Decline goes on and it keeps getting tougher
Oct 2 2008 By Nevill Boyd Maunsell
Since the American sub-prime mortgage debacle broke on us in August last year it has been possible to point to swathes of the economy that were still doing quite well – led by manufacturing whose exports took on a new lease of life the moment the pound toppled from its over-priced perch. The great financial crisis was not a real crisis unless you worked in finance.
True, it was also best not to be an estate agent, come to that, or a house-builder, or a shopkeeper. True, you were stuck if you needed to sell your home. The supply of mortgages dried up and if you did find a buyer with ready cash, his idea of the price was not the number you first thought of.
Yet for most Britons the sun came up in the morning and the pay cheque materialised at the end of the month. It bought less, particularly if you have a hungry family to feed, or drive long distances. But it arrived.
Unemployment crept up, but only crept, cushioned possibly by Polish plumbers and the like going home. The service economy lost momentum, but away from the housing market, construction and retailing, it kept on growing.
This was a slowdown, not a recession. And manufacturing, showing a resilience not seen since the mid-90s, looked set to keep it that way.
No longer, it seems. Recent surveys have hoisted warning signals. Confidence has been ebbing away, as did new orders. Yet while Chancellor Darling surveyed the financial havoc and proclaimed the worst crisis for 60 years, the CBI talked calmly of a “shallow and brief” recession.
At first sight, yesterday’s Purchasing Managers’ survey certainly point to something worse. The decline has ceased to be a gentle one.
Most unusually, the EEF, speaking for its membership of mostly small to middling manufacturers, took issue with these findings. It suggested that construction companies and those selling to consumers - with the shrunken pay cheques – are feeling most of the pain.
The rest, in the EEF’s view, still remember the consequences of ditching skilled workforces in the early 90s and are not going to do it again until life gets a fair bit worse.
The lack of mass unemployment is the great difference between that occasion and this. May it remain so.
----- ----
It was a pleasure to wake up yesterday to the dulcet tones of Sir Brian Pitman on the BBC’s Today programme. In the days when he ran Lloyds Bank, what he said was invariably to the point and rarely obvious.
He is convinced that the present mayhem is a thoroughly healthy process, so long as the solutions remain free-market solutions, and that we will end up with “five, perhaps six” big banks.
Now, which might those be? Lloyds TSB/Halifax (Sir Brian is for the bid), HSBC, Barclays, The Royal Bank of Scotland, Nationwide, I suppose, and now Santander. Sir Brian did not reveal which was his “perhaps”.
He called for a return to old-fashioned, steady-as-you- go banking. Yet as I recall, it was on his watch that Lloyds took over TSB, Cheltenham & Gloucester and finally Scottish Widows, accompanied by cracking organic growth along the way.
