My personal view is that Britain will remain in the EU with a relatively tight outcome at the referendum.
Some polls claim most older people will vote to leave, whilst younger people will opt to stay in the EU, but I don’t believe that is true. There are a lot of older British people with holiday flats and other concerns in neighbouring countries, so I expect the demographic spread of votes to be more similar across the age-groups.
Various polls have shown a broad picture of about 40% wanting to leave the EU, 40% in support of the EU and 20% being undecided. I believe that, in the end, these 20% will rather vote for the devil they know than the devil they don’t.
So I am relatively optimistic that Britain will opt to stay.
In contrast to some of the current headlines, I don’t think it would be catastrophic. We would move into the unknown, but the effect would be more medium to long-term.
In terms of foreign investment, being part of the EU has always been an important part of Britain’s strategy for attracting investors from countries like the US, Japan and China. From a trade point of view, I believe things will continue on the same course for the short term, whilst the change will be felt further down the line.
If she decides to leave the EU, the real medium-term questions come down to firstly what kind of agreement Britain will be able to negotiate with the EU and just how long that negotiation will take. I do believe that the European states genuinely want the UK to stay in the EU, but I am not so sure that all of those states will be too willing to meet Britain in the middle, were it to come to an “out-negotiation”.
Whilst there have been some more controversial headlines, the majority of projections predicted a maximum 3% loss in GDP over the next 10 years, so we really are talking about a relative decline and not recession. It’s mainly about lost opportunities, but how do you measure lost opportunities?
There is a lot of uncertainty and there seems to be no plan for what will happen if Britain chooses to leave the EU.
About 18 months ago, when people started to discuss Brexit in earnest, people thought Britain should follow the Norwegian or Swiss model, but at that time they had not yet realised that both countries pay into the EU: On a per capita basis, Norway pays about the same amount as the UK whereas Switzerland pays about half.
More significantly, they did not realise that both these countries must support the free movement of labour across Europe, which of course was one of the key factors which has lead to the Brexit campaign.
Boris Johnson who is now a leader in the Brexit Campaign seemed ill informed when he later suggested Britain should negotiate a Canadian style EU deal. The Canadian model only covers the trade of goods and does not apply at all to services, such as financial or insurance services.
As the previous Mayor of London, he should have been well aware what impact this might have on Britain’s economy.
I studied Finance and Accounting in Bremen on a course including a one year exchange in Leeds and then went on to do a Masters in Reading.
I would heavily recommend to everyone that they spend a significant period of time outside their own educational environment. I believe this is much more valuable than a short work-placement, because you learn to think outside the box. You don’t just make comparisons; you learn that there are many ways to achieve something. One nation learns in one way and the other has a completely different approach, but they both get things done and deliver results.
This experience certainly helped me eight years later when I took on my current role and I would advise everyone to take this opportunity at a young age.
If your first international experience is as the new regional CEO sent from the mother company, you must expect that the people around you will not always present you with the full picture. If you have had that early experience in a foreign environment, you will have an open mind and be in a stronger position to filter out personal opinions and create a framework for you to grow on.
At the age of 16, I wrote my first CV as a school exercise. I stated that my hobbies were politics, history and economics and that is exactly what I do today, so I am lucky to have fulfilled those aspirations.
After my Masters, I joined Lufthansa in the controlling department just at the start of the first Kuwait crisis. The American troops had marched in, there was a lot of fear of terrorist attacks and nobody wanted to fly anymore. This kind of uncertainty made me think about the aviation industry and whether it would offer me a promising career.
Not just in times of war, but generally, the profitability is so uncertain because there are so many market distortions. Low cost airlines with heavy airport subsidisation; foreign nations investing in strategic independence; and so on. If you can captain a niche, you can make a lot of money in the airline business, but the question will always be how long will that niche be available? So as an industry, it will always be difficult.
I moved into Banking which was a straightforward choice following my studies.
Dresdner Bank offered international opportunities because they were planning to merge with BNP Paribas and they planned to “conquer” eastern Europe. Banking in the early 90s had an “Aufbruchstimmung” [sense of new opportunity], which made the whole industry very interesting and I thoroughly enjoyed analysing these foreign opportunities.
Of course things did not work out as hoped for Dresdner, but my own ambition to work internationally was firmly cemented.
In the early 90s, Dresdner had a book value of around 10 billion Deutsche Marks.
They generated a yearly profit of about one billion, which on the face of it sounds magnificent. However this was just after the German re-unification and government bonds offered a 9% interest rate. So the true productivity of the Bank and its 40.000 employees could be described as 100 million Deutsche Marks more than investing in bonds equating to 2 500 Deutsche Marks per employee.
As I mentioned, there was a real sense of change in the German banking system at the time, but there was no clear business model and I believe Dresdner Bank lost its focus on generating value.
Germany was still adjusting to the Anglo-Saxon model of capitalism and they had not yet understood this Return on Equity approach and how to use capital and resources efficiently instead of just staring at the bottom line profit.
Firstly, I would avoid sweeping statements that one business model is better than the other. Just like your question about my career, it’s really all about finding the right balance, understanding the opportunities and using them wisely.
Returning to the airline business, when I was at Lufthansa, the then depreciation period of approximately 10 years was having a negative impact on the bottom line. As aeroplanes are generally in service for at least 20 years if not longer, extending the depreciation period over time to 20 years seemed to improve the figures in the profit and loss account. But the airlines did not improve their actual performance and had to start a sale and lease back process to improve cash flow in the short-term.
However, in a period today where many airlines only own a small proportion of their aircrafts, one sees that lease-models can be signals for profitability issues. This in turn has a significant impact on the risk the lease companies are carrying.
One must differentiate between benefitting from opportunities and covering up weaknesses. Sell and leaseback models can be very effective, but also very misleading. For example the Sainsbury’s Supermarket chain sold some of its stores to lease them back. This may have provided capital to invest but was it really generating long-term revenue for them as a group?
The traditional German department store giant Karstadt followed a similar model in recent years and filed for insolvency soon after. So you see leaseback schemes should be seen as at least a yellow light, if not an orange one.
So, as I mentioned earlier, the first question one must ask with any proposed business model is “will it generate true value?”
London is not Britain, and New York is not America. However, New York is only the commercial capital of America, whereas London means more to the UK than that. It is also the political capital and has a larger impact on the country as a whole.
Drawing back to my experience in America, it is a nation, which is driven by visions.
The UK on the other hand is quite the opposite. It relies heavily on excellent tacticians and a “we’ll cross that bridge when we get there” attitude.
The German approach is somewhere in the middle of this scale between vision and tactics because the Germans are strongly focussed on strategy. Famous for brilliant engineers, structures and processes, they always have a plan, always have to work, but are not necessarily always that flexible.
When German companies fail in the UK, it is generally because they have been too rigid, too focussed on structure and not flexible enough.
In the end the customers want a solution not a process or structure.
I’m not claiming one of these approaches is better than the other. It’s just different and that is why I believe the Germans and the Brits can work well together, because their tactics and strategies compliment each other. Germans can also get on with Americans, because they need a vision and the Americans need strategy.
However, Germans always have to work on these relationships to avoid friction in the overlapping areas, whereas the Americans and Brits are so far apart that they generally get on well without working too hard for it.
Be open, be friendly, be polite. Be firm in what you believe in, but be flexible to adjust your beliefs.
This might sound like a contradiction, but it is not. Culture is generally built on purpose, so one needs to reflect through one’s own learning process in order to grow an understanding of the new environment.
In the end, it also boils down to a large extent to your manners. If you treat people kindly and with respect, they will generally do the same. You will always encounter difficulties and difficult people, both in business and in private, but if you follow that approach, you will get the most out of your experience.
And don’t take yourself too seriously!
Whilst studying in Leeds in the late 80s, one had the feeling that Britain’s only two cities with so-called “European flair” were Edinburgh and London, whereas the UK today has become truly global.
When I moved back here 10 years later in 1998, Britain had significantly progressed. London was already much more international and probably on a par with Paris, but it has moved on.
Meanwhile, I would say London has become the most global city in Europe, perhaps in the World in terms of generating ideas and openness. Its population has grown by 20% in those 15 years and it is not necessarily because of the high standard of living or salary.
In fact the standard of living in London is arguably lower than in many cities, but it is a place of opportunity, which is something we too often forget. And that’s why Brexit could be dangerous for London, because it will limit those opportunities.
It’s not all about the absolute salary or wealth; it is the opportunities, which motivate individuals. If you can align people’s interests with the interests of the company, you will generate growth, because interests lead to opportunities, which in the long run will be beneficial to the company.
Interview Date: 17/05/16