If you read some of the more hysterical headlines you’d forgiven for thinking that Britain has turned into an economic wasteland almost overnight. Don’t believe it.
Indeed, during my last visit to London shoppers were very much in evidence and coffee shops were booming. Hotel lobbies were still crowded and most hotels all over the country were enjoying healthy occupancy rates of over 70 per cent. I still had to book a table at some of my favourite restaurants. Superficially, at least, it was business as usual, which might come as a relief to the gullible who may have anticipated mushrooming shanty towns or soup kitchens.
There is no shortage of scaremongers and so-called financial experts ready to talk the economy down as we in Dubai know from recent experience. Economies that are high profile and successful tend to attract such often gleeful attacks. Here, we shrug them off as we know our economic fundamentals are strong, just as they are in Britain.
And just as the roared back to life following the 1979 recession, the UAE made a phenomenal recovery from the 1991 Gulf War . This is because both governments are stable and proactive. The UAE has been less affected than its western counterparts and has the ability to rebound efficiently and swiftly.
So, let’s the situation into some . While it is certainly true that the British economy is in “recession”, the word is not as chilling as it first sounded. It simply means “a decline in GDP for two or more consecutive quarters”.
Realistically, this cannot classed as good news but it isn’t the end of the world either for a country that over the last eight years has enjoyed unprecedented economic growth that outpaced most of Western Europe.
In fact, Britain’s GDP contracted by 1.5 per cent during the fourth quarter of 2008, which may sound ominous. However, we take into account that the ’s economy rose by 0.7 per cent last year when its GDP equated to US$2.279 trillion.
Not bad for a nation of 61 million where unemployment is still running at a relatively low 5 per cent as opposed to 8 per cent in the US, 7.5 per cent in France and 7.9 per cent in Germany.
As Prime Minister Gordon Brown has stressed, this is a global that requires united global solutions. He’s right. Germany saw its GDP shrink by 2.1 per cent during the last three quarters of 2008; Russia’s has contracted by 8 per cent since January last year, while the second largest economy in the world, Japan, is suffering a 12.7% GDP annualised reduction. Several other countries have asked the International Monetary Fund (IMF) to bail them out.
Britain’s Business Secretary Lord Peter Mandelson recently promised to prove the “doomsters” wrong on his country’s economy, which he described as “open and dynamic”. Likewise, the Business Minister Lord Mervyn Davies has hit back at the gloom merchants, saying Britain is still attracting overseas investment despite the credit crisis and anyone who writes off London as an important capital market does so “at their peril”. “London is absolutely critical as a capital of the financial centre” and “it will remain as one of the top financial centres in the world,” he said.
It’s true that both Lord Mandelson and Lord Davies have a vested interest in being upbeat given that they are both members of the government, but they aren’t the only ones with a fairly positive view. Boris Schlossberg, a Wall Street trader, who is a regular on CNBC and Bloomberg radio and television, recently noted that retail sales “posted a gain of 0.7 per cent versus a forecast of 0.0 per cent and suggested that the could the first of G7 nations to stage a rebound. “The economy may more resilient than the market’s current dour consensus,” he writes.
A survey released in February showed that consumer confidence in the was two points up on the previous month with consumers more optimistic about the general outlook. If the trend continues this is excellent news because the more consumers spend, the sooner the economy will turn around.
The Bank of England’s Deputy Governor Charlie Bean is similarly positive. He has predicted that the weak sterling pound will help recovery, particularly the export and tourism sectors, which may cut short the recession at the end of this year.
In the meantime, life for the majority of ordinary British residents isn’t too painful provided they can hold onto their jobs. Inflation is down, property is affordable for those with substantial deposits, interest on mortgages has greatly reduced, rents are cheaper and food costs are down with supermarket chains Tesco and Asda engaged in price wars. It seems hard to believe that only a year ago unbridled price increases were triggering riots all over the place.
Most economists agree that once the new US administration has its economic house in order, Britain will become more buoyant, as will the rest of the world. We all know the underlying causes of this worldwide recession but we must stop the unproductive blame game and hand-wringing.
Britain is the irreplaceable beating heart of the English-speaking world and a cosmopolitan magnet for the brightest and best. My guess is that the Lady Britannia will emerge from this storm stronger, wiser and more beautiful than ever before.