IT just seems to go from bad to worse, with the country now poised for another winter of discontent. This will be no replay of the labour troubles of 1979 (though that can't be ruled out), but more a collective sense of mourning for our battered disposable incomes, job prospects and investment values.
With much of the economy staring down a barrel, the whooping and hollering in Beijing looks a little out of place. Maybe it helps cheer us up, but it won't last.
As US Federal Reserve chairman Ben Bernanke warns of a further fallout in the financi
al system, the gloom will resume and the rain lashing Britain will no doubt turn into a head-on hurricane.
The banks continue to look for something to lift their spirits, but the underlying prognosis is not good. Take HBOS, which is rapidly turning into a barometer of the British economy. The bank has already shed 550 jobs in business banking, following the tail-off in corporate activity, and earlier this month another 400 went, including the closure of The Mortgage Business, a specialist lending arm. On Friday it announced the closure of a quarter of its estate agency branches, putting 100 more jobs at risk.
None of this comes as a great surprise since there had been speculation since early summer that the Edinburgh-based bank would be pruning its head count. While some of the predictions were overstated, the drip-drip of job cuts appears to have no prospect of ending any time soon.
HBOS was always likely to be hammered by the housing downturn, given its exposure to this market. No wonder it has been issuing mixed messages on the extent to which it continues to form the backbone of the company. It seems at once to be seen as the mortgage champion and yet insisting it is no longer reliant on mortgages.
Needless to say, closing 53 branches of Halifax Estate Agents is an indication of the depth of the recession gripping the housing market, which has seen a 40% slump in sales in the three months to the end of June. Mortgages issued to first-time buyers fell by 46% in June against the same month last year. Forecasters are now saying that 6,000 jobs will be lost among estate agents across the country.
Sadly, there was an inevitability about all this. As the housing market set off like an out-of-control thoroughbred there had to come a time when it just stopped running. What no one predicted was its suddenness or the extent to which it would run out of breath.
The crisis was largely created by exuberant markets – greed to you and me – and the markets have rightly taken steps to resolve it.
But there is only so much they can do. Governments have also contributed by allowing credit to flow too freely, for encouraging a culture of spending rather than saving. That era of spending on the never-never is rapidly closing, but a new era that restores consumer confidence – and boosts disposable income – now has to be cultivated.
When it does, the conditions will be very different. Tighter lending criteria, for consumers and business, will be with us for the foreseeable future. This will be no bad thing if it brings some sanity to spending habits.
It will be some time before we see the sort of house-price inflation witnessed over this past decade, and the enthusiasm for the big deal is likely to wane. All this is backed up in the latest growth figures that show the long-running boom is over.
Sixteen years of continuous growth have come to an abrupt end, leaving Britain poised to enter a recession. Some believe we are already there, and certainly some sectors – housing, for instance – are undoubtedly in negative territory.
With a collapse in investment, a contraction in household demand and a fall in exports, there are few positives to take out of the figures from the Office for National Statistics. To add to the pessimistic outlook, Jonathan Loynes of Capital Economics says things will be "considerably worse" in 2009.
Thus far, the British Government has appeared ponderous over the growing economic crisis. The Treasury made the big mistake of apparently promising a stamp duty holiday without actually doing so, a move that merely postponed more housing transactions.
The time has come for some radical measures, fiscal as well as monetary, to help the markets heal their wounds, but the Treasury seems bereft of good ideas and the autumn season of party conferences leading up to the Pre-Budget Report will be a difficult few months for the UK Government.
The full article contains 792 words and appears in Scotland On Sunday newspaper.
