PANIC may be over-egging it, but there are unsettling similarities between the economic backcloth now and the false halcyon years before the 2008 financial crash.
We again have a runaway housing market that has triggered explicit concern from the Bank of England this time round of a dangerous house price “bubble” developing.
And yesterday’s bumper retail sales figures suggest the general public is amassing debt again in the way that became popular with consumers, banks and governments in the run-up to the financial crisis.
Retail sales volumes leapt nearly 7 per cent in April according to official data – the fastest year-on-year sales expansion on the high street since 2004.
Meanwhile, fears have also been expressed from the Bank of England (BoE) over banks and other financial institutions embarking on a risky “search for yield” – better returns on their money – in this era of historically low interest rates.
It was this practice that had market professionals coming up with ever more esoteric and abstruse products to usher in the subprime crash that triggered the banking crisis.
That search for yield started in dodgy mortgage-linked bonds, but quickly moved on through collateralised debt obligations (CDOs) and structured investment vehicles (SIVs) leading to the house of cards that was opaque acronym banking.
The echoes of the early millennium siren voices, therefore, are not forced. Of course, up to a point the retail sales surge in April can be explained by the late fall of Easter this year. But there have been several late-falling Easters since the crash without this sort of high street growth.
Equally, it is rebounding consumer spending that is largely propelling the economic recovery for which we waited through what one BoE governor called seven lean years.
But these latest retail numbers are further evidence that Britain needs a more balanced sustainable recovery. Thankfully, it looks like the bell is finally tolling for the government’s Help to Buy scheme.
Some ramped up business investment and better news on the exports front would also be welcome correctives to a flaky consumer-led charge towards the cliff again.
Momentum gathers behind RBS lawsuits
ON THE shareholder legal actions against Royal Bank of Scotland over the bank’s rights issue in 2008, the least you can say is that they have certainly got a quorum.
And the news that taxpayer-backed Scottish Widows is the latest to sue taxpayer-backed RBS adds spice, ensuring a High Court action where the taxpayer is destined to both win and lose simultaneously. Widows, as part of Lloyds Banking Group, has joined the RBoS Shareholders Action Group, representing 100 institutional investors in RBS at the time of the £12 billion cash call, as well as 12,000 private shareholders.
Another claim fronted by legal firm Stewarts Law has more than 300 disgruntled institutional investors on board. In excess of 3,500 small shareholders via the RBS Rights Issue Action Group have also launched proceedings; while a handful of blue-chip institutions such as Standard Life Investments, Legal & General Asset Management and Aviva have hired their own American corporate litigation hotshots to join the fray.
Whatever the eventual legal judgment, a lot of people are going to have their day in court.