Recession ending for some

Brazil has come out of recession after its economy grew in the April-to-June quarter. The largest economy in Latin America expanded by 1.9% in the second quarter from the previous three months.

Data also showed Sweden emerged from recession on Friday, a sign that economies are starting to recover from the global economic downturn. Other countries that have come out recession include the eurozone's largest economies, Germany and France. Japan, the world's second-largest economy, also grew by 0.6% in the second quarter, less than the 0.9% growth the government initially estimated.

An Bord Snip Nua report is out

As a result of Ireland's financial crisis there were calls before Christmas for the formation of a new body to identify areas for cut-backs in public expenditure. A group of experts was called together at the behest of the Minister for Finance Brian Lenihan. The group's formal title is "Special Group on Public Service Numbers and Expenditure Programmes". It is a four person group, headed by University College Dublin economist Colm McCarthy (pictured above). Colloquially, it is referred to as "An Bord Snip Nua".

Today, the Department of Finance published An Bord Snip Nua's recommendations for around €5.3bn worth of public spending cuts. The 80-page report includes hundreds of proposals, including the abolition of the Department of Community, Rural and Gaeltacht Affairs.

It recommends a reduction of up to 5% in social-welfare rates, an increase in the retirement age, a reduction in the number of Irish embassies and increases in hospital charges. Other proposals include a cut of 500 in Defence Forces personnel, an amalgamation of small primary schools, means tests for home-care packages and reduced spending on road maintenance. An Bord Snip is also recommending the abolition of Sports Campus Ireland and the Irish Film Board, a 33% reduction in the number of VECs and the discontinuation of the rural transport scheme.

Ramsay's own kitchen nightmare

Profits at Gordon Ramsay's UK restaurants fell by 87% in the last year, forcing the chef to inject £3.5m of his own money into the business. His father-in-law and partner Chris Hutcheson also pumped in £1.5m to help cope with mounting debts and tax bills.

The latest accounts showed that in 2007-08 pre-tax profits plummeted £3.05m to £383,325. At the same time, net debt soared from £4.06m to £9.48m.

The closure of two of Ramsay's London restaurants alone accounted for a £9.5m drop in revenue. The Savoy Grill was shut because of refurbishment of its host hotel, while the Connaught's lease expired. A third venue, La Noisette, ceased trading in January this year, and was said to have been a "consistently underperforming site".

Ramsay has told how he had to sell his Ferrari to help raise funds, blaming the company's problems on his own over-ambition. Some 25 staff also lost their jobs as part of the restructuring efforts.

The 2009 Q1 results are in...

Official figures show that there was a dramatic contraction in the economy in the first three months of this year.

The Central Statistics Office said economic output, as measured by GDP (gross domestic product), fell at an annual rate of 8.5%. The decline in GNP (gross national product) - which excludes profits from multi-national companies based here - was even bigger at 12%. The CSO describes these figures as 'unprecedented' and they are weaker than economists had expected.

Consumer spending was more than 9% lower than the same period in 2008, while capital investment plummeted by 34%. Industrial output dropped 10.5% over the year, including a fall of 31.4% in construction output. New housing was down by 47%, and there was a 20% fall in other building and construction projects.

Other CSO figures showed a fall in the Balance of Payments current account deficit in the first three months of this year. The deficit was €2.53 billion, down from €4.18 billion a year earlier. The surplus on goods surged to €8 billion, mainly due to a slump in imports. The balance of payments measures flows of trade and income into and out of the country.

IMF releases its report on the Irish economy

A new report released yesterday on the Irish economy says that it was perhaps the most overheated of all advanced economies. The detailed analysis by the International Monetary Fund says the collapse of tax revenue could push the budget deficit up to 12% of national income this year, compared with a Government target of 10.75%.

The IMF says Ireland's seemingly unstoppable economic growth of recent years masked serious problems - including the fragility of the public finances. It says generous rises in public sector wages pushed up wages elsewhere, making Ireland less competitive. In recent years, the IMF says, Ireland became the most expensive economy in the euro zone with the possible exception of Luxembourg.

The report says losses now faced by the banks could be about €35 billion by 2010 - although the bulk of that would be absorbed the banks' reserves. The IMF is broadly supportive of the Government's NAMA project to buy back bank debt. But it says setting a price for the purchase of those assets could be easier if the banks are nationalised. Not paying the right price, it says, opens the taxpayer to huge risks. The report says nationalisation could also be used to effect necessary mergers.

The IMF is projecting that the Irish economy will shrink by 8.5% this year, with another 3% drop in 2010. It says unemployment will reach 15.5% of the workforce next year.

WHAT IS... NAMA?

What is it?

NAMA stands for the National Assets Management Agency and its creation was first announced in the April 2009 Budget. It is to be run under the control of the National Treasury Management Agency. The Governmant line is that NAMA is firstly an asset management company dealing with assets transferred from banks. NAMA will not be a bank as it will not be taking deposits from the public and will not have a banking licence. The idea is that the NAMA will buy all of the land and property development loans of the six Irish banks of covered by the State guarantee. In May, the Government approved the appointment of Brendan McDonagh as interim managing director of NAMA.

Why was it created?
By taking problem property loans off the hands of the banks, the Government hopes to put those institutions in a position where they can resume lending with a clean bill of health, their balance sheets strengthened and uncertainty over their bad debts reduced. NAMA will probably become the biggest landowner in Ireland. Developers might not yet realise it - but every single land and investment property they own which has outstanding debt could end up in the new National Asset Management Agency.

So, the banks give over their bad debts. What do they get in return?
NAMA will give the banks government bonds, which it is hoped will result in a freeing up of credit within the economy. NAMA will then manage the bank’s bad loans over a considerable period of time.

How big will the transferred loans be?
The total potential value of the loans which will be taken on by NAMA will be between €80 billion and €90 billion. It is expected that the top 50 borrowers will account for some €40bn–€50bn of the expected total due to be taken over by the new state agency.

Even if the total debts are bought by Nama at two-thirds of their face value – the bill could be in the region of €60 billion. (Ireland’s national debt is currently €54 billion).

What is the time-scale for NAMA?
It could be 12 to 18 months before NAMA gets going properly - although it is expected to be legally rubber-stamped in the autumn. It may need to exist for another 10 to 15 years - it is definitely no short-term fix.

What to expect when the recession ends.

Time magazine has a very interesting piece this week, written by Justin Fox. In it he wonders how life will be different after the current recession. He pins it down to five major areas.

* Bear in mind, the article is written very much from an American viewpoint.

1. Frugality
This is an extremely fashionable topic at the moment. Some cultural observers even think Americans are due for a prolonged shift away from the consumption obsession of the post–World War II era. That strikes me as an iffy bet, but it is clear that the debt-fueled consumer spending binge of the past couple of decades is over. The household debt-to-income percentage more than doubled, from 65% in 1982 to 135% in 2007. That turned out to be way too much for us to handle, and now the leveraging process has gone into reverse. The latest household debt-load reading from the Federal Reserve is 128%, and while nobody knows exactly where the percentage will end up, a lot lower seems like a safe prediction. Which means that for years to come, American households will be spending less than they take in.

2. Bear Markets
The long boom in stock prices from 1982 to 2000 and the shorter one in housing prices from about 1997 to 2006 were fueled by rising debt. Ever easier mortgage terms and falling interest rates provided a brisk tailwind for home prices. In the stock market, higher profits pushed along by bigger consumer and corporate debt loads brought higher stock prices. Start ratcheting the indebtedness down and throw in slower growth, and both of these processes go backward. For the long-term health of the economy, that's good — as we've learned, debt-fueled growth is not indefinitely sustainable. It means, though, that both the stock market and the housing market will be confronting headwinds for years to come.

3. Volatility
The Great Moderation was a name economists gave to a post-1982 era marked by only two mild recessions and long stretches of uninterrupted growth. That's over, and the transition to whatever comes next will, if history is any guide, be messy. From 1970 to '82, the U.S. economy was hit by four downturns, two of which (1973-75 and 1981-82) until recently competed for the title of "worst since the Great Depression." The current recession has undisputed claim to that title. And while we may be about to climb out of it, don't be surprised if we endure more downturns. Think of a W shape — maybe multiple Ws — not a V.

4. High energy prices
Saying energy prices would stay high was one of the great forecasting errors of the late 1970s and early '80s — so it's a little scary to predict that they will stay high this time around. But the fact that even the slightest hint of a turnaround in the global economy has sent oil prices skyrocketing from $35 a barrel to more than $70 ought to be a sign that the upward price cycle that started a decade ago isn't played out yet. The crucial element may be that the struggling U.S. no longer drives the global demand cycle — China and India do.

5. Higher taxes
There's just no way to square the cost of current recession-fighting efforts, future Medicare commitments and the various goals of the Obama Administration with the current level of taxation. Taxes are going to have to go up, and raising rates on just the very richest won't be enough. The only alternative is what some call the inflation tax — reducing the relative size of the country's debts by letting prices rise across the board. But that has its costs too. The free-lunch era is over.

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Latvian economy on the brink

Latvia is in danger of becoming the first European Union member to face total economic ruin, experts have warned. Their economy, driven by consumer demand, was hit hard last year amid the global economic downturn. In December the International Monetary Fund approved a 7.5bn euro rescue package for Latvia. Now, the tiny Baltic state has been urged to devalue its currency or risk the collapse of its economy - despite fears such a move could cause turmoil elsewhere in Europe.

Although devaluation would damage Latvia's ambitions of joining the euro, analysts said it was the only hope of avoiding a catastrophe after an international bailout failed to reverse the country's fortunes. One economist said Latvia's economy shrank 18pc in the first three months of the year. "The IMF medicine hasn't worked," he said. "Without a devaluation, you end up in the same place. It just takes longer to get there."

When Latvia joined the EU, expectations were high that the country could soon join the euro and living conditions would improve. It fixed the lat to the euro, allowing it to move within a small band. A small and open country, Latvia quickly attracted investment. The big Swedish banks established subsidiaries and an influx of foreign capital helped sustain a real estate boom.

Rising domestic consumption, a thriving property market and capital inflows all helped spur growth. But says Ed Parker at Fitch Ratings, "one of the problems was that a lot of this foreign capital was directed to real estate development and mortgages rather than building an export oriented manufacturing base. This was in contrast to countries like Poland, where a lot of FDIn(foreign direct investment) was used to set up manufacturing plants. A lot of the development in Latvia went into the real estate sector."

At the same time, its fast growth and a fixed exchange rate pushed prices higher. Latvia became an expensive place to do business. "This excessive optimism plus the entry and aggressive lending policies of foreign banks, led to a huge credit boom and huge current account deficit," said Fitch's Parker. When the capital stopped flooding in, as the credit crunch forced banks to tighten lending, the economy froze.

Roubini

Every couple of months we publish what Dr. Doom, Nouriel Roubini is saying/predicting about the economic mess we find ourselves in. This week's TIME Magazine has an interview with him where he mentions Ireland. Here is some of it:

Where is the global economy heading from here?
My concern right now is that this U-shaped recession we are in could turn into something much uglier, meaning a Japanese-style L-shaped recession: near stagnation or stag-deflation. We're in the worst global synchronized recession in the last 60 years. Unless we take the right policy actions we'll end up in a near-depression. I did not want to use that term six months ago. At that time I said the chances of a near-depression were only 10%. But today those chances are 33% or so.

How can this be avoided?
You have to have a set of concerted, coherent policies done not just by the U.S., but Europe, Japan, China and everyone else. The credit crunch is just massive. One thing that's needed is much more aggressive monetary easing. The second dimension is that you need much more fiscal stimulus — in the countries that can afford it — that is front-loaded. The U.S. [stimulus package] is $800 billion but only $200 billion is front-loaded. Of that $200 billion [in stimulus] this year, half of it is tax cuts. That's going to be a waste of money because people are not going to spend it.

Why hasn't the banking mess been cleaned up?
You have to do triage between banks that are illiquid and undercapitalized but solvent, and those that are insolvent. The insolvent ones you have to shut down. You need more aggressive credit creation by the government or you have to force the banks to lend. We're in a war economy. You need command-economy allocation of credit to the real economy. Otherwise the incentive individually for every institution is to pull out, not extend credit. Not enough is being done.

Is there a part of the world you are especially worried about right now?
I'm worried about every part of the world. People thought the rest of the world would decouple from the U.S. That was nonsense. Emerging Europe is on the verge of a fully fledged sovereign debt, banking and currency crisis. I think China is in a near-recession right now. Many emerging markets, even those that are in better shape, are in severe trouble. I don't think there is any economy in the world right now that is safe.

Is a breakup of the European monetary union possible?
I don't see that as being likely but the probability of that eventually happening is rising. Right now we are facing a situation in which many countries now have banking systems that are too big to fail and also too big to be saved. Now if Ireland or Greece go bust, then there is already a commitment from the Germans and French to, one way or another, bail them out — because they know that otherwise the monetary union is going to collapse. But if you have to rescue on top of them Austria and Italy, Portugal and Spain and Belgium and the Netherlands, then that is not going to be possible. I am still of the view that we can avoid a collapse of the monetary union, but this is really the very first true test of its stability.

Many people are pinning their hopes on the Chinese government to stimulate demand. Is that justified?
I have to give credit to the Chinese. Their fiscal stimulus will contain the degree of economic contraction. But China is radically dependent on U.S. growth. Forcing state-owned enterprises and banks to spend more when you have overcapacity, or to lend more when there are already large [amounts of bad debt], is going to postpone a problem, maybe by a few months. But it will lead to a harder fall down the line. A hard landing is unavoidable given what has happened to the rest of the world.

Domino's to get a bigger pizza the action!

Recessions are not bad for everyone. Some industries thrive in a downturn. Many qualms and quibbles go out the window as needs triumph over desires. Fast-food outlets are a case in point. Their food is generally seen as being 'recession-proof'.

Yesterday, the London-listed arm of Domino's Pizza announced it is planning a sizeable investment in Ireland in order to cope with growing demand for its products here. The company's plans include 10 new Irish stores in 2009. This follows on its seven new outlets last year. Each new store creates an average of 30 jobs.

The company, which operates the franchise for the global brand in the UK and Ireland, currently has a commissary facility in Naas, Co Kildare. It was built for €15m and produces and distributes pizza bases and other products to the chain's stores across Ireland.

Domino's Pizza UK & Ireland said yesterday that full-year sales jumped 18.4pc last year to £350.8m (€397m), while pre-tax profit rose 24.7pc to £23.4m (€26.5m). Like-for-like sales in 450 outlets were up 10pc. At the end of December, the firm had 553 stores between the UK and Ireland, with 41 in the Republic of Ireland and 13 in Northern Ireland. Its store in Tallaght is one of the busiest Domino's outlets in the world.

Four Star Pizza, the wholly Irish owned franchise based pizza company, announced last month it will create 200 jobs over 2009, with the opening of ten new franchise locations here.

What is an economic depression?

The London Times is running regular briefings to coincide with Target Two Point Zero, the Bank of England's contest for sixth-formers in the UK run in conjunction with the newspaper. The competition challenges students to play the role of the Bank's Monetary Policy Committee (MPC) and recommend the best level for interest rates. This week: After Gordon Brown talked of a new Depression, they explain the phenomenon.

How is an economic depression different from a recession? First of all, it is important to understand that there is no precise or agreed definition of a depression. Even now, 70 years after the last experience of the 1930s economic slump that became know as the Great Depression, the world's leading economists are still wrangling over what caused it and what it meant. Defining the term is made more difficult since the last experience of anything like a depression was in this period, more than seven decades ago, which is well beyond many people's living memory. In general, it is accepted by most commentators and experts that a depression is a very severe form of recession: one involving a deeper decline in GDP and most other measures of economic welfare, including employment, and which probably lasts for significantly longer than the typical recessions experienced in modern times.

How different is the scale of a depression from a recession? Very different. In modern times, the typical experience of recession in big Western economies has been a period of declining GDP that has lasted perhaps three to six quarters, and the typical fall in GDP over the period of recession has been in the order of 1 to 3 per cent. Some recessions have been even briefer and less deep, but all of these have still been bad enough to cause considerable hardship and to alter the business landscape significantly. By contrast, the Great Depression in the United States stretched from 1929 to 1933, and involved a collapse in the economy that saw national output and income shrink by 29.6per cent. GDP dropped by 8.6per cent in 1930 alone, by 6.4 per cent in 1931 and by 13 per cent in 1932. Recovery in 1934 to 1937 was followed by a relapse into recession. It was only the huge rise in industrial production in the US war economy of the early Forties that ended this profound period of economic woes in America.

What was the toll from this slump? The impact was brutal. The proportion of the workforce without jobs surged from 2 per cent to a quarter of those of working age. Output from US factories was halved, consumer prices fell by a quarter as the economy slid into deflation, four-fifths of the value of the US stock market was wiped out, from the Wall Street crash onwards, and house prices fell by nearly a third.

What about Britain in the Depression? Britain's experience of the Thirties was grim and painful, but far from as searing as that of the US. British GDP plunged by about 5 per cent, compared with the 2.9 per cent drop suffered in the worst modern recession in the early Eighties. During the early Thirties, British unemployment doubled from 7 to 15per cent of the workforce. However, this experience was much less severe than the slump that the UK suffered in the early Twenties. Although that is not part of what we know as “the Great Depression”, it clearly was a depression on the same scale. In the wake of the First World War, UK GDP plummeted by 23 per cent, mirroring the experience of America a decade later.

www.timesonline.co.uk/economics
www.timesonline.co.uk/targettwopointzero
www.bankofengland.co.uk/education/targettwopointzero

Increased disposable income to go into savings?

David Smith, Economics Editor with the Sunday Times has a well written article today dealing with how the reduction in interest rates amongst other factors will mean an increase in consumers' disposable income - which people will save rather than spend.
(I have abridged the article slightly).

Wandering round Poundland, as one does, is a bit different from the rarefied atmosphere of Davos but is an experience to be recommended. In this Aladdin's cave, which has everything from the latest Rupert annual, six-packs of rare incandescent light bulbs and mini tool kits to household goods, toiletries and non-perishable foods, there is a sense of wonder that anybody can make this stuff for £1, let alone sell it.

The Poundland effect underlines how tough things are for higher-priced retailers, which is why it is expanding while many of them are shrinking. That, however, is not the only message. Just down the road is a 99p shop and, unless my eyes were deceiving me, it was busier. To economists, if not to Poundland, that is gratifying. It shows price signals work, even at low prices and that the fashionable "left digit effect" is alive and well.

This is the effect that makes us more likely to buy at £9.99 than £10. By the same token, 99p is more appealing than £1. I am tempted to open a 98p shop, though experts say that to make a real difference you might have to go to 89p, if not 49p. The real point is that one of the stories of 2009 will be that consumers can buy cheaply, if they choose to, and not just at the discounters. We are moving into a period where inflation will be negligible, and for periods negative, in spite of sterling's fall.

This, and what will be a very gloomy economic forecast, prompted the Bank to cut interest rates from 1.5% to 1%. As I wrote last week, I would not have done so at this time. But how strange it is that such low rates have become almost commonplace. Low rates are providing a bonus for borrowers, bringing big reductions in mortgage payments. More generally, low inflation — helped by the government's temporary Vat cut — will provide a boost to real income growth. Just how big was underlined by the National Institute of Economic and Social Research in its latest review.

It predicts real household disposable income will jump 3.3% this year, well up on last year's increase of 1.5% and 2007's zero growth. If this is right, it will be the best year for income growth since 2001. We will not have had it so good for a long time. The question is: what will people do with it? Simon Kirby and Ray Barrell, economists at the institute, are pretty sure they will not spend it. Alongside that 3.3% rise in incomes they predict a 3.8% slump in consumer spending. Saving, not spending, will be the watchword this year, they say, with the saving ratio predicted to jump from 1.3% last year to 7.1% this year.

It is an interesting forecast and a brave one. Lots of unprecedented things are happening but that would be an unprecedented divergence between income growth and spending. Barrell points out that something similar happened in the early 1990s, but spread over three years. This time, he said, the effects were coming through much quicker, with falling housing wealth and lack of availability of credit being the two main factors pushing spending lower.

...

Surely, you will say, this recession is all about households deleveraging — paying off debt — and a sharp drop in consumer spending will be a natural consequence of that. But, as I have pointed out before, consumer spending has been rising at a slower rate in recent years and was, in any case, mainly financed out of income growth.

...

There will be a two-way debt battle in the coming months, rising unemployment making it hard for a minority to service their home loans, while lower interest rates will make it easier for the majority.

Where will this leave spending? Nationwide's consumer confidence index is at a record low, though the proportion of people saying now is a good time for a big purchase has risen again. That is important. Official figures show retail sales held up pretty well through to the end of last year, but that spending on big-ticket items was very weak. Ask any car dealer.

In the end, confidence is the key. Consumer recessions are not caused by people cutting back who have to. They happen when those who are not badly squeezed decide it is prudent not to spend. This is Keynes's paradox of thrift; we would like a higher level of savings but not right now.

It could go either way. But if the institute is right in its calculation of the rise in real incomes this year, I would be quite surprised if it is also right on spending.

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Pawnbrokers far from broke

The Guardian has an article this morning about one of the winners in the recession - pawnbrokers.

Britain's biggest pawnbroker has cheered the City by predicting it will comfortably beat profit expectations after enjoying a surge in business last year. H&T Group reported this morning that its chain of 105 UK stores experienced strong growth during the last six months of 2008, a time when many families began to suffer from the downturn in the economy. With like-for-like sales up by 3% in December, H&T is confident that its pre-tax profits for the year will beat consensus forecasts of £10m by at least 10%.

H&T, whose website's slogan reads "Helping you get your hands on cash", opened 16 new stores last year. Much of its business involves making loans guaranteed against personal possessions such as gold jewellery, though the company, founded in 1897, also provides cheque-cashing services. Chief executive John Nichols said H&T was planning to open more stores and hire more staff in 2009. So far, H&T has not seen an increase in the number of customers failing to repay their loans. Nichols said this could change, though, if consumers were hit by rising prices and bills this year. The average loan made by H&T is £120, typically repaid after three months. H&T reported last summer that gross profit in its pawnbroking business grew by almost 36% in the first half of the year. The soaring gold price has also helped the company, as it buys broken jewellery which is sold on as for scrap metal.

Analysts at Daniel Stewart tipped pawnbrokers as likely winners of the financial crisis. Shares in H&T jumped by 13%, gaining 19.5p to close at 172p.

Dell poleaxes us!

* Sorry about the lack of posts in recent days. We had a new exam system in the school over Christmas which seems to have increased the scale of corrections substantially - for me at least! But leavonomists, rest assured, normal service resumes from today. *

Well, this week brought us one of the worst pieces of news since the recession hit when Dell in Limerick announced 1900 job losses over the next 12 months. The manufacturing plant is moving to Poland. 450 people will lose their jobs by the end of April, with the remainder gone by next Christmas. About 1,000 high-value jobs will remain in Limerick, but for the workers who were losing their jobs, the decision was final and would not be reversed.

The job losses are a huge blow for the mid-west region, but the knock-on effects may be far worse. Dell confirmed that 1,500 jobs in other locally based companies supplying it would be directly affected by the downsizing. Local business leaders have estimated that as many as 5,000 people could lose their jobs by the end of the year, as the shockwave from the announcement hit the city. With unemployment rates in Limerick among the highest in the country, and jobs going by the day across a range of industries, the chances of re-employment for many are slim, at best. In all, the events of this week are yet another reminder that the country's largest employers no matter what sector they're in - Waterford Crystal, Tara Mines and now Dell - are vulnerable to the vicissitudes of a wildly turbulent global economy.

Where to invest now?

The Sunday Independent has an interesting article by Dan White this morning asking which shares we should buy in a recession.

10% unemployment before Easter?

Ireland's main body for personnel managers, the Chartered Institute of Personnel and Development (CIPD), predicted yesterday that redundancies will soar to about 2,270 a week in the period between New Year and Easter, sending unemployment above the 10% mark. CIPD Director Michael McDonnell said employees would feel the full effect of "the triple whammy" of the bursting property bubble, the global recession and the crisis in financial markets. "The ripple effects are already spreading out from the construction and property market epicentre to hospitality, retail, travel, personal and professional services firms", Mr McDonnell said. He believes some employers have held back from job cuts but lack of access to bank credit, falling consumer demand and the relative strength of the euro against a weakened sterling will force their hand.

Shhhh! We are having a sale - but don't tell anyone!

Secret sales seems to be how some sellers of highly income elastic goods (or in some cases Veblen/snob goods) are dealing with the recession. Sarah O'Connor writes in today's Financial Times about luxury retailers who do not wish to put gaudy 'Sale' signs up in their business. Instead, they are are inviting customers to discreet events or selling stock cheaply through 'private sale' websites. The reason? They fear that if they explicitly reduce their prices through a conventional sale, the perceived high quality and more importantly the exclusive status their goods enjoy will be tarnished.

Luxury retailers resort to secret sales, Financial Times, 20.12.2008.

Sir Richard Branson says the economy is 'f***ed'!

Sir Richard Branson has delivered a characteristically blunt verdict on the state of the economy, describing it as "f***ed". But Britain's cheeriest billionaire said that he hoped that the downturn might only last a couple of years instead of becoming a repeat of the Great Depression of the 1930s as so many economists now fear. The Virgin boss was asked his views on the economy by Five News. “I was going to say, it’s f***ed, but I think I had better not have said that,” he replied. He added: “I think it is a terrible, terrible mess, which has been brought upon us by some very irresponsible people in the banking community, some very lax regulation and we are going to have to work hard to dig ourselves out of it.

“I think governments have moved quickly and hopefully it will be a two-year, two or three-year nightmare not a 1929 nightmare. But we are all going to have to work very, very hard to get things back on the even level.” A spokesman for Sir Richard said: “He’s only saying what everyone’s thinking, in a more forthright way. He was making the point that the economy is in dire straits. It’s nothing that hasn’t been said every day for the last three months.”

Scudamore dismisses EPL debt fears

Lord David Triesman, chairman of the Football Association, said in October that English soccer was carrying a combined £3 billion of debt. UK Sports minister Andy Burnham called for measures to ensure debt doesn’t endanger the “very existence of one of our great clubs.” However, Richard Scudamore, the English Premier League’s chief executive officer, said today, "Top English soccer clubs have 'manageable' debt because revenue can be maintained even in the financial crisis". He went onto state, "the level of debt is not a huge concern". About half the debt at the twenty Premier League teams was “soft debt” in the form of loans from owners, who don’t expect to recoup the funds, Scudamore said.

Still, the operators of Manchester United and Liverpool took out loans to fund their purchases. The U.S.-based Glazer family has debt of more than £660 million linked to United following its purchase in 2005. George Gillett and Tom Hicks at Liverpool owe around £300 million after buying the Premier League leader last year. Bearing this in mind, it will be intersting to see if these words come back to haunt Scudamore if a leading club falls victim to the credit crunch.

Jeremeconomics?

Ok, so Jeremy Clarkson isn't really known for his economics insight but following Top Gear's show in Dublin last week, he writes in yesterday's Sunday Times, about our continuing pursuit of the highlife here despite our fall into recession. The article is well written and worth a read.

"I was in Dublin last weekend, and had a very real sense I’d been invited to the last days of the Roman empire. As far as I could work out, everyone had a Rolls-Royce Phantom and a coat made from something that’s now extinct. And then there were the women. Wow. Not that long ago every girl on the Emerald Isle had a face the colour of straw and orange hair. Now it’s the other way around..."

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