Thursday, 3 July 2008
The UK Faces Recession
Every set of numbers released right now suggests the UK is slipping into a serious recession.The housing market is collapsing, retail sales are falling, and now both manufacturing and and services are slowing down sharply. This could well get nasty. The UK should have had a sharp correction in 2001/2002 but Gordon Brown unleashed a tidal wave of government spending, the first that Britain had seen for thirty years or more. That created an illusion of prosperity that has been unsustainable. People are drwing comparisons with the last recession of 1990/91, but that was mainly caused by currency problems. Once those were cured - fairly simply by pulling out of the ERM - the underlying economy was pretty sound. That isn't true today. The underlying economy is over-taxed and over-borrowed. In fact, this could well be the worst recession since 1980/81.