Business View: Don't believe that things can only get better

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The Independent Online

Don't say you weren't warned. The FTSE 100 crashed 122.1 points on Friday. If we were not in the midst of a financial markets whirlwind, that might be considered alarming. But the credit crunch caused initially by the US sub-prime crisis is still unfolding. The size of the losses at most banks remains unknown and the web of interconnecting loans between banks that have borrowed debt to buy other types of debt is still to unravel.

On Friday the situation was further complicated by the comments of Alan Greenspan, the former head of the US Federal Reserve, that the current market turmoil looks remarkably similar to that in the early stages of the 1987 crash. He added that, 20 years ago, "fear" was a primary cause of the meltdown. As Wall Street and the City hang on his every word, his latest pronouncements will do little to calm already shattered nerves.

In case you need reminding, 1987 saw the largest one-day peace-time fall in the US stock market, when more than 20 per cent was wiped off the value of the Dow Jones index.

In a nutshell, Mr Greenspan says fear, which drives markets down, is a much stronger force than euphoria, which drives markets up. Hence, a long-term gradual rise is more often than not brought down to earth with a violent bump. Hardly an appealing prospect. To make matters worse, the IMF says the effects of the turmoil will be felt well into next year.

This is not a short-term storm in a tea cup – it's a long-term financial hurricane that will claim some institutional scalps before it blows itself out.

And just to cap a great day, new figures showed that US employers had cut back on jobs for the first time in four years.

Sorry to be a bear, but in my view things are going to get worse.

Adapt or sign off

Patience Wheatcroft's departure from The Sunday Telegraph is yet another sign that the old order in newspapers is being swept aside. I have great admiration for Ms Wheatcroft (I was on the staff of that paper before I joined The Independent on Sunday) and her editorial judgement. But clearly she wasn't convinced of the merits of the Telegraph Group's digital revolution.

Personally, I think the attempt by Daily Telegraph editor Will Lewis to transform the group into a genuine multimedia operation is a bold initiative that should be applauded. Newspapers of every description have been in gradual decline for years. Readership is down and shows no sign of picking up, and the drift of advertising on to the internet is only going to continue. The process of turning print journalists into broadcasters is always going to be a painful one, with those unwilling or unable to adjust paying the price.

For Sunday journalists, the challenge is even harder. Unlike their daily counterparts, who are used to reacting fast to breaking news, they enjoy the luxury of a whole week to root out exclusives and write longer, more considered articles.

Ms Wheatcroft obviously felt that the process of integrating The Sunday Telegraph into the group's digital revolution threatened the quality of her paper, not least because her staff would be forced to adopt a different mindset in a 24-hour rolling news environment. But if the Telegraph's rivals follow its lead – which seems likely – then editors of other Sunday titles will be faced with the same issues.

All aboard the ghost train

I don't know whether to laugh or cry at First Great Western's decision to bring back the trusty old Intercity 125s. Maybe they will improve punctuality on the line from London to the West Country, but it is still a sad indictment of the state of the UK's rail network. After all the promises of new investment and new trains, the best we can do is a return to rolling stock that, although refurbished, was first introduced when flares and flower power were in vogue. I guess that as long as these trains run on time, the rail-going public won't complain. But really, is this the best we can do?

Black clouds at Sky

A few months back, I wrote that BSkyB faced a real risk of being broken up by the competition authorities. Now Dresdner Kleinwort analysts have come to the same conclusion. They believe it is very likely that media watchdog Ofcom, which is conducting an investigation of the pay-TV market, will refer the matter to the Competition Commission.

Possible outcomes, says Dresd-ner, include Sky being forced to separate its content-ownership and retail-distribution arms. Under the Enterprise Act, all the commission needs to decide is whether the market for pay-TV is distorted – not whether any company is to blame for that distortion. Sky's shares have been performing well recently and any investigation will not be concluded until 2009. But there is a growing chance that it may finally be in line for a regulatory duffing up – a prospect it has dodged for over a decade.