Bail out blues
The bail out has promised fundamental changes in the way that the banking sector is to operate, but it's only masking underlying problems in property markets
The UK government’s emergency £37bn recapitalisation of the UK banking sector means fundamental changes for Royal Bank of Scotland, HBOS, Lloyds TSB and Barclays. But it cannot alter a simple truth. The country’s housing market is still in decline.
This is the key driver to impending recession and the model that is being replicated from country to country around the world.
The FTSE fell to its lowest point in more than five years on Thursday as fears of a global recession sent world stockmarkets into another dive.
Asia, Europe and the US were each affected by more bad news regarding jobs and retail sales.
Poor manufacturing figures from the US saw the Dow Jones index fall nearly 1 percent on Thursday evening.
For many the banking crisis has at least ceased to be the biggest threat to world economies, yet they remain in a vice like grip of recession downturn.
Mining and oil stocks continued to fall in London, while US crude oil fell another $3 to $71.73 on expectations of lower demand.
The week’s worsening news followed a markets rally on Monday after the world's governments had followed Gordon Brown’s £37billion lead by injecting capital into the banks.
The housing sector statistics are not all bad.
Halifax released its latest housing figures showing that the average house price fell just 1.3 percent in September, the slowest margin for the last seven months, according to its house price index.
The average house price is now £172,108 - a drop of 12.4 percent compared to last year.
Lenders remained optimistic last week that the half a per cent cut in the Bank of England base rate would help borrowers and provide a valuable support to the housing market.
But the underlying trend remains firmly fixed in a downwards spiral as fears over job losses and recesssion contnue to weaken confidence.
The International Monetary Fund predicted last week that the UK economy would fall into recession next year as growth forecasts were cut for the period from 1.7 percent to -0.1 percent.
British companies are clearly struggling, with Ernst & Young warning last week there were 111 profit warnings from quoted companies in the three months to 30 September.
Other than property price decline, unemployment remains the other big threat, with many leading companies cutting jobs.
The UK’s Office for National Statistics revealed on Wednesday that unemployment rose to the highest level in almost two years in September.
Claims for jobless benefits rose 31,800 to 939,900, the highest since November 2006, although the rise was lower than the 35,000 that many had predicted.
Home repossessions will continue to compliment global unemployment in the most unhealthy fashion.
The number of homeowners in England and Wales facing repossession rose to a 16-year high in the summer and some still fear this will get worse.
The number of court orders for mortgage repossessions rose to 28,568 in the three months to the end of June - the highest since the third quarter of 1992, when 30,587 orders were made.
Mr Brown and his fellow world leaders will hope this week their rescue plans really have saved the banks.
The property sector is another matter.
