Wednesday 26 January 2011

Bear Baiting

After yesterdays shock news on the economy, came Mervyn the Wrong's comments on the UK economy. Now, some people who have read this blog for a while will know that we are no fans of the Bank of England here. The Bank was far too complacent before the financial crisis.

Today though, there are bears running riot in every paper and on the Opposition benches. The UK is doomed, the economy is weak beyond belief, everything is terrible.

However, this is far from the truth. No one knows what happened in the figures produced yesterday and they may yet turn out to be well off the mark. Business confidence is at a high level, fewer companies are going bust, people are repaying their debts. Of course, some of this is going to look like GDP fall, but by most measures this is a rebalancing of the economy away from Government debt splurging.

In fact, even the Government borrowing was under the expected amount for December.

Things just are not so grim in the UK to get too over-excited about one GDP number. And Mervyn's point about living standards is correct, which is why having assets like shares, precious metals and commodities is so important to maintain above inflation returns; but we have known this for a long time now.

The real threat to the UK comes from a sclerotic Europe and weak Euro. This is our export market, if the Euro crumbles and Sovereign debt concerns rise about Spain then the UK is next in line and I will be a lot more worried.


Sebastian Weetabix said...

"Europe is our export market" - true enough, but...hmmm... I spend a lot of my time trying to increase my firm's sales into the BRICS, with a modicum of success. I certainly don't need government permission or (heaven forfend) "help"; we chose to do this 10 years ago because any fool could see that Europe's industrial base was going to be hollowed out by the rise of China and the rest, so if we didn't do something we would suffer steady decline. Usually I find people are quite happy to buy from the Brits, and we do still have a name for making some excellent top end stuff. That of course is the key, chasing after humdrum commodity stuff is a waste of time.

But I am always, as a German former colleague liked to say, "negatively astonished" by the huge number of firms in Britain who seem to make no effort to widen their customer base in new markets. No wonder we get our collective arses kicked by the Germans, Japs & Yanks.

roym said...

@SW, perhaps the shove in the back towards new markets is the "help" govt should provide?
long term, boosting language skills, short term, send prince andrew down to south america.

andrew said...

Government statistics are snapshots and when the subject is moving unexpectedly, the picture is more than usually blurry.

I expect a large revision in 3 months time.

CityUnslicker said...

SW - welcome input. I agree, the lack of exporting confidence is critical, as is the (un)willingess of firms to open up offices outside of Europe.

Budgie said...

"... as is the unwillingess of firms to open up offices outside of Europe" ... that's because all governments (our 'leaders') have told us, for the last 40 years, that out future is in 'Europe'. And people have believed them.

Anonymous said...

Our standard of living in plummeting.
Our quality of life is plummeting.
Our life expectancy is plummeting
The chances of decent job are plummeting
Earnings power is plummeting.
Public service provision is plummeting
Food supplies are plummeting

Costs are sky-rocketing

There won't be any good news again in our lifetimes.

Timbo614 said...

@anon 7:14

Well, I've had good news lately so...
My standard of living will rise...etc.

So there is some around :)

At a macro level though - I'm as despondent as you. Luckily I will now have more money to spend on the contingency / tin hat plan.

Anonymous said...

It seems that Proctor and Gamble are expecting a Euro collapse - from a very good source.

Steven_L said...

Someone's got to make the bear case.

ex-export manager said...

@Roym: In the 1970s the government (mainly via the Diplomatic Service personnel resident in-country) ran a very effective operation in persuading (generally first-time) British exporters to make the world their oyster. However, for some unknown reason this international match-making service putting exporters directly in touch with potential clients (and vice versa) was allowed to decline and is but a shadow of its former self - to the general detriment of the UK's exporting efforts. Having been a beneficiary of this service I am fairly sure the opportunities discovered by the folks with their feet on the ground overseas more than made up for the costs of keeping them there.

CityUnslicker said...

Timbo - too true, there is really no such thing as macro - economists are just modelling stuff. There is only micro; there is no society etc.