The Chancellor evoked a children’s classic today when he presented his forecast for the UK economy. He foresees improved growth and exudes positivity. As he said himself he represents Tigger to the opposition Eeyore.
Put politics to one side, the forecasts seem at odds with what many of us are experiencing in what increasingly feels like a parallel universe. A universe where people are holding off buying new cars, where there is pressure on housing and where discretionary spend is reduced as wages inch forward but slower than inflation. A universe where, I believe SME finance is overheating.
Let’s take housing. I honestly can’t recall a government meddling so much in the market. Creating artificial and illogical barriers to movement through stamp duty thresholds. Effectively pricing out private small-scale landlords and yet simultaneously (through the FCA) making it harder to borrow to own a property. Add to this the wholesale pillaging of the countryside in the South and wasteful neglect of more difficult Brownfield sites in the forgotten Midlands and North and the cocktail is heady indeed.
The weasel words alluding to speeding-up planning really mean riding roughshod over decades of sensible and gradual development with an orgy of speculative building. Despite this development stampede, the market tampering has contrived to render these houses difficult to sell. So the housing crisis continues unabated.
The Government (of all hues) also plays in financial markets. After stepping in to save the banks they felt emboldened and they have encouraged a wave of start-ups with cheap funding. Quietly some of this is being unwound and only time will tell what the result will be.
In a universe distinct from the Chancellor, I see excesses in SME finance worse than those we saw in 2007 and more akin to 1987-1990. Reduced or no security, fine margins and increased quantum. Put bluntly, the drive for income growth is seeing risk taking that borders on reckless.
As an old stager I just don’t believe that the canons of lending have changed in centuries. Others clearly differ. Time will tell.
But if I am right then that 1.4% growth rate might come under a bit of pressure. So, when thinking about “Tigger’s world” I have to conclude that he has picked the wrong character. Maybe Number 11 should be renamed “the Wolery” instead.