Sterling at €1.33 is a threat

Britain, the EU and the price of independence

An article by Bob Bischof, Advisory Board.

At the heart of the British argument against closer ties with Europe has always been many UK citizens’ fear of losing control over the country’s affairs in general and in economics in particular.  For many in Britain, the euro project is not a basket of former independent currencies, rather a basket case.  Doubts about the wisdom of so-called ‘German-backed austerity policies’ or about the longer-term ability of Greece and others to stay in the single currency have strengthened this belief in many British minds.

The ‘in-out’ referendum on Britain’s membership of the European Union which could take place in 2017, depending on the outcome of the May general election, will further focus attention on this point. Latest opinion polls indicate a majority in favour of departing.

The big question for a relatively small country like Britain is what ‘independence’ means in a globalised world.  Being on your own, in monetary affairs as well as politically, can be damaging. Against its €1.04 low point in 2009, sterling has appreciated by 30% to beyond €1.33.  This may be good news for Britons holidaying abroad, but the pound’s rise will hammer British manufacturing exports.

Switzerland, which has just abandoned its currency peg against the euro, has a current account surplus and high-value manufacturing goods, helping the Swiss absorb the shock of the latest 20% Swiss franc revaluation. Britain, on the other hand, has a large and growing current account deficit. It desperately needs to rebalance its economy away from (financial) services to manufacturing.

Although the UK’s coalition government has declared it wishes to further the ‘march of the manufacturers’, it has made little progress. Britain’s external performance will get worse. All this spells future trouble for sterling, especially if an inconclusive May election result brings political uncertainty.

Against this sobering background, Britain’s power over monetary and fiscal policy – setting interest rates, deciding quantitative easing and calibrating fiscal expansion or contraction – is well short of being an unmitigated benefit.

Germany has been doing well within the euro area because it benefits from the weak euro for its non-European exports, and even more from the stability, or lack of volatility, that emanates from membership of a large club. Germany still runs a substantial trade surplus with the rest of the euro area, but it has fallen sharply in recent years, making up less than 25% of Germany’s overall external surplus, against 40% in 2011.

If Britain wants to be serious about rebalancing the economy, it has to give its manufacturers a solid base, particularly in foreign trade. Currency hedging is expensive, the more so when volatility is high. The euro bloc encompasses most of the UK’s largest trade partners. Every transaction to another currency – whether one is buying or selling – costs money.
With so much of British industry in foreign ownership, there is an additional danger. When the foreign owners see developments they don’t like, they will first stop investing and then look elsewhere. At the German-British Chamber of Commerce and Industry we hear many worried comments from the over 1200 German-owned companies in the UK. The grumbling is getting louder.

And it’s not confined to the Germans. British business is overwhelming in favour of the UK staying in the EU, as a recent poll by the EEF manufacturers organisation showed. Britain can hardly be expected to join the euro in the foreseeable future. But as the election approaches, the issue of UK EU membership will start increasingly to occupy business people’s minds. Some might even support Labour as a potential party of government that will not brook a referendum on the matter – and could bring a weaker currency as well.

Bob Bischof is vice president of the German British Chamber of Industry and Commerce in London and chairman of the German British Forum.

Events VIP Speakers

Robert Hough CBE, Director of Peel Holdings, to speak at GBF dinner on January 28

Robert Hough CBE, DL Director of Peel Holdings
Robert Hough CBE,
Director of Peel Holdings

Robert Hough CBE, Director of Peel Holdings is to speak at the German British Forum VIP dinner after the conference on the 28th of January. Peel Holdings is one the largest property investment companies in the UK, and one of its central aims is to make North-West England into the leading economic regions in the country.

Joining Robert in the Emirates Old Trafford will be bi-lingual comedian Christian Schulte-Loh – called the “funny German – the only one!” by Kkunst Magazine in Belgium. The dinner by invitation or pay to attend. If you wish to attend the dinner please contact Kira directly:

Webinar by UKTI: Industrie 4.0 – Working on the Fourth Industrial Revolution in Germany and the UK

industry-4.0.for-webIndustrie 4.0 is a term coined by German industry to describe how the use of the Internet of Things and machine-to-machine communication in the world of production can create a “smart factory”. Interested in learning more?

On the 20th of January 2015, from 14:00 to 15:00 UK time, UKTI offers a webinar which s designed for UK companies who want to know what is behind the buzzword Industrie 4.0, what opportunities it offers and how they can get involved in the “Fourth Industrial Revolution”.

Presenters will be:

  • Detlef Zuehlke from the German Research Centre for Artificial Intelligence in Kaiserslautern
  • A representative from the Manufacturing Technology Centre in Coventry
  • Supported by a showcase from a UK company.

If you would like to get involved please contact Katja Schlaug:  or call +49 (0) 89 21109 135.

Attendance is free.


Gillian Karran-Cumberlege

Gillian GBFGillian is a co-founder of Fidelio Partners,  a Board Development and Executive Search consultancy. Fidelio is based in London and works internationally with a strong focus on Germany. Gillian heads Fidelio’s Board Practice and supports Chairmen and CEOs in building effective Boards and Executive leadership teams. This is underpinned by Gillian’s pre-eminent track record of shareholder and stakeholder engagement on a global basis.

Since March 2015 Gillian has also been an Independent Non-Executive Director of Jaguar Land Rover India.

With the 30% Club Gillian actively promotes greater Board effectiveness through increased diversity and Fidelio is a signatory to the Voluntary Code of Conduct for Executive Search firms. Gillian is also a member of the German- British Chamber of Industry & Commerce  and a fluent German speaker.

Prior to founding Fidelio Gillian was a partner with Brunswick  and held  senior executive roles within some of  Europe’s leading corporates; this included the role of Global Head of Investor Relations for Volkswagen AG  (2000 – 20007) sitting on the Group Governance and Marketing  Committees – the most senior female executive globally. Previously Gillian had enjoyed a highly successful career in banking for example heading Group Investor Relations for UBS (1998- 2000). She started her career in Banking Supervision with the Bank of England.

Gillian has an MA in History from Trinity Hall, Cambridge, and attended the Harvard General Management Programme.

Former Board Members

Oliver Lawson, Investment Manager, Augusta Ventures


Oliver Lawson is an investment manager at Augusta Ventures.

He was formerly a senior associate at law firm Stevens & Bolton LLP. A Modern Languages graduate of Worcester College, Oxford in French and German, he spent three years (including 18 months in Brussels) as a pan-European investor relations consultant for large and mid-cap US and European companies including Compaq, P&G and DaimlerChrysler (as it then was). He qualified as a solicitor in 2007 and joined Stevens & Bolton in 2008, becoming a senior associate in 2013.

Oliver acts predominantly in high value commercial litigation and arbitration matters for a range of corporate and individual clients. He has particular interest in and experience of IT, engineering and aviation disputes, as well as litigation arising in insolvency. Recent cases include an international arbitration under ICC rules pursuant to a sale of goods contract in the oil and gas industry (much of which work was in German) and an international IT dispute involving the supply of consulting, hardware and managed services in the retail industry.

An avowed technophile, Oliver takes great interest in the potential applications for the use of technology in society, commerce and the law. As well as being a board member of the GBF, he is a member of the Society of Computers and Law (and part of its Technology Futures Group) and an associate member of R3, the insolvency professionals’ association. He has responsibility for maintaining Stevens & Bolton’s relationships with its international partner firms in Germany, Switzerland and Africa and has spent time on secondment with Menold Bezler in Stuttgart. Away from work, he sings in Stevens & Bolton’s office choir and enjoys family life, golf and photography.


Stevens & Bolton LLP is a Top 100 law firm operating from a single office in Guildford, Surrey and is Legal Business’s 2016 National / Regional Firm of the Year. Recommended in 24 specialist practice areas by the leading independent legal directories and identified by Chambers & Partners as a National Leader outside London for Corporate/M&A, Intellectual Property and Litigation, the firm delivers excellence beyond the City and one of the best client experiences while maintaining a great culture.

Events News


Launch of The Routledge Handbook of German Politics & Culture

January 21, 2015 – 1900 hrs


Colvin German handbook_cover_PortraitThe event is now fully booked (January 16).

In 2014 Germany looked back at a troubled hundred years since World War I; but also at the “peaceful revolution” and fall of the wall.

The Anholt-GfK Roper Nation Brands Index announced on 12 November 2014 that Germany had beaten the USA to become the top-ranked global national “brand”; Germany scored highly not only for sports prowess but for leadership in Europe, a robust economy, steady political stewardship, honest and competent government, and social equality.

The brand new Routledge Handbook of German Politics and Culture, in 28 highly accessible chapters, engages world experts on Germany’s politics, economics, society, and culture to investigate and illuminate the successes and complexities of a contemporary nation.

To mark the publication of the Handbook, a panel of expert commentators together with the book’s editor and contributors will explore questions around Germany’s global significance and international relations, its national and cultural priorities, its European leadership and its economic policies; who are “the Germans” now?

The panel includes:

  • David Marsh CBE (author of numerous books on Germany and Europe)
  • Thomas Kielinger (Die Welt)
  • Helen Pidd (The Guardian)
  • Professor Sarah Colvin (University of Cambridge)
  • Professor Mary Fulbrook (University College London)
  • Professor William Paterson OBE (University of Aston)

In conjunction with the German British Forum, an organisation established in 1995 to reinforce pivotal political and business relationships to promote education and social exchange between Germany and Britain, publisher Routledge announces the launch of this important book.

VENUE Goethe-Institut London Library

TICKETS Admission free –  Please be aware that the event is now fully booked!

CONTACT Goethe-Institut London Reception, Tel. 020 7596 4000





Learning from the Mittelstand: Long term lessons for the FTSE 100

This article by Stephen Cheetham of PK Engineering was published in Fidelio Partners’ Overture newsletter and is reproduced with their permission.

Fidelio Partners is a Board Development and Executive Search consultancy based in London, with a functional focus on Finance, Communications, Governance and Strategy. Fidelio works internationally and is particularly active in the German market.

The Backdrop

Recent events at Tesco, one of the UK’s largest and most successful companies, will doubtless occupy commentators and academics for some time to come.

Yet as a former stock market analyst turned SME owner-manager, what strikes me most forcibly is the relevance to a large supermarket chain of lessons from the German Mittelstand.


Photo owned by the creator Martin Bodman, licensed under this Creative Commons Licence.

This has its particular irony, since the major competitive threat in UK food retailing comes from two German supermarket chains (Aldi and Lidl), who, if now too large to qualify as Mittelstand companies, nonetheless derive significant portions of their DNA from that tradition. Neither is publicly quoted, and neither has ever worried about reporting earnings. Both have demonstrated admirable long-term strategic focus in their assault on the UK market, and both have notably frugal corporate cultures.

I believe that there are at least three significant lessons for UK quoted companies, and their DAX 30 counterparts, from the German Mittelstand:

1. Quarterly Earnings

For quoted companies the quarter (or the half yearly earnings statement) is a major focus which threatens to dominate corporate communication: but allowing it to do so is a mistake.

Companies like Unilever have demonstrated that is possible to take a much longer-term view and not be caught up in the game of quarterly earnings guidance. The stock market cares about near-term earnings, but it’s by no means the whole story. Investors will punish strategic incoherence and poor accounting much more than they reward short-term earnings growth, yet many companies spend too much time on the latter.

In extreme cases, “the quarter” develops its own dynamic and is pursued with macho fervour by company management. Missing the quarter becomes a sin to be avoided at all costs, and those with divisional P&L responsibility resort to “cookie jar” accounting, resulting in periods of eerie predictability followed by major blow-ups.

Stephen Cheetham-web
Stephen Cheetham, CEO of PK Engineering

While there is clearly a credibility point here – a CFO who regularly springs bad surprises is likely to enjoy only a short tenure – sticking to targets in the face of adverse business performance is unlikely to end well. Absolute management control over even small businesses is an illusion – building credibility through frank communication and doing what you say you’ll do is preferable.

The lesson from the Mittelstand is clear: freed from the earnings treadmill, such companies have more space to focus on the longer term and can afford to take a more strategic view.

Of course, management teams at quoted businesses can only dream of this: the Faustian bargain of a stock market listing involves surrender of certain forms of privacy and freedom in exchange for access to capital. It sets the difficult task of finding the elusive balance between short and long-term communication: but in many cases the tendency can be to err on the side of the short-term.

I would encourage companies to have the confidence to resist the tyranny of the quarter, and articulate the longer term strategy.

BMW is a case in point: a quoted company but still family controlled, and with a sizeable helping of Mittelstand DNA, some years ago it announced its “Efficient Dynamics” programme to a chorus of disapproval from analysts. It was reported that the investment in fuel efficiency technologies would negatively impact earnings, and the share price suffered for a while.

Yet with this investment, BMW bolstered its leadership position in fuel efficiency, CO2 emissions, and compliance with EU legislation: the shares soon recovered and company remains one of the most highly rated of the European automotive groups.

2. Remuneration

In my view this is the most important lesson from the Mittelstand for those concerned with corporate governance It is blindingly obvious: you will get the behaviour that your compensation system rewards. If you pay people for short-term financial results, that’s what you will get. Mittelstand companies benefit from a focus on long-term, in many cases on intergenerational, wealth transfer.

Owner-managers worry about the business they will hand on to their children. In cases where operational responsibility has been delegated to professional managers, remuneration and reward time horizons are kept similarly long-term. Time horizons in quoted companies in the Anglo-Saxon tradition are much shorter, in my view often too short.

Moreover, if the CEO – or indeed anyone else in a senior position – stands to gain multiple millions from the achievement of an EPS growth target, the internal pressure to achieve this target will become intense. Subordinates will understand the game, and those who want to be CEO themselves one day will do their utmost to make it happen. The organisation will become focused on achieving the target, lose sight of the bigger picture and, ultimately, accounting rules may be bent to fit.

3. The Competition

I am not a retailer, and would not presume to opine on what large UK supermarkets should do about the threat from Aldi and Lidl. Nonetheless the diagnosis is clear: UK firms face the risk of being “stuck in the middle” a competitive conundrum familiar from my days in the automotive industry.

Not “posh” enough to be Waitrose, but unable to match the prices of the German discounters, and with large out-of-town stores increasingly looking like white elephants, there are tough strategic choices to be made. Aldi opened its first UK store in 1989, so the threat is hardly new, yet it is striking how little response there has been from successive management teams at the major incumbents.

Here again the Mittelstand lesson is about the long-term: successful Mittelstand businesses focus obsessively on the competition, on adapting their business model to suit their customers. In the engineering sectors where they are strongest these companies aim to dominate not just today’s technology but tomorrow’s as well.

Businesses such as injection moulding machine manufacturer Arburg do not simply ensure that their current products are competitive. Rather, they also create chess pieces on the board to meet potential future threats – in Arburg’s case that from 3D printing. A technology attracting much breathless press commentary, 3D printing is currently not cost-competitive for most production volumes: nonetheless, Arburg is building competences in anticipation of a world in which it might be.

In our view this kind of long-term thinking provides a valuable lesson for many a quoted UK company.

Stephen Cheetham, author of this article, is the Chief Executive of PK Engineering Ltd, an engineering company headquartered in Herefordshire, UK.

Credit to: Fidelio Partners and Gillian Karran-Cumberlege


German material handling group LKE launches in UK

German intralogistics company LKE Group has announced plans to start a subsidiary in the UK.

LKE offers a range of more than 1,500 transport solutions in aluminium, stainless steel and galvanized steel. Here you can see some of their trolleys.

The EU35 million company, which makes a range of pallet trucks, trolleys and industry solutions for storing and moving material, already sells its equipment in the UK but will set up a subsidiary here in 2015 to exploit material handling markets across several vertical sectors.

The UK company will be a sales and marketing operation at first. Depending on the market reaction, managing director Björn Riechers said “anything is possible, including building a small assembly line.”

LKE Group is also doing a similar expansion in the United States, which has a comparable industrial base to the UK, Riechers said. With the UK this forms LKE’s internationalisation strategy for the next four years. The company already has a production partner in China, specialising in industrial solutions, mainly laundry products.

Mr Riechers, who took over the company earlier this year, said that the majority of current LKE customers are German-speaking. “After joining the firm the most common question I was asked was why don’t you have a presence in the UK, especially in the automotive assembly industries?”

The company is organised into five business segments – intralogistics, hygiene handling, industry solutions, aerospace & amp; aviation, and global mail. It will focus on three of these in the UK, especially intralogistics that covers tugger trains, line supply material delivery products and also factory planning consultancy.

Hygiene handling, another target market in the UK, covers the chemical, pharmaceuticals and food industries which need a clean room environment. The products are designed to minimise spilling and have a lot of customisation options “for industries that are hard to automate,” said Riechers.

Customisation is important, where LKE has a team of 16 design engineers that design bespoke solutions from paper to prototype in a few weeks. Its products are mainly made from steel, stainless steel or aluminium.

Mr Riechers referenced the influence of the Toyota Production System and Porsche Production System on its product design. One principle of these systems is to remove forklifts from the assembly areas to be replaced by leaner, faster material delivery systems.

LKE Group was founded in 1994 by two engineers who wanted to serve the global mail handling needs of Deutsche Post, the then name of DHL. They designed a system of pre-stacking parcels and using trolleys in lines to deliver batches of mail to delivery trucks more efficiently. Today global mail represents more than 50 per cent of LKE’s turnover.

In 2009, LKE began its international expansion with a small subsidiary in Poland. Then in 2012 it bought another German company specialising in aviation material handling using lightweight products.

Present at the Westminster launch were Louise Ellman (Labour/Co-operative MP for Liverpool Riverside), pictured above with LKE MD Björn Riechers, along with representatives from Royal Mail, the Ministry of Defence, Crown (material handling), BAC Mono, Unipart, SHD magazine and others.

Bernard Molloy, global director of Unipart aftermarket logistics, was guest speaker at the launch on Tuesday October 21 at the House of Commons. He acknowledged Toyota’s key role in designing the lean manufacturing assembly process, the Toyota Production System, from which spawned the many proprietary manufacturing systems at automotive and logistics companies today.

He also praised the late Sir Nicholas Scheele, who died in August, as the main architect of Jaguar Land Rover’s turnaround at the Halewood plant in Merseyside. Sir Nicholas’s intervention, with the adoption of Toyota’s principles at UK car plants, was the start of the revival of the British automotive industry on which many logistics and material handling companies now partly depend.

LKE managing director Björn Riechers with Louise Ellman MP at the company launch in Westminster

German SMEs and the Russian Market

The German Mittelstand does battle to conquer the Russian market.

Kremlin Embankment ©  Lyudmila Izmaylova
Kremlin Embankment © Lyudmila Izmaylova

September brings more good news to Germany, world champion exporter. The Statistisches Bundesamt – Federal Bureau of Statistics – reports that for the first time ever, German exports of merchandise for the month of July 2014 were in excess of Eu1 billion, a record amount for one month. This result dovetails with the SME survey conducted shortly beforehand and published by Ernst & Young; the analysis, now in its 12th year, quizzed 700 SMEs, and an unprecedented 56% of those interviewed replied that they were fully satisfied with how their companies were faring.

These numbers, however, only reflect a momentary state of affairs. The worsening of the crisis in the Ukraine which has already led the European Union to inflict economic sanctions on Russia could very quickly cast a shadow over the picture or, even worse, backfire over the whole economy, and German SMEs in particular. Another indicator highlighted by the study is that one in five companies today is bracing to withstand losses as a result of the conflict.

Volker Treier, Deputy CEO and Head of Foreign Trade with the Association of German Chambers of Industry and Commerce (DIHT) believes that the machine tool and innovative plant sectors which traditionally are where SMEs are most active in Germany will be the hardest hit. The effect of the European Union sanctions and the lack of clarity in how to apply them, heightened by the devaluation of the rouble and the consequent increase in price for the Russian client all adds up to a heavy drawback to German exports. The political difficulties with the EU is pushing the Russian economy back into the arms of China. None of this, evidently is in the interests of German exports – Russia is indisputably a major market with great potential, above all for German SMEs.

Those directly involved all share the same point of view. A survey carried out by the Russo-German Chamber of Commerce (AHK) showed that some three-quarters of German companies interviewed believe that the long-term potential of the Russian market is high, or very high. It is with this belief in mind that when tensions between the Kremlin and the EU are behind us, German exports to Russia return to reasonable levels . It is of paramount importance that no long-term interruptions be allowed to upset trade, and that preparations be made for a campaign to regain market share in Russia to be launched as soon as the geopolitical situation gets back to normal.



Germany: memories of a nation – Exhibition at the British Museum

VW Beetle
With the first prototype built in 1935, the Volkswagen Beetle, ‘Käfer’, has remained a design icon and one of VW’s most famous cars until today.

From the 16th of October 2014 until the 25th of January 2015 the British Museum invites its visitors to take a tour across 600 years of German history, celebrating the 25th anniversary of the fall of the Berlin Wall and Germany’s reunification. Whilst displaying German art by Dürer, Holbein and Richter the exhibition also presents more technological achievements ranging from Gutenberg’s printing press to Meissen porcelain, the Bauhaus movement and modern design icons such as the famous VW Beetle.

Overall Germany: memories of a nation features 200 objects selected to reflect on a number of key themes: floating frontiers; empire and nation; arts and achievement; crisis and memory. Focusing on a key period from the 15th Century to the present day the exhibition tries to examine the central moments that have defined Germany’s past, it’s great, world-changing achievements as well as its devastating tragedies, and explores the profound influence that Germany’s history, culture and inventiveness have had across Europe.

Germany: memories of a nation is an attempt to present a Germany that goes beyond WWI and WWII, an attempt that seems to have the right timing considering that German-British relations in the frame of the European Union have become as significant as ever.

‘We are a people’: Banners like this, calling for Germany’s reunification, were brought to the famous Monday Demonstrations in East Germany at the end of the 1990s.

An accompanying podcast to the British Museum exhibition, directed by British Museum director Neil MacGregor himself, can be downloaded from the BBC Radio 4 website.

The exhibition is sponsored by Betsy and Jack Ryan. With support from Salomon Oppenheimer Philanthropic Foundation.

Kira Raebel

credit to The British Museum