Friday, 29 January 2010
British Banking System No Longer Stable and Low Risk: Standard and Poor
We have been lectured till our ears hurt by Gordon Brown telling us how he saved the banking system, saved the world, put us in the best possible position to lead the world out of recession. We in Scotland have had our neighbours insulted by the fourth rate Secretary of State for Scotland telling us that Ireland and Iceland were backward looking basket cases, and that that is how Scotland would have been if it hadn’t had the blessed United Kingdom to bail it out.
So sure enough, when it came, 3 months after the rest of the G20 countries of course, we were somewhat surprised to find that our “leading” was being done from the rear, and our growth figure was in fact only 0.1%. The Chancellor was obliged to say that even this pathetic little figure could be a blip, and that the figures by next month might be negative again.
A further blow came yesterday when the alarm was raised over the Government’s ballooning debt crisis. International credit rating agency Standard & Poor warned in a report that Britain’s banking industry was no longer stable. It was seen as a further sign that the massive deficit that Britain is running might leave the country close to bankruptcy. And it came amid new warnings of a Bank of England interest rate rise. Standard & Poor’ statement said: “We no longer classify the United Kingdom among the most stable and low-risk banking systems globally.”
It seems to me that we are likely to hit the second leg of the recession in the next few months. A growth figure of 0.1% over the period that included the rush to spend that typifies every British Christmas, is hardly a ringing endorsement of the economy. The fact that unemployment reduced slightly over this period is also not terribly surprising. As anyone who has worked in the employment business could tell you, it happens every year.
But January and February are always hard months for businesses. As well as the credit card bills landing on the mat, there will be the yearly pay offs in shops and restaurants, bars and clubs that mark the end of the spending spree and return to normal.
I wonder how long it will be before the inflation that the quantitative easing is bound to set in train, will start to hit us and add to the misery?