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One Direction?

One Direction?

With the Greek instalment of their payback ahead of schedule, the EUR has really gained a lot of traction against the Pound, but also against the USD. The UK has so much going on internally that could really move the value of our currency over the coming weeks. As things begin to unfold from a political, social and economic perspective, let’s have a look at what some of these factors could be.

Some reports have indicated that perhaps the lending volumes expected by the banks could fall as businesses and people stray from lending in times of uncertainty and an unclear fiscal regime. Potentially, this would push lending costs up and – if this was the case – these would be passed on to the consumer. The BBA Chief Economist said that there was no sign of this as yet, but surely it must be tabled as a risk. Of course, SCB and HSBC are both already examining a move offshore. This would be damaging for both our taxation revenue, but also our perceived attractiveness to businesses as a home for them.

The National Institute of Economic and Social Research pared back their forecast of British economic growth from 2.9% to 2.5% and commented that, in their opinion, none of the main political parties really did what they should have done about stagnant productivity. On balance the report mentioned strong consumer spending could help buoy the economy.

Not having a government for, possibly, a long time could have a deeper impact on businesses too. Of course, the ability of the majority in any coalition to pass their promised bills into action becomes diluted. It’s tough enough to convince everybody in one party to back an action, let alone possibly three parties, and you still have an opposition. What would businesses do in times where the future of their capital is uncertain? Invest? Borrow? Do nothing until we see more clearly? Personally, I think the situation says more about the state of politics than it does about the voting people of Britain…

Happy voting, all.


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