No tight collar for TM Lewin

It's refreshing to post some up-beat news for a change. Amidst the gloom of ailing and failing car manufacturers I found this piece in The Times uplifting. Its focus is very much for business students and is perfectly timed for the AS course.

TM Lewin, Jermyn Street shirtmaker, is thought to be due to report sales up around 20% since last February. It opened 11 new stores over the course of the year to boot. Why is it when the City boys are losing their jobs that sales of classic cotton shirts are on the up? The answer it appears is TM Lewin's promotional strategy of almost constant discounts - not what you would expect in a market in which quality is often judged by price. The company's best known discount is its offer of four shirts for £100. The result is that, on price, TM Lewin competes with M&S but still has the advantage of being perceived as being more up-market.

Watch out for my stripey red and blue number tomorrow - so cheered am I that I intend to get out the iron tonight!

Recommended site

I can strongly recommend John Sloman's economics news site to AS and A2 students looking for a way of relating what they study in class to what is going on in the real world.

Yes, it is linked to his book and, yes, it is all part of the online promotion which seems to accompany textbooks these days. But it is well worth a look. It takes the form of a blog with entries that give links to news and articles. Each blog is followed by a series of questions. The search facility is good - I used it to find resources on the problems of interpreting GDP statistics for my Year 11 GCSE students. Unless you have Sloman's book, finding blogs linked to chapters is not likely to be useful.

We are currently reviewing textbook provision for sixth form students and Sloman's book is a contender - it is one we have used in the past with success.

Young Economist of the Year 2009

Those of you putting together your essay for the Royal Economics Society's essay competition might like to read teh winning entry from last year.

It is available on the Tutor2u website or by clicking here.

Slumdog success

Whether or not Slumdog Millionaire wins the Oscar for best picture, the story of the film's making should interest GCSE and AS students studying business. The film industry can generate box offices success, yes (Slumdog has so far netted £21 million) but the risks involved are huge.

The business story behind the glamour of the Oscars makes interesting reading and a good case study in entrepreneurship and raising finance for 'independent' films. Click to read more in today's Sunday Times.

What's it all costing?

Today a group of influential Labour MPs call for another £20 billion of government injections into the economy to reduce the impact of the recession. They claim that, if implemented, their package of measures would ensure that 2009 became known as the year the recession bottomed out. The measures include a freeze on stamp duty on house purchases, a tax credit for those buying houses, an increase in the Job Seeker's Allowance and a reduction in capital gains tax on new investments.

But what is all this really costing? There are several ways of answering this question. According to the Office for National Satistics ONS), the effect of the bank bailouts has been to add between 70 and 100% of the nation's GDP to national debt. The recession itself has reduced the amount of tax collected from individuals and businesses by around £7 billion. Then there is the cost to the economy of the lost output due to falling demand.

Economists have a simple but useful concept to measure 'cost'. This concept measures not the financial costs but the cost of what is foregone - the opportunity cost. The graphic at the top of this blog shows what the money so far spent on bank bailouts could have bought had it been spent on alternatives. This helps us to make sense of the very big numbers which have appeared of late.

My Year 10 economics and business students will be looking at opportunity cost after they return from half term.

Useful weblinks

ONS announcement on the national debt

January's public finances release from the ONS

Stephanie Flanders on the cost of the bank bailouts

BBC video on the reduction in tax revenue

BBC article on the reduction in tax revenue

Tutor2u presentation of the impact of the recession on tax revenues

BBC graphics: the global downturn

Chance to be Chancellor

Fancy a go at being Chancellor? Well now you can thanks to a competition being run by the Citizenship Foundation and The Times.

Here is what you have to do:

Students are provided with a list of ways (policies) in which public money can be spent on areas such as Environment, Health and Education. However, just like in the ‘real world’, they can’t pick them all. Students will need to prioritise the policies that they think are most important, making compromises where necessary, and then justify their choices by writing the Chancellor’s speech. Once they’ve made their choices, students will need to write a speech of between 500-1000 words to explain to the country what they will be spending their money on, and why. Students will need to express their opinions clearly in writing and be persuasive in their arguments. They’ve got a whole country to convince!

Contact SDW if you are interested in taking part - the competition is open to all students aged 14 - 19. Closing date for entries is 31 March 2009.

Further information

Chance to be Chancellor website

Competition pack

Briefing information on the Budget and the economy

What IS happening to prices?

During the Great Depression prices in the US fell by 10% a year from 1930 - 33. Fears of deflation are obviously weighing heavily in the minds of the Bank of England's MPC (see 'Turn on the printing press' below) But what exactly IS happening to prices in the UK.

On the government's preferred measure of prices (the Consumer Price Index - CPI), prices were UP 3.0% last month compared to January 2007. So what is all the fuss about deflation? Part of the problem is that whilst the CPI shows prices rising the comparisonn is with the same period last year. So prices may be falling but they may still be higher than last January. The expectation is that by the middle of the year CPI will be showing more of the trend that worries the Bank of England.

An alternative measure of prices, the RPI (Retail Price Index), shows prices last month only 0.1% higher than last January. But the RPI includes a measure of mortage interest payments which are falling due to lower interest rates and falling house prices. The correction in house prices is probably in itself desirable. Asset price bubbles as they are known (over-inflated house prices for eaxmple) tend to devote scarce resources away from their most productive uses - a little less obsession with property prices would not be a bad thing. The house price bubble of the last decade is, after all, why we are where we are today and what led to 'creative' banking practices at the root of the credit crunch.

Prices, then, may not be falling and inflation may still be above the Bank of England's target rate of 2%. But, as we have seen, economic indicators can turn on the head of a pin.

Watch this space ...

Useful weblinks

Spectre of deflation haunts Britain (Independent)