UK labor costs grow by more than 2% again

Flower pickers harvest daffodils on a farm near Holbeach in eastern England, on February 25, 2019. (AFP)
Updated 05 July 2019
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UK labor costs grow by more than 2% again

  • British employers have been on a hiring spree recently, pushing up pay for workers at the quickest pace in a decade
  • Many economists have linked the jobs boom to uncertainty about Brexit

LONDON: Growth in British unit labor costs, an early signal of inflation pressures ahead, slowed to 2.1 percent in the first three months of 2019 but it was the sixth quarter in a row when costs grew by more than 2 percent in annual terms.
British employers have been on a hiring spree recently, pushing up pay for workers at the quickest pace in a decade, one of the few bright spots for the economy ahead of its departure from the European Union.
Many economists have linked the jobs boom to uncertainty about Brexit which has made employers favor hiring workers — who can be laid off quickly — over longer-term commitments to investing in equipment.
The Office for National Statistics said the 2.1 percent increase in labor costs in the January-March period was weaker than a rise of 3.1 percent in the fourth quarter of last year.
The ONS also confirmed preliminary data showing a weak picture for productivity in early 2019.
Britain’s poor productivity record poses a risk to the country’s long-term growth prospects.
Output per hour fell by an annual 0.2 percent in the January-March period for its third straight fall, the longest such run since 2013 when Britain was struggling to emerge from the hangover of the global financial crisis.
“Our latest figures represent a continuation of the UK’s productivity puzzle,” said Katherine Kent, head of productivity at the ONS. “This sustained stagnation in productivity in the last decade is at odds with what we’ve seen after previous economic downturns.”


BMW picks insider Zipse as CEO to catch up with rivals

Oliver Zipse
Updated 19 July 2019
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BMW picks insider Zipse as CEO to catch up with rivals

  • German giant has lost ground to Mercedes-Benz and Tesla as tech steps up

FRANKFURT: BMW has named Oliver Zipse as its new CEO, continuing the German carmaker’s tradition of promoting production chiefs to the top job even as the auto industry expands into new areas such as technology and services.
Hailing Zipse’s “decisive” leadership style, BMW hopes the 55-year-old can help it win back its edge in electric cars and the premium market  from rival Mercedes-Benz.
But some analysts questioned whether Zipse was the right choice with new fields such as software and services like car-sharing becoming increasingly important.
“What is intriguing is the cultural bias to appoint the head of production. It works sometimes but ... being good at building cars is not a defining edge the way it was 20 years ago,” said Jefferies analyst Philippe Houchois.
Current CEO Harald Krueger, and former chiefs Norbert Reithofer, Bernd Pischetsrieder and Joachim Milberg were all former production heads.
Zipse joined BMW as a trainee in 1991 and served as head of brand and product strategies and boss of BMW’s Oxford plant in England before joining the board.
He will become chief executive on Aug. 16, taking over from Krueger who said he would not be available for a second term.
“With Oliver Zipse, a decisive strategic and analytical leader will assume the Chair of the Board of Management of BMW. He will provide fresh momentum in shaping  the future,” said Reithofer.
Zipse helped expand BMW’s efficient production network in Hungary, China and the US, in a move that delivered industry-leading profit margins.
Under Krueger, BMW was overtaken in 2016 by Mercedes-Benz as the best-selling luxury car brand.
It also had an early lead over US  rival Tesla in electric cars, but scaled back ambitions after its i3 model failed to sell large numbers.
Reithofer initially championed Krueger’s low-key consensus-seeking leadership, but pressured him to roll out electric vehicles more aggressively, forcing Krueger to skip the Paris Motor Show in 2016 to reevaluate BMW’s electric strategy.
Krueger’s reluctance to push low-margin electric vehicles led to an exodus of talented electric vehicle experts, including Christian Senger, now Volkswagen’s (VW) board member responsible for software, and Audi’s Markus Duesmann, who is seen as a future CEO of the company.
Both were poached by VW CEO Herbert Diess, a former BMW board member responsible for research who was himself passed over for BMW’s top job in 2015.
VW has since pushed a radical 80 billion euro ($90 billion) electric car mass production strategy, and a sweeping alliance with Ford.

Other skills
“A CEO needs to have an idea for how mobility will evolve in the future. This goes far beyond optimising an existing business,” said Carsten Breitfeld, chief executive of China-based ICONIQ motors, and former BMW engineer. “He needs to build teams, attract talent, and promote a culture oriented along consumer electronics and internet dynamics.”
German manufacturers have dominated the high-performance market for decades, but analysts warn shifts towards sophisticated technology and software is opening the door to new challengers.
“Tesla has a lead of three to four years in areas like software and electronics. There is a risk that the Germans can’t catch up,” UBS analyst Patrick Hummel said.
Germany’s Auto Motor und Sport car magazine, normally quick to champion German manufacturers, this week ran a cover questioning BMW’s future.
“Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software,” a former BMW board member said.