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Parcels, presents and power stations

21 February 2019

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A personal view of the evolving role of real estate in a world of technological, social and business change, by Richard Pickering, Head of Futures Strategy.

Parcels, presents and power stations

Westminster is broken As leaders on either side of the UK political divide fail to deliver, disaffection is turning to defection. In what feels like a significant moment for the Labour party, 8 of its MPs have decided to forge their own path as collaborative independents, albeit not yet a new party (‘the crucial word is yet’, apparently). Whether they will succeed in this ambition remains to be seen. Rarely in history do political breakaways rise to create credible opposition. However, we are in exceptional times, and the defectors have managed to win over three Tory centrists, who at PMQs this afternoon sat down with their new colleagues on the opposition benches. Does any of this make a difference? One presumes that the new formed band of 11 (now on par with the Lib Dems) will continue to vote on Brexit in the manner that they did prior to their move, and so the outcome would be the same. The Labour party is pushing for by-elections in these seats, which might tip the balance, but is seems unlikely that the independents would acquiesce, nor in any event would there be sufficient numbers to unlock a position on Brexit. Nevertheless, three more Conservative splinters would remove the party’s combined majority with the DUP, which puts pressure on Theresa May, and the messaging is getting louder. As SNP chief Ian Blackford noted, ‘Westminster is broken’.

Global outlook Speaking in the Barbican last week, Mark Carney set out his perspective on the global economic outlook. ‘While the debate in the United Kingdom has been understandably dominated by Brexit, the world has been otherwise engaged’, stated Carney, as he pointed to the headwinds facing the global economy. Tighter financial conditions, record high global policy uncertainty, and the prospect of the highest US trade tariffs in over 50 years point to challenging conditions ahead. Debt (both public and corporate) was in the spotlight, as Carney noted that: outstanding debt has doubled since GFC, public debt burdens have risen to over 90% of GDP for the first time since WW2, 60% of leverage loans are now cov-lite, and that growth in leveraged loans has been driven by securitisation (déjà vu?). Does this suggest we’ve reached the end of the cycle? Not yet, but it does place the world in a ‘delicate equilibrium’, which continued uncertainty over trade and Brexit could tip. Concerning the forecasting of recessions, Carney pointed to two interesting statements: (1) the IMF has only anticipated 1/6 of over 300 recessions in member countries since 1991, and (2) in the words of the late US economist Paul Samuelson, ‘the stock market has predicted nine of the past five recessions’.

On the buses With the proliferation of e-commerce comes a challenge around the proliferation of last mile delivery agents clogging up our streets. Various forms of consolidation depots are being trialled to reduce unnecessary trips and the associated environmental impact. The solution however surely comes in looking at our day-to-day activities. Most people on most days do not naturally pass major shopping centres, nor do delivery vans naturally pass their homes. However, most people on most days do travel to work, and during this journey there are nodal points of concentrated footfall, mainly around major transport hubs. These hubs are a great point for parcel lockers. In a patent secured last month, Amazon took this a step further by proposing parcel collection on the transport vehicles themselves. Armed with GPS tracking, it is proposed that the customer picks up their parcel on their public bus during their commute. The same could be applied to other forms of public transport, albeit those train commuters in the South East may question which part exactly of their packed carriage would be capable of housing this. The bigger point here is that disruptive business models typically focus on driving efficiencies. Here is an example of reinventing the distribution element of the retail value chain to bring greater efficiency (and hence value) to customers, by mapping it against their own activities.

Tough calls Honda’s decision to move its plant from Swindon will not be welcome news in Wiltshire. Doubtless the discussion will run and run on whether this was Brexit related or not; Japan’s new trade deal with the EU surely being a factor. The relocation will deliver a loss of 3,500 direct jobs, plus the various ecosystem impacts. Receiving less mentions in the news this week was Citigroup CEO Michal Corbet’s statement in the FT that Citigroup might be able to substantially automate its call centre operations using AI. This is an obvious move that others will no doubt follow. Automation of roles provides not just cost advantages, it can also deliver better service through quicker call handling, better data insights, and a more interactive customer experience using smartphone apps. To put these two positions into relative context: there are c. 57,000 people employed in car manufacturing jobs in the UK; whereas there are over a million call centre workers in the UK. If Brexit is the trees, digital automation is the wood of which we should not lose sight.

Space power The challenges with delivering power lies in the dichotomy between, on the one hand: (a) toxic polluting fossil fuels and by-product generating nuclear power plants, and on the other (b) as yet inefficient renewable supplies. In the latter category, solar falls down because in many regions the solar strength at ground level is not great enough or consistent enough, and secondly because on Earth we have night-time. Not so in space. In one of the most exciting and futuristic proposals I’ve heard recently, China is planning to launch the world’s first solar power station in space – within 5 years. The proposal is made more futuristic by the fact that the station could be constructed using 3D printing, and works by sending power back to Earth using a microwave or laser beam. The advantage of solar panels in space is a permanent supply of energy, six times more effective than solar panels on the ground. Following an initial test, the ambition is to deliver a 1-megawatt power station by 2030; enough to power 1,000 homes. Whilst one of these isn’t going to solve the world’s energy needs, there is no shortage of space in space (hence the name) and with a larger number of more efficient stations comes the long term prospect of off-earthing our energy production in a manner that is sustainable in perpetuity.

The secret to happiness If you’ve been having a miserable week and are fed up of your colleagues, science is at hand to help you make the next one happier and more productive. A recent study concludes that receiving gifts like flowers is the key to happiness (according to flower gift giving business, Bloom & Wild, published the day before Valentine’s Day). The science behind this statement comes from an analysis by London Metropolitan University, which examined oxytocin levels in participants when gifted with water, flowers and chocolate. In all cases (but water less so) the act of receiving the gift raised oxytocin levels, which are associated with happiness, social bonding and romance. Gifting chocolate benefited from a double whammy, as the substance is inherently oxytocin producing. Happy people are productive people, and social bonding creates high performing teams. Hopefully this illustrates the significant importance of having a well-stocked chocolate vending machine on your office floor. And for those of you that are team leaders, here is a clear business case to ditch the gym and instead go out at lunchtime and buy your colleagues some oxytocin filled treats.

Links to referenced reports can found on our website under 'Snippets'. Take a look here.

© Cushman & Wakefield 2018. This information contained in this briefing is for information purposes only. Accordingly, the information contained herein should not be relied upon or used as a basis for any business decision. Any such decision should be based only on suitable and specific professional advice. This briefing is not directed to, or intended for distribution or use in, any jurisdiction where such distribution or use would be prohibited. To the extent permitted by law, Cushman & Wakefield accepts no duty of care and cannot be held responsible or liable for any loss or damages which may be incurred by any person (directly or indirectly) as a consequence of relying or otherwise acting on the information contained in this briefing.

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