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DON’T SING JERUSALEM TOO SOON

DICK TURPIN
MANAGING DIRECTOR, ARTEMIS

WHAT a relief. Saving £100m, three-quarters of the government’s 820 websites are to go. Whitehall is reluctant to name the doomed. But it is widely believed that www.lovechips.co.uk – run by the marketing department of the Potato Council – is unlikely to survive the cut.

As in the body politic, so at home. British households put £24bn into deposit accounts last year – and took out “only” £20bn in new loans. This is the first time since 1988, when such records began, that savings have exceeded new borrowing.

As a result, the more optimistic among us may break out into singing Jerusalem – as in William Blakes’s poem of 1804, set to music by Sir Hubert Parry in 1916. After all, the UK has an independent currency, an independent economic policy and long debt maturities. It could deal with the problems that we are all fully aware of. If it does this well, relative to other economies, we reckon it will be an increasingly attractive place to be invested.

What, though, of sterling? The pound did not like Grim Gordon (Brown). When he seized the throne, a pound would buy you around $2. By 10 May, when he finally agreed to step down, sterling was below $1.50. British purchasing power had fallen by 25 per cent during his days at 10 Downing Street. But if you have confidence that the new government will sort out the UK’s public finances, then the pound should be quite a good place to be.

On the other hand? One of our number has been reading the latest Financial Stability
Report published by the Bank of England. Reviewing the UK’s financial system, the

bank says ours is particularly vulnerable. It has more re-financing to do over the next few years than banks in Italy, France, Germany or the US.

Meanwhile, we wait for the Basel III liquidity rules for banks, due to be determined after the committee’s meeting in July. It’s all very technical, but it matters. The demands of debt mean markets will remain volatile.