City: Reality triumphs over hope at BP

WHATEVER else Sir John Quinton might be, at least he is a realist. When it comes to the economy, that's more than can be said for government ministers. Last week Sir John, the outgoing chairman of Barclays Bank, warned that the recession could easily persist for another two years. His comments echo those of other leading businessmen and bankers, most of whom can see no earthly reason why the economy should recover to any significant degree over the next few years - even with concerted action by the Government.

Ministers, by contrast, continue to live in a different world, one where hope repeatedly triumphs over reality. 'The important thing is to avoid the danger of talking ourselves into a sense of almost terminal gloom,' said Steven Dorrell, financial secretary to the Treasury, in a vain attempt to gee us all up. Well I for one refuse to take the continuance of deep recession in good spirit. Mr Dorrell also insisted that Sir John was at odds with most independent forecasters and he warned against 'a quick fix at the expense of long-term improvement'. His claims are typical of the Government throughout this recession: unrealistically optimistic and bankrupt of ideas on how to climb out of the hole we are in.

For a long time, most of us went along with the Government. One day soon, the economy will inevitably recover and everything will be all right, most of us thought. But ministers have said it too often for it to be believable any longer. Clearly Barclays does not believe it and nor does the great bulk of British business. The stock market, which sunk to a new low for the year at one point on Friday, certainly does not. And nor does British Petroleum, which has finally been forced to recognise that it has been living way beyond its means for the past couple of years.

For the London market, BP's decision to cut its dividend represents a watershed of considerable proportions. It might have been predictable but it is none the less shocking for all that. For an important British blue chip company, the third largest oil enterprise in the world, to concede it can no longer afford to pay its shareholders what it had led them to expect is by any standards a dreadful admission. To say investors are sore about it is an understatement; they are hopping mad. Already one class action has been filed in the US for misrepresentation. BP must brace itself for many more.

But in truth the company had little option but to adopt the course it has. You can only wait for economic recovery for so long. BP could not carry on borrowing indefinitely to finance its dividend. It has a big enough asset disposal programme on its hands already. To have sold any more in these markets would have meant giving them away. For the City to keep saying - as it does - borrow, sell, cut costs, slash R&D and capital spending, do whatever you have to but above all keep feeding us, is not only unrealistic, it is also greedy. Investors are going to have to reconcile themselves to sharing in some of the pain of this recession. BP's action last week is like the boy removing his finger from the dyke. There are going to be a lot more dividend cuts from big companies before this slump is over.

Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'