East Midlands

East Midlands in good shape to ride the credit crunch

Construction professionals from all over the region gathered at the first 2008 meeting of FBE East Midlands Branch in Leicester on 17 January to hear Chris Brown from the Bank of England give his take on the current World, European and UK financial situation.

The economy has dominated headlines since the beginning of year, focusing on the impact of the turmoil in financial markets resulting from the US Sub-Prime Market; the continuing Northern Rock rescue debates and the pressure on the Bank of England to reduce interest rates sooner rather than later.

 It was unsurprising then, that over 40 businessmen and women braved the region’s flooded roads to descend on the Highpoint Centre, Glenfield Road to be assured that the East Midlands is probably in one of the best positions, economically and commercially, to ride out the storm.

“Because of the diversity of business in the region, and the fact that growth here has always been steady, on the whole we will not see a huge boom or huge bust situation,” commented Mr Brown. “And it is important not to forget that last August the UK economy was growing at between 3%–3.5% , well above average, so we were in quite a strong position when the ‘storm’ hit.”

Mr Brown had recently been speaking to manufacturers, who are still experiencing quite strong growth, though predictions are that this will start to ease off as the year progresses. And although consumer confidence is low, Mr Brown commented that this is not always a great indication of the overall climate, and should be taken ‘with a pinch of salt’. Consumer confidence, i.e. the High Street, tends to react to the housing market, which has slowed sharply, and house builders and estate agents now expect the market to remain soft for most of this year.

“UK Commercial Property prices are of particular interest to the Bank, and this market has experienced quite a sharp slow down. The expectation is that this is going to continue for some time, possibly into 2009, but talking to Building Societies the number of repossessions and arrears are low and on the positive side, we still have high employment so that means if people do get into difficulties at least there is still an income stream.” Mr Brown went on to say.

There is no question that we are heading for a ‘sticky patch’ but Mr Brown says he takes comfort from talking to businesses who are saying that this is not an absolute crisis although 2008 is going to be a very tough year.
“The real challenge is the balance between the slowdown in growth and the risk of increasing inflation in the economy,” he concluded.

Or as one local Construction Managing Director said: “Time to look to your knitting,” Meaning keep your head down and don’t drop any stitches – wise words indeed.