Business Recovery and Insolvency Practitioners

Join the Poppleton & Appleby mailing list for up to date insolvency news.

Poppleton & Appleby :: News

Business Recovery and Insolvency Practitioners

NEWS: CREDIT CRUNCH – STATE OF THE ECONOMY

Added: 30/05/2008

There are growing fears for the British economy and this is being outlined in the media on a daily basis.

• Oil prices have now reached their highest level of $135 per barrel, an increase of 50% over the last 6 months.

• Stock markets continue to be volatile amidst worldwide uncertainty.

• Diesel and petrol prices have increased by 81% over the last 4 years.

• Inflation reaches 3.7% against a target set by the Bank of England of 2%.

• Gas, electricity and utility bills have increased by 100% over the last 4 years.

• Climatic changes and the hunger for bio fuel has meant a sharp increase in demand for staple commodities. This has lead to food shortages and there have even been occasions of rioting in Bangladesh, Haiti and Egypt.

• Retail sales have reduced over the last 2 months.

• Unemployment having fallen for the last decade has now turned the corner with an increase in each of the three months to March 2008.

• House prices are continuing to fall and some pundits believe that house prices will fall by as much as 20% over the next 2 years. Additionally, the RICS predict a downturn in house sales by as much as 40% for the next 12 months.

• Banks and Building Societies have withdrawn a large number of mortgage products and have tightened their lending criteria – resulting in the Credit Crunch.

• A number of high profile construction and building companies have cancelled or delayed the start of major housing projects which will, in the long term, cause a further shortage of housing and have an adverse effect on people being able to get on the housing ladder.

• Further interest rate cuts for struggling home owners, borrowers and businesses are unlikely if the Bank of England is to continue to pursue the target inflation rate of 2%.

Implications of the Credit Crunch

Undoubtedly, in light of the above, there are going to be huge implications for the whole country. In recent interviews, the billionaire hedge fund manager George Soros, has stated his belief that whilst the “acute phase” of the credit crunch may be over, the wider implications for the UK economy are very worrying in light of the housing price boom, burgeoning levels of personal debt and the fragility of the financial sector in general.

Remortgages Over-promoted

Looking back on the last 10 years it appears that the economic boom was built on quicksand. Soaring house prices and low interest rates lead to the emergence of a debt bubble as homeowners found that they had access to substantial equity. Lenders were only too willing to offer to remortgage property and adverts for homeowner secured loans became the scourge of daytime television.

Mortgage Default Concerns

But now, in the afterglow of the boom, there is increasing concern that the days of negative equity may return as house prices begin to look uncertain and mortgage default rates start to rise.

Analysts within the media are now looking to play the blame game, but what is the point? History tells us that where money and politics are concerned, lessons are seldom learnt.

Instead of looking back, let’s look forward.

Lifestyle Changes

Our way of life will probably change dramatically over the next decade as food and fuel prices continue to increase. The rising costs of transport may lead to a mandatory rethink about the way we organise our lives.

So what will this mean for you and I? Well, perhaps we will work, shop and holiday closer to home as we strive to minimize our reliance on oil based fuels. ‘Localisation’ may become the new political buzz word and who knows, maybe through this process our towns and communities will be rejuvenated.

Change is often painful. Letting go of our current way of life and embracing a new uncertain future fills many of us with fear.

Talk To Personal & Corporate Finance Specialists

At Poppleton & Appleby we have been dealing with the ‘booms and busts’ of economic cycles since 1885 and on a daily basis we are witness to the turmoil people face when their circumstances are forced to change. Through the technical expertise, integrity and creativity of our team we have helped countless companies and individuals come through their crises and we know that with change can come new opportunities.

BACK

Website Designed and Hosted by Autus