CSFB said: “Steel prices collapse when the export market is deeply liquid, triggered by a global de-stocking or a major regional crisis. Corus Led blue chips higher yesterday as Credit Suisse First Boston urged investors to pile into the stock, assuring them that the best is yet to come for the steel industry. Britain’s success in ironing out the peaks and troughs of the cycle seems to put us in the vanguard of the plodders.jeremy.warner independent.co.uk. If workers try to recoup the losses through their wage claims, they’ll only be punished with higher interest rates still. And if corporate profitability isn’t quite as good in Britain as it is elsewhere, then there’s not going to be as significant a pick-up in business investment to compensate for the slower rate of growth in domestic demand Still, no need for panic. The message from the ABN Amro/London Business School report is that the slow plodders win through in the end.

Many householders will be feeling the pinch.With higher taxes a virtual certainty after the election, the squeeze on consumption can only get worse. The consumer boom which sustained it through the post-bubble business downturn is slowing fast. Retailers had a rotten Christmas, January wasn’t much better and all the signs are that February will be worse. The release of government papers this week under the Freedom of Information Act has reminded us of the 15 per cent interest rates rose to at the height of the ERM crisis in 1992. The 4.75 per cent charged today looks insignificant by comparison, yet it’s still one-third higher than it was little more than two years ago. Despite the abolition of the tax break on dividends, dividends have continued to rise and still make up a greater proportion of the rate of return on equities than almost anywhere else.It is in capital growth that the British stock market has fallen behind. It may be some years yet before the buying of defined-contribution pension arrangements outweighs the selling of the final-salary schemes.Furthermore, the economy isn’t looking as buoyant as it was.

Big pension funds and life companies, historically the biggest buyers of UK equities, have in recent years turned into substantial sellers as liabilities mature. The reasons for this appear to be more structural than political. An exhaustive study of long-term rates of return in 17 national stock markets by Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School finds that there is virtually no correlation between high levels of economic growth and high levels of stock market return. To the contrary, countries showing very rapid rates of economic growth tend to have the poorest performing stock markets.This is because very high levels of growth generally end in very deep periods of recession. They also tend to attract an oversupply of capital, which means that returns fall correspondingly.

And finally, in fast-growing economies the lion’s share of the spoils will always be taken by the workforce, not corporate profits. It is to mature, plodding, slow-growth countries that you must turn for the best and most consistent long-term rates of return The same is true of individual stocks. Growth companies are capable of sensational short-term share price performance, but few make it into orbit Most will fall back to earth, like spent rockets. It is the big, boring stalwarts with established market positions that are ultimately the more reliable and consistent.So where do London shares fit into this matrix? As with corporate profitability, Britain has also been a bit of a laggard in terms of stock market performance. Since Labour came to power in May 1997, the FTSE All Share index has underperformed most of its peers, including the main indices in the United States, Germany and France.Right-leaning commentators have been quick to blame this phenomenon on the Labour government itself, which has abolished the tax credit on dividends, boosted public spending and increased the weight of regulation and tax on business Yet the numbers don’t entirely support the argument. In past cycles, record levels of corporate profitability have always in the end triggered wage inflation. As costs rise beyond the growth in revenues, profitability begins to fall once more, and with lower levels of profitability comes falling share prices.