Monday, August 15, 2011

The UK is splitting into two - maybe three - possibly four parts

My clients are bored of me telling them that they must for get about the idea of a single domestic market and start thinking about the ultra-fragmented UK. We are a country that is splitting apart into areas of prosperity and areas of terminal decline.

This has not just happened but the recent economic events have accelerated the process. During the past government the only way the process was slowed was by the massive diversion of public spending from south to north.

Turn-off the tap and you return to the underlying position. Well actually you don't since it has got worse. Instead of a geography finding its natural level of economic activity the distortion means it will be worse once the funds are stopped.

This graph from the FT shows the split in the UK by the levels of households with negative equity (click on the image to see it full sized).

Remember, that you don't exactly feel like being an active consumer when you know that your house is worth less than you paid. Remember, that a disproportional number of householders are 50-plus.

The message is clear to me. I just hope my clients and others are listening. Dick Stroud

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