Here is another one of those scary charts that tells us that the UK economy is in deep trouble. It illustrates UK employment and it tells us two things. First, only one person in ten is employed in manufacturing. Second, two workers in ten are employed in the financial sector. That is right; for every one person actually making something physical, two people are in the money lending business.Here we come to the big unmentionable problem; financial sector employment. As of the end of 2007, 6.5 ,million people were employed in financial services. With the credit crunch, the sector is about to shrink dramatically. If it fell back to the employment levels of 2000, over one million jobs would go. If it shrank to its 1995 level, almost 2 million jobs would disappear.
These are fearful numbers, but how can this sector continue to employ so many people when lending volumes have contracted so sharply? For example, mortgage approvals are down by at least 50 percent in one year. In principle, that should mean that mortgage lending officers are working only half as hard as they were 12 months ago. Or to put it another way, banks should be able to fire half their lending officers without any significant loss of efficiency.
We are about to learn a bitter lesson. Economies should always diversify. The UK became overly dependent on just one industry - financial services. That industry is now in deep trouble. It will contract massively and therefore the upcoming recession will be deeper and more painful than it should have been.
8 comments:
Alice, we are heading for an almighty crash. You are pointing out various aspects and good for you.
There is no escape for UK PLC.
I work in manufacturing,the company I work for makes things for nuclear power stations,ships,subs and other high tec items and let me tell you its hard being the only buggers who make real things you can hold in your hand.
we had some idiot civil servant come the other day to "help" his help was to train me to do the job I have done for 20yrs, as to buying new plant no way.
The MD told him to fuck off and acused him of being a useless parasite.The guy hadn't got a clue having never had a real job we may have been from different planets.
Mitch, you have my every sympathy. I work in farming, and have to deal with civil servants (like they do what I want - I wish!) all the time. None of them have an ounce of practical knowledge of what they are supposed to be dealing with. They all sit in their airconditioned offices, attending endless meetings, with targets, and rulebooks etc etc , but not a clue how those rules will play in the real world.
And the number of them ever rises, and the number of people who actually produce something falls constantly. It cannot continue for ever. It must reverse eventually. Surely?
That one wont get back in without an armed escort.
He was a grade a moron about the real world.
When I come into the city of London in the morning, it is still as busy as always (or if not, very nearly). This leads me to believe that there has not yet been a significant contraction in employment, despite a significant contraction of business. I’m attributing this to the bank bailouts giving banks breathing space. But this can only be a temporary measure.
The loan shop game is up for banks and they need to reinvent themselves, or at least diversify into other financial services. For example small business payroll and accounting, self-assessments tax returns for individuals. Stuff which they can earn money on aside from lending – which will still play a big part but not be only business.
Unfortunately, before that I’m expecting to see a number of carefully planned coordinated redundancy waves. Already we’re seeing the tip of the iceberg with citi and rbs layoffs - announced on the same day notice. That’s no accident.
Im wondering if the government have already been advised of this through their banking chums which would explain the enormous borrowing requirement recently announced needed to counter loss of tax revenue.
Unfortunately, you can’t borrow you way out of debt either.
I wonder what proportion of the government credits given to the banks will just be used to pay unproductive staff salaries and bonuses. Paying bankers to do nothing! Just like the overmanning, stand-on-your shovel days of the nationalised gas, steel and coal industries, tec., of the 70's and early 80's. What a waste - again. All debts to be repaid properly, I hope, by taxpayers, not (largely) by inflating the currency again.
B. in C.
Just because they are writing 63% fewer loans doesnt mean they have 63% less work. Dealing with people who cant afford repayments must be time consuming and doing due diligence then refusing everything will take more hours than shutting your eyes and signing off on anything.
However, there have to be massive numbers of bank redundancies on the way. I suspect they are waiting for a distraction from a big news event then they will all announce at once.
I agree: London buzzes as usual: restaurants are packed, people are shopping like mad, the white wine tarts are out in force - everything is normal and has not changed since August 2007. I believe the UK is best placed in all the world to ride this recession out and to come out stronger than other countries. Why? Because we will descend into a Danteien hell hole for two years: if anything survives that, it will be tough.
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