The latest dispatch from the economic front line is not good news.
Manufacturing fell 1.3pc in October compared with the previous month while overall industrial output fell 0.8pc.
But we have to put these numbers in perspective. It must be remembered that the UK economy is bumping along the bottom. In these circumstances it is normal to have conflicting data that don’t allow any clear pattern to emerge.
Human nature, which likes as much certainty as possible, looks for trends in data that reassure the country is going in the right direction. It’s otherwise known as the feel-good factor.
At the moment, one month to the next, one quarter to the next, the economic figures are up and then down, which is extremely frustrating for sentiment. But it is typical for an economy that has stopped the rot, as we have, but is fighting hard to make progress against fierce economic head winds. You only have to look at the German industrial production figures for October, which were also published on Friday, to see the extent of the challenges in the eurozone. Its (Euronext: ALITS.NX - news) strongest and largest economy saw production fall 2.6pc from September. But just as analysts were not quick to write off the German economy on the back of one month’s data, nor should we take the latest economic news as proof we’re heading back into recession.
As the British Chambers of Commerce pointed out on Friday, manufacturing has proved throughout the past five years that it is well managed and has survived severe challenges. Crucially, many manufacturers have maintained their skill bases during the downturn so can respond to improvements in the economic environment quarter on quarter.
But the numbers are a reminder to the Coalition that recovery is fragile and needs all the political help it can get. Every Whitehall department must be a department for growth, any proposed policy change must first past the growth or anti-growth test. This country still has world-leading assets, be they our cities, our higher education, our creativity in a vast array of industries and a workforce united in one desire to progress. What a shame our politics is the missing piece.
= Value in splitting the dog’s dinner of HP =
Hewlett-Packard, the US technology firm, has a stockmarket value of $27bn (£16.3bn), which sounds a lot, but when you consider it has spent $31bn buying other companies, including the ill-fated $11.1bn acquisition of UK-based Autonomy (LSE: AU.L - news) , something has gone seriously wrong.
The fact that HP is a dog’s dinner of a business isn’t new. But what is now exercising the market is that its value is worth so much less than the sum of its expensively assembled parts.
As an exercise in value destruction, HP is almost unparalleled.
It was only last month that HP wrote off $8.8bn, the majority of which related to the Autonomy deal, highlighting how poor its acquisition track record has been. In its defence it claimed to have been hoodwinked into buying Autonomy, a charge vehemently denied by Mike Lynch, the ex-Autonomy boss who sold the business to HP in the first place.
That particular row is headed for the courts so we don’t know what the outcome will be. But HP can’t ignore its other mega-mistakes.
According to data compiled by Bloomberg, there was the $17.6bn acquisition of Compaq (NYSE: HPQ - news) to start with back in 2002. Then there was Electronic Data Systems (NasdaqGM: EDS - news) in May 2008 for £13.9bn, followed by a deal to acquire Palm in April 2010 for a mere $1.2bn. All this was limbering up for the most recent Autonomy acquisition.
At one point last year HP had a market value of more than $100bn with a share price touching $50. Now the only thing it’s touching is the void at $13.82.
So where is this headed? The market’s patience is unlikely to stretch much longer. Although HP has a newish chief executive in the form of former eBay boss Meg Whitman her strategy has yet to be proven and, given the scale of the problems unfolding at the company, will need a very long time to come good. With the best will in the world, HP is not a business that shareholders can expect to enjoy a rapid turnaround.
It is in few of the tech world’s fast growing, high value areas. A software-based strategy centred on Autonomy clearly now has major issues. Even its shares revisiting their 2009 low point of $25 seems a Herculean task.
As analysts made clear on Friday to Bloomberg, surely the time has come for alternative action.
With the share price so low there is now real value to be had from breaking HP up. One idea is to split it into an enterprise business based around its software operations and a separate hardware company selling PCs and printers. Certainly a break-up could deliver twice as much value than leaving the business in its current shape a situation that has left investors without any confidence in Whitman’s ability to reverse its rapid descent.