Antony Hilton told the BMF Members Day audience that he is optimistic about the UK’s ability to recover from this recession.
Hilton said that this is the fourth recession he has seen “and the seventh banking crisis”. After each banking crisis he said that legislation was brought out to “ensure it could never happen again”.
Those worried about how the much heralded government cuts will adversely affect the economy should take heart, he said. “Politicians never cut as much as they say they will because they lose their nerve. The only time real, proper cuts have been made by a government was in 1923. Lloyd George did it and by doing so made the Liberal party unelectable for the next centuary.”
It’s case of finding the reality amongst the rhetoric, he said. The rhetoric, possiblt fuelled by the medioa, is that the cuts will be deep and will hurt very, very much. The reality is that the government will find it very difficult to do exactly what they have said they will do regarding the cuts.
“It will still be bad, but it won’t be completely brutal because the government will lose its nerve.”
Looking back at the last recession, Hilton pointed out that the UK is actually quite good at coming out of recessions. “The economic situation in 1993 was pretty much as bad as it is now. The Budgets of Norman Lamont and then when he was sacked Kenneth Clarke made things dire but by 1997 there was a boom again and Labour came in to reap benefits of those earlier squeezes.”
The squeeze on the banks and finance will continue, he said, and there will be less money around. “However, if you look at where the mass of bank lending was going during the boom of 2007, most of it was actually going into the financial sector itself, into equity and venture capital, that’s what’s really been hit.”
In a bit of good news for the builders merchant sector, Hilton said that the RMI market will still be pretty positive for the next few years, judging by what happened during and after previous recessions, even if housebuilding itself stays relatively low.
A fuller report on BMF Members Day will be in BMJ’s October issue.