London bubble on brink of bursting

Robyn Hall

August 16, 2012

Nick Hopkinson, PPR director, says the credit and capital markets remain effectively closed to all but the most creditworthy ‘blue chip’ companies and individuals.

Responding to yesterday’s Bank of England MPC minutes he said: “Reading the lengthy and rather tedious minutes from this month’s meeting in the Bank of England ‘Ivory Tower’ it is clear that the Bank are attempting to drive the economy forward into a thick fog of confusing and conflicting data whilst steering by the rear view mirror.”

Hopkinson said all normal ‘economic levers’ remain broken since the credit crunch and UK PLC is “drifting rudderless on the global economic sea”.

He added: “Whilst it has been taken off the news by the Olympics and bankers’ summer holidays the Eurozone crisis is still developing apace in the background with unemployment still rising and gross production falling in nearly all our main trading partner countries.

“The all-important US and Chinese data sets are also inconclusive in terms of setting future direction with unemployment remaining high and production falling respectively in these vital markets.”

Mortgage lending continues to remain around decade-low levels with buyers either unwilling or unable to take on new purchases.

Hopkinson said: “UK Inflation continues to be much higher ‘in the real world’ than the official data suggests with this week’s news about food commodity prices and pending train price increases, of 10%-plus in some cases, piling more pressure on many struggling households this autumn.

“House prices are only being propped up statistically by the ‘oligarch enclaves’ in Central London. It can only be a matter of time before even this central London bubble bursts.”

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