Category: Economics

Economics, Life

Is help to buy actually helping first time buyers?

This may be a controversial question, but I have to ask whether the Government backed ‘Help to Buy’ scheme is actually helping first-time buyers.

On the surface it should be a brilliant scheme. Outside of London the Government will give you up to 20% of the value of your new home, to a maximum of £40,000. They retain the 20% ownership and share the risk a little in that if the value goes down, then so does their investment. the 20% remains at 20%, whatever the value.

But I have an issue with it.

And that is that the homebuilders are loading the price of the new houses by up to £40,000.

So the valuation of the house isn’t real and no-one is prepared to call ‘Emporers new clothes’ as they are making too much money.

The selling agents make great commission and the home builders get an amazing price for a new home.

And the only loser is the buyer.

You probably won’t notice when you’re buying it.

But this overvaluing become very real when you come to sell it.

In the ‘Help to Buy’ paperwork, they warn that the value may go down for the first five years by an average of say 5%.

And this is where the real issue lies.

When you come to resell it, you can’t sell it to someone else using the same ‘Help to Buy’ scheme that helped you to buy as it’s only available for brand new homes. A previously owned home, however new is no longer a new home by the strict definition of their scheme.

So the real value of the house is crystallised when you come to sell. Because the house is no longer new, you can only sell it to a buyer without the help of the scheme and their own additional £40,000.

So by definition, it has to find its value based on the other homes for sale around it.

in one scheme I looked at recently, the ‘Help to Buy’ to buy houses were set at a price of £191,000 for a three-bed semi.

Not bad value most of you will think.

But when every other slightly older house in the road is for sale at £145-155,000 it starts to look like a very expensive trap that you’ve been lulled into.

There’s no way out without taking the hit.

You can’t even rent it to cover your losses as it’s in their terms that you can’t rent a house bought under the ‘Help to Buy’ scheme and as they own the second charge, they can enforce this.

So I believe that we’re creating a new negative equity bubble that’s just waiting to burst.

We’ve all been told since we were kids that the ultimate freedom is to own your own home. There’s nothing better than investing in bricks and mortar.

But not when it’s deliberately overpriced and almost impossible to resell within ten years without taking a huge loss.

Of course the mortgage lenders are going to back the scheme as they have the first charge over the property. Unless it’s been a completely savage cut will see their 25% safely back in their previously Government backed pockets.

But for the little person with a dream of home ownership, if their circumstances change and they have to sell, their future is one that’s faced with a potentially huge personal debt or a home they don’t want to live in and yet can’t afford to sell.

So I’m not sure the ‘Help to Buy’ is helping at all.

It’s inflating prices to make it even harder for first-time buyers to get on the market without it and storing up problems for them in the future.

If you do think it’s for you, then read the small print. read it again and then choose to keep renting for a while longer.

And don’t believe that ‘Help to Buy’ will actually help.

Brand Experience, branding, Economics, Life

Why Tesla need Apple and Apple need Tesla

Tesla are losing money at an incredible rate. According to The Verge, they lost around $785 million in the first quarter of 2018 and are down to cash reserves of only $2.7 billion, after starting the year with $3.4 billion. If they carry on at this burn rate they will run out of cash and have to file for protection by the close of 2018.

Apple, on the other hand, are making money like it’s going out of fashion. In the last quarter of 2017 they made a profit of $20.1 billion. This leaves them in a position where they have retained profits of $91.9 billion.

But when did Apple last create anything that was truly disruptive? The iPod, the iPhone? maybe the Apple TV?

All of their recent lunches have been derivations, not innovations.

Their launches over the last number of years have been dull to say the least. But there’s little doubt they design some of the most sought-after products in the world that carry an incredible premium price.

On the surface this is similar to the Tesla.

It was a disruptor in the passenger car market and their Semi is sure to disrupt the market for Heavy Goods Vehicles. If you’ve ever driven a Tesla, it’s hard to argue that they are anything other than quick, but their fit and finish is poor. It’s nowhere near as good as the products coming in from the German manufacturers Audi and Mercedes and a long way behind the British designed Jaguar iPace – All of which will match the Tesla for range in the next few years.

The Jaguar iPace at the Electric Innovation Centre in West Bromwich UK
The Jaguar iPace at the Electric Innovation Centre in West Bromwich UK

When these products hit the mainstream market, they will have a serious impact on Tesla sales. The competitors’ products just look and feel better. The one area Tesla continue to lead is in their battery technology – which for me as an iPhone owner, is another serious Apple weakness.

So Tesla need design input, they also need cash – desperately if they want to continue to compete. The interior of the Tesla is just plain bland and for me, cars like the Model X are different, but ugly and overcomplicated. The gull-wing doors are schoolboy stuff, designed by someone with a Countach poster on their wall as a kid. For me, they have no place in the real world.

Apple need to advance their battery technology and look for an outlet for their cash that is going to give their shareholders a long-term return. We know Apple are working on a car, it’s been leaked all over the place. When Apple do eventually launch, are they really going to be satisfied with the standard charging system available to everyone else?

The answer has to be no.

They even had to design their own charging plug and headphone socket for their phones!

The Tesla charging network is already worldwide and can deliver charge at exceptional rates.

Tesla Model S recharging

We know that Dyson, who have some of the most advanced motor technology, are working hard to produce a car too. Autocar have produced their own drawing of what this may look like here. It’s quite cool and they could again come in as another disruptor to the car market.

Dyson car by Autocar

So for me, Apple and Tesla throwing their technology and design together will be the perfect match. Working together with Apple’s cash, will leave them both in a considerably stronger position than the sum of the parts.

I’m not sure which of the stocks to advise investing in, but maybe wait until Tesla tanks a little further and then swoop in, as if Apple come to town with the Tesla, it is going to be a world beater and every major car manufacturer needs to take note.

They are two brands that have made their name for innovation. Their brand values overlap in almost every way and there doesn’t seem to be anything that would stop them working together apart from some bloody-mindedness from Apple because the existing Tesla model range wasn’t their initial concept. To me though, it seems like their innovation and their organisational culture – such as single-minded strong leader, obsession with detail, being a massive disrupter in new markets – are completely complementary and both need each other to grow to the next level.

So, watch this space. It’s going to happen.

Best branding books, Brand Experience, brand values, branding, Economics, Social media

LogoJoy Artificial Intelligence Logo design review

Creating a logo with artificial intelligence

I ran a brand consultancy for well over 20 years and as a team, we created literally thousands of logos and quite a few brands that you would know. The logo is one element of the branding, but it’s one that is easy to spend a fortune on without getting something you are totally happy with.

Design is a completely subjective thing and one person’s great is another person’s awful. So, only you can decide whether you like a logo or not. The great thing about this Artificial Intelligence design tool which is called LogoJoy is that you can create as many versions of a logo as you like, without having to pay. I have given LogoJoy a full review over here complete with plenty of examples of it in action.

Here’s a film to show you how to do it for yourself. You can honestly create a great logo in under ten minutes.

So that’s it. It’s dead simple and anyone can use this to create a great logo. With the artificial intelligence behind the system, it genuinely learns what you like and the more you use it, the more close it gets to something you’ll love straight away.

Create your own logo for free for yourself here

One thing I do mention in the film is the difference between pop songs and album tracks. When you have created a few options I would always advise you print them out and stick them on the wall. Don’t make an immediate decision. The one to choose is the one that grows on you and that isn’t always the one you love immediately.

Economics, Life

The growing problem of student debt

Students loans aren't working in the UK
Students loans aren’t working in the UK

Student loans aren’t working.

They aren’t helping those who need help the most. At the same time, they are scaring potential students away and making the universities irresponsibly rich. They are also creating a future debt time bomb that will bring the country to its knees again, when it becomes clear that a massive proportion of the ‘loans’ are never going to be paid off, in the not too distant future.

Universities are no longer incentivised to deliver the best possible education, but rather strip back the contact time to the minimum they can get away with, whilst still achieving acceptable results. The focus is becoming about getting a result rather than learning to love a subject, inspire a new generation or just progress thinking in their area of study. I’m sure there are many exceptions, but with so many students coming from the middle majority who only got average A levels, standards simply have to fall, whilst universities just get richer.

Universities are now becoming ultra-powerful property owners and managers, creating a near monopoly for student accommodation in their city or campus. We all know that a position of monopoly will always drive competition down and prices up. This isn’t good news for students.

The university is no longer just taking the £9k tuition fee but adding an average of £500 per month for accommodation too, which adds up to £6k on top. Restrictions for private landlords are being added by the universities to make it harder for genuine competition to enter the market. Any graduate of my generation will have lived in some terrible ‘Young Ones’ style places as students and it probably made us appreciate how lucky we were to be gaining our free education and living away from home.

But graduating with £50-60k of debt is a bad thing. The thought of the debt is enough to put off some very bright young people who are scared of carrying that debt burden through their life ahead. Even worse when the government up the interest rate to 6% it is just asking to be bundled up and sold to the highest bidder, which means the graduate debtor will be pursued mercilessly for payback.

A reasonable earning graduate who becomes say a senior leader in a school by the time they reach 30 years old may be paying back £300 per month for their loan. They will also be paying into their pension at the same time. They may also be trying to buy a house or even bring up kids. It is just not possible to do all of these things at the same time unless you are from the very richest elite, where money isn’t an issue anyway.

If you don’t need a degree to enter your intended job, more and more will conclude that it doesn’t make financial sense to do so. As such, far less will actually go and our university sector will become ever more desperate cost-cutters.

There will also be millions of graduates who never get to the earning threshold to pay the loan back and little incentive for them to earn over it and start being hit hard by the payback they will face when they do.

So my solution is simple. Introduce proper means testing again, so the poorest get the most help, the richest get none and change the payback of a loan into a payment into a personal pension.

We should cap university tuition fees to a sensible level. Ensure class sizes are sensible too and agree a minimum amount of contact and one to one time.

We also need to cap accommodation fees so they are at least reasonable. £500 per month rent is the price of a small house per month to rent, not a single bedroom in a flat with five others who all share a kitchen – unless you are in central London.

And finally, add a new type of graduate tax, where they pay an extra few percent, but that tax goes into an individual pension contribution account for them to claim when they are old enough to retire – however old that may be by then. That way, they become self-sufficient and the state is paid back by helping them to provide for themselves in their old age.

University education should be free and accessible to everyone who is bright and motivated enough to pursue it. It can’t just be a right for the rich or those with the nerve to go massively into debt and mortgage their own futures.

brand values, branding, Economics, Life

Why we need British Steel

British-Steel-logo
British Steel logo

British Steel first appeared in 1967 which was formed out of the nationalised British Steel Corporation (BSC). It went on to be privatised and launched as British Steel plc in 1988. It was even big enough to be part of the FTSE 100 Index. In 1999 the company merged with Koninklijke Hoogovens to form Corus Group  and even then, many of us thought it was a mistake and would start the end of the steel industry in Britain. It’s easy with hindsight, but it looks like that was right.

Corus-logo
Corus logo

And it’s why we need British Steel again. Quality, traceable, home manufactured fabulous, british steel.  It may not have been a glamorous brand, but it was one we knew and understood.

I shared a tweet the other day by a man called Dick who pointed out the following “The argument for Trident is that it costs £120bn and saves 600 jobs. The argument against Steel is that it costs £1.5bn and saves 15,000 jobs”

There is a new standard in Europe called BS/EN 1090 and what it says is that EVERYTHING, right down to welding rods has to be traceable back to source. No traceability, no CE Mark. This is currently impossible with imported steel as there is no way of knowing where it came from. If you don’t know how it was made, where it was made or what it was made with, then how can you guarantee it is safe? For an insurer, how can they assess that risk?

So for me, bringing back British Steel would be a huge step forward.

So maybe this is just too obvious to be useful but if we are about to lose our steel industry and 15,000 jobs anyway, then surely it must be worth investing in this industry again.

We poured billions into our banks to save face more than to save jobs and now it must be time for this support to turn to one of our core industries. Steel.

Even taking the finances alone. 15,000 families will be immediately having to draw benefits for some considerable time. Let’s say an average of three years. Then by my maths that’s at least £1bn million over this period and ongoing devastation to communities that just don’t need more bad news.

If you take Port Talbot as a case, then maybe energy is the issue? This can be solved with the Severn Barrage. Every aluminium producer in the world seems to use Hydro Power to smelt  aluminium, so why not clean steel up at the same time and make it go green. That’s a bargain at between £10-34bn – which makes the saving of steel look positively cheap.

Severn-Barrages-map
Severn Barrages map

British Steel is Britain through and through. It’s literally what our country was built with and by my very simple way of thinking, something our government should not just support but make it a model of how decent targeted intervention can help rebuild Britain from our proud industrial heritage outwards.

 

brand values, branding, Economics, Life

What next for Alton Towers, Merlin and The Smiler?

What next for Alton Towers, Merlin and The Smiler
What next for Alton Towers, Merlin and The Smiler
What happened in the accident was nothing short of horrific and has wrecked young lives forever.  I can’t imagine how frightening that must have been and it must never happen again, anywhere in the world.

But for a moment, I would like to take a slightly dispassionate look at what I believe will happen to the brands of Alton Towers, Merlin and The Smiler.

Firstly I think the brand of Alton Towers will be fine, it will be damaged for a while, numbers will be down, but in reality, there is never a safer time to visit any attraction than just after an accident. Every early warning system will be on super high alert and the HSE will be crawling all over their every move. Alton Towers is a British superbrand and the way that Merlin CEO Nick Varney has handled himself in the press has been, in my opinion, nothing short of excellent, open and honest. He has allowed all of the bad news to come out, offered refunds to anyone who wants them and generally sounded very distressed by the incident. He has displayed good human values that people will relate to. He has four kids himself and I’m sure they use the park themselves, so of course he would want it to be world class safe – what parent wouldn’t?

Merlin are a world class brand. I saw a presentation from their Head of HR at Blooloop live a few weeks ago and they are delivering standards worldwide. I think this means you can rest assured that they will be running the most stringent safety checks on every one of their rides in every country they operate (which is a lot). Merlin will now get better because of this – everywhere.

But for Smiler, the future is less certain. There is an awful argument that this only adds a new element of danger to the ride for the real risk takers, but I hate this argument. For me, risk in an attraction MUST only ever be perceived. Real risk is just not appropriate in a fun environment.

So I think Smiler is on its way out. I would suggest that it will be removed as quietly as possible (press coverage allowing), maybe with the costs covered by the German manufacturers and it will turn up with totally new branding and maybe a new track layout in another market (The Far East or possibly Eastern Europe). The Smiler brand is busted and if I was in charge, I would bite the financial bullet and get rid of the bad name it could yet deliver.

In the meantime, I can only wish for a speedy recovery for those who have been injured both physically and mentally. And thanks to the London Evening Standard for their image. Here’s the link to their article.

Brand Experience, branding, Economics

The real health of the Tesco brand

Dave Lewis, Tesco chief executive

 

We saw recently that Tesco announced a quite staggering £6.4bn loss on trading. A huge headline figure, but in reality a total myth to allow the business the time and money to restructure.

The loss was caused by £7bn of one off write downs including a property write down of £4.7bn. Now, I’m no accountant, but if my maths are anywhere near right, this will meant they can reclaim at least £1.4bn in tax on their profits they paid last year and maybe claw some back from previous years too. So rather than lose £6.4bn, they have actually made £2bn in actual cash profit in the last 12 months. With me so far?

On the day that Tesco made the announcement, their share price fell by 5% to 223p. But in reality it had been at a low of only 150p during that same year and it is a huge growth in actual value over the same period. It’s at around 216p today. Hardly the sign of a business in crisis in the eyes of the market.

The disparity in their profit is far stranger when you consider how they got away with such a HUGE property write down when Helical Bar, the (mainly) London based Property Developer announced yesterday that their portfolio had increased in value by 27% in the previous 12 months?

Each of the other supermarkets seems to have followed suit with huge portfolio write downs, which only goes to confirm that it is another corrupt accounting practice each of them is employing to claw back tax.

Jack Welch, the former GE CEO said in a famous interview that with bad news, you have to get it all out fast, as it’s going to come out anyway. This feels to me what Tesco have done. They have painted a picture that is even worse than reality to shock the expectations lower.

This will give them the time, money and opportunity to take stock and rebuild the brand by putting in front line staff. They need to rebuild relationships with suppliers and build trust with customers. They need to listen, adapt and listen some more. And then they need to action their ideas fast, before the market moves again.

The Tesco brand is not dead, it’s just sleeping. It’ll be back and hopefully with a little more grace and a desire to please customers rather than only focus on the profit.

branding, Economics, Life

Offsetting formal education for young people – Why rushing to university may not be the only answer

Why rushing to University may not be the right answer
Why rushing to University may not be the right answer

In the old days (of not many years ago), if you did okay in your A Levels you went to university. Better grades meant a better university and a better university meant a better job for life. Right?

With successive governments targeting more and more young people going to university there is a danger of doing more harm than good. You create half a generation who feel like they have failed – even if they were never destined to be academic – and you create a false hope in those that do complete degrees that they should automatically have a right to a graduate level job which pays more than the equivalent job with no degree entry qualification.

I think this has all changed. With the introduction of paid tertiary education for all, graduation taxation and prospective debts which will last a lifetime, it begins to offer more exciting alternatives to the conventional red brick university route. A ski season or two seems remarkably cheap by comparison. You earn, whilst you learn to live away from home and render yourself far more employable and have an amazing experience at the same time.

Travelling the world alone or in groups, will undoubtedly broaden your mind, enhance your experience and make you far more employable than a peer who has just done a degree whilst living at home. In my design agency days we were far more interested in whether someone as interesting than if they were qualified. Expedia’s ‘Travel yourself interesting’ campaign was brilliant (and won lots of awards)

This generation of young people will work longer, be healthier, live longer and see more of the world than we ever will. They’ll see medical changes that hadn’t even been dreamt of in science fiction, so why does forcing them into a school grading and exam system from year six onwards make sense? Why not encourage offsetting tertiary education for a few years to see the world and experience a bit of life before they have to decide what they want to do for the rest of it.

At eleven, I still wanted to be an astronaut or a train driver and yet this is when the average student has to begin to decide what their future holds. I’m not sure your average 18 year old facing a 60 year working career can know, or should be forced to decide what shape their life will take. So, why not let them take a few years?

A 25 year old that’s seen the world, seen poverty in a third world country first hand, slept on a beach,  skied for a year and maybe had to work some terrible jobs to make ends meet and has a far better chance of being driven to succeed and really KNOWING what they want to do than an eleven year old who’s only been to Disneyland.