Thursday, 30 April 2009

What will we do?

...if the UK banking system shrinks? Will we go back to bashing metal and digging coal?

April 30 (Bloomberg) -- Britain’s financial industry will shrink to as little as 7 percent of gross domestic product as the global crisis forces foreign banks to retreat from London, former Bank of England policy maker Willem Buiter said.

“Financial services in the City grew in the U.K. from 5.5 percent of GDP in 1996 to about 10.8 percent in 2007,” Buiter said today at a conference in London on the future of its financial district, known as the City. “It will probably go back in a steady state to something halfway there, to around 7 or 7.5 percent. That’s a big adjustment.”

The British economy contracted the most since 1979 in the first quarter as business services and finance shrank at a record pace. The depth of the global crisis has cast a shadow on the U.K.’s prospects for recovery because of its dependence on banking and financial services as motors of growth.

“We are seeing the repatriation of cross-border banking,” Buiter said. “This is inevitable” and “bad news for London because this is the home of cross-border banking.”


Markbaldy said...

If we do start bashing metal and digging coal, there will be a bit of a shock coming to people who have lived beyond their means for the last decade or so !
Standards of living will drop significantly as we compete with workers in China and India... a wake up call if ever there was one !!!!

Anonymous said...

Jim Rogers explained this rather better. Banking will move where the money is, and the UK doesn't have any, so the UK without a reliable currency of its own cannot indulge in foreign currency lending.
The situation is extremely bleak, house prices are the least of our worries.

fajensen said...

as we compete with workersNah, that is almost Over: de-globalisation will immidiately follow the first sovereign default. Go Gordon!!

Jo Jordan said...

You need to put this in perspective.

a. In a routine drought in Zimbabwe we would contract by 3% usually form 3% growth. Britain will live. For the record a 7% downtown or 10% swing is liveable too though scary.

b. Much of the lost business was smoke and mirrors. Numbers on paper have to be adjusted. The real economy is largely unaffected.

c. Financial services was only 10% or less at its peak. Easy money perhaps but not the biggest sector. Let's get back to work.

d. Globalization offers other opportunties. Lets find them.

e. Science offer other opportunities that are heaps more interesting.

Time to pick our jaws up off he desk and move on.

Anonymous said...

Good riddance: the finance industry was resplendent with scum bags and served up over-paid but essentially crappy jobs shovelling paper and peddling dodgy investments. The only saving grace was the prostitution and lap dancing. To see it all disappear would be delightful!