Sterling means crunch is felt
Jan 22 2009 By Jonathan Walker
Unemployment has increased by 18,000 in the West Midlands between September and November, according to the latest government figures.
Yesterday’s statistics showed how the recession is really hurting people.
As the total number of unemployed in the region is 187,000, it means the number out of work has increased by around 10 per cent in just three months.
Of course, as they cover the period up to November, it’s always possible that the real number of unemployed today is even higher.
There was a period when the credit crunch and economic downturn was seen as a bit of a game in well-to-do circles.
I read a few lifestyle articles about people who were eating in Pizza Hut instead of posh restaurants, or discovering the joys of taking the bus instead of filling the car with petrol, as they supposedly tightened their belts.
The reality was that for people who had not lost their jobs and were not stuck in negative equity, the economic downturn had made little difference to their lives. Even negative equity wasn’t always a problem for those who had no intention of selling their home anyway.
But Britain’s economic problems are beginning directly to affect more and more people, as jobs are lost, firms such as Jaguar Land Rover suspend shifts and businesses impose wage freezes.
The great debate in British politics is whether this is entirely due to global problems which began in America, as Gordon Brown insists, or whether Britain’s difficulties are worse than elsewhere.
Unfortunately for Mr Brown, one very direct result of the recession is the dramatic fall in Sterling compared to other currencies.
Last January, you could buy a euro for 74p. It will now cost around 94p.
And you could buy a dollar for around 50p, compared to 72p today.
This means that the cost of going on holiday has effectively increased.
Travel overseas, and things seem more expensive – while British tourists feel poorer, compared to the native population, than they used to be.
The rising cost of buying a souvenir on holiday may seem like a trivial issue when major banks such as RBS-Nat West are on life support, but it is something that voters can immediately understand, and which undermine the argument that every country is suffering equally.
Perhaps not many of us are going abroad at the moment, and Sterling may recover by the time we are once again thinking about our summer holidays, but the omens are not good.
However, if and when the economy does recover, politicians will still face a major challenge.
This is how to construct a successful and stable economy which does not rely on credit.
The days when loans and mortgages were available for the asking, even to those of us who could barely afford the repayments, may never come back.
