Wednesday, 14 July 2010
A look on the bright side
The news is almost without exception bad.
Austerity measures taken by most of the world’s governments have raised fears that we may all fall back into recession. In Britain, this risk is real and though the coalition politicians are talking up the economy, they must know that 40% cuts in departmental budgets will mean increased public sector unemployment, a slack unlikely to be taken up by the private firms.
There will be increased pressure on banks to stay liquid, so lending -both to individuals and companies - will stay constrained. Falling consumer confidence may increase saving levels, but lower saving rates will reduce the income of savers.
But hang on!
Life hasn't been so bad if you are still in work, and most of us are. Unemployment rates are much lower than in the recession of the mid 70's. Mortgage holders have benefited from low interest rates. Credit card debts have fallen and fewer homeowners are borrowing from equity release schemes to fund or maintain an unsustainable lifestyle.
The British are beginning to understand the truth in Micawber’s dictum: Live within your means or the devil will get you. Actually he talked in terms of shillings and pence. The truth applies to businesses too, including UK Ltd.
The Economy needs to grow and Germany provides the template. A diverse industrial base, with their thriving automobile industry and now the leader in solar power technology. Our reliance on financial services makes us vulnerable to threats of exodus by these financial wheeler- dealers. Excessive reliance on this business has hurt even Jersey. Despite healthy surpluses in the past, they are considering a tax ceiling of 50%.
Currently the one industry that is doing well is tourism in Britain. In 2009, there were more domestic tourists than in the previous year, and this may surprise you, tourism contributes more to the economy than financial services.
The news from abroad is also good as far as travel is concerned. According to The International Air Transport Association, scheduled airlines showed an 11.7% increase in passenger traffic in May 2010, despite the European troubles relating to the ash cloud and British Airways’ battles with its cabin crews. This dispute affected passenger traffic from Heathrow, as well as those from Glasgow, Edinburgh and Aberdeen. Overall BAA airports showed a fall in passengers carried in June 2010 of 1.7% over the same month in 2009.
However, if BAA estimates are accepted, without the strikes, Heathrow would have carried 140,000 more passengers in June 2010, an increase of 2.5% over those of June 2009.
Recessions end when people get tired of feeling poor. Reliance on politicians to put things right is wrong. It's time to learn from Polonius's advice to his son: Borrowing takes the edge off husbandry.
So let’s work harder and reward yourself with a well earned holiday!