Warning: Britain faces new recession
Economy set to relapse into dreaded 'double-dip' downturn, say world's central bankers
The world's central bankers have warned that the British economy faces relapsing into another recession – the much-feared "double dip" downturn.
A continuing drought in bank lending, evidenced in the latest figures from the Bank of England, and the threat that spiralling public borrowing will feed through to higher interest rates and inflation, are judged by international economists to be mortal dangers to a sustained recovery.
The Organisation for Economic Cooperation and Development (OECD), which comprises the 30 most advanced economies in the world, added to the gloom, saying that Britain remained "deep" in recession and faced a "bleak short-term outlook".
"The recovery is likely to be slow and unemployment is expected to climb significantly," it said, adding that the Treasury could do "considerably more" to fix the public finances.
Both warnings are at odds with recent market optimism and so-called green shoots suggesting that output in the economy may be recovering. But the Bank for International Settlements (BIS), which includes the Bank of England, the US Federal Reserve and the European Central Bank, said it feared that the problems of the world's banks are far from fixed and could easily trigger a so-called "double dip" or "W-shaped" downturn. "A major cause for concern is the limited progress in addressing the underlying problems in the financial sector," it said.
"A significant risk is therefore that the current stimulus will lead only to a temporary pick-up in growth, followed by protracted stagnation."
The BIS cautioned that "governments may not have acted quickly enough to remove problem assets from the balance sheets of key banks". It added that financial products should be treated like medicines and sold to consumers only when they are certified safe, to help prevent a repeat of last year's financial meltdown.
Figures from the Bank of England yesterday confirmed that the banks and building societies remain reluctant to lend to any but the most secure of businesses and home buyers. Mortgage approvals barely improved during May, remaining stuck at a little over 43,000 – some way above the nadir of 27,000 last winter, but under half of their normal level. Analysts at Capital Economics said the figures were "consistent with house prices falling at double-digit annual rates".
Detailed data on changes to the money supply indicated that relatively little of the £100bn pumped into the economy by the Bank of England through its policy of "quantitative easing", akin to "printing money", is finding its way as yet into meaningful lending by the banks to small businesses and first-time buyers.
A small improvement in consumer confidence was registered last month, and there is plenty of evidence of more buyer interest at estate agents and of shoppers continuing to shop. However, for as long as the banking system remains reliant on public funding and unwilling to offer credit, little of this still-fragile optimism will be seen in hard purchases of "big ticket" items such as houses, cars and other goods linked to house purchase, such as electrical appliances and furniture.
Figures to be released by the Office for National Statistics are likely to reveal that the downturn in the UK in the first quarter of the year was even more severe than first thought, though most economists think the worst of the slump is over. A CBI survey published yesterday said more than 95 per cent of banks and building societies expected their bad debts to rise over the next few months. Such write-offs will join the existing "toxic assets" on the banks' balance sheets and make them even less willing to take on riskier lending – the much feared "negative feedback loop".
Most embarrassing for ministers is the OECD's "health check" on important public services. The OECD agreed that, since Labour came to power in 1997, health spending has "surged" but "the returns so far appear modest". Ironically, given official enthusiasm for "league tables", the OECD says the UK's economic future is endangered by the inequality of educational achievement – a factor which has left the UK towards the bottom of the league table of advanced economies for social mobility: "International standardised tests show that the UK lags better performing countries significantly."
However, the OECD supports the shift away from targeting: "The focus on raising the school leaving age and meeting performance targets in education may still be distracting attention from the more important goal of raising core literacy and numeracy achievement." It adds: "Adequate provision of public infrastructure should be a priority, particularly in transport where road and airport congestion, and problems in the rail system impede business and constrain productivity."
Ministers have cancelled this year's Comprehensive Spending Review on the grounds that the economic picture is too uncertain and that, after a general election, "tough choices" may become easier to implement. Still, the OECD said it wanted "explicit" detail on spending cuts and tax rises, adding: "Experience in other countries suggests that a focus on expenditure cuts, rather than revenue raising, is associated with more successful consolidations." At the moment, the OECD claims, the Government is not being "ambitious" enough.
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Comments
Prioritise UK workers for all jobs and use the 'secutiry ' provision in EU agreements to cut off EU free movement of labour.
Revise the labour migration provision to prevent companies offloading UK labour to bring in cheap workforce from outside of the EU.
Have EU trade commitments out in the open, including the provision for cheap labour migration into from outside the EU, so we can see and decide if we want these commitments.
Require that all MPs 'intending to stand down' at the next election, who have had to repay money, stand down now, to avoid prosecution. Hold byelections
Hold a UK referendum on the Lisbon Treaty.
End bailouts to PFI schemes and take them back into public hands.
Nah, sod it.
I'd rather be in Europe than run the risk of my idiotic voting compatriots voting in another Labour government to ruin my savings thanks.
Sir, I think you have been duped by an impostor. Lord Mandelson would never have said such things. The person who gave you this quote is clearly suffering form a compulsive truth disorder and so cannot ever be confused with the real Mandelson.
"and sold to consumers only when they are certified safe"
So the OxBridge grads who came up with CDOs and related products either
didn't know or didn't care whether they were safe.
The banks they worked for either didn't know or didn't care whether this
stuff might expose them (and therefore us) to a systemic risk.
The companies that were performing the risk-assessment on these
CDOs either didn't know or didn't care what the real underlying risk
was as long as they were paid.
And the underwriters (who now appear not to have or to have had the
funds to actually perform that function) didn't care either.
With all these players, intricately involved in the complex dance that
is modern finance, appearing clueless exactly what hope do we have
of a couple of guys in suits from the BoE or the FSA actually certifying
the next peabrain idea safe?
My money is going to be worthless. This is because of inflation. This
is because of the fiat dolllar and the lack of a link to anything of any
intrinsic value. Fix the Fed. Fix inflation. Stop giving us this crap about
tweaking the financial system. Please !
- marriage migration
- supposed 'skills shortage' of 'ethnic chefs'with no qualification required
- student visas for dodgy colleges
- the provision for international students to work here for 2 years if they do study and graduate - because that means forever
There is no point in a housing program:
- while migration continues expanding through these quasi legal means (today's housing shift will not affect this)
- while the construction jobs are all going to EU workers, so there is no job creation in it - when the work is done, these workers will then qualify for welfare payments here, too.
. . which is, of course, exactly what the Ratings Agencies were supposed to do! The trouble is that they got it wrong. Does this remind anyone of Thalidomide?
It is time that we grew up! When we were young, we probably had faith that Mummy, Daddy, Nurse, Nanny, Teacher or whoever knew best. This seems to have left many people with the strange idea that there are people in Whitehall, the universities, or wherever, who would get things right. The all seeing, all knowing regulator does not, and can not, exist!
Yes I fell for the "decoupling" argument that the BRIC economies would not be dragged down along with the developed economies. However, I suspect they are starting to recover from their "de-stocking" recession, in the classical "V" recession pattern. The developed economies are entering into a period of stagflation (quantitative easing will produce inflation) due to the continuing banking crisis.
The point is, why are you guys comparing the figures from 'this time last year' when they were pie in the sky nonsense? If the banks are only lending to those who can pay it back, then long may it continue! Your 'double dip' I welcome with open arms, as just maybe, the jobs created will be long lasting and with the best companies, due to the weaker ones falling by the wayside leaving the strong to survive. Is that not a better way forward than a return to the 'good old days' which were our downfall in the first place? We need to get real in this country and it's about time it started now!
There can be no economic recovery if the energy supply is declining -and it is, end of story. It's called The Long Emergency, The slide down Hubbert's Peak, The Party Over, the depression that never ends ..... all a result of the squandering of the oil supply on trivial pursuits over recent decades. Witha declininh oil supply the world economy will slowly grind to a halt. Prepare or perish. The government certainly will not help you.
There are many beautiful mature women and men chatting on that community^^^^^^^^^Cougar Circle^^^^^^^^which designed to help ethnically diverse singles meet new friends and make dates. u will have a more lovely baby not long after....
A strong pre-requisite must be to nationalise all banks and any "profits" made by them to go into the exchequer. This will remove the "casino" mentality of the self-appointed gurus, who have so stupendously failed.
Currencies, like blood in a healthy body, must circulate freely, without clotting, or contamination by toxins--it needs close scrutiny and 24/7 attention. Interesting that, the word "toxic" was used by those in the know, to describe deals which could infect/destroy the financial system.
We have been misled yet again, into believing that the "greenshoots" are appearing--now the OECD say that, the UK needs to get a comprehensive grip on its educational standards, its society and its public spending, to even compete with the rest of the world.
It seems the UK may be in the pawnbrokers for a long time, before being finally purchased by the US.
The US own us now and has owned us since WWII, or why else did we go into Iraq?
Weapons of Mass Destruction was never the case, Regime change is something we've done in the past but never for the good of the changees. We're simply not powerful enough to coerce the resource rich countries of the Middle East to hand over the goods into our hands (again), but the American State values UK PLC enough in a propaganda campaign against it's own people to give us a chunk of the contractual pie available if we pitch in... Cue massive transfer of monies from public hands to private companies profiteering from the war on terror... Cue torture and death in the Middle East leading to Islamic extremism against the west... Cue all the stuff your intelligence people said would happen Mr. Blair...
Who owns us? Well it certainly isn't the good people of this country.
How the Pope accepted Tony Blair into the Catholic faith amazes me.
(OK perhaps I left the point slightly up there but demographics, resource starvation, peak oil, fiat currency, inflation and fiscal crises - it's all hooked up together driving us into the next dark age)
- Mayer Amschel Rothschild, founder of the Rothschild banking dynasty
There you have it, in a nutshell.
Last one out, turn the lights off - oops, I'd forgotten that government
policy will ensure that there aren't any lights on anyway...
Toolan
A "severely emaciated" Michael Jackson weighed just over 8 stone (51kg) and was disfigured and virtually bald after years of physical abuse, according to leaked results from an official autopsy.
I love Brown and Yellow too, vomit BROKE WE ARE BROKE I SAY FIX NO FIX WITH HASHISH POPPEYY WE DIE DEATH TO FOREIGHNERS DEATH TUBE AND TRAINS SUNDAY CLOSED schools jails broke ......Am i okay?/
I thank you
Firozali A Mulla
Madoff got 150 years for 50billion fiddle, so Brown should get about 20,000 years for his mistakes.
Then one can cope with any recession :-)
1. Re-capitalise banks, enabling the banks to increase mortgage lending (re-inflating the house price bubble) and to offer households more consumer credit which they will blow on imports (supporting our fake 'retail' economy)
2. Fund a bloated public sector composed of bureaucrats and target setters. Who cares if these public sector employees produce anything!
3000 years for Mr Brown, but it could be american money.
I'll let you do the maths.
I know this. Tell me where I can find the biggest tree to hang the chicken and the politicians. They caused this.
I thank you
Firozali A Mulla
I DO NOT beleive this We had many we won we did it so we can we have to if we want UK? Who wants UK?
WE all DO
I thank you
Firozali A Mulla
The problem seems to be that Britain over the last 50 years has moved from an economy which produces real goods to one which produces almost nothing except hot air. Scottish oil to some extent created this problem and allowed the economy to function pretty well despite the underlying weaknesses. Now that oil is gone and that financial sectors globally no longer generate lots of cash (but very little value), there is a serious problem. And the real jobs have been exported to China. Dont blame the foreigners - have a look at what the economists, financiers, and politicians have been doing or not doing. Britain is not unique in having these problems, but the extent to which we have them is greater than most - if not all - other countries. Labour, Conservatives, UKIP, BNP, EU or no EU - the problems are the same and would be the same.
The answer? Not sure - but determining what the problem and problems are is the first stage to searching for viable answers and feasible strategies to counter depression, depair, poverty and misery in the UK.
Mr Alex Weir (Scottish-born and UK Passport Holder),
Gaborone and Harare, Africa
http://www.google.co.uk/search?sour