Having just spent a few days in the United Kingdom, I have to report the mood in London is, to say the least, gloomy. The chancellor, Alistair Darling, will present his first budget today to a country that is increasingly pessimistic about the economic future.
All the lead indicators consumer spending, house prices, retailing footfall are heading downwards. The stock market is fragile, awaiting another dose of bad news from across the Atlantic or even worse a shock within the British financial system.
Northern Rock has been nationalised, at great cost to the British taxpayer, but many believe others are on the brink of serious trouble.
Royal Bank of Scotland is whispered about as the next casualty, and if the worst were to happen at RBS, it would be beyond the financial capacity of the British Government to put it right.
Nationalisation would not be possible in the case of a bank of that size. But it may not come to that RBS has deep pockets and sound management, and may weather the storm.
The British economic “miracle” of the Tony Blair years has now gone sour on his successor, Gordon Brown, who as chancellor assured Britain that the boom-and-busy cycle was a thing of the past, thanks to his “prudential” management of the economy.
In fact, it now turns out that Britain’s Blairite boom was founded on rising property prices and credit availability.
Britain has re-mortgaged its future, and now that values have started to fall, it will pay a heavy price this coming summer and autumn.
As in the United States, the property experts see a decline, even a collapse, in property values. It will not be a pleasant experience for a generation used to living on inflated house values.
“Across the water”, as they say, in my ancestral home Ireland, things are looking even worse. The property boom there has been even more explosive than in Britain, and the government has less room to manoeuvre, being tied to the policies of the European Central Bank via its membership of the euro-zone.
All in all, it is a good time to be in Dubai, which, by the time you read this column, is where I shall be, sheltering from the global storm.
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