Mark Wadsworth

This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working

That’s one way of looking at it…

… Mr K drew my attention to Tullett Prebon’s lastest Strategy Note

Government and opposition alike base their thinking on the assumption that, by one means or another, growth can be restored. We see no reason whatever to assume this. To focus on the deficit is to ignore the fact that the British economy had become debt dependant long before the financial crisis.

Together, private and public borrowing has averaged 11.2% of GDP since 2003. Over the past decade, borrowing has driven up output in financial services (+123%), construction (+27%) and real estate (+26%), whilst lavish public spending has propelled expansion in health (+35%), education (+27%) and public administration and defence (+22%).

Real output in all other industries is now 5% lower than it was ten years ago.

Between them, real estate, finance, health, education, construction and public administration are six of Britain’s eight largest industries, and account for more than 58% of output. Yet the future prospects for at least five of these six sectors are grim, because:

– Public sector spending cuts are modest, but growth is now a thing of the past.
– Net mortgage borrowing, critical to the real estate and construction sectors, has crashed, from £113bn in 2007-08 to a derisory £3bn last year.
– The aggregate of private (mortgage and credit) borrowing has now turned negative.

That sectors which account for 58% of output are hamstrung in this way leads us to believe that the fiscal and economic outlook is drastically worse than is generally assumed…

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