Genuine Recovery
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Most economic indicators suggest that the word ‘recession’ no longer applies to the state of the UK economy, there is growth in the economy, albeit limited, and whilst the financial markets have been volatile in recent weeks, talk of a double-dip recession is still just that: talk.
However, looking at the top line figures isn’t always the best way of telling what’s been going on, and if you begin to dig a little bit deeper you can see that things remain incredibly difficult for millions of people across the UK.
Most economic indicators suggest that the word ‘recession’ no longer applies to the state of the UK economy, there is growth in the economy, albeit limited, and whilst the financial markets have been volatile in recent weeks, talk of a double-dip recession is still just that: talk.
However, looking at the top line figures isn’t always the best way of telling what’s been going on, and if you begin to dig a little bit deeper you can see that things remain incredibly difficult for millions of people across the UK.
Evidence of this is found in the quarterly insolvency figures. In the first three months of 2010 a new record high was recorded for the number of people who were declared bankrupt. The total figure of nearly 36,000 people was almost 20% higher than the same period the previous year, although it was only a slight rise since on the figures of the previous quarter.
The figures also revealed that the number of companies going bust fell sharply, down 25% on the same quarter in 2009 and down 8% on the previous month. This, of course, is a good sign, and suggests that things are looking better for companies, or that those who were susceptible to going bust have done, nonetheless it takes a while for this upturn to filter down to individuals.
And whilst it does, it’s the individuals who still pose a problem. In the two years running up to the financial crisis, the UK’s residents borrowed £86bn on the value of their homes, in the last two years, we’ve paid £36bn back, and the housing market crashed in between, that leaves a massive amount of equity missing from the market, and one that could pose a problem should people need to take more equity out of their houses if there is a further recession.
The simple problem is that the credit hole that we, as a nation, got ourselves into was incredibly deep, and people have been trying to ‘dig upwards’ to get themselves out and more credit is not the solution.
The long and short of it is that whilst the top line figures might be promising, underneath the finances of the nation aren’t robust enough to deal with a double-dip. The number of people who will declare themselves insolvent could be even worse than the first time round and really put the banks, and therefore the British taxpayer, in trouble. It’s not a positive outlook.
