How to Survive the Meltdown Panorama

How to Survive the Meltdown

The world economy is in meltdown, the euro is in turmoil and the future looks bleak. Does it have to be so bad? Panorama investigates how Britain plc could survive the crisis.

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A world financial crisis we hoped we would never see again. 80 years


on, are we facing another depression that could last for


years? Riots, internal dissent and fracture, those are things that you


would expect to come with this. The euro crisis deepens. Ties with


old allies are strained. Deep divisions. Britain out on its own.


What is on offer isn't in Britain's interests... We live in historic


times. There's huge questions surface about our relationship with


Europe and at home lives and familiar iz to support. I have a


roof to keep over my head. Is there a new route to prosperity? New


markets to be exploited? New job to be created? If British businesses


don't follow the markets abroad, they're going to miss out. They may


be difference between thriving and surviving or even dying.


As storm clouds gather, tonight we investigate what we must do to


There's been a lot of talk of how bad things are - talk of recession,


depression and now, isolation from Europe. There's been less talk on


how to solve the problems. So, I'm going ton a mission to discover how


we can steer the economy through these troubled times. It's not


going to be easy, but the outcome will affect us all.


You may find my starting place surprising. A primary school in


London. We're going through the biggest squeeze on living standards


for decades. There's talk of a lost generation. But here, they're


trying to fight the gloom. They're preparing the children for a


different kind of future. You don't have to be brilliant to realise


that Europe's in a mess and that the growing, emerging economies are


not European economies. Therefore it seemed ill advised to focus


one's modern foreign language teaching solely on Europe. Their


teachers want them to learn a Chinese language, spoken by over a


billion people, a people whose economy and culture will


increasingly dominate our lives. China is a rising power. It's


courteous, apart from anything else, if you're doing business with a


power, to greet and speak to people in Mandarin. It needs to be taught


regularly and consistently throughout a child's school life,


starting in reception. Difficult challenge. Difficult, though it is,


it's a challenge worth taking on. It could be essential if future


British generations are to benefit We can't just look at schools for


solutions. We need to look in the work place as well. Calculating


your route. So I'm taking a journey to the heartland of British


This is what Britain used to do well. Manufacturing was the engine


of the nation's economic growth. This train was built here in Derby


in 1956, but in fact, the relationship between industry and


rail in Derby goes back further than that, to the 1800s. They still


make trains here and a lot of people are fighting hard to ensure


that rail is an industry here, not just a tourist attraction.


Manufacturing is still at the heart of the economy in the Midlands.


Bombardier's factory in Derby plays a big part in the local economy.


This is where they make the trains for London Underground.


And for some of the biggest main line rail operators in the country.


It's also the last train Paul Smith is one of the 3,000


people who still work here. You're going to take Stuart with you.


I like everything about the job. It's really demanding, challenging


and it really pushes you to try and achieve. Back in March, the Cabinet


came to Derby, manufacturing, they declared, was once again going to


be our path to prosperity. Derby is a great example of what the British


economy should be in the future, which is, a series of manufacturing


business that's export around the world. Those comments raised huge


hopes amongst the 3,000 workers at Bombardier. But the news which came


out just weeks later meant their joy was short lived.


This morning's dawn didn't bring warmth for the workers of


Bombardier. The Government awarded a massive contract to build new


trains for the Thameslink route not to Bombardier in Derby, but to


Siemens in Germany. I think it's disgraceful. I just


cannot understand how they can justify spending �1.4 billion of


British taxpayers money to boost the German economy. I just can't


understand that. After losing the contract, 1400 jobs are going at


this factory. Paul Smith has just been told his job is one of them.


Emotionally it's draining and I feel awful. I'm still shaking and


what not. I've got a family to support. What was it like going


home and telling your wife that? Horrendous. All sorts of thoughts


were going through my mind. What am I going to do next? What future


have I got? I might end up losing my house or all those kind of


things. It's almost like they're shutting down Britain.


Manufacturing matters? Big time, yeah. Do you think the politicians


understand that? No. Not at all. The Government said it had no


choice. It had to get best value But giving the German economy a


helping hand might seem strange. Germany will now be making our new


trains. Of course, they already The Mini for instance is a brand


that Britain invented. Now the cars are still manufactured here, but


the company which makes them is BMW of Germany. Britain seems to have


lost control of its manufacturing industry. Manufacturing used to be


a third of our economy. Now it's slumped to about a tenth. In its


place, newer, flashier, younger feeling businesses took over. We no


longer had to manufacture, the argument went, instead we turned to


the City to provide the nation's wealth and all went well, for a


while. But the credit crunch and recession destroyed much of that


dream. Just how serious the crash has been for our economy was made


clear by last month's gloomy economic forecasts. It painted a


picture of an economy which, far from bouncing back, was actually on


the edge of another recession. And that's why the debate about


manufacturing and the make up of our economy is centre stage once


again. I don't think we can exist just from the City. I don't think


you can exist just with services. I don't think you can exist just


flipping hamburgers. Manufacturing employs people and could employ


more people. It used to employ 6.5 million people. Now it's barely two


million. Ironically, to create new economic


growth, we may have to return to an older economic model, one in which


we actually make a lot more things. Turn left in 100 yards.


Manufacturing was our past. Could it also be a future destination?


The fortunes of this company echo the rise and fall of Britain's


manufacturing industry. When our industry led the world, this was


one of the most successful products of its kind. Made in Britain still


sells. I'm at one of the most famous parts of Derby's industrial


history, Royal Crown Derby. They've been making pottery here for about


260 years. They made it for the Titanic. They made the most


expensive plate ever in the world. They are about to make a new range,


and I'm going to help them. This is Tim my instructor. Hi. Right, where


do we start? This may look simple, but not for me. To survive in a


world dominated by cheaper labour in the Far East, British


manufacturers have had to go up market. Oh, my word, that looks


like it's my work. The buzz word is quality, no cheap crockery here.


It's a plate! Everybody! It's my plate. And this is where the


process all ends, as the plate comes out of the kiln. If this


doesn't save British industry, I don't know what will. For the local


MP, protecting manufacturing is no laughing matter. I do genuinely


believe that manufacturing has a vitally important role to play in


the recovery of the UK economy, by putting all our eggs in the


financial services basket, it meant when the crash arrived, the


resilience of the country was severely impaired. As a consequence,


we've suffered much more severely than other countries, like Germany,


for example, that continued to A few miles away is JCB, a genuine


British manufacturing success story. It employs 10,000 people. These are


JCB backhoe loaders. That's a digger, to you and me. From here at


their base in Staffordshire, they're exported throughout the


worldment Three quarters of all JCB's machines are sold abroad.


They sell to 150 countries. They're the most popular diggers of their


kind in the worldment For JCB, it's all about exports.


So should we rebuild our economy like JCB has built its business?


wend to India 30 years ago. We used to tell 50 machines a year. Then


100 machines a year. Last year we did I think 27,000 machines in


India. Now, really the whole world is our market, and particularly Far


Unlike JCB, almost half of British exports go to Europe. And Europe,


of course, is in deep crisis. Europe today: crippled by debt.


Riots on the streets. British taxpayers, on the hook for billions


of pounds of loans and guarantees, just to help bail out the euro. The


troubles in the eurozone are also stifling its economic growth, and


that is bad news for our companies, tried to sell their goods to a


recession hit Continent. Welcome to my world. This is where we make


structured steel for projects all around the UK. Sid Pepper has been


in the steel industry for over 40 years. Like many sports businesses


in Britain, he has suffered first and from the ongoing crisis in


Europe -- many small businesses. The biggest beer is the uncertainty


has the potential to cause serious problems for small companies like


myself. A lot of work in the UK is carried out by companies owned and


run from Europe. They are being cautious, putting a hold on


projects. I employ a these guys this week, will they get a wage


packet at the end of the week? It is as fundamental as that.


believes it is political ineptitude that is damaging British Business.


While they are messing around in Europe, we have to continue. I wish


they would get it sorted because we are going to be limited, I can only


keep pushing the boundaries a Just four days ago, European


leaders met. Desperate to save its the euro, 26 countries agreed to


try to strengthen their ties. David Cameron refused to sign Britain up.


Saying it would stop our ability to defend our financial services


industry. What is Owen offer isn't in Britain's interests, so I did


not agree to it -- what is on offer. Critics in the coalition claimed


that position has isolated Britain and undermined our relationship


with our biggest export markets. am bitterly disappointed by the


outcome. I think there is a real danger that over time, the United


Kingdom will be isolated and marginalised within the European


Union. We are going to be now excluded from key economic


decisions that will affect our country in the future. Clearly a


manufacturing company further north in England will think first about


the single market. We don't want to be marginalised from that single


market. That is not a risk we are running, claims the government.


are still members of the European Union, we have access to the single


market. But the deal that was offered to David Cameron in the


early hours of Friday morning was one that was not in our national


interest, didn't protect our interests. Therefore, the Prime


Minister was absolutely right to say he wouldn't sign up to it.


may be right, people may even agree with you, but surely, there is a


cost to damaging that relationship? The fact is that we do trade a lot


with European Union, but that is individual businesses and customers


trading with individual businesses and customers elsewhere. We want


access to European markets and it is right that European businesses


have access to our markets, and that will continue. The markets


remained worried. Indeed, many in the financial world think that at


best, Europe is tying itself in two years of austerity. At worst, the


euro could collapse. It cannot sustain itself. It is not


competitive, it can't pay its debt off. Whether it is the periphery


going first or the core knocking the periphery out, it is inevitable


that it will collapse. The politicians are buying time. There


is nothing you can do unless you create proper growth to move


yourself out of this type of crisis. You think the euro and the EU as an


institution will end? Absolutely. Some believe a collapse of the euro


will cost Britain billions. If Europe declines, we will have to


look for new opportunities further afield. Please find alternative


This is picture-postcard England. Rolling hills, babbling brooks, a


church spire and a Downton Abbey style manor house at the heart of


the village. But this most English of settings is the backdrop for a


photo-shoot with a twist. The internet children's clothing


company,, is preparing to unveil its latest


collection. We are looking to market these products beyond the


British consumer, to consumers overseas. We are taking British


products, in Britain, and making them appealing to customers all


over the world. It is no coincidence that this business has


chosen an international look for its models. These children


represent exactly the new emerging markets, that the company wants to


export to. British businesses don't follow those markets abroad, then


they are going to miss out. They may be the difference between


thriving and surviving, or even dying in this climate. You have got


to be out there. 1, 2, 3! What could feel this company's growth,


and power Britain back to prosperity, is a business idea


based on the biggest global social change that has happened in


We think we are probably less than a quarter of the way through the


most remarkable growth of middle classes on a global basis that the


world will have seen for certainly, Will be 3 billion people in the


global middle class. This is extraordinary. These extraordinary


places are collectively known as the BRIC countries. Short for


Brazil, Russia, India, and of course, China. I experienced this


incredible growth first and when I was recently in China. Hundreds of


millions of potential new middle- class customers, for Britain's


ailing economy. Over the next decade, their likely growth will be


about the same as another one of them today, so another 13 trillion.


That will be close, if not more than double, the likely


contribution to global GDP, double of the US and Europe put together.


China is a very large market for European brands, including clothes,


fashion products, watches, automobiles. China is the second


largest market for BMW, for Audi, for Mercedes. So, the gold rush is


on. But if we are going to win here in China, are we doing enough?


Germany now exports more to the BRICs than to France. In the UK, if


you add all of the BRICs together, we export about the same to them as


we did to Ireland, and that is not our most important export market.


Earlier this year, the Chinese premier came to the UK. We thought


we had done well, getting around �1.5 billion worth of deals. Only


the next day, he went to Germany, and they announced almost �10


billion worth of deals. It made our attempts at breaking into this


market look feeble. China, Brazil, India, these are countries which


are growing and investing. If we have lost years of high


unemployment and no investment now, if we lose the race to the new


technologies, to the new industries, we will never, ever catch up again.


That is why I think it is so important to act now, to get our


economy moving, to get businesses confident, to start investing where


the new jobs are going to come from. For a long time there has been a


bit of a missed opportunity, we haven't been exporting as much to


the likes of India and China as we might have done. Steering our


economy to wards the newer growth societies is going to take time. --


to wards. Time we don't have. So in addition to the long-term strategy,


we also need a quick fix. In the past, we have turned to the


government to spend mac got way out of recession. -- to spend our way


out of recession. It is hoped major infrastructure projects like this


will provide a major boost to the economy. This is the King's Cross


station in London and they are ploughing some �400 million into


the side. This project is fully publicly funded, signed off in


times of plenty. We no longer have that kind of money. Our budget


deficit is the second largest in the EU. So rather than spending our


way out of trouble, the government is taking the axe to public


spending. But by cutting too much, are they undermining hopes of a


quick recovery? In the 19th century, 18th century, doctors' fault if you


cut patient and let them lead, that would make them better -- doctors


thought. It was quite medicine. This government still thinks more


cuts and more bleeding will make things better. This economy needs a


tonic, an antibiotic, they need a lift and then a long-term plan to


get the patient fit and healthy again. We have just got cuts, cuts,


cuts. I think the risk if we ignore our deficit, if we say, we can keep


on borrowing in the way that we were, are enormous. The easy thing


might be to pretend we don't have a problem. We do have a problem with


the deficit but if we can address it, we will see strong growth in


the future. It is 12 days to Christmas, and despite the attempts


at cheer, the tough times are taking a real toll. In Derby, Paul


Smith and his son are out Christmas shopping. He is facing a new year


without work. We have had to tighten our belts, because of not


knowing the future events. We can't go out and spend as much as we


would do at a normal Christmas, because of what is happening. I am


extremely angry, unbelievably let down. I feel I have still got the


hell of a lot to give, I have 30 years left to give to the system. I


have always worked. Incredibly For Paul, and people like him, the


economy needs a quick solution. But it takes time to develop new


markets. It takes time to pay back our debt. So some experts are


calling for a more radical package now, to kick-start growth. Wouldn't


it be great if very small businesses paid no tax at all on


their profits to a certain level? And up to another level, assuming


they are growing, they can pay only 10% or something. You can also


bring in quite large tax cuts for lower-paid workers. That includes


the consumption tax. You can cut VAT very heavily if you want to


have an effect. How much would you suggest? 1% or 2% doesn't have an


effect. I think you would have to make a 10% cut if you really wanted


people to start spending. government says the economy can't


afford tax cuts. Nothing is more important than getting the deficit


down. If we don't take those difficult decisions, if we don't


have credibility in our fiscal plans, then in the long term, we


leave ourselves in a very dangerous position. NTS, there are times when


governments will be unpopular -- and yes. The important thing is


that we do the right thing for the Preparing our children for a


different economic future is a big step. To grow, some say we are


going to need to rebalance our economy, and find new markets


abroad. We face an absolutely defining crisis, and you can stick


your head in the sand and rock bottom in the air and think it


isn't there, but we are in it. don't think that as a population,


we have really grasped our problem. There is something wrong with our


economy, that it is very badly balanced and is in the wrong place,


that we need to do something dramatic to move it into the right


place. That place is not familiar. Getting there won't be easy. We


will have to make some big decisions if we are to secure our


The world economy appears to be in meltdown, the euro is in turmoil and the economic future looks bleak. But does it have to be this bad? Panorama investigates how Britain plc could survive the crisis. Reporter Adam Shaw explores the potential for growth away from Europe in the fast-growing economies of places like Brazil, China and India. He also asks what our government needs to do to chart a path to a brighter future.

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