12:21pm Thursday 4th December 2008
By Katharine Lawley
THERE will be no quick fix for the problems facing the UK economy, according to two experts who have visited Salisbury to speak at seminars.
Mark Berrisford-Smith, senior economist for HSBC, described his presentation as “the grimmest I have done” in 13 years, and Fionnuala Earley, chief economist at Nationwide, said there was “little recovery in sight”.
Ms Earley, speaking about the property market as a guest of solicitors Trethowans, said: “Since last October prices have been dropping like a stone. There has been a 14.6 per cent year-on-year fall. We expect prices to continue to fall until 2010 when they will be rising again.
“Credit criteria are remaining restrictive: some of that is due to the conditions in the financial markets and some is down to underwriting criteria.”
She said the rental sector had not been as badly affected, but reminded her audience that tenants, as well as homeowners, could get into difficulties.
“The future looks brighter,” she said.
“People who cannot afford to enter the market, such as those staying with their parents, may feel more comfortable with affordability and, when credit comes back, we may see an upturn.”
She concluded: “The economy is heading into recession. We will have a bumpy year in 2009 and defaults will increase given that unemployment is increasing. “Confidence will come back when affordability returns.”
Mr Berrisford-Smith, giving an overview of the economy to business people at the White Hart Hotel, joked: “Just because no bank has failed for four weeks, do not think it’s all over – it’s not.
“We cannot guarantee there will not need to be further rescue packages.”
He said a downturn linked with a bank crisis made things a great deal worse. “Money stops flowing round the system,” he said, “and when money goes in and does not go out, the economy stops.”
He said the real threat to recovery was not inflation, but deflation.
“We need to spend money and spend it quickly,” he said, “and get the money to people who will spend it.”
He said that next year the advanced economies would be in recession, having experienced two successive quarters of negative growth, and they would be relying on the emerging economies to bring them out of it.
“People feel miserable,” he said.
“This will not be a bumper Christmas – people are worried not just about their bank, but their jobs.
“Unemployment will go through 2.5million.
“A deep recession looks likely and it will last four–five quarters.
“I think it will be 2011 before we get back to normal.”
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