The United Kingdom is braced for the onset of a deep and lasting recession in 2009 which is set to spread downstream from banking into property, retail and then just about anyone else trying to make an honest living in the private sector.
Be in no doubt, this will be the deepest and toughest recession since the 1930's and the UK will struggle more than almost any other country to emerge from it for three critical reasons:
1. The UK became over dependant on banking and financial services in the city and on the magical rise of property prices. Over the last ten years no-one worried about adding value anymore by productive processes or innovation. Even though little real wealth was being generated, we still felt better off because although average salaries had not increased significantly for over ten years, our house was valued at thousands more each year.
2. Much of the public sector in the UK thinks it is the private sector. There used to be a clear demarcation between the private sector that generated wealth via taxes which funded the public sector, who spent this money wisely on essential public services that society needed to function properly. It was quite simple really. Today, the lines are blurred and confused. Local authorities, agencies and NHS Trusts employ consultants to formulate business plans that will allow them to engage with partners and stakeholders while formulating a sustainable strategy. It is all fairly harmless when there is lots of public money to waste but quickly runs in to trouble when tax revenue dries up and essential services fail to be delivered efficiently while it is only the real private sector that can drive the country out of the recession.
3. The politicians running the UK economy appear not to have even the vaguest understanding of basic macro economic principles, or they prefer to play party politics, when they should know better. While the government had little choice but to shore up the poorly regulated banking sector with our money in order to avoid a complete financial melt-down, they cannot now complain that the banks are not lending enough. As new shareholders in some of the big banks the taxpayer does not want to see the banks playing fast and loose with our cash.
This double standard combined with the inept attempt to stimulate a petrified economy with a 2.5 % cut in VAT is as the Germans might say, "crass". The Germans have a good track record on running their economy during the deep recession of the 1970's. It was not them left going cap in hand to the IMF for a bail out. It was the UK.
This might be a "global problem" because it passes responsibility elsewhere but the impact of the "global recession" will be felt more keenly in the UK than almost any other country.
Be in no doubt, this will be the deepest and toughest recession since the 1930's and the UK will struggle more than almost any other country to emerge from it for three critical reasons:
1. The UK became over dependant on banking and financial services in the city and on the magical rise of property prices. Over the last ten years no-one worried about adding value anymore by productive processes or innovation. Even though little real wealth was being generated, we still felt better off because although average salaries had not increased significantly for over ten years, our house was valued at thousands more each year.
2. Much of the public sector in the UK thinks it is the private sector. There used to be a clear demarcation between the private sector that generated wealth via taxes which funded the public sector, who spent this money wisely on essential public services that society needed to function properly. It was quite simple really. Today, the lines are blurred and confused. Local authorities, agencies and NHS Trusts employ consultants to formulate business plans that will allow them to engage with partners and stakeholders while formulating a sustainable strategy. It is all fairly harmless when there is lots of public money to waste but quickly runs in to trouble when tax revenue dries up and essential services fail to be delivered efficiently while it is only the real private sector that can drive the country out of the recession.
3. The politicians running the UK economy appear not to have even the vaguest understanding of basic macro economic principles, or they prefer to play party politics, when they should know better. While the government had little choice but to shore up the poorly regulated banking sector with our money in order to avoid a complete financial melt-down, they cannot now complain that the banks are not lending enough. As new shareholders in some of the big banks the taxpayer does not want to see the banks playing fast and loose with our cash.
This double standard combined with the inept attempt to stimulate a petrified economy with a 2.5 % cut in VAT is as the Germans might say, "crass". The Germans have a good track record on running their economy during the deep recession of the 1970's. It was not them left going cap in hand to the IMF for a bail out. It was the UK.
This might be a "global problem" because it passes responsibility elsewhere but the impact of the "global recession" will be felt more keenly in the UK than almost any other country.
