The butterfly effect of Vodafone's Romanian mobiles on Spanish building sites

Jul 22 2008 By Nevill Boyd-Maunsell

A butterfly flutters its wings in the Amazonian rain forest and an American investment banker leaps to his death on Wall Street – or what have you. Vodafone has given a telling demonstration of the inter-relation of unrelated events.

You might have thought that mobile phones should be immune to the fall-out from the American sub-prime disaster.

Not so. Look at any building site and you will see somebody talking on his mobile under his hard hat. If he is a migrant from eastern Europe he is probably running up a bill for “roaming”, too.

So when the Spanish construction industry seized up under pressure from the stern European Central Bank a lot of Romanians working in it went home. They stopped talking on their mobiles. Vodafone’s Spanish revenues took a severe hit, accompanied by a slowdown in Romania.

The same sort of thing is happening, but less so, in Ireland and the UK, where Vodafone’s revenues from calls fell by 4.4 per cent in the three months to June.

So down went Vodafone’s shares by 20.25p, more than 13 per cent. Every penny on or off Vodafone is said to be worth two-points on the Footsie – say 40 points yesterday, bang in line with the day’s loss. In other words, the rest of the index came out all square.

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The Financial Services Authority started regulating mortgages on October, 2004. It laid down a raft of elaborate rules with boxes to tick, mostly designed to protect borrowers. But it never got round to insisting that individual sales people, advising home-buyers on the biggest financial commitment of their lives, should be registered as “fit and proper” like their counterparts selling insurance and giving investment advice.

Strangely it was not until 2006 that the FSA caught any fraudulent activity at all and then only two cases that year. The number rose to six in 2007 and now to 17 in the past 12 months.

On the face of it, though, these were mostly small fry, dodgy individuals who forged pay slips to persuade a lender – who in those days was usually ready and eager to be persuaded – that the would-be borrower earned a great deal more than was the case.

While the Bank of England’s money laundering regulations can make the process of cashing a cheque for £1,000 insufferably tedious, the FSA seems to have caught nobody using re-mortgages for money laundering or to raise cash for sinister purposes.

It is now addressing the issue. But re-mortgages are no longer so easy to come by. The credit crunch is doing half the job anyway.

Meantime, new rules devised by the Council of Mortgage Lenders could straighten out the market for newly-built flats. From September, builders and developers will have to sign a form listing any “incentives” – price cuts, if you prefer - that they have agreed with a buyer. The idea is that the mortgage will be based on the real price paid for the place, not some inflated number in the brochure.

That could bring the apparent prices for some developments down with a bump. But it may also make wary banks and building societies a little less unwilling to lend.