Concorde001
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British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 6:02 am

The media is reporting that a report by the DTI (Department of Trade and Industry) will show next week that British firms account for more than a third of all European profits....can this really be true???

According to the report (using the "Value Added Scoreboard" - which lists the companies making the largest contributions in the UK and in Europe):

  • British companies are dominant, making almost as much profit as French and German companies combined
  • British companies make more than a third of all European profits
  • British corporate profits are also rising faster (12.4% compared with 9.6% in France and 5.4% in Germany)


Source: Click Here

I know the British economy has been performing well for the past 15 years, but are our companies really performing this well? I am sceptical because while the German and French economies may be lagging, they have some very impressive companies which export much more than Britain. Germany is still the world's largest exporter and corporate profits in Germany are meant to be very healthy (just look at LH!). Also France is still one of the world's top 5 exporters (Britain is 7 overall but much higher for services / invisibles). Also I tend to be wary of stats as they can be easily manipulated - for example are these British companies dominant because there is a small group of very large money making corporations such as BP? I ask because according to the the British Chambers of Commerce, a survey of its members shows that 49% of its member firms think it is "much harder" to set up a new business in the UK compared to 1997 (when Blair came to power).

It is great if our companies are doing this well, but I was hoping some experts on a.net may be able to present a much more balanced picture than reports issued by governments!

[Edited 2007-04-16 23:12:55]
 
Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 5:14 pm

Yes, I can imagine that this might be true, though I also agree with the linked article that the climate for start-ups isn't particularly friendly at the moment.

Britain has a much more entrepreneurial economic model than the other major European economies, driven by profit as the benchmark of success to a higher degree, though the Netherlands I would suspect also contributes to a level out of proportion to their relative size.

Invisibles will be the key to it, London is not just by far the main European financial centre, it's also seriously threatening New York's status as the world's leading financial centre. Part of the reason for that is the relatively light regulatory hand, meaning that a lot of companies have shifted their headquarters to London to take advantage of it. Undoubtedly the figures will therefore be skewed by companies nominally being British, but with their operations elsewhere.

But what does it mean, really? Britain does have an amazingly free market, quite possibly the freest of any major economy. Take the stock market; everything is for sale, including the stock market itself, something no other nation would even consider. So in such an environment, British companies will tend to be extremely highly focused on profits. In general terms, this is a Good Thing, and if it's maintained, then that's economically healthy. But I'm not sure it's that important as an isolated "fact".
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pelican
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 6:31 pm

It could be true, although I'm still looking for a source with actual data.
While this may have a considerable impact on a nations economy I doubt it shows that the UK is winning in the Champions League of European business (whatever that may be).
The composition of one nation's business is probably the dominant factor. As Banco said London is by far the main European financial centre. The financial sector (banks, fonds...) tends to have much bigger profit margins than e.g. industries. That could explain the size of the British profits.

Quoting Banco (Reply 1):
Take the stock market; everything is for sale, including the stock market itself, something no other nation would even consider.

 Yeah sure How do you explain that the Deutsche Börse AG (German stock market) is a public traded company? The majority of share is held by hedge fonds from London. Prejudice...

pelican
 
Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 9:23 pm

Quoting Pelican (Reply 2):
I doubt it shows that the UK is winning in the Champions League of European business (whatever that may be).

Oh, that's a politician speaking. I wouldn't pay the slightest attention to that.

Quoting Pelican (Reply 2):
How do you explain that the Deutsche Börse AG (German stock market) is a public traded company? The majority of share is held by hedge fonds from London. Prejudice...

Not at all. The Bourse can't be taken over by a foreign entity, it's against the regulations, nor can the NYSE, NASDAQ or any other major stock exchange. The LSE can, it is no different to any other company quoted on its own exchange in that regard.
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pelican
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 9:41 pm

Quoting Banco (Reply 3):
Not at all. The Bourse can't be taken over by a foreign entity, it's against the regulations, nor can the NYSE, NASDAQ or any other major stock exchange. The LSE can, it is no different to any other company quoted on its own exchange in that regard.

We are talking about different things. I don't know about this regulation but I don't doubt you. I was talking about ownership and about 90% of the shares of the Deutsche Börse AG are held by foreign investors. I would consider this as "for sale" and sold.

pelican
 
Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 9:49 pm

Quoting Pelican (Reply 4):
I was talking about ownership and about 90% of the shares of the Deutsche Börse AG are held by foreign investors. I would consider this as "for sale" and sold.

Yes, I understand what you mean there, but the difference is that the LSe can be bought, lock stock and barrel by anyone, and controlled elsewhere, which is part of the reason why the likes of the DB, NASDAQ and all the others launched takeover bids for it in recent years. It sparked off a debate about how right it was that the LSE could be bought when no other exchange can. some saying that it's simply unfair and should be prevented unless everyone else opened up their exchanges for potential purchase, others saying that you either have an open market or you don't, and that if any potential purchaser stuffed up the LSE, then someone else would simply start a new exchange to which everyone would migrate.

As it happened, they fended off the various approaches and retained their independence, but either way, it is markedly different to anyone else to even allow it, whilst the government take no interest in, or have any policy on, the ownership of the stock market. Institutional investors might hold high levels of ownership in other stock markets, but they aren't permitted to take control of them.

Incidentally, I'm not necessarily saying that the British way is a better one at all. Just very, very different. Unique in fact.
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jonathan-l
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 9:59 pm

Quoting Pelican (Reply 2):
the UK is winning in the Champions League of European business

And the real Champions League as well: Liverpool, Chelsea, Manchester
3 out of 4 semi-finalists !
 
ltbewr
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 10:02 pm

I would suspect that besides the items noted above, other advantages for UK companies vs. Euro based companies could include less regulation of labor (since the Thacher administration and limiting labor costs) thus more productive workers, a culture that encourages making a profit, that they speak English the dominate language of trade and commence and a well respected legal system.
Germany and France have fare more unionized labor, their workers are less productive in numbers of hours due to regulations like fewer working hours per worker and so on vs. the UK. The UK, unlike many Euro countries, does see making profits as a good thing. In the more socialistic Euro countries, making a big profit is seen as shameful, that all the money should go to the government or the workers. The colonial history of the UK means many countries in Africa and Asia use English as does the USA, so use the dominate language of trade and commence. The UK, including it's foreign territories (Bermuda, Br. Virgin Islands, Cayman Is.) have a well established and respected legal system as well as very supportive of business. In the Euro countries, the system is far to 'foreign', not favorable toward businesses, limits lawsuits to enforce contracts and so on.
 
Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 17, 2007 10:07 pm

Quoting LTBEWR (Reply 7):
I would suspect that besides the items noted above, other advantages for UK companies vs. Euro based companies could include less regulation of labor (since the Thacher administration and limiting labor costs) thus more productive workers,

One major difference is the ease of starting a business in the UK. All you need is about £150 to register the name and you're basically off. VAT isn't applicable until you earn more than £60,000-ish, you don't usually pay your first lot of taxes for about 2 years, which gives huge breathing space, and the tax applicable for companies up to £300,000 turnover is only 19% (though that's going up to 22%, thanks Gordon  grumpy  ). You don't need to have any kind of bond in the bank, which is common in mainland Europe. It does encourage people to start up businesses.
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pelican
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RE: British Firms Produce 1/3 Of All European Prof

Wed Apr 18, 2007 6:31 am

Quoting Banco (Reply 5):
Yes, I understand what you mean there, but the difference is that the LSe can be bought, lock stock and barrel by anyone, and controlled elsewhere, which is part of the reason why the likes of the DB, NASDAQ and all the others launched takeover bids for it in recent years. It sparked off a debate about how right it was that the LSE could be bought when no other exchange can. some saying that it's simply unfair and should be prevented unless everyone else opened up their exchanges for potential purchase, others saying that you either have an open market or you don't, and that if any potential purchaser stuffed up the LSE, then someone else would simply start a new exchange to which everyone would migrate.

Sorry for my too fast conclusion (the prejudice thing) in reply 4.

Quoting LTBEWR (Reply 7):
I would suspect that besides the items noted above, other advantages for UK companies vs. Euro based companies could include less regulation of labor (since the Thacher administration and limiting labor costs) thus more productive workers, a culture that encourages making a profit, that they speak English the dominate language of trade and commence and a well respected legal system.

Labour productivity has not much to do with profit margins. France and Germany have much higher labour productivity rates than the UK. France has an even higher than the US while Germany has the low productivity of the ex-GDR.
Source www.oecd.org/dataoecd/28/17/36396820.xls

Quoting LTBEWR (Reply 7):
Germany and France have fare more unionized labor

Actually trade union membership figures of the UK are much higher than the figures of France - which has even lower figures than the US - and still considerable higher than German figures. Labour market regulation play a much more important role. But I doubt they have a huge impact on profit margins.
Source http://www.oecd.org/document/12/0,23...649_34495_31781132_1_1_1_1,00.html

Quoting Banco (Reply 8):
One major difference is the ease of starting a business in the UK.

While this is a good thing and Germany could learn a lot in this regard from the UK I doubt it makes any difference regarding the combined profits.

pelican
 
LHStarAlliance
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 18, 2007 6:54 am

There´s just one reason for this :

The UK has privatized many Companies Thatcher and Blair have privatized almost all Companies which were public before
In Germany many Public Companies have been privatized but for example the Deutsche Bahn AG is still (still and hopefully for ever www.bahn-fuer-alle.de ) public . If the German Government would privatize all then it would be far bigger then the English one ...
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LHStarAlliance
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 2:26 am

Here you see German companies are the most valuated companies then the French and then I suppose the British :

"Deutsche Marken landeten - abgesehen von BMW - im Mittelfeld. Mit SAP (Platz 27), Mercedes (Platz 29), dem Sportwagenbauer Porsche (Platz 40), der Deutschen Bank (Platz 41), Siemens (Platz 71), T-Mobile (Rang 77) und Volkswagen (Rang 83) habe sich Deutschland aber vor Frankreich den Spitzenwert in Europa gesichert."

http://www.sueddeutsche.de/,ra3m5/wirtschaft/artikel/244/111133/

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kaddyuk
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 3:00 am

Its companies like Tesco and the RBS which have announced record breaking profits stretching into billions of pounds which have boosted the british side.
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Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 3:56 am

Quoting LHStarAlliance (Reply 11):
Here you see German companies are the most valuated companies then the French and then I suppose the British

That's not really any more meaningful than the idea that British companies produce a third of European profits idea. Britain tends not to have huge national champions in the way that Germany and France does, because if they get to that size, there's a serious temptation to flog off huge chunks of them because of the shareholder value idea. What you get instead are vast numbers of medium size businesses, which is why you have a FTSE 100, 200 and 500 of still fairly substantial operators.

Quoting LHStarAlliance (Reply 10):
The UK has privatized many Companies Thatcher and Blair have privatized almost all Companies which were public before

Most of those have either vanished, been sold off, broken up or otherwise disappeared. And that was 20 years ago or more, it's not really relevant to today.

For whatever reason, Britain has an entirely different approach to this to the other major European countries. Here, the idea (and the reality) is to flog anything that moves to the foreigners, extracting as much cash as possible from them and then using that to buy something else. The British system doesn't lend itself to a Vivendi, the shareholders would chuck out the board before they could say Vive la France.
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prebennorholm
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 4:16 am

I don't doubt those figures.

But as LHStarAlliance indicated in reply number 10, corporate profits are not always an indicator of general well-being.

For instance Germany and France may have the world's best railway systems, but since they are public they don't generate any profits. That's a tremendous asset compared to the privatised railways in Britain where the absence of competition generates massive profits and lousy service, both for passengers and cargo.

There are many industries which cannot be efficiently privatised, those where you cannot produce a normal competition. Among the most prominent such things are railways and airports - and all such infrastructure services which cannot easily be duplicated.

Sadly here in Denmark we have to some extent followed the British privatisation trend. For instance a few railway routes were privatised some years back. Luckily only a minor part intended as a "soft start". A British railroad company won the contract and immediately created such a disaster that it will last at least fifty years until any crazy politician next time dares to mention the word "railway privatisation".
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Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 4:21 am

Quoting Prebennorholm (Reply 14):
A British railroad company won the contract and immediately created such a disaster

Now, what in God's name possessed you to think a British railway company would be a good idea?  Wink
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LHStarAlliance
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 4:29 am

Quoting Prebennorholm (Reply 14):

For instance Germany and France may have the world's best railway systems, but since they are public they don't generate any profits. That's a tremendous asset compared to the privatised railways in Britain where the absence of competition generates massive profits and lousy service, both for passengers and cargo.

Well I assume that with Privatization = more competition . But the problem is : The Companies will just keep all what makes profit , so routes that are not profitable will be closed , making that many people will not have service .
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LHStarAlliance
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 4:34 am

Quoting Prebennorholm (Reply 14):

There are many industries which cannot be efficiently privatized, those where you cannot produce a normal competition. Among the most prominent such things are railways and airports - and all such infrastructure services which cannot easily be duplicated.

That´s it , the State must own such important infrastructure to guarantee the Service to all the Population also for the not profitable service .
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Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 4:37 am

Quoting LHStarAlliance (Reply 16):
Well I assume that with Privatization = more competition .

That's the idea, but the trouble with rail is that creating genuine competition is extremely difficult, you only have one network of railways and a finite capacity on them. In reality, you can't have a free for all on routes and timings that you can in most transport systems. So, in the UK you ended up with a complete dog's breakfast of a system where franchises were awarded on a regional basis.

I don't think anyone thinks that the way it was done was the right one, and if anything the last fifteen years have been marked by various attempts to undo some of the damage. Trouble is, the franchises are necessarily long term, and it's a very bad idea for governments to suddenly pull the rug from underneath companies by making huge changes.
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LHStarAlliance
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 4:50 am

Quoting Banco (Reply 18):

The privatization of the English Railway system was one of the "criminal" actions of thatcher ...
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gkirk
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 4:53 am

Quoting LHStarAlliance (Reply 19):
The privatization of the English Railway system was one of the "criminal" actions of thatcher ...

FWIW, the whole British railway system was privatized...
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prebennorholm
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 5:30 am

Quoting Banco (Reply 15):
Now, what in God's name possessed you to think a British railway company would be a good idea?

Stupid and shortsighted politicians did that.

We now have a name for that economic system of selling off public assets to private companies: "Tis i bukserne okonomi" (pie in the pants economy). It warms so nicely in the pocket of the finance minister, but only for a short while after which it is not pleasant at all. And in any case some corrective and often quite expensive measures are urgently needed, or the whole thing stinks. It's a very good name - Pie in the pants economy.

Quoting LHStarAlliance (Reply 16):
Well I assume that with Privatization = more competition.

Competition can only exist when you have two or more players. It is not possible to have more than one operator of a railway route.

Imagine that we only had one supermarket chain. We saw that in the former Soviet Union.

Privatising without competition is the same as re-inventing the Soviet Union.

Of course I believe in competition. But when competition is not possible, then we have to use the second best management system, to leave it in the hands of people who can be expelled at next elections when they foul up things.

The last option (expelling at next election) also lacked in the Soviet Union making their system fully as bad as privatisation without competition.
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Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 5:48 am

Quoting Prebennorholm (Reply 21):
We now have a name for that economic system of selling off public assets to private companies: "Tis i bukserne okonomi" (pie in the pants economy). It warms so nicely in the pocket of the finance minister, but only for a short while after which it is not pleasant at all. And in any case some corrective and often quite expensive measures are urgently needed, or the whole thing stinks. It's a very good name - Pie in the pants economy.

Generally speaking, it works very well. Barely anyone wants to go back to the days when companies were owned and (mis)managed by the government. Rail was a cock-up, but that's more or less the only one, really. All the others have done well, and it isn't the business of government to try to manage business, merely to create the conditions for business to thrive. Re-nationalising anything is pretty much unthinkable now. Britain has become such a laissez-faire economy that the IMF recently designated the City of London as a tax haven! Quite extraordinary.
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LHStarAlliance
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 6:01 am

Quoting Prebennorholm (Reply 21):

Competition can only exist when you have two or more players. It is not possible to have more than one operator of a railway route.

Imagine that we only had one supermarket chain. We saw that in the former Soviet Union.

Privatising without competition is the same as re-inventing the Soviet Union.

Of course I believe in competition. But when competition is not possible, then we have to use the second best management system, to leave it in the hands of people who can be expelled at next elections when they foul up things.

The last option (expelling at next election) also lacked in the Soviet Union making their system fully as bad as privatisation without competition.

Yea that´s right , but if the company stays public the government can control the prices ,etc
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prebennorholm
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 6:43 am

Quoting Banco (Reply 22):
Generally speaking, it works very well. Barely anyone wants to go back to the days when companies were owned and (mis)managed by the government. Rail was a cock-up, but...

You are so right, Banco. When there is competition, better privatize today than tomorrow.

But exactly railways are the most prominent example of an industry with which you cannot produce meaningful competition. Airports are another example.

And back to the original topic: Things are really going very well in Britain these days. I believe that it is to a large extent due to privatization of many industries, and also the "hire and fire" labor system which is very different to Germany and France. In Germany and France, if you are "lucky" to get a job, then you are more or less hired on a lifetime contract.

If an industry in Germany or France risks to have a workforce shrink in the future, then they are reluctant to hire more labor today, better outsource to a foreign country even if the cost is slightly higher. It is almost political suicide to propose to loosen the stiff labor rules.

Here in Denmark we also have the "hire and fire" system, or an ammended system which we call "Flexicurity" where the state provides individual economic security, job finding service and job qualification (education) service.

Lately we have had a minor invation of German and French politicians who wanted to study our Flexicurity system. But I guess that it all comes to nothing. When it is a hard won right to have a lifetime-job, then it is very difficult to change even if everybody can see that a more flexible system is needed.

And of course, when looking back into history, then it is unbelievable what the British state has been involved in. State run car factories (yes, I owned a Mini 1967), state run coal mines, even state run aircraft factories, shipyards and much more. A lot of the privatizations in Britain was very much needed, and in fact they came way too late.

Many industries were kept alive on public subsidices for way too long time, and then it spoils everything when it finally has to be closed down. I have seem coal districts in Wales where whole societies were broken up. Only few retired people were left behind with practically no services, and two out of three houses carried a sticker telling that it was for sale at £2,000.
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prebennorholm
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 6:58 am

Quoting LHStarAlliance (Reply 23):
...if the company stays public the government can control the prices ,etc

Yes, that's not the "perfect" situation. But when the only alternative is that prices are controlled by a capitalist monopole, then it is by far the better system.

If you ever go and buy a one way railway ticket from London to Cardiff (a friend of mine did that some years back), then you will know what I'm talking about. He could have toured practically all Europe for what that privatized monopole asked from him.

I was in Swansea and told him that I was too lazy to drive the whole length of the M4 to Heathrow and pick him up. It cost him dearly to have such a lazy ignorant as friend.
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pelican
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 9:17 pm

Quoting Prebennorholm (Reply 14):

For instance Germany and France may have the world's best railway systems, but since they are public they don't generate any profits.

Tell that to DB (which is soon to be privatised.
http://www.finanznachrichten.de/nach...ichten-2007-02/artikel-7687725.asp

Quoting Prebennorholm (Reply 24):
If an industry in Germany or France risks to have a workforce shrink in the future, then they are reluctant to hire more labor today, better outsource to a foreign country even if the cost is slightly higher. It is almost political suicide to propose to loosen the stiff labor rules.

All in all I've to agree. But there are ways to avoid job protection like temporary employment. And in the moment there are no more outsource trends in the German economy - there are even companies who are coming back because of the relative low labour costs (productivity included).

Quoting Prebennorholm (Reply 24):

Lately we have had a minor invation of German and French politicians who wanted to study our Flexicurity system. But I guess that it all comes to nothing. When it is a hard won right to have a lifetime-job, then it is very difficult to change even if everybody can see that a more flexible system is needed.

Much has changed already over here and there will be even more changes. Of course we are far away from the Danish system nonetheless the job finding service is in the middle of a radical change (although I would prefer to privatise it) and the labour market regulations changed during the last years, too.

There are reasons why Germany is coming back out of it's long time recession at the moment. Some of them are to be found at labour market change.

pelican
 
ME AVN FAN
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 9:44 pm

Quoting Concorde001 (Thread starter):
will show next week that British firms account for more than a third of all European profits....can this really be true???

if the companies in the U.K. have such bad tax-declaration advisors why not '?  Silly  scratchchin 
 
LHStarAlliance
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RE: British Firms Produce 1/3 Of All European Prof

Tue Apr 24, 2007 9:49 pm

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NoUFO
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RE: British Firms Produce 1/3 Of All European Profits?

Tue Apr 24, 2007 11:02 pm

Quoting Concorde001 (Thread starter):
The media is reporting that a report by the DTI (Department of Trade and Industry) will show next week that British firms account for more than a third of all European profits....can this really be true???

Ok, finance and business is not were I'm at my best, but could it be that the British economy bases on small to medium sized companies, whereas in say: Germany the economy relies more on enterprises listed on the stock exchange?
Those companies usually have a captive finance company outside Europe. Officially, the finance company makes the profit (and pays taxes outside Germany).
This is why I believe it was correct to lower corporate tax rate, first under Schroeder, now again under Merkel.
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baroque
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 2:06 am

Quoting Concorde001 (Thread starter):
It is great if our companies are doing this well, but I was hoping some experts on a.net may be able to present a much more balanced picture than reports issued by governments!



Quoting Banco (Reply 22):
Re-nationalising anything is pretty much unthinkable now. Britain has become such a laissez-faire economy that the IMF recently designated the City of London as a tax haven! Quite extraordinary.

Are there any tax reasons for the difference.

In Aus Keating introduced a system where dividends can have attached to them imputed credit for tax paid by the company. Once that was introduced, there is a strong incentive for companies to declare their profits and pay tax. To see the difference just look at News Corp tax and dividend rates compared with most Aus companies.

Relatively simple changes such as imputation can make a huge difference to the way companies arrange their affairs. Is something like this a factor? I suspect MAF is wondering along similar lines. In other words, does the UK tax system provide a higher incentive to declare profits compared with other EU systems?
 
Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 4:14 am

Quoting NoUFO (Reply 29):
Ok, finance and business is not were I'm at my best, but could it be that the British economy bases on small to medium sized companies, whereas in say: Germany the economy relies more on enterprises listed on the stock exchange?

Partly. Put it this way, had VW been a UK company, it would have been flogged off by now. The various mechanisms for preventing foreign takeovers in Germany and France are wholly alien here, where everything is for sale at the right price. What that does mean is that you don't get huge, unwieldy conglomerates, because the shareholders start screaming. It also means that German and French companies can openly buy British ones, but the reverse is not true, to the fury of the City. Such financial protectionism means that unless a company is extremely successful (like Tesco, for example) there's no such thing as being too big to be bought, and if they fail to deliver, bought they will be. Often, that happens with smaller companies buying bigger ones too, such as the recent purchase of BAA, where, quite simply, the shareholders attitude is that if X foreign company is daft enough to pay that much, then they are wise enough to take the cheque and run.

You also have vast numbers of privately owned businesses (my own modest effort for a start). Starting a business of any description is ludicrously simple in Britain, and compared to what is required in a nation like Germany, laughably so. No special deposits at the bank are required, VAT is not payable by small businesses, and the taxation regime is extremely business friendly. Because of that, even when companies get bigger, they quite often see no reason to list on the stock market, and you can see a good example of that right now with private equity companies looking to buy (and take private) a chain as big as Boots, whilst Phillip Green bought BHS lock, stock and barrel himself. His last salary was £2 billion by the way, because it's simply his own company.

Quoting Baroque (Reply 30):
Are there any tax reasons for the difference.

There is an extremely generous system where people are resident, but non-domiciled. That means that they only pay UK tax on money earnt in the UK and not overseas. So, the likes of Lakshmi Mittal (Mittal Steel) is a UK resident, but doesn't pay tax on the vast majority of his income. The basic deal is that they get the break, and in return they are expected to contribute to the country. It's fabulous for them, they pay bugger all, and whilst it sticks in the throat somewhat, it's also rather good for the UK economy overall as well, because these fabulously wealthy people DO end up pouring a lot of cash into the UK.
She's as nervous as a very small nun at a penguin shoot.
 
prebennorholm
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 6:17 am

Quoting Pelican (Reply 26):
For instance Germany and France may have the world's best railway systems, but since they are public they don't generate any profits.

Tell that to DB (which is soon to be privatised.

From www.db.de: Deutsche Bahn ist 2008 bereit für eine Teilprivatisierung (German Railway is in 2008 ready for partial prvatization).

I would assume that the majority stake will still be public - hope so.

Quoting Pelican (Reply 26):
Much has changed already over here and there will be even more changes. Of course we are far away from the Danish system nonetheless the job finding service is in the middle of a radical change (although I would prefer to privatise it) and the labour market regulations changed during the last years, too.

There are reasons why Germany is coming back out of it's long time recession at the moment. Some of them are to be found at labour market change.

I'm glad to hear that. Mostly because das Vaterland deserves it, but also because Germany happens to be (one of) the most important export markets for Danish industry, maybe number one, maybe next to Britain only.
Always keep your number of landings equal to your number of take-offs
 
pelican
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 6:54 am

Quoting Prebennorholm (Reply 32):
I'm glad to hear that. Mostly because das Vaterland deserves it, but also because Germany happens to be (one of) the most important export markets for Danish industry, maybe number one, maybe next to Britain only.

I just hope the reform process isn't stopped too early.
The main export partners of Denmark are Germany, Sweden and the UK (in that order). The Danish exports to Germany are about twice as much as those to the UK (in 2004 at least).

Quoting NoUFO (Reply 29):

Ok, finance and business is not were I'm at my best, but could it be that the British economy bases on small to medium sized companies, whereas in say: Germany the economy relies more on enterprises listed on the stock exchange?

I doubt it. Small and medium sized companies are crucial for the German economy and are much more important than the big companies. How many really big German enterprises are there in the end?

Quoting ME AVN FAN (Reply 27):
if the companies in the U.K. have such bad tax-declaration advisors why not '



Quoting Baroque (Reply 30):

That could be indeed the biggest reason. Taxation on profits are indeed relative low in the UK. Therefore I would tend to think this is the most important factor.

pelican
 
prebennorholm
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 7:21 am

Quoting Pelican (Reply 33):
The main export partners of Denmark are Germany, Sweden and the UK (in that order). The Danish exports to Germany are about twice as much as those to the UK

Huh, seems as if I'm still living in the (good) old days when Danish bacon and butter to Britain was our main export article. That was what I learned at school way back in a former century. Thanks for the update, Pelican.
Always keep your number of landings equal to your number of take-offs
 
Pyrex
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 8:59 am

Quoting Prebennorholm (Reply 24):
state run coal mines

Now the government may not necessarily be the best entity to RUN a coal mine but it is definitely the only entity that should be allowed to "own" one. Natural resources is a field where by definition there can be no competition (as the resources are finite) and they are a blessing / curse of the country they can be found in and its people. For that reason everyone should benefit from their exploration (though obviously companies who do the mining / drilling should be adequately compensated for the risk they take).

Quoting Banco (Reply 31):
Because of that, even when companies get bigger, they quite often see no reason to list on the stock market, and you can see a good example of that right now with private equity companies looking to buy (and take private) a chain as big as Boots,

I don't believe that is the reason - one of the reasons of the UK's success is how effective its stock market is. You can find hundreds of small and mid-size companies listed on the exchanges (including many companies who couldn't seriously contemplate being taken public in other European countries), and the fact that enterpreneurs and venture capitalists know they can go to the City and find dozens of investment bankers willing to "shove their stock down investor's throats" is the reason you have so many start-ups in the UK (some of them actually eventually turn a profit).

I am not familiar with the BHS example but the case of Boots is a different one - the excess of liquidity in Private Equity funds worldwide, which is keeping all public companies on their toes, specially large retailers, as the high value of their real estate assets makes them a perfect break-up play.
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Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 4:37 pm

Quoting Pyrex (Reply 35):
Now the government may not necessarily be the best entity to RUN a coal mine but it is definitely the only entity that should be allowed to "own" one. Natural resources is a field where by definition there can be no competition (as the resources are finite) and they are a blessing / curse of the country they can be found in and its people. For that reason everyone should benefit from their exploration (though obviously companies who do the mining / drilling should be adequately compensated for the risk they take).

Intreresting. Why should coal be different to oil?

Quoting Pyrex (Reply 35):
I don't believe that is the reason

I didn't say it was the reason. That was just one element of a deeply complex system.

Quoting Pyrex (Reply 35):
of the UK's success is how effective its stock market is. You can find hundreds of small and mid-size companies listed on the exchanges (including many companies who couldn't seriously contemplate being taken public in other European countries), and the fact that enterpreneurs and venture capitalists know they can go to the City and find dozens of investment bankers willing to "shove their stock down investor's throats" is the reason you have so many start-ups in the UK (some of them actually eventually turn a profit).

Yes, that's true. However, listing on the stock market greatly increases the level of scrutiny and financial complexity of the company (for obvious reasons). That increases a company's costs markedly, and many medium size businesses don't want to do it. Nevertheless, the point that they can go down that route is a valid one.

Quoting Pyrex (Reply 35):
I am not familiar with the BHS example but the case of Boots is a different one - the excess of liquidity in Private Equity funds worldwide, which is keeping all public companies on their toes, specially large retailers, as the high value of their real estate assets makes them a perfect break-up play.

Indeed so. But the point being made was that equity funds are perfect example of companies that needn't necessarily be publicly quoted ones. And it's no co-incidence that the largest venture capital and private equity groups are privately held British or American companies.
She's as nervous as a very small nun at a penguin shoot.
 
baroque
Posts: 12302
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 6:10 pm

Quoting Pelican (Reply 33):
Quoting Baroque (Reply 30):

That could be indeed the biggest reason. Taxation on profits are indeed relative low in the UK. Therefore I would tend to think this is the most important factor.

Interesting. The tax imputation has made a huge difference to profit declaration in Aus. Costello (our Treasurer, who keeps on being slightly embarrassed by larger and larger surpluses) rabbits on about the minerals boom being responsible for a huge rise in corporate taxation here. It is, but largely because of a little understood change by Keating nearly 20 years ago. Basically, the rule is no imputation, no profits - well markedly lower ones at least.

Quoting Banco (Reply 36):
Quoting Pyrex (Reply 35):
Now the government may not necessarily be the best entity to RUN a coal mine but it is definitely the only entity that should be allowed to "own" one. Natural resources is a field where by definition there can be no competition (as the resources are finite) and they are a blessing / curse of the country they can be found in and its people. For that reason everyone should benefit from their exploration (though obviously companies who do the mining / drilling should be adequately compensated for the risk they take).

Interesting. Why should coal be different to oil?

It isn't any different. Except that manning for the oil industry is low, so huge workforces were generally not involved. In the 70s, the US had huge campaigns against state involvement in the oil industry based around would you like the oil industry to be like US postal system, which I thought was an odd argument because the US postal system seemed pretty good to me!
As exploration risks rise, oil prices will rise, but possibly not commensurate with risk. I can see a time (perhaps in 10 years or so) when the UK will look at exploration in the N Sea and decide that state involvement is needed to try to squeeze the last few percent out of the area. Which will not be good for the general appraisal of state involvement because they will inevitably have poor discovery rates. However, eventually national interest will make this a must.
 
Banco
Posts: 14343
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 6:33 pm

Quoting Baroque (Reply 37):
I can see a time (perhaps in 10 years or so) when the UK will look at exploration in the N Sea and decide that state involvement is needed to try to squeeze the last few percent out of the area. Which will not be good for the general appraisal of state involvement because they will inevitably have poor discovery rates. However, eventually national interest will make this a must.

I don't think so. The government wouldn't want to get remotely involved in that. All they would do to encourage further exploration (if needed) would be to change the financial arrangements to make it worth the while of the oil companies, that's all.
She's as nervous as a very small nun at a penguin shoot.
 
baroque
Posts: 12302
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 8:07 pm

Quoting Banco (Reply 38):
I don't think so. The government wouldn't want to get remotely involved in that. All they would do to encourage further exploration (if needed) would be to change the financial arrangements to make it worth the while of the oil companies, that's all.

That will take them so far, but after that, the need for oil will take them down that route. It is basically the same reason that resulted in the initial nationalization of the railways and the coal mines. It will be done a bit more cleverly the next time. The UK taxpayer would be a great deal better off if they had hung on to British Gas or whatever it was called.
 
Pyrex
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 8:16 pm

Quoting Banco (Reply 36):
Intreresting. Why should coal be different to oil?

It shouldn't, that is what I was defending. Look, I am not here defending the government should OWN all the mines (coal and others), I just think that all mining rights should be property of the state, who should have a say on the admissable level of output and can then of course lease them out in exchange for royalties.

Quoting Banco (Reply 36):
Indeed so. But the point being made was that equity funds are perfect example of companies that needn't necessarily be publicly quoted ones. And it's no co-incidence that the largest venture capital and private equity groups are privately held British or American companies.

Private-equity firms in Germany (or funds that invest in that country) have a remarkable level of activity, it just isn't as high-profile as the ones that operate in the US and the UK as they tend to focus on mid-sized companies and real estate (not surprisingly, since those are the mainstays of the German economy).

US and UK PE funds have a distinct advantage over other countries not in the way the private enterprise market works (no significant competitive advantage there, at least in the UK) but in the way the public market works. PE firms are not natural owners of the companies, their purpose is usually just to buy the companies, turn them around, squeeze the maximum level of profits in 2-3 years and sell them off. If the public market does not work the opportunity for successful exits will be severely limited, on the extreme PE firms may even decide not to invest.
Read this very carefully, I shall write this only once!
 
Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 8:21 pm

Quoting Baroque (Reply 39):
That will take them so far, but after that, the need for oil will take them down that route. It is basically the same reason that resulted in the initial nationalization of the railways and the coal mines. It will be done a bit more cleverly the next time. The UK taxpayer would be a great deal better off if they had hung on to British Gas or whatever it was called.

I don't see remotely how. British Gas was a massive drain on the public purse, along with most of the nationalised industries. There's no reason to think that would have changed. Gas prices in real terms are generally speaking lower (the recent spike notwithstanding), the public don't have to prop up a disaster of a company, and private industry does location of new resources infinitely better than the public sector, just as is the case with the oil companies. Besides, the next generation of power stations will be nuclear, not oil or gas, so British dependency on (and revenue from) North Sea oil and gas will decline. Government is crap at doing these things, private industry is good at it. Let private industry do it all, just as has been the case for the last two decades. The coal mine scenario was one of no choice whatsoever, by the end of the war they were downright dangerous, and there was simply no choice. Comparing then and now is apples and oranges.
She's as nervous as a very small nun at a penguin shoot.
 
Banco
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Joined: Mon Oct 29, 2001 11:56 pm

RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 8:35 pm

Quoting Pyrex (Reply 40):
It shouldn't, that is what I was defending. Look, I am not here defending the government should OWN all the mines (coal and others), I just think that all mining rights should be property of the state, who should have a say on the admissable level of output and can then of course lease them out in exchange for royalties.

And the same with oil fields? Because to some extent (I guess it's arguable) that's more or less what happens, isn't it?

Quoting Pyrex (Reply 40):
PE firms are not natural owners of the companies, their purpose is usually just to buy the companies, turn them around, squeeze the maximum level of profits in 2-3 years and sell them off. If the public market does not work the opportunity for successful exits will be severely limited, on the extreme PE firms may even decide not to invest.

Certainly. Hence their repuation as asset strippers, particularly when a company isn't doing especially badly in the first place. But that's the risk that they take. A classic example was the Magnet takeover about 15 years ago, where PE companies got into an idiotic bidding war with each other, grossly overpaid, and promptly collapsed. If you're a shareholder, it's all great news, because the potential purchasers are private, they don't have to justify the amount of money they pay to the City, and so the prospect of them doing something a bit dim is all the greater.

Not good for the staff though.
She's as nervous as a very small nun at a penguin shoot.
 
Pyrex
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 8:52 pm

Quoting Banco (Reply 42):
And the same with oil fields? Because to some extent (I guess it's arguable) that's more or less what happens, isn't it?

That is, in fact, what happens in some countries (I am not so sure about the US and the UK), and that is what I defend should happen with all natural resources (potable water included).

Note however that nationalized oil companies seem to be doing just fine in some countries (e.g. Saudi Arabia - operationally I mean, obviously there is huge corruption going on but that is just SOP in the country), partly because of the free-market economy for contractors.
Read this very carefully, I shall write this only once!
 
Banco
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 9:29 pm

Quoting Pyrex (Reply 43):
That is, in fact, what happens in some countries (I am not so sure about the US and the UK),

More or less. The oilfields remain UK property, and the companies are taxed on their revenues from North Sea oil and gas. It's a pretty light hand, in truth.
She's as nervous as a very small nun at a penguin shoot.
 
baroque
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RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 10:33 pm

Quoting Banco (Reply 41):
I don't see remotely how. British Gas was a massive drain on the public purse, along with most of the nationalised industries. There's no reason to think that would have changed. Gas prices in real terms are generally speaking lower (the recent spike notwithstanding), the public don't have to prop up a disaster of a company, and private industry does location of new resources infinitely better than the public sector, just as is the case with the oil companies.

Er well, I am not sure about the gas supply bit, that should never have been confused with the exploration arm. When it was sold, they effectively gave away a very successful exploration effort. If you look at some of their discoveries now, in at least some cases the companies that now own them are very shy to admit who did find them.
And before you think that gas prices are lower, remember that the main gasfields in the N Sea are largely depleted. Let me know how prices look around 2010!! The chill of field depletion in the N Sea has yet to hit, which does not mean that it has been cancelled!! Luckily Norway has some very large fields, but you know about the blue eyed Arabs of the North.  Smile
Areas are assessed on the basis of ranked prospects. Basically, private industry will drill down to a particular potential size of prospect, based on ROI criteria but also weighted for head office costs. The larger companies in about 1975 were not keen on prospects with less than 500 million recoverable barrels. Experience took them down to about 100 at about ?? 1990. By 2000 they were willing to look at 50 million provided it was not deep water.
There will always be prospects too small for companies to be willing to test. A nation can either decide to run with the interests of the various companies, or it can decide its own interests should come first.
All reducing taxation does it lower the minimum point that will be drilled. As they say, the final examination will be conducted by Professor Drill - and in spite of wondrous seismic, Prof Drill's daily rate is still highly expensive. And even after Prof Drill gives you a pass, you still have to pay development costs.
 
Banco
Posts: 14343
Joined: Mon Oct 29, 2001 11:56 pm

RE: British Firms Produce 1/3 Of All European Profits?

Wed Apr 25, 2007 10:39 pm

Quoting Baroque (Reply 45):
When it was sold, they effectively gave away a very successful exploration effort.

Oh, you can argue it was sold off too cheap, sure. But that's not the same as saying it shouldn't have been sold at all.

Quoting Baroque (Reply 45):
And before you think that gas prices are lower, remember that the main gasfields in the N Sea are largely depleted. Let me know how prices look around 2010!!

That's going to happen anyway, it's a finite resource. But the UK does have a good deal with Norway for natural gas already, and the whole issue about power generation now is because of the unspoken, but abundantly clear government viewpoint that they aren't under any circumstances going to be reliant on a somewhat unstable Russia for gas, hence the determination to press ahead with a new generation of nuclear stations. They dress it up as a green policy and so forth, but it's all about security of supply.

Quoting Baroque (Reply 45):
Areas are assessed on the basis of ranked prospects.

I don't doubt you, but I'm not going to be able to debate it with you due a lamentable absence of knowledge on my part.  Wink
She's as nervous as a very small nun at a penguin shoot.
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: British Firms Produce 1/3 Of All European Profits?

Thu Apr 26, 2007 2:43 am

Quoting Banco (Reply 46):
Quoting Baroque (Reply 45):
Areas are assessed on the basis of ranked prospects.

I don't doubt you, but I'm not going to be able to debate it with you due a lamentable absence of knowledge on my part.

There is a strange but neat thing called Zipf's law. You plot the log of the size of whatever it is on the ordinate, and the log of the rank of the whatever it is on the abscissa. Thus the biggest is one, second largest 2 and so on. The data then plot on a gentle curve. If there are kinks, this suggests that some of the data are missing.

This works for populations of cities, bacterial colonies and, apparently political parties. More interestingly, it also applies, roughly to the sizes of most mineral deposits and oil fields. Oilfields are a bit odd because the largest two are very close in size which causes the the top two to be too close together. But away from them, it works fine with oilfields. Which is a long way round of saying that the field size is logarithmically distributed. Big grin

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