Tag Archives: Bank of England

Business Interest: Suggestion #1

HBR has written previously about the current low rate of interest in the UK’s economy.  In this series, HBR investigates British public’s lack of interest in the subject, and tries to work out what is best to do about it

In the previous post we confirmed that the British public has only a passing interest in business.

Having identified the symptoms, a wise and careful doctor would reflect on his medical training, perhaps consult a textbook or two, in order to come to a diagnosis. Not just what, but why the people of the UK are not engaged.  Why do they not appreciate the cruel beauty of capitalism, or at least the many iPads that commerce has created?

However that seemed like far too difficult a question for a Tuesday evening, so on this occasion we will skip diagnosis, and start prescribing right away, the business equivalent of the frustrated GP’s immediate antibiotics course.

Today’s suggestion is actually a simple one, and it’s all about wording. When I wake up and consider my morning cornflakes, I am in something of a sensitive state, in both mind and body. If I am perusing a paper, the last thing I want to be digesting (even mentally) is anything that might be considered disgusting, let alone gross, lest I see my cornflakes for a second time.

It is for that reason that I propose that the Gross Domestic Product (whose naming I have never understood) is changed forthwith to the Delicious Domestic Product. Meanwhile GDP’s unsightly cousin Gross Profit is immediately to become Sumptuous Profit, an altogether more delectable prospect.

In one fell swoop the readership of the morning business section will rise, interest rates will move in step, and we are off the mark.

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Business Interest: the Research

HBR has written previously about the current low rate of interest in the UK’s economy.  Indeed the Bank of England’s current strategy is to keep it that way, at least until the money men work out what on earth they are doing.  In this series, HBR investigates the low rate of interest in the British economy amongst the general public, and tries to work out what is best to do about it.

The first step, of course, is primary research.  The bank announces the interest rate on a regular basis, but we very rarely get to see the data behind the press releases. How do we know that Carney et al have got their sums right? Are the people of Britain actually very interested in business after all? Thankfully, the wonderful people at Google have given the man on the street a means by which to canvas other men on the street, the Google Survey.  We asked 350 UK internet browsers how interested they were in Business, on a scale of 1 to 7, and this is what we found:

Survey results (UW)Crikey, that’s a lot of information! How do we read that? Well the first thing to note is that a large chunk of the population is not at all interested in business, so our friends at the Bank of England are not wrong. And it looks like men are more interested in business than women. Now that is interesting, I hear you murmur.  Misogynists will be nodding approvingly, while national programs will be launched to get our girls more interested in business. Maybe this is why the boards of the UK are so bereft of female directors?

But wait just one gosh-darned minute.  Because this column is not just a shrine to silly business satire, it is also a place where we care about proper data analysis. Because there is a problem in the raw data that Mr Google provided me with, in that the sample is not representative of the overall population.  And in fact, if you weight the data appropriately, this is what you get:

Survey results (W)Now that’s more like it.  Once again, it looks like overall no one is that interested in business (40% totally uninterested overall!), but this time round women are actually even more interested than men in business, so pipe down misogynists. What is really going on here? It turns out that the problem was that our sample contained a disproportionate number of older women, and age is actually the area where you start to see differences between respondents:



The chart above shows the percentage selecting 6 or 7 (i.e. very interested), vs. the percentage selecting 1, or not interested at all, and isn’t it interesting? Older people are the most uninterested, while the most interested people are aged 25-34. Obviously the question is whether that means interest rates will naturally rise as people get older, or whether people just lose interest as they get older. Either way that is some intriguing information.

So what have we learnt? We have learned to avoid sexist stereotypes, because ladies love business, and we have learnt that data always tells the truth, except when it doesn’t.  We have learnt that the youth of today aren’t so indifferent after all. And finally, the Old Lady of Threadneedle Street has been spot on, as when it comes to business, interest rates in the UK remain low.

Hat tip: Google Surveys

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Bank of England interest rates remain low

The Bank of England released its quarterly inflation report this week, prompting much discussion in the Square Mile. There had been speculation in the City that interest rates would rise, however the Old Lady of Threadneedle Street soon put those rumours to rest.

“While there are some who believe that the general public’s interest in the state of the economy should be increased, that is not our current objective,” the Bank explained. “While the economy is on the road to recovery, at the moment we are keen to keep the public’s awareness and interest in economics as low as possible.”

The general population’s interest in the world of finance is currently been at an all time low, having fallen to 0.5% in 2009, staying at that level ever since. This sudden decrease was the result of a concerted effort among money-makers to distract the man on the street from what was going on. “With Lehmann and the whole sub-prime thing, we honestly had no idea what we were doing,” reports one industry insider. “We thought that the best thing to do was to make everything about the economy as boring and un-interesting as possible.” This strategy was a great success, allowing the banking industry to get back to business as usual.

When you look at the data over a longer time period, it is clear that this decrease is not just a one-off, with the decrease in general interest in the economy part of a larger trend.

(Created with DataWrapper, Source: Bank of England)

Official Bank of England figures indicate that interest has fallen from 10-15% in the 70’s and 80’s, to the low single digit numbers that we see today. Economist Henry Kelsey-Wilkinson believes that this is due to the range of other more interesting things on offer in the modern world. “In the 80’s, there honestly wasn’t that much going on, so reading about GDP and FDI didn’t seem like such a bad thing. These days the FT is up against Netflix, and there’s only one winner in that fight.”

However regardless of the underlying reason, the fact remains that interest rates are staying low in the near future. Governor Mark Carney had the last word: “We continue to think that interest rates will remain on hold until the second half of next year, later than the markets and most economists expect.”


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