fund managers though, and as we have picked them as our winners we probably won’t bother.

As for persisting skill shortages, how come these reports in the news?

“Recent graduates are more likely to be working in lower-skilled jobs than they were 10 years ago, new figures suggest. More than a third of recent graduates were in non-graduate jobs at the end of 2011 – up from about a quarter in 2001.”
[BBC website 7 March 2012]

Britain is facing a shortage of workers with programming skills, fuelled by poor-quality training courses in universities and colleges, which has left firms in fields ranging from advertising to Formula 1 struggling to recruit.

Leading companies interviewed for a new Guardian series say they require staff at a senior level to be computer literate, combining digital skills with the ability to lead a team. But they face delays in hiring the right staff, or have to give new employees extensive training because many computer science courses are nothing more than “sausage factories”. [Guardian, 9 January 2012]
http://www.guardian.co.uk/education/2012/jan/09/computer-science-courses-digital-skills

Bob
Id agree our education system leaves a lot to be desired. But two things about that stat…

One, the same old “too many people take degrees” stats are meaningless. More graduates have jobs through uni now, and keeping them for while after graduating is pretty common until they decide what they want to do or find the right job for their aspirations. Plus there is a recession on, which is hardly comparable to 2001 nor is it a long term solution to the UK’s skills shortage.

Two, plenty of skills are not transferable. The skills needed in banking are pretty generic, but in programming they are very specific. So even if those stats meant something generic, they mean nothing for programming.

m4e

I agree with much of that @15 although there are unresolved issues about whether the mix of degree subjects taken by undergrads are best suited to labour market demands – however, we need to keep in mind that the majority of undergrads are now young women.

There have been regular reports in the business press about shortages of computer skills going back 10 years or so and nothing much seems to have happened to reform the supply side in Britain. My son tells me that there also persisting shortages in America so a computer science degree from one of the better reputed unis looks a good bet for the job markets on both sides of the Atlantic.

bob

one of the things you said there highlights the problem with education in this country.

In programming one of the ‘better reputed’ universities is Hull. No one in this country wants to go to hull cos they think it will get them a rubbish degree and not set them up well for life – when in fact guys come out of there and start programming I-phone apps and travelling the world pretty much within weeks.

We have a very jaundiced view of status in this country. In effect, it doesn’t matter how good the idea/education/talent – what matters is the school/university/accent.

So we neglect real talent badly – which we can get away with if we then import talent from places with less cultural idiocy behind them – but we are now a very anti-immigration country too (see the Economist this week).

I know a lot of art history graduates from oxbridge who are barely able to string a coherent sentance together when put under anything approaching real pressure in the workplace (most get PR jobs as they are just well spoken and quite pretty). Yet some how this doesn’t rank as low as media studies on the “worthless degree” stakes, which boggles my mind.

@ 11 m4e

Sounds about right – I think we’ve got awhile to go yet before games are seen as just another form of art/entertainment and therefore treated more rationally (basically we need to get to the point where even old people are used to games, bearing in mind that people who play Solitaire and Minesweeper probably don’t think of themselves as “gamers”).

@ 12 Richard W

Regarding skills shortages, unfortunately I can hardly see Gove pushing for more IT literacy in education; that wouldn’t leave any room for Latin or Why Britain Is The Best Country Ever lessons.

CG

Trouble is, by the time that happens it will be too late. Our gaming industry will have largely gone abroad by then. five years ago we were top dogs. Now we are one of a handful of leading centres – by the end of this government’s five years in charge there may be no coming back.

But hey, we still have banking right?

@ 19 m4e

Heh. To be fair, there’s always the possibility of a resurgence, possibly due to wider industry changes.

I was watching a podcast recently that said that taking, say, Skyrim, WoW, and Angry Birds and throwing them all in the general category of “video games” is getting less and less helpful as games become more varied. It predicted that in the future we’ll start to think of video games as two or more distinct media. Whether or not that’s true, specialisation of this kind could affect the UK industry and, in 20 years, see us as leaders in whatever the contemporary equivalent is of gaming apps or MMOs, for example.

Chaise

Without action soon the UK won’t lead any area of gaming in 20 years time. But you are right that different types of programming also cluster within the wider programming clusters. A country that supports programmers may find they are supporting a specialism in one area of gaming.

They will often cluster together though. programmers may want to specialise – but the facilities and needs of one part of the games industry are very much the same as another part of the games industry. Access to international labour pools, good digital infrastructure and an urban location suitable for counter-culture social life.(Bankers traditionally like champers, cocaine and expensive hookers who keep their traps shut – programmers prefer live bands, cheap beer and comic book stores).

It has become a cliche – but counter-culture is a crucial part of the gaming sector.

m4e

It happens I know several academics who graduated from Hull uni or who taught there. The problem with Hull is not the uni there but the city council and its regular ranking at or near the bottom of the local education authority league table for England – which is a persuasive reason for not wanting to have one’s kids go to school there.

I’m unconvinced that an average Oxbridge grad is better educated than an average grad from any of the other Russell Group unis. The great advantage of an Oxbridge education IMO is the tutorial system, which fosters intensive self-learning.

bob

Where one’s kids go to school has little to do with where one’s kids go to uni. Or at least it should. Of course the high cost of university is making many kids study close to home, which means they are opting for a less good education in a lot of cases, and depriving good unis like Hull of raw programming talent to turn into valuable wealth creators.

And I’m unconvinced that an average russell group grad is better educated than an average non-Russell group grad. But that may reflect the sectors I have worked in – and the rather generic and commonplace courses most Russell Group Grads do (English, History, Politics, etc).

Oh

I should also add – we have a massive challenge in overcoming this problem with univserities because of the inherrant self-bias of human beings.

Politics and universities are sectors staffed by people who went to Oxbridge and Russell group unis and want to believe that reflects a standard of education and not snobbery on the part of their peers who hired them and promoted them.

Likewise Politics especially is staffed by people with generic degrees like Politics, Philosophy and Economics – so when it comes to edeucation reform they tend not to really admit that their courses are of little economic value to the country and don’t serve to mark them out as anything special academically. Programming, mechanical engineering, chemistry and so on are degrees of real value and are, frankly, much harder to get a first in from any uni. But politicians would rather mock media staudies than deal with real problems. (Note, media studies, if the course is built right, is of way more relevance to our economy and society than PPE)

m4e: “Likewise Politics especially is staffed by people with generic degrees like Politics, Philosophy and Economics – so when it comes to edeucation reform they tend not to really admit that their courses are of little economic value to the country and don’t serve to mark them out as anything special academically.”

LOL! My son is a Oxford PPE grad – he works in the American computer industry for a multinational company. The self-learning skills gained in the Oxbridge tutorial system are marketable. It’s unwise to knock a degree for which 70pc of the applicants are rejected – and btw he went not to one of those fee-paying schools but to the maintained school down the road, which usually achieves an average score in the A-level exams better than Eton.

The Economist ran a news report in the early 1980s about what happened to philosophy PhDs from American universities where the annual output exceeded the numbers of academic vacancies. As reported, the computer industry valued their analytical skills.

@ 21 m4e

“Bankers traditionally like champers, cocaine and expensive hookers who keep their traps shut – programmers prefer live bands, cheap beer and comic book stores”

That actually cheers me up. Good point RE cultural draws, it hadn’t occurred to me.

Chaise

Pleased to put a smile on your face. There are plenty in gaming who now consider Shorditch “costa-del-Shorditch” as it has become too mainstream and boring – they are moving out.

Bob

Would never claim any degree from Oxbridge wasn’t marketable. Just that something generic like PPE has little inherrant value. I’d add that having been to a “failing school” my own education gave me rather a different route to self-learning, though not one I’d advocate. I quit English GCSE classes and studied it myself because the lessons were so dismal. Most people don’t react that way to a bad education, and those at good schools have little cause to react at all. So self-learning is an important part of university experience for a lot of people and it needs better emphasising.

I don’t know many philosophy grads in programming – but there are quite a lot of psych grads getting involved now. Just like marketing, understanding how people think can be much more valuable than just sitting in a room with a “patient” asking “how does that make you feel?” or whatever they do.

m4e: “Just that something generic like PPE has little inherrant value.”

After reforms several decades back, the extent of subject specialiation in the PPE degree is very flexible so it’s possible for undergrads to specialise mainly in P, P or E according to personal preferences. My son gave up on the politics content at the earliest possible opportunity and ended up majoring in philosophy. In the event, that hasn’t harmed his employment prospects.

Judging by this recent league table of graduate salaries by degree subject, economists do rather well by the test of the market.
http://www.thecompleteuniversityguide.co.uk/careers/what-do-graduates-earn/

Good advice from Wittgenstein: “Whereof we cannot speak, thereof we must stay silent.”

Surely the economy is stagnating because collectively we’re all massively over-indebted after the drunken orgy of lending by under-regulated banks who make money from debt?

If UK business really does owe 500% of GDP, as some estimates have it, then they can hardly be expected to borrow more to stimulate growth. They’re either going bankrupt or scrambling to pay off debt. The few that are looking for investment finance aren’t going to be enough to make a difference.

Similarly banks, having sobered up a bit, can’t be expected to push even more lending into the real economy, because it is a massive risk (which explains the discrepancy between base rate and lending rates at the moment. IDS’s arguments about people on welfare apply to the banks as well. They’ve gotten used to government subsidies and can’t operate without them.

Banks in fact loan only about 8% into the real economy with 92% still going into so-called “investment banking”. Banks priorities are clear. They are focussed on gambling: they bet, or lend to other people to bet on the price of our houses and commodities like food and force prices up to the point of collapse.

Consumers too are paying off debt or going bankrupt, rather than shopping. Unemployment is high and for every job there are 11 people looking for work, because business is paying off debt, etc.

Meanwhile the govt is pursuing an aggressive austerity problem despite many of the world’s leading economists saying that austerity makes recessions worse. And since it makes no economic sense, we have to look elsewhere for reasons. Could it be that the Tories are using this as a rather cynical opportunity to shrink the state while blaming Labour for creating the crisis? Minimal government is one of the main tenets of the Neo-Conservative cult. So while the UK burns the government are ideologically fiddling away. Where is the empirical evidence that Neo-Conservatism and it’s hand maiden Neo-Classical Economics have done anything but concentrate wealth in the hands of the 1% while causing havoc and mayhem in the real economy, destroying lives and ruining the environment?

Bob

Without wanting to diminish your son’s academic achievement – which I really don’t intend to do – getting a degree at all is a marvelous achievement, and getting top grades in one is all the more so – but while some degree of specialisation in PPE is possible now, the only one of those with significant market value is the E – and that value would be all the greater just by studying an economics degree.

What your son has is the value of demonstrating that he is capable of learning to a certain level – indeed a high level – and of course he also has the value of the slight employer-bias towards status (he did it at a ‘top’ uni rather than some other uni).

Now that is great for him personally – and for those who do what he has done – but as an economy we need people with less generic degrees and we need to move away from the out-dated bias towards certain institutions. I say this because it gives credibility and status to something like PPE that it is taught to lots of people at Oxford, where something like programming is not afforded the status it deserves because it is taught at Hull. (I didn’t study programming or at Hull, I should stress). That is a problem because it warps decisions away from programming, which the economy relies on – and towards PPE, which the economy wouldn’t notice if it dissapeared.

But we do, as a country, tend to look down at anything that appears ‘vocational’ unless it is a law or medicin degree – and only then because they are 1000 years old.

jayarava

It is a bit simplistic to focus on the trigger for the economic malaise and ignore that we started to recover (rising from about 8% below economic peak to about 4% below economic peak) until summer 2010, when the economy inexplicably tanked again.

I say inexplicably because while the credit crunch was a global phenomenon, our stagnation is not. Countries with more debt have recovered better than the UK – Countries that suffered similar levels of economic contraction have recovered better than the UK. Countries of similarly international focus for trade have seen much less unemployment result from the downturn – and so on.

As such it seems sensible to ask what the UK is doing wrong. While the austerity measures obviously play their part in causing unemployment and shrinking the economy – there are other more entrenched problems with Britain that need to be resolved.

m4e: “I say this because it gives credibility and status to something like PPE that it is taught to lots of people at Oxford, where something like programming is not afforded the status it deserves because it is taught at Hull. (I didn’t study programming or at Hull, I should stress).”

I fondly recall a long and, for me, an illuminating conversation I had in Oxford in the mid 1990s with Tony Hoare, then professor of computing at Oxford and a Turin Award winner. I was interested to read in the Wikipedia entry for him that his first degree was in Classics at Oxford.

Bob

Please to hear he retrained to learn something useful.

m4e: “Please to hear he retrained to learn something useful.”

Aren’t we all glad that Tony Hoare progressed from a first degree in Classics to become an esteemed professor of computing at Oxford? But that only goes to show that a degree subject needn’t indicate very much about personal aptitudes and subsequent career development. Would that more graduates could make a similar transition and so help to alleviate the persisting shortage in computer skills – which seems to me to be a rather more important cause to promote than knocking PPE grads from Oxford.

Btw I went to see Tony Hoare to discuss whether there is some robust procedure to ensure computer programmes – especially safety-critical programmes – aren’t bug-ridden and are fit-for-purpose.

The short answer is that there isn’t any sure way of proving that a computer programme has no bugs and will do what it is intended to do. The potential pitfalls range from bugs in compilers to errors and gaps in user specifications. Programme development usually involves team working so clarity in inter-personal communications between team members is at a premium – which gives some insight into why the analytical skills in philosophy come in handy. Contrast the popular notion of philosophy as a collection of moral prescriptions.

Bob

Degrees do all demonstrate something about one’s ability to learn.
On top of that they demonstrate what has been learned.

A law degree demonstrates a learned knowledge of Land Law or what-have-you. A degree in mechanical engineering demonstrates learned knowledge of, well, mechanical engineering. And PPE demonstrates some learned knowledge in each of philosophy, politics and economics. All three demonstrate an ability to learn.

The UK needs to foster certain types of knowledge and we are not good at making that happen through our degree systems. Sadly.

Oh, and Mr Hoare is right. The most important programmes always have bugs and always will have. I won’t name the company or the individual – but the NatWest fiasco last month was a wonderful demonstration of that. An update to their programme was issues – it had bugs in it – an update on that was issues to fix the bug – but communication had broken down in the mean time and the version with the critical bug was still being distributed.

It is inevitable, and it is normal, but so long as the right practices are adhered to behind the scenes, nothing need ever be known of it.