News:Indebted UK
If there is one area where we have managed to beat our American cousins in a league table it would appear to be with our accumulation of debt – unsecured personal debt. Nearly two thirds of our economy is based on consumer spending and this has expanded as we were all encouraged by dim-witted politicians and greedy bankers to pile up debts and to keep the national spending spree going – after all “It’s good for the country!” The fallacy of growing an economy by merely inflating the debit side of the balance sheet is the economics of the speculator. This may be an acceptable structure for a company to gear up its balance sheet (to make it more efficient) in order to obtain the maximum value out of its capital, but for individuals and families this is a high risk strategy which will inevitably end in disaster when the economy starts to slow down – and here we are.
The good news is that we have not all been so profligate and that there are some quite dramatic variations. One’s first thoughts on debt usually relate to those at the poorer end of society, but in fact it would appear that research (from reallyworriedaboutdebt.com) shows that the most indebted area is actually the City of London, where those in debt owe an average of £41,002. This reflects the high salary and bonus levels, but also the higher risks with the increased level of job losses that are occurring.
At the other end of the scale are the Orkney Islands, where there appears to be the lowest level of debt at a mere £4,188 – well, not so much to buy I suppose?
Another measure is that of debt as a percentage of take-home pay and again there are significant variations. Both the South East and the North West have a debt percentage at some 132% of take-home pay, whilst the more relatively frugal Ulstermen are at a still worrying level of 97%. What is clear though is that these debt levels are neither sustainable nor compatible for a growing UK economy. 16 years of borrowing boom is not repaid in 6 months, especially if your house value is falling.
Airlines have been back in the news for all the wrong reasons. From the dreadful fatalities in Spain through to the previously little known flight concern of mushroom soup injury (as suffered by a Ryanair passenger), there is however, a broader concern regarding the future of many airlines themselves. A challenging mix of overcapacity, falling demand and rising costs, especially on fuel, has meant that for certain airlines and particularly some ailing flag carriers, they may have reached the end of the runway.
Alitalia defies all financial logic, and others may well follow once national pride is overcome. More likely though is that we are going to see a spate of mergers as proposed by BA with Iberia and American Airlines. For passengers, this may well mean the end of such generally cheap air travel, especially with flight capacity being taken out and fewer operators. I will not be mourning this as I would far rather have a safe airline which is profitable enough to look after its fleet, staff and passengers properly, than a cheap one that may be cutting back on some of those vital things I can’t see but still worry about – and mushroom soup doesn’t tend to be one of them.
Following on from my comments last week, it was pointed out to me that although the Russians may have greater expertise in chess than the Americans, the US strength lies in the game of Poker. I am not sure when it comes to international politics that this fills me with too much confidence either way.
And finally... an indication of the impact of the rising cost of commodities is perfectly illustrated by the estimated value of the 50,000 manhole covers stolen this year - £1.5 million. Surely time to launch the new Dyson replaceable manhole cover?
Have a good weekend,
Director
Article last updated: Sep 8, 2008
