David Cameron was once fond of telling us that you can’t borrow your way out of a debt crisis, and it seems many companies have heeded that warning, with net lending to businesses shrinking £3.8 billion in August, despite the efforts of the Bank of England’s Funding for Lending scheme.
However, consumers appear more willing to saddle themselves with huge debts to get on the property ladder, thanks to a range of state-backed initiatives. Banks already get cheap loans through Funding for Lending in return for boosting the flow of credit, and last week the Prime Minister confirmed an extension to the Help to Buy programme south of the Border, despite fears that the previous version, focusing on new-build homes, is fuelling a housing bubble.
A string of builders, including Barratt, Persimmon and Taylor Wimpey, have hailed the UK government’s attempts to stimulate property sales in recent months, and now Edinburgh-based Cala has reported record annual profits as it embarks on an ambitious strategy of doubling in size within the next four years.
A lot of time and effort is being devoted to driving up demand by allowing people with a deposit of just 5 per cent to take out a mortgage, but what is being done to fuel supply? Until more homes come on the market, and at affordable prices, the dream of an affordable home will remain out of reach for too many people.
Labour leader Ed Miliband believes too many builders are simply hoarding land to swell their profits and has threatened to seize it back if his party wins the next election, but the planning system continues to act as a roadblock on the road to rebuilding the housing market.
Official figures show a mere 13,803 home were built in Scotland during the year to March, almost half the previous year’s total of 26,468. That compares with the peak of about 43,000 seen in the early 1950s and late 1960s.
The data for local authority housing is equally stark. Aberdeen and Edinburgh city councils have not completed a new-build home since the third quarter of 2012, while Dundee has built nothing since the end of 2011.
A warm, secure home should be a basic human right, regardless of whether it is owned or rented. Opening up ownership to more people is laudable – if another bubble can be avoided – but surely the market needs help to build, not just to buy.
End of the goldrush for Albermarle & Bond
Pawnbroker Albemarle & Bond is wasting no time as it seeks to avoid breaching the terms of its £51 million debt pile. New chief executive Chris Gillespie has taken up the reins almost a fortnight ahead of schedule, and turnaround specialist Colin Whipp joins the board ahead of a covenant test at the end of this month.
The firm, which began life with a single store in 1983, has been forced to close 33 “pop-up” outlets after a slump in gold prices meant buying jewellery from cash-strapped consumers was no longer profitable, and a planned £35m cash injection fell apart last week.
Gold hit an all-time high of $1,920 an ounce in 2011, but prices have been falling as the economic climate improves. The current shutdown in Washington, together with hopes of a pick-up in demand from China, has seen a modest increase in recent days to about $1,311.
Although Albemarle’s shares rebounded as investors welcomed Gillespie’s early arrival, it looks like the high street gold rush has run out of steam.