Economic woes

European car sales continue to fall. There was a 10.7% decline in March, led by a 17.1% annual fall in Germany. France was down 16.2% and Spain 13.9%. UK sales were up 5.9%.

We have witnessed 18 months of falling European car sales (excluding the UK), with the latest figures showing an acceleration of the decline. The IMF has warned that Eurozone GDP will fall by 0.3% this year, which may prove optimistic. The Euro is forcing austerity policies onto the south and west of the zone. It is also impeding monetary growth in the weak countries. The Cyprus bank bankruptcy has n ot helped confidence, and has revealed the dangers of depositing money in weak banks in weak countries in the zone.

Meanwhile, after a period of good growth in employment in the UK, last month saw an unwelcome rise in unemployment, though the claimant count fell in March. Private sector pay is scarcely growing, at just 0.5%. Total pay is just 0.8% higher than a year earlier, with public sector pay continuing to rise faster than private sector. Public sector pay is up by 1.7%.

It looks as if the considerable attempts to ease money in the UK are still being held back by tough regulatory requirements on banks, and by delays to sorting out the balance sheets and loanbooks of the troubled banks with state involvement. Some money is now getting into the residential property sector, but some banks remain unwilling to lend new money for commercial property. The UK has scope to do more to ease the position, as it still has its own currency and monetary policy. It needs to sort out the troubled banks more quickly and thoroughly.

The IMF is going through a very bad period for economic forecasting, constantly forecasting second half recoveries in advanced countries that do not materialise. It is also at war with it self over whether spending cuts help or hinder economic progress. The IMF used to believe that high deficit countries had to cut. Now some of its people are querying this. They are finding it very difficult to understand and forecast the Eurozone, regularly being too optimistic on output and incomes.

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72 Comments

  1. Leslie Singleton
    Posted April 18, 2013 at 6:36 am | Permalink

    There are many criticisms that can be levelled at the banks (I am in complaint with one of them as I write) but being unwilling to lend new money for commercial property is not one of them. The government ownerships are a red herring, the question is why do you expect private entities to behave irrationally? Would you lend for commercial property? Now if you want government involvement, fine, let’s talk about that, otherwise please stop criticizing bank lending policy–itself paradoxically hardly helped by rules placed on them by government. Do you want the banks at least to try to lend safely or not? It’s a simple question of what percentage of loans you are happy to see written off.

    • Vanessa
      Posted April 18, 2013 at 9:38 am | Permalink

      But this is what the banks are supposed to do – lend money to small companies struggling to get a footing and grow into the corporates of the future.

      If they do not do that because the EU says they have to save so much for their next “crash” what is the point of them?

      We should have retail banks for our deposits and current accounts and “merchant” banks to play with money – it worked for over 70 years !!

    • lifelogic
      Posted April 18, 2013 at 12:23 pm | Permalink

      Development and Commercial property lending is still very difficult at sensible rates and LTVs, mainly due to new banking, regulation rules. It may not be the bank’s fault but it is certainly damaging industry, confidence, jobs and growth in the UK and EU.

      • Bazman
        Posted April 18, 2013 at 8:02 pm | Permalink

        England as Switzerland with no regulations with easy hire and fire and Dingbat as Prime Minister would solve all that.

    • Ralph Musgrave
      Posted April 18, 2013 at 1:36 pm | Permalink

      The definition of lunacy: we have a credit crunch caused by excessive and irresponsible borrowing, and with a view to escaping the ensuing recession, governments slash interest rates so as to encourage more borrowing and repeat the disaster.

    • English Pensioner
      Posted April 18, 2013 at 8:11 pm | Permalink

      Banks are in a no-win situation.
      If they loosen their criteria for lending, and then get too many defaulters (as happened in the past), they are accuse of being reckless. If they tighten their criteria to reduce potential defaults, they are accused of failing business.
      Perhaps some of those who want increased lending to business should consider lending it direct rather than via a bank; somehow |I don’t think they’d take the risk.

  2. margaret brandreth-j
    Posted April 18, 2013 at 6:43 am | Permalink

    If the IMF’s forecast are going askew then the latest prediction of a 0.3% fall is not to be trusted. I am surprised that the UK has continued to buy (and I think you mean new cars)
    as the depreciation is so great between a new and a 2 year old car it is hardly worth buying new. I suppose fleet cars will always buy new as that due to the wear and tear would be worth the outlay.
    The rail networks in some of the EU countries has greatly improved .If people are encouraged to use rail travel then car sales should fall as a consequence .
    I hear of companies now struggling because they have laid off staff and the younger less experienced staff are not managing well. Seventy year olds have been brought back to save the ultimate mess of failure.

    • oldtimer
      Posted April 18, 2013 at 10:56 am | Permalink

      There is heavy discounting in the new car market at the moment because of weak sales in Europe. There is also significant overcapacity leading to assembly plant closures and layoffs, especially in France and Germany – Opel, Renault and Peugot especially are under the cosh. If you are in the market for a new car, you should be able to negotiate a hefty discount.

      Many new car sales are achieved through leasing deals, with guaranteed buyback prices after three years or similar; these deals are often manufacturer financed.

  3. lifelogic
    Posted April 18, 2013 at 7:03 am | Permalink

    Well hardly surprising given a bloated, over paid, frequently pointless and largely incompetent state sector mainly inconveniencing the private sector while living off its taxes and killing it by doing so.

    Poorly run, ever big state type of government across nearly all of the EU, a daft expensive by decree energy religion, more regulation at every turn (gender insurance, PAYE, employments, safety, letting agencies, energy nonsense, electric car and HS train nonsense, building reg nonsense, planning nonsense ……), pay increases largely only for the mainly parasitic sector – what does one expect? This on top of a dis-functional health and education system.

    But this is clearly what the serial ratters, Cameron and Osborne, seem to want – with all their hearts and souls.

    • lifelogic
      Posted April 18, 2013 at 1:25 pm | Permalink

      The usual common sense from Delingpole I see today – as the absurd Carbon trading scam falls to pieces – It’s time to shoot the husky Dave in fact well past time. Alas you lumbered us with Clegg and the Libdums and all you fake green veneer so it is harder alas.

      http://blogs.telegraph.co.uk/news/jamesdelingpole/100212713/time-to-shoot-the-husky-dave/

      • Mark W
        Posted April 19, 2013 at 6:07 am | Permalink

        Seeings that so much of our economy is reliant on energy I can’t see how a serious recovery can ever get underway whilst our own government is strangling it.

        The carbon taxes should be scrapped. This could leave a contractual pay off to the windmill people.

        The other huge shakeup would be to replace fuel duty with VAT (at the current rate). (That is quite a nasty looking percentage too). Whilst that will not alter things for private motor vehicle use, all commercial users Lorries, vans, buses (which do have a fuel tax reduction albeit dwindling). Would reclaim all the VAT.

        Electricity and has should have all VAT removed and all the other invisible tosh.

        Fund it from the growth it would kick start.

    • Bazman
      Posted April 18, 2013 at 5:40 pm | Permalink

      And Britain becoming more like Switzerland is going to fix all this nonsense? How so?

  4. Mike Stallard
    Posted April 18, 2013 at 7:17 am | Permalink

    The Debt. Racing upward.
    That means very low interest rates so the banks can support the government’s borrowing requirements.
    That means that it is not worth investing because you get little return.
    That means that the banks have nothing to give manufacturers and industrialists.
    Add on the mass of EU regulations, each one, no doubt gold plated.

    The wonder is that we are doing so well! Good for the car industry! Good for the people going into work!

  5. Ben Kelly
    Posted April 18, 2013 at 7:24 am | Permalink

    All you say above result from the markets not correcting themselves through failures of weak companies.

    Government can continue to support bubbles or it can watch while systems collapse.

    I am minded to believe that the man in the street with low savings and a steady job would be relatively unaffected by a reboot as long as the government sticks to its guarantee of £85K savings and only the wealthy would suffer unduly.

    I am quite comfortable to try this rather than being slowly bled dry through taxes and cost of living imcreases which make it unappealing to keep getting up in the morning and going to work so that public sector mandarins keep picking up their (frankly ridiculous) salaries, the rich are protected and those on benefits remain over provided for.

    • A different Simon
      Posted April 18, 2013 at 1:55 pm | Permalink

      “cost of living imcreases which make it unappealing to keep getting up in the morning and going to work”

      People seem to be working out that they can’t win because the game is fixed .

      If they are going to have to work till they drop they better take their foot off the gas and pace themselves .

      This must have some impact on the economy , maybe enough to show up on official figures .

      No matter how hard the status quo fights a reset with bailouts , socialising losses etc , it is surely the only way out of this mess .

    • Monty
      Posted April 18, 2013 at 4:49 pm | Permalink

      Ben:

      “I am minded to believe that the man in the street with low savings and a steady job would be relatively unaffected by a reboot as long as the government sticks to its guarantee of £85K savings and only the wealthy would suffer unduly.”

      At first glance I would tend to agree with that. But there is another potential pitfall I would worry about. For example, say we allowed the bad banks to fail, and provided protection only for the £85K deposit accounts, what effect would that have on the pension funds? My fear is that it could be catastrophic.

  6. Steve Cox
    Posted April 18, 2013 at 7:54 am | Permalink

    Private sector pay is scarcely growing, at just 0.5%. …with public sector pay continuing to rise faster than private sector. Public sector pay is up by 1.7%.

    So much for the supposed public sector pay freeze. Like just about everything else in George Osborne’s deficit reduction strategy, it’s just so much hot air. It also shows why there’s no growth. With overall pay increasing by just 0.8% and inflation consistently around 3% or more, average spending power is being eroded by over 2% per annum in real terms. The government seems unlikely to force companies to give their staff higher pay rises, so if it wishes to see real growth return to the economy it has to get inflation down. The only way of doing that is to strengthen Sterling significantly (never mind the effect on manufacturing, which only constitutes 11% of the economy anyway), which will mean normalising interest rates and stopping QE, or any other inflationary monetary idiocy. So which would companies prefer: a return to normal interest rates and the prospect of growth, a new law forcing them to award above-inflation pay increases to all their staff, or for this neverending mess to go on as it is?

    • uanime5
      Posted April 19, 2013 at 3:47 pm | Permalink

      Technically by raising the minimum wage the Government can force companies to pay some staff more money.

      • Edward2
        Posted April 19, 2013 at 4:48 pm | Permalink

        Uni,
        Technically its not the companies who will pay the increased minimum wages you propose, it is their customers who will pay with higher prices when they buy from these businesses.

  7. a-tracy
    Posted April 18, 2013 at 7:55 am | Permalink

    German cars have a tough job competing against Lexus now, with their hybrid cars being preferred by company fleet operators with any sense.

    One problem with the UK car industry is that they source less of their components in the UK and our great companies, employers like Lucas Rists Wire and Cables are now housing estates where large workforces used to be employed.

    • StevenL
      Posted April 18, 2013 at 11:23 pm | Permalink

      I dunno about that, those Lexus’s are expensive and modern turbocharged cars are pretty efficient. If I were getting a lease car I wouldn’t look much further than one of the new Fiesta’s, perhaps a Zetec S, but preferably the ST. They are made in Germany.

  8. Gary
    Posted April 18, 2013 at 8:00 am | Permalink

    The IMF are bad at forecasting, the govt is bad at forecasting, you and I are bad at forecasting. Welcome to the unknowable future. Welcome to economics.

    The markets will eventually bring this whole mess down. The more govts try and manage and manipulate the economy,the more certain it will come crashing down. That is the only forecast that is possible to make.

    • John Doran
      Posted April 18, 2013 at 6:46 pm | Permalink

      Common sense, not Common Purpose.

    • Anthem
      Posted April 18, 2013 at 10:19 pm | Permalink

      I started off disagreeing with your comment after the first paragraph but got your gist with the second.

      As Albert Einstein famously said (I think), “Insanity: doing the same thing over and over again and expecting different results.

      Governments have been tinkering with the economy for centuries and here we are – in a complete mess.

      When will someone in power with half a brain come forward and make the necessary cause and effect observations?

      If I could add just one word to your first paragraph to bring it more in line with the second, it would be to change it to “Welcome to Keynesian economics”.

    • margaret brandreth-j
      Posted April 19, 2013 at 4:30 pm | Permalink

      This is what I said angrily 18 years ago ,when I perceived the changes rapidly happening around me and felt impotent.
      Governments were talking about business going overseas and going global as though they had control over buying ,selling and demand. The markets were already there.

  9. Mike Wilson
    Posted April 18, 2013 at 8:08 am | Permalink

    Why on earth do we need more commercial buildings? Bracknell, for example, is full of empty offices and industrial units. There are roads with To Let signs outside almost every commercial building.

    And our High Streets are full of empty shops – so we don’t need more of them.

    And, as for car sales. Why on earth do we build and buy so many cars? It baffles me. If I buy a new car, which I have a couple of times, I want 20 years use out of it.

    • alan jutson
      Posted April 18, 2013 at 4:49 pm | Permalink

      Mike

      I am with you on both topics.

      Some Bracknell offices have been empty since they were built some 10 – 15 years ago.
      My Daughter who used to work for a Commercial Estate Agency Company many years ago. Said they were asked at the time by a number of Developers what size offices they should build which would be in demand.
      They were informed anything as long as it was way above, or way below 30,000 sq ft.

      In their wisdom the developers chose to ignor such advice, and that is why most of the 30,000 sq ft offices they built have been empty for years.

      Also agree with you about long term car ownership.
      The last Japanese car we owned lasted 18 years (cost £5,000 when two years old) and ran without missing a beat, so we purchased that make again, only this time a pre registered model at a huge discount.
      If it lasts as long as the last one, then that is cheap motoring.

  10. Brian Tomkinson
    Posted April 18, 2013 at 8:23 am | Permalink

    JR: “They are finding it very difficult to understand and forecast the Eurozone, regularly being too optimistic on output and incomes. ”
    How much is that the influence of Christine Lagarde who seems to be the Eurozone’s representative running the IMF? She seems as dedicated to sustaining the Euro whatever the cost as is Brussels. I thought the role of the IMF was to help countries, not currencies, or is there already a country called Europe?

    • John Doran
      Posted April 18, 2013 at 6:53 pm | Permalink

      The IMF is dedicated to one world govt, for which the EU is seen as the forerunner. The project is failing.

  11. Denis Cooper
    Posted April 18, 2013 at 8:45 am | Permalink

    “The Euro is forcing austerity policies onto the south and west of the zone.”

    Yes, according to our Dutch correspondent the Netherlands must now be included among the distressed eurozone states.

    • Peter van Leeuwen
      Posted April 19, 2013 at 6:13 am | Permalink

      @Denis Cooper: True, but one can hardly blame the popping of a Dutch housing bubble on the Germans. That honor should go to former Dutch politicians (fearing rich voters and keeping a mortgage tax rebate system in place) and Dutch banks (dangerous mortgage constructs). The sales of bicycles is doing well, and exports are up as well, we will survive this current adversity.

      • Denis Cooper
        Posted April 19, 2013 at 5:02 pm | Permalink

        I don’t expect you’ll have too many Dutch children searching for scraps of food in rubbish bins.

        http://www.nytimes.com/2013/04/18/world/europe/more-children-in-greece-start-to-go-hungry.html?_r=0

        “ATHENS — As an elementary school principal, Leonidas Nikas is used to seeing children play, laugh and dream about the future. But recently he has seen something altogether different, something he thought was impossible in Greece: children picking through school trash cans for food; needy youngsters asking playmates for leftovers; and an 11-year-old boy, Pantelis Petrakis, bent over with hunger pains.”

        “He confronted Pantelis’s parents, who were ashamed and embarrassed but admitted that they had not been able to find work for months. Their savings were gone, and they were living on rations of pasta and ketchup.”

        Still, it’s all in a good cause, isn’t it?

  12. Denis Cooper
    Posted April 18, 2013 at 9:10 am | Permalink

    The eurozone may be failing in economic terms – Bundesbank chief Jens Weidmann has just said that it may take ten years to overcome the crisis – but that doesn’t really matter to the eurocrats because it’s succeeding brilliantly in political terms.

    Wayward nations whose politicians abused the new opportunities afforded by sharing a currency with Germany are now being crushed and humiliated and hammered into line, with their troublesome national parliaments stripped of power.

    It was striking yesterday when the Dean of St Paul’s said “pray for this nation, giving thanks for its traditions of freedom, for the rule of law and for parliamentary democracy”, traditions which are clearly incompatible with membership of the EU.

    • John Doran
      Posted April 18, 2013 at 6:58 pm | Permalink

      Amen.

  13. Wotnoschool
    Posted April 18, 2013 at 9:12 am | Permalink

    The IMF seems to have become a politicised and suspect organisation. I first became aware of it when Jim Callaghan had to call on it for help in the 70s. We were immediately ordered to undertake some very severe ‘austerity’ measures in return for their financial help just as any sensible bank manager would.
    This time, it seems to be run by Europeans who want the UK to relax purse strings in pusuit of the false god of GDP. Perhaps this is because they can see that the UK govt strategy is working whereas the the French one isn’t. Large parts of the economy are doing well in the circumstances. Maybe the head of the IMF (who has aspirations to become President of France one day soon) and her Chief Accountant are worried that this country will recover more quickly and robustly than their own.

    • uanime5
      Posted April 19, 2013 at 3:51 pm | Permalink

      Given that the UK isn’t growing that much faster than France, despite being able to print money instead of borrowing it, I wouldn’t say the UK strategy is working better than the French one. The German strategy on the other hand …

      • Denis Cooper
        Posted April 19, 2013 at 5:11 pm | Permalink

        I think an essential element of the German strategy was NOT to have Gordon Brown as Finance Minister.

        We’ll never know for sure what would have happened in 2009 if we’d been in the euro and so the Labour government couldn’t have got the Bank of England to lend it £198 billion of new money to help pay its bills.

        The government of Greece couldn’t do that, and for some idea of how it would probably have turned out here see above about children in Greece looking for food in rubbish bins.

  14. Roger Farmer
    Posted April 18, 2013 at 9:29 am | Permalink

    The solution for the UK is to revert to EFTA trading status with the EU, at a stroke ending the constant stream of socialist legislation that pours from Brussels. Internally I suggest divesting ourselves of failing banks and then doing everything tax wise to reduce the burden on what is left of industry. Add to this a five year block on all forms of state pay. If the civil service don’t like it then they can take their talents elsewhere. A cap of £26,000 a year on benefits is crazy, you would, if employed, need to earn about £32,000 to match it. If pensioners are only worth about £105.00 per week after a lifetime of work and contributions why are the feckless worth more. Overseas aid should only be for emergencies of catastrophic proportions. It’s drastic reduction might allow us to educate the seed corn of our future properly. This government have no intention of doing anything approaching the above so a vote for a more Thatcher like party would seem appropriate.
    For Mediterranean Europe the answer involves divesting oneself of the poisonous euro. The borrowing levels of these countries is such that they are never likely to be able to repay what they owe. They should bite the bullet and revert to their old currencies allowing devaluation which might be hard in the short term but within five years would see them able to compete in the World once more. Spain for instance now has to compete with India, Thailand, Croatia, and many other possible holiday destinations. They cannot when a pint of beer costs Eu.3.70 as an example. To help Spain’s reversion to the peseta she would have to introduce a price freeze on everything. Sadly no one in political Spain will have the guts to do it because she is a net beneficiary of EU largesse. I predict however that along with many other countries in southern Europe they are turkeys voting for Christmas. There is a limit to how long Brussels can kick the can down the road.

    • alan jutson
      Posted April 18, 2013 at 4:56 pm | Permalink

      Roger

      Agree with much of what you say.

      Pensioners on £105 per week basic, much more income and its taxed.
      Jobless on up to £500 per week TAX FREE.

      Who in their right mind believes this is equitable, sensible, affordable or even fair ?.

    • John Doran
      Posted April 18, 2013 at 7:09 pm | Permalink

      Roger Farmer for Chancellor.

    • uanime5
      Posted April 19, 2013 at 4:08 pm | Permalink

      The solution for the UK is to revert to EFTA trading status with the EU, at a stroke ending the constant stream of socialist legislation that pours from Brussels.

      EFTA countries have to implement almost all EU laws, even though they have no influence over these laws.

      Add to this a five year block on all forms of state pay. If the civil service don’t like it then they can take their talents elsewhere.

      Given that when many Border Agency staff were fired the result was increased delays at airports expect similar disasters if Civil Servants leave.

      If pensioners are only worth about £105.00 per week after a lifetime of work and contributions why are the feckless worth more.

      Job Seekers Allowance is £71 per week, so it’s clear that the Government does consider the unemployed to be worth less than pensioners.

      For Mediterranean Europe the answer involves divesting oneself of the poisonous euro.

      Ditching a stable currency for a new, less stable one will just make their problems worse.

      They should bite the bullet and revert to their old currencies allowing devaluation which might be hard in the short term but within five years would see them able to compete in the World once more.

      Got any evidence to back up this claim. Make sure you explain how countries that currently have little to compete with will suddenly be able to compete after devaluing and why devaluing hasn’t made the UK more competitive.

      Spain for instance now has to compete with India, Thailand, Croatia, and many other possible holiday destinations.

      Did you just pick three random countries? Why would anyone who goes on holiday to Spain want to go to India, Thailand, or Croatia?

      They cannot when a pint of beer costs Eu.3.70 as an example.

      So you’re saying that if alcohol was cheaper in Spain more people would go to Spain on holiday rather than go to India? What about all the people who go on holiday for reasons other than drinking?

      Sadly no one in political Spain will have the guts to do it because she is a net beneficiary of EU largesse.

      Spain can still benefit from the CAP and CFP even if it leaves the EU, so your argument is flawed.

      In conclusion Spain isn’t going to leave the euro and devalue its currency so people in the UK can have a cheaper holiday in Spain.

      • Denis Cooper
        Posted April 19, 2013 at 5:12 pm | Permalink

        “EFTA countries have to implement almost all EU laws, even though they have no influence over these laws.”

        Wrong again.

  15. Kenneth
    Posted April 18, 2013 at 9:46 am | Permalink

    The unravelling of the Euro could start with little Cyprus. I can see it printing its own money before very long.

  16. behindthefrogs
    Posted April 18, 2013 at 10:06 am | Permalink

    We need the government to take some immediate actions to help improve the economic imbalance. Firstly we need an immediate reduction in employers’ NI contributions which does more than that proposed and delayed by a year in the recent budget.

    More important we need some positive action to improve “onshoring”. In the context of this blog this should mean more components manufactured locally for UK produced cars.
    We also need more call centres moved back to the UK. I and many like me suffer from a major productivity loss by trying to communicate with centres located on the Indian subcontinent.

  17. Pleb
    Posted April 18, 2013 at 12:31 pm | Permalink

    Public sector pay should be capped at 50k
    Public sector pensions should be capped at 50k
    Scrap HS2
    Scrap Trident
    Reduce MPs to 500.
    Stop payments to the EU.
    Sell the BBC

    • John Doran
      Posted April 18, 2013 at 7:11 pm | Permalink

      Please.

    • Bryan
      Posted April 18, 2013 at 9:11 pm | Permalink

      Given that the BBC put up George Galloway to give his views on Mrs Thatcher surely it is time the BBC was made to face the the future as a privatised company. The marketplace would soon make it face reality.

  18. Barbara
    Posted April 18, 2013 at 12:42 pm | Permalink

    And Osborne has just, from April 1st, lumbered us with an escalating carbon floor price that will finally sound the death knell for British manufacturing; even the EU has walked away from such a suicidal move. Only the UK will be hampered.

    ‘UK industrialists have warned they face “catastrophic” problems after the European Parliament voted down a plan to raise the cost of carbon pollution across the EU’, reports the Financial Times.

    • John Doran
      Posted April 18, 2013 at 7:12 pm | Permalink

      Osborne just signed his resignation letter.

  19. pleb
    Posted April 18, 2013 at 1:14 pm | Permalink

    Testing 123

  20. Ralph Musgrave
    Posted April 18, 2013 at 1:33 pm | Permalink

    Westminster politicians including JR are obsessed by banks. If borrowing is so important to the recovery, will someone explain why economic growth was perfectly respectable 30 years ago despite debt (household and corporate) being a fraction of the level we now see? For a chart showing this massive expansion in debt, see first chart here:

    http://www.economicshelp.org/blog/4060/economics/total-uk-debt/

    • A different Simon
      Posted April 18, 2013 at 11:30 pm | Permalink

      What is wrong with you Ralph Musgrave ?

      Are you objecting to working for the bankers for next to nothing ?

      You don’t sound like a team player . More like an insurgent .

      I’ll have to report you and get a European arrest warrant issued and have you taken away never to be heard of again .

      While we are at it can you please explain how we supposedly own the banks yet are enslaved by them ? Is it a paradox ?

  21. Andyvan
    Posted April 18, 2013 at 1:41 pm | Permalink

    Quite honestly I’m amazed that UK car sales are up. My business is 30% down overall compared with this time last year. At the moment I hear of many businesses that are finding sales extremely thin and many are considering laying off workers. The only thing that is increasing is cost. Landlords wanting more rent, raw materials going up, taxes already crushingly high.
    I strongly suspect that the figures bandied about are the usual mess of lies, distortions, half truths and wishful thinking that characterize discussions on tv and in the press. As far as I can see the only business that is doing well is the parasite public sector.

    • JimF
      Posted April 18, 2013 at 6:20 pm | Permalink

      Nope, turnover up 30% yoy here.
      Profits up less as I take on more workers to do parts of my former job so overall productivity (mine as well) well down.
      My tax bill also well down.

    • Bazman
      Posted April 18, 2013 at 7:50 pm | Permalink

      And the parasite utility companies joining along with the coffee chains avoiding corporate taxes on the basis that they employ people. Unlike coffee you cannot avoid gas/electricity bills. Ripped of twice no less on bills and taxes by six foreign owned companies.

    • Anthem
      Posted April 18, 2013 at 10:29 pm | Permalink

      And, by what you have just said there, the “landlord business” and the businesses which supply you with your raw materials?

      Maybe you’re just in the “wrong” business?

  22. Mark
    Posted April 18, 2013 at 3:42 pm | Permalink

    Trying to tip more money into residential lending is like indulging in half a dozen double vodkas on top of a hangover – ill advised, and likely to prolong the ailment and make it more severe or even life threatening.

    Looking at the Land Registry’s latest data it is easy to see that the only strength in the market is for the most expensive London properties (page 13).

    http://www.landregistry.gov.uk/__data/assets/pdf_file/0008/37448/HPIReport20130325.pdf

    Outside of London the £1m+ market is essentially stagnant. At lower price ranges (and especially in London) the market has seen sharply lower volumes. This indicates that much of the money coming into the property market is from rich (mainly foreign) cash buyers seeking to use London property as a wealth safe haven – creating their own bubble in the process. For most of the rest of the market, prices are only viewed as affordable by small numbers of net buyers, among whom BTL landlords figure significantly, as mortgage lending statistics reveal.

    • stred
      Posted April 19, 2013 at 2:12 pm | Permalink

      Yes. A lively increase in expensive million+ houses in parts of London, while east london fell in value in some areas. Perhaps the rich British are selling to go to havens abroad, while foreign wealthy can take advantage of tax limits in the UK. Nuts!

      Re. Buy to let. My East London neighbour has been letting for 7 years and now wishes to sell. He pays £600 for his mortgage and receives £800 rent via Barking council. The expenses leave no profit and the value is falling. How BTL is expanding in these circumstances is a mystery, unless it is with cash purchases when bank accounts are even less profitable and risky.

  23. Acorn
    Posted April 18, 2013 at 4:14 pm | Permalink

    Cheer-up JR, some days are good days! I met a lady this morning who actually knew why she had recently been sent a Poll Card. Who says folks just ain’t interested in County elections?

    Anyway, you may remember that back in 2010, George Soros said, at the inaugural meeting of his INET think tank (at King’s Cambridge); that he could trace the super bubble that exploded in 2007, back to its origin in 1980; the start of the Reagan – Thatcher fiscal austerity interlude, namely her “MEDIUM-TERM FINANCIAL STRATEGY”. (Not sure who wrote that for her?). We know how that ended, and the fact that the lady did actually turn, eventually.

    The thing is I (now) know this and you certainly know it. The Great Depression and Mrs T attempting to re-run it in 1980; is now getting a third outing in the shape of Cameron – Osborne. Even the IMF’s Christine Lagarde and Olivier Blanchard are waking up to how modern sovereign fiat currency systems work. And, how they don’t work in the Euro-zone.

    They say madness is attempting to do the same thing over and over again and expecting a different answer. Is there any way you and a few of your MP mates could perform a coup d’état at the Treasury. This is all getting very serious now.

  24. Jon
    Posted April 18, 2013 at 5:45 pm | Permalink

    Public spending is not being cut and that has cut the private sector more which we need for the recovery. The stimulus to the private sector is reducing the public spend and point made about restricting what the banks can lend at this time.

  25. Bazman
    Posted April 18, 2013 at 5:54 pm | Permalink

    If you are fearful fore your job and the future the last thing you are going to be doing is going out and buying a new car. Everyone is keeping hold of them it would seem and paying for repairs to old ones, however they can only do this for so long cars have got better and increased their longevity though. My 1999 Mondeo is nearly finished, but even though at the moment things are not to bad there will not be another three year old replacement as the Mondeo was and the idea of getting another mortgage is beyond a joke. This idea of putting everyone in fear of their work and cuts to benefits does have a knock on effect and is neatly illustrated in the car market. How many Mondeos will be sold due to the millionaires tax cut? Not many I suspect and few second hand ones for sure. Council tax fully paid and tin hat being worn. Maybe their could be some sort of tax to extract money from people and their partners who work, but do not have a mortgage/rent and are not middle class and still get benefits. Would be popular I’m sure due to jealousy, mean mindedness and thinking that the rich should not pay. A new Tory policy. Well almost new. Bedrooms are paid for so no slack there. Ram it.

  26. Electro-Kevin
    Posted April 18, 2013 at 6:32 pm | Permalink

    What can be done about zero levels of corporation tax from privatised utility companies ?

    (and the escalating customer bills/escalating profits – going to foreign economies in some cases)

    • sm
      Posted April 19, 2013 at 7:22 pm | Permalink

      We need to look at what is an appropriate level of debt in a company which is allowed for tax deductions.

      If loan capital was not tax preferred, there would be less financial risk in firms.

      The issue of privately created interest bearing debt all over again.

    • Mark
      Posted April 19, 2013 at 7:34 pm | Permalink

      Stop the absurd investment in uncompetitive sources of energy: then there won’t be the depreciation bills to offset against gross profits, and tax will apply. More to the point, we’d have lower energy bills.

  27. English Pensioner
    Posted April 18, 2013 at 8:24 pm | Permalink

    I still fail to see why the government thinks that more building and construction are our salvation. These bring nothing into the country (except immigrant labour) and do nothing for our balance of trade. The government should be assisting all those companies who are producing products for export to countries outside the EU.
    As one of your Conservative colleagues noted recently, Honda, at Swindon, who make cars for the European market have had to cut back production due to reduced demand, whilst Jaguar-LandRover, who concentrate on non-EU markets, have recently had to start an extra shift. We need to be concentrating on the new Asian markets and also South America, not on building at home which seems to do little to increase the overall wealth of the country.

  28. Breyan
    Posted April 18, 2013 at 9:07 pm | Permalink

    Given how well the French economy is doing, and ignoring the occasional french financial scandal, it must be most welcome to our government to have the French management of the IMF telling us how to run our economy!

    Froxymoron surely?

  29. waramess
    Posted April 19, 2013 at 11:25 am | Permalink

    We are still in a bubble depite the so called recession.

    Banks have been saved from having to properly address their bad debts; house prices remain at a stupidly high level; interest rates allow companies and the private sector to avoid failure and permit the state to continue growing and, we think we can see growth?

    Absolute. nonsense. No less than a failed regime looking to one quarters figures (as all failed regimes do) for temporary salvation.

    Pull the props away and the entire edifice collapses so why look to more credit to resolve the problem? The economy and the size of the state are being sustained at a false level and have to be allowed to shrink before growth can be expected.

  30. uanime5
    Posted April 19, 2013 at 4:10 pm | Permalink

    The IMF has warned that Eurozone GDP will fall by 0.3% this year, which may prove optimistic.

    Well given that some eurozone countries are having severe economic problems it’s no surprise that the average will be low. However this doesn’t mean that the GDP of all eurozone countries will shrink.

    The IMF is also forecasting that the UK will grow 0.7% but this had been downgraded several times and may be downgraded again.

    http://www.independent.co.uk/news/uk/politics/double-blow-for-george-osborne-as-imf-downgrades-uk-growth-forecast-and-calls-for-a-plan-b-8575457.html

    The Euro is forcing austerity policies onto the south and west of the zone.

    The UK also has austerity policies, which are resulting in low growth. Maybe we should try something else.

    Meanwhile, after a period of good growth in employment in the UK, last month saw an unwelcome rise in unemployment, though the claimant count fell in March.

    While employment may be increasing unemployment has remained around the 2.5 million mark for some time. So it seems that while jobs are being created they’re not being created fast enough.

    • Denis Cooper
      Posted April 19, 2013 at 5:22 pm | Permalink

      Like Peter van Leeuwen, you don’t grasp what “austerity” means for people who are experiencing the real thing rather than the mild version we have here.

  31. sm
    Posted April 19, 2013 at 7:49 pm | Permalink

    Per Prof Steve Keen
    We could create money per capita and distribute it to all individuals – to pay down debts first or spend freely within the UK economy if debt free.

    This would speed up deleveraging by the private sector and rebalance the economy. The banks would then get some cash back and this could help them better than funding for lending.

    Why not £60 billion, £1000 per capita. Bank reserves could be moved up to roughly match thus minimise inflation. It would also recapitalize the banks. If it doesnt, then resolve them and QE new banks. Maybe even raise interest rates slowly.

    We could even consider building our own power stations or not close existing servicebale plant.Anyway would it not be more expedient and cheaper to build a few more interconnector cables given the time scales. I understand some french nuclear plant load follow, so with more export cables the plants could run flatout. We could then use coal/gas etc to manage our peaks.

    Arent we a crisis country? so when do we invoke national security to overide previous erroneous decisions.

    • Denis Cooper
      Posted April 20, 2013 at 9:10 am | Permalink

      The government has already distributed the best part of £375 billion of new money among the population, say about £6000 per capita once an allowance has been made for transmission losses when the money was routed from the Bank to the Treasury through the gilts market, and deductions have been made for the portions sent abroad to the EU and for other forms of “international aid” rather than being spent into the UK economy when the government paid its bills.

      The difference is that the government has not distributed the average of £6000 per capita uniformly across the whole population as suggested but instead has used it as part of its normal payments to employees of the public sector, to contractors and suppliers to the public sector, to state pensioners and welfare beneficiaries, and to all the many bodies which receive grants for one reason or another.

      In 2009 about a quarter of all the money being spent by government was in effect newly created money indirectly borrowed from the Bank.

      If we still lived in the pre-electronic era and the Bank had literally printed £375 billion, and that physical money had then been spent by the government to help pay its bills, people would probably have noticed an increase in the number of crisp new banknotes among the notes and coins in their wages and pensions etc, and those new banknotes would have been spent in the shops etc and so would have spread around the whole of the economy.

    • waramess
      Posted April 20, 2013 at 9:21 am | Permalink

      Just goes to show how out of touch these Keynesians are. They still think they can magic money out of nowhere and now they think that by giving it to us directly the economy will improve.

      What in fact they would be doing is devaluing the existing stock of money and giving us the proceeds to pay down debt. A zero sum game which does nothing other than redistribute wealth from poor people to to rich people.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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