Ashley’s tough life lesson

HERE is a lesson for Mike Ashley from Henry Ford, for the case against the work practices at Sports Direct is not just a legal, moral and human one. It is also an economic one.

In January 1914, Ford famously doubled the daily pay of his 25,000 workers to $5, and cut their working day from nine hours to eight hours. This was, he explained, so that the people who built his cars would earn enough to buy them.

Well, yes. But actually there were other less admirable reasons. one was that Ford faced massive labour turnover. His workers hated the new moving production lines and he had trouble manning them. The second was that by putting up wages he wanted to drive weaker competitors out of the business. They eventually were forced to put up their wages too.

Sports Direct, which Ashley founded, is castigated in a report by MPs today. But it is not alone: ‘Although Sports Direct is a particularly bad example of a business that exploits its workers in order to maximise its profits, it is unlikely that it is the only organisation that operates in such a way.’

of course that is right. There is a host of evidence of mistreatment of workers in the distribution sector, a sector that is itself being transformed by the shift to online and the arrival of two ultra-competitive German supermarkets, Lidl and Aldi. It is a tough business with competition driving down margins and trimming costs. But there is a difference between running a business in a lean and efficient manner and openly exploiting the workforce. The Sports Direct experience will force a change of direction, maybe not enough, elsewhere.

Legislation can only reach so far. one of the most troubling aspects of this story is that the decline in unemployment, now down to 4.9pc, has not put economic pressure on employers to treat their people better. The Henry Ford message has not yet gotten through. So what, aside from enforcing pay and other standards more effectively, is to be done?

one way forward is to train people so that they have other job options and don’t have to accept poor work practices in the distribution industry. For example, Singapore helps finance professionals with conversion programmes, particularly for people in mid-career. These cover areas such as creative industries, healthcare, and information technology. Another idea is called Skills Future, which is about lifelong learning. The idea here is that people are responsible for their own learning. Leaving training to companies won’t work if they are trying to replace you with a robot. The Government gives workers some money, topped up from time to time, to help them retrain.

There is a parallel here with manufacturing, not so much 100 years ago but over the past 30 years. Manufacturers in the developed world have learnt how to provide satisfying jobs by upskilling the workforce and by using robots to do unpleasant tasks. A car plant is now a much better place to work than it was a generation ago and of course vastly better than in Henry Ford’s day. It also produces much higher quality cars. If this dreadful Sports Direct tale has any happy outcome it will be to push service industry companies to follow manufacturers’ example and acknowledge it is in their economic self-interest to deal more decently with their people.

Positive thinking

MIGHT the economic impact of Brexit not be so bad after all? There have not as yet been any mainstream forecasts suggesting that the outcome will be positive – that is, that UK growth next year will be higher than it otherwise would have been had we not voted out. But the relentless gloom is easing a little.

For example the IMF’s forecasts, while still negative, were much less so than its pre-Brexit statements had warned. The new Government borrowing figures suggest that prior to the vote, the fiscal deficit was starting to come down a little.

Lending for home buying has not, as yet, been hit at all. Indeed rather the reverse. The latest retail sales are poor, but these numbers jump around and the overall trend is still solid. The Bank of England agents, who talk with companies across the land, are not reporting any serious distress. This suggests that if there is to be a collapse in business confidence, it hasn’t happened yet.

There may be a parallel between now and the period in 2012-13, when the reporting of the British economy was relentlessly negative – all the stuff about a double and even triple dip – when as we subsequently found out the economy was growing, albeit slowly, throughout.

The purchasing managers’ indices will give a better feeling for the medium-term outlook, and the first post-Brexit ones will be out today. Some slowdown next year is still on the cards, but despite that the UK may well grow faster than Germany, France and Italy. That would put a rather different spin on our negotiations with the remainder of the EU than the current ‘UK will be punished for leaving’ commentary suggests.

Coining confidence

On the principle that you should look not at what people say but what they do, here is an intriguing statistic. The amount of money in circulation – that is, pound notes and coins – has shot up in recent weeks. It is now nearly 9pc higher than a year ago. Why this has happened is a bit of a puzzle. Maybe simply we are a bit more confident about the economy than we let on.