Biz/ed defines a monopoly in theory as a situation in which one firm produces the entire output of a market. In practice, in the UK any one firm that has 25 per cent of a market is considered to have monopoly power.

Monopolies are said to restrict competition, for example they create high barriers to entry thereby reducing the number of possible entrants into the industry.

The world-wide competition between web browsers provides an interesting case study of whether there exists monopoly power within this industry. Web browsers are software applications allowing us to present or retrieve information sources on the World Wide Web. The major web browsers, in order of their percentage share of the world market in September 2011, were:

·      Internet Explorer from Microsoft with 38.5 per cent of the market.

·      Firefox from Mozilla with 25 per cent

·      Chrome from Google with 20.9 per cent

·      Safari from Apple Inc with 8 per cent

·      Opera with 2.7 per cent

·      Mobile browsers with 6.7 per cent

The concentration ratio of the top four web browser firms is 90 per cent

Barriers to entry may stop new entrants but how competitive is the market between the existing main providers? Web browsers are free to download so one would expect the best browser to have the biggest growth. However, the top five web browsers have all received good reviews from computer magazines, meaning none in particular has a huge competitive advantage over the others in terms of what it does.

Interestingly there are large geographical variations in the market share each web browser has. For example Opera is very popular in the Ukraine and Firefox is the market leader in Germany and Poland. Chrome leads the way in India and Pakistan, Russia and South America, whilst Internet Explorer (IE) dominates in North America and the UK.

Analysing changes in market share may provide some insight into who is winning the battle of the web browsers.

In 2008, Internet Explorer had nearly 70 per cent of the market (down from a peak of 95 per cent) in terms of usage share of web browsers, but in 2011 this had fallen to around 40 per cent. For the most part, the decrease can be accounted for by the rise of Chrome which has grown from nothing in 2008 to capturing nearly one quarter of the market be the end of 2011. Safari’s usage is directly related to the sales on Macs compared with PCs.

Most users do not actually know what a browser is, so how well are the web browsers branded and how do they gain custom? I personally had never heard of Opera until recently. I own a Mac and therefore know about Safari, but I use Firefox based on word of mouth. IE and Chrome are well promoted through Microsoft and Google. Internet Explorer would seemingly have an advantage just through its name, which describes what it does. It also has a potential captured market to start with since most PCs come with Windows bundles and IE is part of this, so the user has to make an effort to change. Judging by the growth in Chrome, consumers are  prepared to do this. A recent report from Reuters on the 21^st March 2012 now places Chrome as the new market leader, but based on the usage on just one day, the 18^th March 2012. The growth trend is in its favour and it seems likely to be the true market leader soon.

How do web browsers make money? IE is commercial, but offered as a free add-on to the paid-for Windows operating system. Mozilla Firefox is more interesting because it is an open-source software maintained by members of the open-source community and free to users. It receives income from Google based on the number of Google searches made through the built-in search bar. This may seem strange now because since Google’s Chrome launch in 2008 it has been a competitor to Firefox. Why then is it in the interest of Google to pay Firefox millions of dollars a year? The explanation lies in Google gaining more advertising revenue, which in turn is dependent on the number using the Google search engine. Cutting off Firefox would enable Google to use the millions saved in increasing the advertising of Chrome, but this would be overshadowed by a potentially much greater loss of traffic of Google searches. Also if Google ceased contracting with Firefox then Microsoft’s Bing would surely leap into the void and support Firefox in order for Bing to gain surfers. In December 2011 Firefox and Google agreed on a three-year revenue sharing deal.

In conclusion, what is unusual about this so-called monopoly market is that it is seemingly free to the consumer and it is the user traffic that brings in other income. Internet Explorer once had 95 per cent of the market, but it now has less than 40 per cent, so the market has become more competitive with the rise of Firefox and Chrome. However, the future is difficult to predict. Current trends suggest that Chrome may become the new market leader. However one complication is phone browsing, which is assuming greater importance, so each of the major organisations is looking to innovate in this area helping give them a competitive edge and least in the short-term.

I leave you with this thought. Does the market for Internet browsers need controlling and if so how is this achieved? Should it be up to individual countries acting alone or through international agreements?

Besides the Olympic competitors there will be plenty of other winners and losers from the London 2012 Olympics and some of them may be quite surprising.

One of the big losers will be the London “West End” theatres, at least according to Andrew Lloyd Webber, the musical impresario whose “Really Useful Group” owns seven London theatres. With advance bookings at 10 per cent of their normal level, he might just have a good point, but why is this so?

The explanation lies with the estimated drop off in regular tourists visiting London during the period of the Olympics. The European Tour Operators Association (ETOA) think there will be a slump in “sightseeing” tourists visiting London. Bookings for visits during the period of the Olympic Games are already much lower than for the equivalent period in 2011. Foreign tourists seem more reluctant to visit London. The fear of traffic congestion, high hotel prices, the value of currencies and the worry over the 2011 summer riots can all be added to the fact that many Europeans have experienced a reduction in real incomes exacerbated by the austerity measures introduced by European governments. The combination of these things means a reduction in potential tourist numbers to London.

However, the demand for tickets for most Olympic events was well oversubscribed and many applicants were left disappointed. The majority of the tickets were sold to British citizens so most of the visitors to the London Olympics will be from other parts of the United Kingdom rather than from abroad. Many of these will come for the day or be short stay visitors and may not take in a theatre visit.

The theatres will need to think carefully about what to do. The new musical “Sweeney Todd” will open in March and shut down for the two and a half week duration of the Games. Another option for theatres is to heavily discount tickets in an effort to boost demand. They will need to have a good idea of the price elasticity of demand for their shows.

If theatregoers are down in numbers during the Olympics then many West End restaurants will also see a decline in business as the inevitable knock on effect.

Facts on London’s Tourism Economy

• 30 million visitors a year
• Worth £15 billion
• Accounts for 10 per cent London economy
• Employs 13 per cent of the workforce

A financial thought. Theatres will be reluctant to disclose in detail their estimated revenue losses but none the less it is interesting to come up with some sort of figure in order to gauge the importance of the issue. Assume theatre ticket sales are 250 less per show with an average ticket price of £50 and additional spend of £10 on refreshments and programmes. How much revenue would be lost during the Games with 9 shows per week? How much revenue would the “Really Useful Group” with its seven theatres stand to lose?

Looking at more direct winners and losers it would seem at first glance that a definite winner of the 2012 games is Rio Tinto plc. Its mines will be supplying the gold, silver and copper for 4,700 medals. This is a great marketing opportunity for Rio Tinto in promoting its sustainability to a potential audience of 4 billion viewers. Rio Tinto can account for every gram of metal to specific mines and thereby assure stringent standards are met. In fact more than 99 per cent of the metal will come from Utah. Like Rio Tinto, other headline sponsors of the games such as BP, Dow and EDF seem a little at odds with the billing that these games will be the greenest ever and are seen as easy targets by various activist groups especially given that sustainability was a critical part of the initial bid.

Other sponsors include McDonald’s and Coca Cola providing food and drink to thousands of spectators inside the Olympic Park. Some would make the point that this hardly fits in with the idea of promoting healthy foods and lifestyles. One controversial way of looking at this is that some sponsors pay for monopoly style rights as preferred traders and so the big players win at the expense of smaller traders, therefore, lowering choice and raising prices. This view is supported by Games Monitor, which claims on its website that local businesses will not have access to the Olympic Park or the immediate neighbourhood to sell their products.

A financial thought. It would be interesting to contrast the price of food and drink from vendors in and close to the Olympic Park with the prices charged by these organizations elsewhere in London.

On a final note, not all the Olympic spirit has been lost or sold to the highest bidder and perhaps the estimated 70,000 volunteers, old and young, who will help best illustrate this.

One of the biggest themes affecting us all as humans and as students of business and economics is that of world population growth. The following data illustrate why this is such a major topic:

Year                            Global Population

1AD                            200m-300m

1600                          600m

1750                          800m

      2000                          6,000m

  2050                          8,000m –10,000m              

Source: Human Population History  from Population Matters

The reasons for the population explosion between 1750 and today lie in improvements in agriculture, the industrial revolution and better public health. As a result, at the start of the 21^st Century the world’s population increased by ten times in 300 years. Today, it stands at 6.9bn.

The topic of population and how it can be controlled in an era of peak oil, rapid industrialisation in emerging countries and climate change arouses strong passions. At times, reading around the theme can suggest that little has changed since the ‘gloomy conclusions’ of Rev. Thomas Malthus. Malthusian theory states that as populations grow geometrically, land capacity to feed the growing numbers of people only increases arithmetically. For Malthus, population growth outstrips the land available to grow food – therefore famine, starvation and conflict are inevitable.

In July 2011, a discussion in The Guardian debated links between population and development, the impact of larger populations on the environment, and what can be done to ensure that Malthusian gloom doesn’t become the norm. Some clear tensions appeared in the podcast and the comments that followed:

• Population growth is a development issue. Large families act as forms of social security and care in countries where no state provision is made.
• A key driver in controlling the rate of population growth is women’s empowerment and choice over whether or not to reproduce.
• Challenging patriarchy in high population growth areas may be necessary to achieve the above.
• The developed world should not lecture developing countries on the need to control population growth.

Despite the rise in global population it is unclear that more people necessarily means greater instance of famine. The UN’s Food and Agriculture Organisation (FAO) notes that sufficient food is produced to ensure that no one goes hungry. Even so, the FAO estimates that there are 840m undernourished people in the world, with 799m of them living in developing countries.

The World Hunger Education Service notes that the reasons for hunger are to do with poverty, mis-management of economies, conflict, climate change and hunger itself (as poor health, fatigue and mental impairment cuts people’s ability to work and learn). The rising cost of food is a striking aspect in recent years and the FAO reports on food prices regularly. The impact on people in developing countries of steep increases in the prices of commodities has been a topic Biz/ed has blogged about before.

Clearly the issue of population growth is multi-faceted, bringing with it notions of human rights, gender equality, economic management, aid and development and so on. It is one of the mega issues affecting the planet and our progress in meeting the challenge of 9bn people in future will determine the fates of millions.

OK, so we’ve looked into some of the reasons why health and safety gets such a bad press in the UK. We’ve busted some myths surrounding (H&S) requirements, noting that fears of a compensation culture taking over are more perception than reality. Yesterday I analysed some of the main principles behind H&S law and analysed some data on the most dangerous occupations. For the final part in this run, I’ll point to one excellent source of H&S statistics, complete with information on key industry sectors, Great Britain and EU data and further useful background.

The Health and Safety Executive’s (HSE) statistics page offers a one-stop source of data on this topic. As well as accessing the Annual Statistics Report, you can browse data by region, use the HSE’s HandS-On Data Tool, helping you access and export stats into your work, and see headline data presented in easily-read formats. In 2009-10, for instance, almost a quarter of a million reportable injuries occurred in Britain; 28.5m working days were lost due to work-related ill health or injury; and 152 people were killed at work.

One of the most striking charts available at the site is this one, showing how since 1974 (when the HASAW Act was introduced) fatal accidents in the workplace have declined. The fact that the rate of fatal injury has fallen from almost three deaths per 100,000 workers in 1974 to 0.5 deaths in 2010 is a sign of the progress made in this area. Of course, during this period the composition of the UK’s workforce has changed, with a decline in heavy industry in favour of the service sector. But the HSE say that only up to a half of the fall in workplace deaths is accounted for by these changes.

Clearly, Britain has been making good progress on H&S in the past 35 years. If there are complaints to be made about the impact of H&S culture on UK life, they should be directed elsewhere than the HASAW Act and other regulations. Perhaps the media and claims management industry would be more appropriate targets.

Health and Safety (H&S) gets a bad press. Stories of innocent activities being outlawed by over-zealous inspectors are rife. It has become commonplace for people to yearn for the days when children were able to play conkers without the need for goggles, ladders could be climbed with impunity, back-garden fireworks displays could be organised without consent forms being completed and church clocks could be wound without need for expensive insurance.

As the ‘goggles for conkers’ story, linked to above, shows the idea that Health and Safety law prohibits a normal game of conkers is a myth. It is true that some over-zealous headteachers may have thought it a good idea to tell children to only play conkers in school if they are wearing goggles, but this is not the same as it being insisted upon by Health and Safety law.

The idea that there is a pre-occupation with ludicrous rules in UK workplace legislation was fought on a regular basis by the Health and Safety Executive in their ‘Myth of the Month’ feature. So why do stories emerge so frequently of new ‘outrages’ involving what has become known as ‘elf and safety’? As we have seen, the UK organisation which works to reduce work-related deaths and serious injury is anxious to dispel myths. So what’s the reason?

Critics of supposed ‘over-regulation’ in Britain often complain that our freedoms are being curtailed by H&S, or that legal requirements are strangling innovation and risk-taking. If the law-makers are not to blame then it must be the fault of the rise of the ‘compensation culture’ and the accompanying increase in ‘no-win no-fee’ legal claims. But as this document indicates, there’s not much evidence to back up this idea.

So when the Prime Minister set up a government review of the operation of H&S laws and the growth of the compensation culture, its findings were eagerly awaited. The report was published in October 2010 and the following recommendations were made:

Compensation Culture – This is summed up as a problem of “perception rather than reality”. UK citizens “perceive Britain to be a far more litigious society than it was 10 or 20 years ago.” The culture is “fuelled by media stories” where people get big payouts for personal injury. It all leads to a climate of fear and blame. The report cites damages claims of close to £300m paid out by the NHS in 2009-10, but these are more likely linked to botched operations and failed care standards in hospitals than conker fights, cheese-rolling and low-flying geese.

Access to Justice – The report says that this 1999 Act is responsible for much of the problem of the ‘elf and safety’ culture in Britain. The major culprits are identified as the growth of claims management companies and new Conditional Fee Agreements and After the Event insurance. If we must point to one group as being responsible for the perceived rise in claims, it is the legal profession and the businesses that refer cases on to them. Attempts at self-regulation of the industry failed so the Claims Management Regulator (CMR) was set up in 2007 to oversee the £300m annual personal injury sector, which spends around £40m per year on advertising. The report seems unable to do much more than write letters to the CMR and the Solicitors Regulation Authority expressing concerns.

So if the problem is largely overblown, consisting of a series of perceptions reinforced by the media, leading to a legal bunfight which is played out daily on our TV screens, was the investigation really worthwhile? In one of its more enlightened observations, the report points out that since the introduction of the 1974 Health and Safety at Work Act, the UK has become one of the safest countries in which to work. Non-fatal accidents are lower than anywhere else in Europe, and we have the regions second-lowest number of fatal accidents at work. H&S is a vital part of protecting people at work and we have much to be proud of in the improvements it has brought about.

Tomorrow, I’ll look into some of the reasons why we need strong H&S regulation and probe a little deeper into why it has attracted such a bad press in recent years.

One of the most valuable industries to Egypt is tourism which is a vital source of foreign exchange. Euromonitor report tourism receipts to have exceeded $10bn in each of the last three years. In 2010, an estimated 14m foreign tourists visited Egypt, drawn by the sites of ancient civilisation and major holiday destinations in the Red Sea area. Business Monitor International saw this as a year-on-year increase of 18%, driven by economic recovery in source markets.

In addition, in 2010 the value of the Egyptian pound depreciated. Tourism students and economists will recognise that this tends to promote increased visitor numbers from source markets, as tourists’ expenditure goes further after currency depreciation in a tourism receiving area. But depreciation also poses risks to the wider Egyptian economy as the fall in the value of the pound also makes the price of imported goods rise. This can lead to higher inflation which can undermine market confidence and trading conditions.

Egypt’s spring revolution that began with protests towards the end of January 2011, led to around one million tourists fleeing the country, according to government estimates. Hotel occupancy rates plummeted, exacerbated by industrial relations issues at airports which led many foreign airlines to cancel flights to the country. There are encouraging signs that tourist operators have resumed their Egypt tours in the aftermath of the uprising.

Unfortunately, corruption, money-laundering and profiteering stained the reputation of many of those responsible for tourism at a governmental level under the previous Mubarak-led regime that was overthrown this spring. Last month, the former tourism minister, Zuhair Garranah was jailed for five years having been found guilty of granting licences to develop tourism sites illegally. Public anger at corrupt officials was one of the causes of the strength of Egypt’s uprising.

One of the benefits of removing those responsible for corruption in the tourism industry is the possible protection of important sites of Egypt’s natural heritage. By protecting these sites, valuable lessons can be learned about the development of civilisation in the country. They can also be preserved for future generations and if managed properly, may allow sustainable commercial exploitation. One of these sites is the nature reserve along the northern shore of Lake Qarun.

Lake Qarun is located in the Fayoum oasis only just over 40 miles from the Egyptian capital, Cairo. It is an important wildlife wetland area and is reputed to be the oldest nature reserve in the world. In addition to its flora and fauna, though, the area adjacent to the lake also contains archaeological sites, geological formations and important fossil remains including those of creatures such as whales, turtles and early primates. A month before Mubarak’s regime was toppled, the authorities had awarded an area of prime land from within the reserve to developers to build a tourist resort.

Now that the ruling elite of Egypt has been removed from power, proper investigation into the awarding of development contracts can take place. Egypt’s Supreme Council for Antiquities can assess the archaeological evidence around Lake Qarun. The revolution may have come just in time to save this site of ancient treasures.

Yesterday, I noted the agreement of the IMF to lend $3bn to Egypt and its acceptance that the country needs investment in its economy in order to recover from the financial effects of the struggle to overthrow Mubarak. Today, let’s consider why Egypt’s finances had deteriorated to such an extent to require IMF help and what the aims of the loaned funds are.

Egypt needs financial help because of the fragile state of its foreign exchange reserves. The protest movement that emerged in January brought the country’s tourism industry to a grinding halt. This sector, together with foreign direct investment (FDI), accounts for the majority of Egypt’s foreign exchange. It needs these for a number of reasons, according to IMF guidelines:

·        To maintain confidence that it can intervene to support its currency

·        To limit external vulnerability to absorb shocks

·        To indicate that it can meet its external obligations

·        To maintain a reserve for national disasters or emergencies

Egypt’s debts are largely denominated in US dollars. It needs foreign exchange reserves to demonstrate that it can meet these debt obligations. When the popular uprising took hold, there were widespread calls for higher government spending to boost standards of living through higher wages and bigger subsidies on basic commodities. At the same time, government tax revenues fell due to the crisis in tourism and FDI.

The uprising has also led to a growing balance of payments crisis, which also has the potential to undermine the value of Egypt’s currency. The IMF loan will help Egypt manage the return to economic stability. The funds are very low-geared, believed to be attracting an interest rate of 1.5%. Critics of the Washington Consensus will fear that the IMF deal paves the way for policies such as privatisation and deficit cuts blamed for creating unnecessary hardship in other countries.

Right now, though, the IMF and Egypt’s interim government agree that it’s too early to implement reforms. Protecting low-income households by ensuring they have an effective ‘safety net’ is seen as being a priority. Tomorrow, we’ll consider how this protection can best be provided.

The development of hydraulic fracturing techniques to release gas and oil trapped in shale has been hailed as offering a bridge to a low-carbon future for energy-hungry developed and emerging economies. But concerns about contamination of water supplies, release of combustible gas, destruction of natural environment, worker safety and true green credentials are sufficient for many to ask whether the rush to develop shale gas fields throughout the world, but especially in the US, runs the risk of long-lasting damage to landscapes, communities and workers.

Well Contamination an Issue with Shale Gas Drilling?

Hydraulic fracturing, or ‘fracking’ is a drilling technique involving blasting tonnes of water, sand and chemicals into shale rock formations. In the US, the gas released as a result is thought capable of providing enough natural gas to supply the country for the majority of this century. Worries over the environmental effect of this extraction method, though, cloud the future. These concerns are magnified by the apparent soft-touch regulation that affects the shale gas industry. Fields in the US state of Pennsylvania are thought to offer sufficient gas to last the entire US for 10-20 years. But occurrences of explosions at works run by Chesapeake Energy which injured three workers in the State last February, are just one of the risks the drilling holds.

On the environmental impact of fracking, considerable debate ensues. In some countries, notably France, pressure is being applied to law-makers to rescind existing shale gas drilling agreements. In France, there have been loudly voiced concerns about the impact of fracking on the water supply, with scientists warning of toxic gas release and increased salinity in drinking water. One year after the BP Deepwater Horizon disaster released thousands of barrels of oil into the Gulf of Mexico, another Chesapeake gas well blew out during fracking, raising fears about the safety record of this unconventional form of fossil fuel extraction.

Can Fracking Cut the Need for This?

And yet many energy analysts expect this method of gas extraction to continue to be developed fast. One of the main drivers of this is the energy security it offers countries. Oil-dependent states are at the mercy of producers in the middle-east and eastern Europe for their supplies. As ‘peak oil’ nears, its price is likely to increase, especially given political upheaval in some Arab states. The recent nuclear catastrophe at Fukushima, Japan and 25^th anniversary of the Chernobyl disaster, serve as warnings of becoming dependent on nuclear power for our energy needs. Shale gas offers a fix for the next few decades, cutting reliance on countries like Russia and Saudi Arabia to keep economic activity moving.

But a natural gas well spewing thousands of gallons of fracking fluid in northeastern Pennsylvania is not the best PR for an industry that many welcome, but some fear – however inevitable its continued growth appears. The 2010 film, ‘Gasland’ offered some spectacular footage of flames igniting from a tap at a kitchen sink, although the linkage between this and fracking is hotly disputed. However, recent statements by US leaders seem to signpost more formal regulation of the industry, but opponents are reconciled to the ongoing rollout of shale gas drilling, given the energy security it offers. The final point to consider is whether natural gas is a green energy source and fracking a sustainable method of extraction.

Global Heatmap: Climate Change in Action?

The green issues are complicated, involving claim and counter-claim by opponents and industry insiders. Burning gas in power stations produces around half of the carbon emissions of coal. Greenhouse gas emission limits may be cheaper to attain by using shale gas, rather than renewable energy production, say company lobbyists. This is disputed by many academics and environmentalists, who believe that natural gas can only be part of a solution to the problem of achieving carbon neutrality, at best.

This is an extremely complex case study, but it offers an excellent source of learning about a whole range of topics, from price signals, externalities and opportunity cost in economics, through environmental impacts of business activity, to geo-politics and the importance of market analysis.

The tumult and the horror of the revolt in Egypt during January and February, which ended with the military council taking interim control of the country before elections later this year, was screened across the world. However, little thought was given to the day-to-day problems that the upheaval would cause the Egyptian economy, despite the widespread acknowledgement that former president Hosni Mubarak had to relinquish power.

To western eyes the biggest problem for Egypt was in the abrupt halt brought to the country’s tourism industry. Certainly, tourism is a vital sector in terms of providing employment for the Egypt’s burgeoning population. It also brings in foreign currency, as tourists exchange their holiday money for Egyptian Pounds. In addition to the country’s traditional tourist attractions, such as Luxor, Aswan and Cairo, there are comparatively recently developed coastal resorts such as Sharm El Sheikh.

But while Egypt’s tourism industry is undoubtedly important (and its plans to achieve 14 million visitors this year will have been dented by the revolution, and perhaps also by yesterday’s hoax bomb threat) we must remember that the country has other key industries and its economy has to keep moving, whatever the trials of the tourism sector.

This article in the weekly Al-Ahram newspaper, which is produced in Cairo, shows how everyday concerns of the state are still important. The piece reported that despite the chaotic scenes that we have witnessed in recent weeks, the work of the Egyptian tax authorities has been proceeding as usual. With activity in the tax offices apparently ‘unchanged’, there has not been a fall in tax files submitted this year.

The Higher Council of the Armed Forces, which is in temporary control of the country, took the decision to allow taxpayers to make their payments in three interest-free instalments this year, to allow all files to be processed in time; but it seems that the majority of taxpayers preferred to pay up in cash. The head of the Egyptian tax authority said that many large organisations paid taxes earlier than normal and in dollars to help the country in its vital transition period.

But it’s not all good news on the tax front: this year’s tax payments reflect business carried out before the Egyptian uprising. This means that the impact of the slowdown in tax payments will only be felt next year. This is when the authorities expect a steep drop in tax revenues of 30 to 40%. They report that the major organisations and sectors have been hit the hardest by the disruption caused by civil strife. These include the Suez Canal, the Egyptian General Petroleum Corporation and the tourism sector.

It will be interesting to see what the Egyptian authorities do to try to make good the expected shortfall in tax revenues next year. A 2% tax on capital market profits has already been suggested. A surefire way of generating higher tax revenue, though, is to increase the number of taxpayers. This will mean increasing the number of employees receiving wages and salaries sufficiently high to trigger tax payments. Egypt will need to grow its economy in order to produce this outcome. With high unemployment rates, especially among young adults, this policy would be recommended in any case.

The Monetary Policy Committee (MPC) of the Bank of England announced the decision on interest rates following its March meeting yesterday (Thursday). The MPC voted to maintain Bank Rate at 0.5 per cent, the level it has been at for two years now, and to maintain the asset purchasing programme (quantitative easing) at £200 billion.

The minutes of the meeting will be released on 23rd March and, following the last meeting, analysts will be looking for signs of how soon an interest rate rise can be expected; many are predicting a rise in May. The last set of minutes showed a further widening of the difference in opinion amongst the nine-member committee with three voting for a rate rise and one for expanding quantitative easing. The divergence between those who wanted to see a rate rise also widened with two voting for a 0.5 per cent increase and one for a 0.25 per cent rise.

Inflation is way above target and the Governor of the Bank of England, Mervyn King, has made it clear that expectations are that the consumer prices index (CPI) will rise to around 5 per cent before coming back down to its target of 2.0 per cent next year. Temporary factors like the rise in value added tax (VAT), increases in commodity prices and fuel duty will eventually fall out of the index and together with the spare capacity in the economy will bring down price pressures, according to the Bank's forecasts.

The medium term danger is still that the higher inflation being experienced at the moment leads to expectations of future inflation and changes in behaviour of individuals and firms in negotiating wages and setting prices. If this happens then the current relatively high inflation could lead to spiraling inflation which would require more serious policy 'medicine', and if interest rates did have to increase significantly the economic recovery could be compromised.

The MPC, therefore, faces a difficult few months but it does now seem likely that interest rates will rise sooner rather than later.

New rules announced by the media regulator Ofcom, mean that businesses will now be able to use product placement on some TV programmes in the UK for the first time. Product placement is a marketing tool whereby a company pays to have its product or brand either prominently displayed within a TV programme or used by the actors and so brings the product to the attention of actual and potential customers and raises awareness of the product.

Product placement has been common in the movie industry and on US TV - the James Bond franchise is a very good example. In the last two James Bond films starring Daniel Craig as the secret agent, a number of the hi-tech gadgets used by Mr Bond are very clearly branded products - a Sony Ericsson phone, Sony VAIO laptops, Sony cameras and TVs along with Microsoft Surface, a platform which allows users to manipulate digital content through hand gestures or touch - have all been prominent throughout the movie. Apple, Coca-Cola, Dell, Hewlett Packard, IKEA, Minute Maid fruit juices, Rolex watches and various types of champagne amongst others have all been examples of companies or brands which have used product placement extensively in media to date. Now, such companies and brands are likely to be seen more obviously in TV programmes in the UK.

The new regulations do come with some restrictions. The letter 'P' must be displayed for three seconds at the start and end of a programme that will have product placement and the tactic will not be allowed to be used in various types of programmes including news and current affairs programmes and on programmes aimed at children. In addition, product placement will not be allowed on the BBC.

Analysts are not expecting an explosion of this tactic in the UK in the short-term. Getting a better understanding of how product placement works, what the potential costs and benefits are and whether potential and existing customers will welcome it are all things that marketers will want to investigate carefully before committing to the tactic. Some customers might see deliberate product placement as intrusive, not appropriate to the content of the programme or the characters who are using the product or even putting a product in a plot which gives it the wrong 'personality', for example, do smart phone manufacturers want viewers to see criminals in a programme using one of their products?

Analysts expect product placement will grow only slowly over the next few years with one estimate from Barclays, quoted by the  Financial Times, as amounting to around £150 million a year by 2016, just 4 per cent of current UK advertising expenditure.

The UK government's announcement about its international aid budget yesterday (Tuesday 1st March) caused much concern on news and radio stations and led to a flurry of emails, text messages and tweets from the public complaining that the government was 'wasting money'. At the heart of such complaints and the leading questions put to International Development Secretary, Andrew Mitchell, was that aid being given to India was inappropriate given India's status as a nuclear power and the fact that it also has a 'space programme'.

Mr Mitchell announced that aid to India would remain at its 2009-10 levels and so $295 million will find its way to the country, targeted at helping those who need it most. Mr Mitchell was keen to point out in the various interviews he took part in that despite strong growth rates in India, the number of people living in poverty is significant. More people live in poverty in India than the whole of sub-Saharan Africa put together. Mr Mitchell said that the UK had a moral obligation to help those in most need as well as its commitment to the Millennium Development Goals (MDG). In addition he said that providing aid helped keep the UK safer because where there is poverty there is the potential for terrorism.

Opponents of the decision to provide aid to India point out that the country has a growth rate of around 10 per cent a year, that it is now classed as a middle income country (MIC), that its government seem to have the money to spend on defence, nuclear missiles and a space programme so it should use some of this money to get its own population out of poverty rather than relying on other countries like the UK. They further pointed out that it was 'obscene' to be giving aid to India when there were elderly people in the UK dying of cold.

The debate over aid is always going to be emotional. The argument that a donor country could better use the funds elsewhere - especially on its 'own people' is a powerful one on the face of it. In addition the focus on questions to Mr Mitchell that if India can afford a 'space programme' that this in itself was proof that it was wasting money, which could be better spent on its own poor. There is of course merit in this argument - any decision has an opportunity cost but in analysing that decision the relative value of the benefits and costs involved need to be looked at more closely.

One expert on India who was interviewed on a radio station and given the question, asked in a clearly derisory tone, 'should a country that could afford a space programme really be eligible for aid from the UK?'  His answer was telling. The 'space programme', said the expert, was more a satellite building programme and the satellites are planned to be used to help India monitor climate change, agriculture and so on and as such are of direct benefit to India in helping to improve its capacity to feed its own population. In addition, such a programme provides employment, helps improve educational capital which in turn have spill-over effects to other areas of the economy.

If India chose to cancel such a project would the value of the benefits foregone be greater or less than the value of the benefits gained by diverting the money freed up on helping the poor? That is the key question in these sort of debates but the somewhat crass line of questioning by some interviewers shows an alarming lack of understanding of even basic economics.

Indeed, if our concern for the elderly and others in our society is so great it could equally be argued that we should shut down some radio and news stations and divert the money which is wasted on these ill-informed presenters and divert the money instead to helping keep the elderly warm in winter!

Revised figures for UK gross domestic product (GDP) were released late last week and showed that the economy shrank slightly more than the initial estimate suggested. The Office for National Statistics (ONS) had originally released figures suggesting the economy had contracted by 0.5 per cent in the fourth quarter of 2010 but this has now been revised to a contraction of 0.6 per cent. This, said the ONS, compares to a contraction of 2.1 per cent in the same quarter of 2009.

The contraction was largely blamed on the effects of the bad weather in November and December when they were first released and this still seems to be one of the main explanation of events. The main factors contributing to the revised figures was production industries which were originally estimated to have grown by 0.9 per cent but have now been revised down to 0.7 per cent. Construction fell but not by as much as previously quoted; the revised figures putting construction output down by 2.5 per cent compared to the 3.3 per cent quoted in the first data release.

Activity in the service sector was also revised down from a fall of 0.5 per cent to a contraction of 0.7 per cent. The main reasons for the fall in this sector were due to a fall in business services of 1.1 per cent and a fall in transport, storage and communications services of 1.4 per cent. Government final consumption expenditure rose by 0.7 per cent in the quarter and gross domestic fixed capital formation (investment) fell by 2.5 per cent. The ONS did point out, however, that whilst down in the fourth quarter of 2010, investment is 5.6 per cent higher than the equivalent period of 2009, some measure at least of a recovery in the economy which might be spluttering but is still expected to be positive over the year as a whole.

The minutes of the Monetary Policy Committee (MPC) help to reveal the differing thoughts of its nine members on the direction of monetary policy and gives the markets some indication of the likelihood of changes in policy. The inflation figure has been above the government's 2.0 per cent target for some time now and with interest rates at an all-time low of 0.5 per cent, analysts have been expecting rates to go up for a few months. Each time the Committee meet, however, rates seem to be kept on hold. The question is, how much longer is this likely to go on?

Over the past few meetings, the MPC has been divided on the future direction of policy. First one, then two people voted for a rise in interest rates whereas another, Adam Posen, has been voting for an increase in the Bank's asset purchasing facility (quantitative easing). What this has been highlighting are the difficulties facing the MPC in judging the risks to inflation in the future. It has to be remembered that the Bank's remit is to control inflation and as such its policy decisions have to be couched in line with that remit.

The release of the minutes of the MPC's February meeting show a three way split that is getting wider. The main arguments which underly the split are as follows. Those voting to maintain Bank Rate at 0.5 per cent believe that the economic data points to inflation coming back to target in the medium term. They believe that spare capacity in the economy and the fall out of one-off factors such as the rise in value added tax (VAT) and fuel duties will bring prices down as we move towards the end of this year and into next. They are cautious about increasing interest rates too fast too soon because they believe that it could choke off the recovery, which is fragile, and if this happens inflation will undershoot target - something that is as unwanted as it being over target.

Those voting for a rate rise believe that inflationary pressures are building in the economy. Despite the state of the recovery, commodity and food prices have been putting upward pressure on prices and the Bank has been wrong on too many occasions in the recent past about the speed at which it expects inflation to come back to target. If interest rates are not increased then inflationary expectations will rise and this will feed through to wage demands and possibly trigger a wage-price spiral. A clear message needs to be sent to markets and workers that the Bank will not tolerate higher inflation.

The third view is that the recovery is still so weak that a further boost is needed to get the economy going through further quantitative easing. According to this view, the weak recovery means that inflation is likely to fall below target in the medium term and that there is no sign as yet of inflationary expectations rising. The risk of this when balanced against the prospects of lower consumption because of unemployment and public spending cuts is much higher and so a further increase in quantitative easing is warranted.

The debate amongst the Committee was highlighted by a paragraph in the minutes which read:

"There remained a wider than usual range of views among Committee members about the outlook for growth. The Committee continued to judge that relative to the most likely path the risks to growth were skewed to the downside. Taking that skew into account, the Committee’s best collective judgment was that gross domestic product (GDP) growth was about as likely to be above its historical average rate as below it in the medium term. It was likely that some spare capacity would persist throughout the forecast period."

When it came to the decision, six of the Committee, including the Governor, Mervyn King, voted to maintain Bank Rate at 0.5 per cent. One member, Andrew Sentance, voted to increase Bank Rate by 0.5 per cent, two others, Martin Weale and Spencer Dale, voted to increase Bank Rate by 0.25 per cent and Andrew Posen voted to increase the asset purchasing facility by £50 billion.

The next meeting of the MPC will be held on 9th and 10th March.