Warning: Britain faces new recession

[Francois Cellier]

From the Independent

Warning: Britain faces new recession

Economy set to relapse into dreaded 'double-dip' downturn, say world's central bankers

By Sean O'Grady
Economics Editor
Tuesday, 30 June 2009


The world's central bankers have warned that the British economy faces relapsing into another recession – the much-feared "double dip" downturn.

A continuing drought in bank lending, evidenced in the latest figures from the Bank of England, and the threat that spiralling public borrowing will feed through to higher interest rates and inflation, are judged by international economists to be mortal dangers to a sustained recovery.

The Organisation for Economic Cooperation and Development (OECD), which comprises the 30 most advanced economies in the world, added to the gloom, saying that Britain remained "deep" in recession and faced a "bleak short-term outlook".

"The recovery is likely to be slow and unemployment is expected to climb significantly," it said, adding that the Treasury could do "considerably more" to fix the public finances.

Both warnings are at odds with recent market optimism and so-called green shoots suggesting that output in the economy may be recovering. But the Bank for International Settlements (BIS), which includes the Bank of England, the US Federal Reserve and the European Central Bank, said it feared that the problems of the world's banks are far from fixed and could easily trigger a so-called "double dip" or "W-shaped" downturn. "A major cause for concern is the limited progress in addressing the underlying problems in the financial sector," it said.

"A significant risk is therefore that the current stimulus will lead only to a temporary pick-up in growth, followed by protracted stagnation."

The BIS cautioned that "governments may not have acted quickly enough to remove problem assets from the balance sheets of key banks". It added that financial products should be treated like medicines and sold to consumers only when they are certified safe, to help prevent a repeat of last year's financial meltdown.

Figures from the Bank of England yesterday confirmed that the banks and building societies remain reluctant to lend to any but the most secure of businesses and home buyers. Mortgage approvals barely improved during May, remaining stuck at a little over 43,000 – some way above the nadir of 27,000 last winter, but under half of their normal level. Analysts at Capital Economics said the figures were "consistent with house prices falling at double-digit annual rates".

Detailed data on changes to the money supply indicated that relatively little of the £100bn pumped into the economy by the Bank of England through its policy of "quantitative easing", akin to "printing money", is finding its way as yet into meaningful lending by the banks to small businesses and first-time buyers.

A small improvement in consumer confidence was registered last month, and there is plenty of evidence of more buyer interest at estate agents and of shoppers continuing to shop. However, for as long as the banking system remains reliant on public funding and unwilling to offer credit, little of this still-fragile optimism will be seen in hard purchases of "big ticket" items such as houses, cars and other goods linked to house purchase, such as electrical appliances and furniture.

Figures to be released by the Office for National Statistics are likely to reveal that the downturn in the UK in the first quarter of the year was even more severe than first thought, though most economists think the worst of the slump is over. A CBI survey published yesterday said more than 95 per cent of banks and building societies expected their bad debts to rise over the next few months. Such write-offs will join the existing "toxic assets" on the banks' balance sheets and make them even less willing to take on riskier lending – the much feared "negative feedback loop".

Most embarrassing for ministers is the OECD's "health check" on important public services. The OECD agreed that, since Labour came to power in 1997, health spending has "surged" but "the returns so far appear modest". Ironically, given official enthusiasm for "league tables", the OECD says the UK's economic future is endangered by the inequality of educational achievement – a factor which has left the UK towards the bottom of the league table of advanced economies for social mobility: "International standardised tests show that the UK lags better performing countries significantly."

However, the OECD supports the shift away from targeting: "The focus on raising the school leaving age and meeting performance targets in education may still be distracting attention from the more important goal of raising core literacy and numeracy achievement." It adds: "Adequate provision of public infrastructure should be a priority, particularly in transport where road and airport congestion, and problems in the rail system impede business and constrain productivity."

Ministers have cancelled this year's Comprehensive Spending Review on the grounds that the economic picture is too uncertain and that, after a general election, "tough choices" may become easier to implement. Still, the OECD said it wanted "explicit" detail on spending cuts and tax rises, adding: "Experience in other countries suggests that a focus on expenditure cuts, rather than revenue raising, is associated with more successful consolidations." At the moment, the OECD claims, the Government is not being "ambitious" enough.

[roadkill]

Serves Britain right for exporting its rogues, thieves and convicts to Australia in the 19th century. Sufficient of their descendants are engaged in digging up the continent and selling the land-mass to Asia that we are travelling quite well, thank you.

[Yorkist]

What? (does one have to do with the other)

[P & CA News Bot]

The UK economy contracted 2.4% in the first quarter of 2009, its biggest decline in 51 years, the latest data shows.

More...

[sarmajor]

Originally Posted by roadkill

Serves Britain right for exporting its rogues, thieves and convicts to Australia in the 19th century. Sufficient of their descendants are engaged in digging up the continent and selling the land-mass to Asia that we are travelling quite well, thank you.

Do you think that it is worth our while to buy Britain now - or just to wait for the fire sale?

[Yorkist]

Originally Posted by sarmajor

Do you think that it is worth our while to buy Britain now - or just to wait for the fire sale?

Dream on. Would all you Aussies like some vinegar with those chips?

[Sir Digalot]

aussies better get in quick the chinese are chomping at the bit....

i also know a few americans who wouldn't mind a bit of "culture" for the right price

[sarmajor]

Originally Posted by Yorkist

Dream on. Would all you Aussies like some vinegar with those chips?

No dream Yorkist - I have vinegar with my chips every Friday night

In fact I do not have to order. The fish & chip shop know my requirements (2 dhufish, chips - with salt and vinegar - 1 simoza and 2 battered pineapple rings so they have it ready for me each Friday at 6pm.

One day the world may change and I will amend that order.

[Francois Cellier]

Originally Posted by sarmajor

One day the world may change and I will amend that order.

I am an anarchist ... at least as far as food is concerned. My palate likes to be surprised every day afresh, and there is nothing more boring for me than to know ahead of time what I shall eat tomorrow and the day after.

I go to the food store to shop, and I never make up my mind beforehand as to what I am going to buy. I look around what they have to offer and then decide on the fly. That choice is already half of the joy of eating.

I throw stuff into my shopping cart and then I experiment ... and it hardly ever goes wrong.

[sarmajor]

Actually I have pretty much the same attitude to food as you have Francois however I am limited by the fact that SWMBO is very unadventurous in her eating habits.

As I do most of the cooking I can rarely be bothered to cook two sets of meals so I take the path of least resistance and just cook what she can/will eat.

I know that it is the lazy way out however I have a very busy life (busy is probably not the right word to use compared with your schedule) and do not devote a lot of time to cooking.

We mainly eat grills however Friday is my night off and I go to the fish & chip shop about 200 metres away from my house.

The up side is that if I ate and drank the foods and drinks that I liked I would be even fatter than I am now.

[Francois Cellier]

I'll give you an example of what I mean by surprising my palate.

Everyone eats ravioli. You find them in the U.S. in the stores filled with either riccota cheese or spinach or meat. This is all fine, but after a while, your palate gets accustomed to the taste and is no longer shell-shocked, even if the ravioli are prepared well.

Yet, did you ever try freshly made ravioli filled with chunks of oranges? It's a revelation. Put them on a bed of tomato sauce, preferably "arrabiata" (if you can't get it, buy fresh Roma tomatoes (the oval ones), peel them, crush them finely in the food processor, add a small can of tomato paste (but no catsup, please!), and add two entire fresh serano peppers that you grind together with your tomato). Don't cover the ravioli with the sauce, lay them onto the bed of the tomato sauce -- they are beautiful, like white little boats in a red sea. Then, just before serving, sprinkle a few pine nuts over the plates.

It's the hammer! Try it! If your designated husband hasn't proposed to you yet, this may just possibly do the trick.

[Sir Digalot]

i am the opposite i like to know exaclty what i am eating and i expect a certain taste from the food... variations tend make me enjoy it less

[CatWoman]

Originally Posted by Francois Cellier

I'll give you an example of what I mean by surprising my palate.

Everyone eats ravioli. You find them in the U.S. in the stores filled with either riccota cheese or spinach or meat. This is all fine, but after a while, your palate gets accustomed to the taste and is no longer shell-shocked, even if the ravioli are prepared well.

Yet, did you ever try freshly made ravioli filled with chunks of oranges? It's a revelation. Put them on a bed of tomato sauce, preferably "arrabiata" (if you can't get it, buy fresh Roma tomatoes (the oval ones), peel them, crush them finely in the food processor, add a small can of tomato paste (but no catchup, please!), and add two entire fresh serano peppers that you grind together with your tomato). Don't cover the ravioli with the sauce, lay them onto the bed of the tomato sauce -- they are beautiful. Then, just before serving, sprinkle a few pine nuts over the plates.

It's the hammer! Try it! If your designated husband hasn't proposed to you yet, this may just possibly do the trick.

ah an experimental chef people will either love your food or hate it no middle ground. I myself enjoy the classics but some times I do like to try fusion, atm I'm experimenting with chilli boulagnaise havn't quite got the right ratio of heat yet but sofar results are promising.

[Antiphon]

Nothing wrong with a nice dose of Thai. Burn your palate & sweeten it all at once.

[potter]

Any more if find myself eating chicken sandwitches...or if I'm feeling really gourmet...a frozen meal......

I don't really like to cook much...

The missus likes to cook but her cooking sucks so I won't eat it.

[potter]

Originally Posted by Francois Cellier

Yet, did you ever try freshly made ravioli filled with chunks of oranges? It's a revelation. Put them on a bed of tomato sauce, preferably "arrabiata" (if you can't get it, buy fresh Roma tomatoes (the oval ones), peel them, crush them finely in the food processor, add a small can of tomato paste (but no catsup, please!), and add two entire fresh serano peppers that you grind together with your tomato). Don't cover the ravioli with the sauce, lay them onto the bed of the tomato sauce -- they are beautiful, like white little boats in a red sea. Then, just before serving, sprinkle a few pine nuts over the plates.

That sounds yummy!