Growing up, British Leyland was always held up as a model of inefficiency with its constant disputes, poorly made products, third-rate management and working practices out of the automotive dark age. Nowadays industry is lean and hungry, if sadly on its knees, so where are the new kings of inefficiency to be found? Look no further than the multi-billion-pound UK fund management industry.
Depending on what figures you believe, 70 to 80 per cent of the thousands of funds in the City – unit trusts, investment trusts and pensions – consistently underperform the stock market. Can you imagine falling short in your job to such an extent and still keeping your position? Well that argument doesn’t apply to fund managers, who seem insulated from the ruthless zero-sum game they love to preach to the boards of firms they invest in. Instead they keep rolling along, levying bumper fees for rubbish.
The Government likes to talk about protecting the wealth creators in the City, but surely our fund managers need a bit of the Eighties-style rationalisation that the car industry went through. No wonder there are growing rumours of mergers and a major shakeout of funds. It’s not before time.
Rein in the ‘second charge’ firms
The repossession figures for 2008 released by the Council of Mortgage Lenders on Friday could have been much worse without the slightly more sympathetic approach to arrears forced on the big banks last autumn. This move, combined with the dramatic lowering of the base rate by the Bank of England, has probably helped keep 5,000 to 10,000 families in their homes, for the time being at least.
But this year will be worse than last. There are 219,000 mortgage holders with arrears of three months or more, against 127,500 a year ago, and much of this is down to the actions of the “second charge” mortgage firms.
You’ve probably seen these outfits in press and TV adverts, posing questions like, “Why not consolidate your debts into one manageable monthly payment?” Well many people have found out the answer the hard way, as these firms routinely move to repossess after one or two missed payments.
Now I don’t buy into the lazy argument that these borrowers are “victims”. The marketing of the loans may have been crass and irresponsible but enough consumers knew what they were getting into and took the convenient option of borrowing money rather than saving and waiting for the second car or holiday abroad.
However, by rushing to repossess in this environment, second-charge firms are damaging the wider economy and putting an unnecessary strain on our social fabric.
The Office of Fair Trading has released guidance to these companies on how they should handle debtors. That’s not enough. They must be told clearly that they have to fall into line with the big banks in their approach to repossession. And if this means some of them go under, good riddance.
- More about:
- Automotive Equipment (car Industry)
- Debt Market (bond Market)
- Loans And Lending Market