23rd Sep 2008
Irish News day and Ruane’s problems
That time of the month again on O’Conall Street.
When Gary McDonald, the Irish News’ Business Editor phoned on Friday for our monthly chat about the column I said I wanted to write about the financial crisis.
He said; “good, but remember keep it tight”. Those are Gary’s words of advice every month. The key to good newspaper writing is concise and clear prose.
The article follows but I could not let the morning pass without metaphorically screaming at Caitriona Ruane who this morning gave an awful interview on Good Morning Ulster. She has an excuse for everything and an answer for nobody. What a sad indictment of politics. In fact Wendy Austin had to point out that fifteen minutes after the interview with the Minister not a single supportive text had been received, such is the public outrage at her.
What a week.
Did you ever think George W Bush would cast aside two decades of light regulation and laissez-faire economic policy for the effective nationalisation of the US finance sector?
The Republicans have exchanged ‘Reaganomics’ for ‘Castronomics’ in just a few days – it is too early to say who how effective their actions will be. What is clear, however, is that the decision by the US and UK governments to come to the aid of the debt-stricken banking sector will see all of us pay significantly more tax for decades to come.
Closer to home, Bank of Ireland last week promised to halve its usual dividend payout to shareholders as the British government cast aside years of tightly-controlled competition law to allow the merger of HBOS and Lloyds TSB. Sure, Gordon Brown’s beleaguered government was stuck between a rock and a hard place, but does anyone honestly think that customers will be better off in a year’s time when only one bank controls more than a third of the entire UK mortgage market?
What’s this got to do with PR I hear you say?
Lots.
The financial markets are built on confidence and the public relations business is all about maintaining that confidence.
Here in Belfast, local banks have been working hard to put forward a positive spin on things in spite of the global turmoil. First Trust bravely predicted that we would escape the worst of the downturn last week. But a closer look at its report seemed to point to an over-reliance on Q1 2008 stats. It does not take an economist to realise that we are in a very different world today then we were in March.
The First Trust report also claimed that there was little evidence of widespread private sector job losses in NI. Did the authors consult the property sector, the Law Society, the RICS, estate agents and mortgage brokers or consider the professional services sector in general? Or were they simply content to rely on a set of numbers that were six months old?
I ask this question because over 60,000 jobs were created here in the professional services area over the past decade and over 20,000 in construction. Manufacturing, which the report cites as a well-performing sector, shed over 19,000 jobs during the same period.
We now know that the Construction and Property Group has seen 2,500 jobs lost amongst its members in the last year. Extrapolating that figure across the rest of the sector, you could reasonably assume that thousands more might be lost by Christmas.
We also know that there have been significant job losses in estate agencies, construction suppliers and solicitors firms. These have been kept largely below the radar and may not yet be appearing on the official figures - but ask anyone and they will tell you jobs here are being lost and in significant numbers.
Amazingly, the First Trust report also cites widespread job growth in the financial services sector. But where is it?
Yes, we do have a huge recession ‘cushion’ in the form of our large public sector, and thankfully this will keep many people from a spell on the dole. However, I am still puzzled why the banks here appear to be largely unconcerned about their exposure to the local property market slump. It grew at a much faster rate than the rest of the UK over the past decade and is now falling faster.
Put simply, how come our local banks are not writing off their debts on land acquisitions they played a part in buying and which are now no longer viable?
Are we really expected to believe that ‘toxic debt’ does not exist on this island?
There will be plenty of spin in the financial sector in the weeks and months ahead as the turmoil continues, but the era of hiding the problems between the lines of carefully-constructed balance sheets may well be over. This new era of transparency should apply on Donegall Square as it should on Wall Street.
It would be very helpful if the Executive met to discuss all this, but then I guess they just have more important things to be getting on with.
[...] Ireland Economic Conference in Belfast yesterday with a poor speech which drew heavily on the First Trust Quarterly Economic Review - a report which has been loosing credibility by the minute since its publication. As one [...]