Foreclosures And the UK

Posted on March 19th, 2009 by Samanta Parks

The industrial production in the UK reached in 2008 at the lowest level in the past 35 years, which shows that the recession and the foreclosures crisis effects are much deeper than the initial estimates. The UK Office of Statistics announced that the industrial production, which represents 18% of GDP, fell by 1.7% only in December, which marks a decrease of 9.4% compared to 2007.

In the last quarter of 2008, industrial production fell by 4.5 percent, the biggest decline since the first half of 1974, as an effect of the foreclosures crisis in the USA.

Representatives of the British office of statistics said that only the data, which show the decrease of the industrial production, would cut 0.1% of the estimates for GDP in the past quarter.

Officials of the International Monetary Fund (IMF) think that the UK economy is compressed by 2.8% in 2009, which is double reported to the first forecast. The number of British companies that “have pulled up the shutters” increased by 24%, according to latest official statistics published by authorities in London. Specifically, more than 15,000 companies in the UK have entered into bankruptcy last year and this is a consequence of the American foreclosures crisis too. The emphasizing of the foreclosures crisis in the last part of the year was underlined by the increase in the number of bankruptcies in the 4th quarter of 2008.

Thus, in the period mentioned, entered bankruptcy nearly 5000 of the total of 15,500 recorded throughout the entire year. Consumption is affected, unemployment raises and figures have confirmed the entry in recession caused by the foreclosures crisis, and the British managers are depressed, everything goes wrong in the British economy as well.

Analysts have begun to ask a question which they did not believe to ever ask if the UK is almost in national bankruptcy?

Currently, worldwide there are three major crises: the financial crisis, the real estate crisis, therefore the foreclosures crisis, and the economic one reflected in the industrial crisis. Britain faces all three at the same time and at high level, according to Emmanuel Lechypre, responsible of an economic forecasting center in France.

The financial crisis and the foreclosures crisis are associated with serious problems in the UK banking system, where the state had to intervene heavily in order to support some mammoth banking groups. Furthermore, losses incurred by these banks amounted to inconceivable sums, as is the case of RBS, which expects a loss of 32 billion. Almost one quarter of the UK economic growth came from the financial sector.

The real estate, therefore the foreclosure crisis is associated with a devastating drop in the real estate prices, a decline that reached 30%, since the beginning of the crisis so far.

The industrial crisis has already been felt in the British area, especially in the automotive sector, but also in the constructions area. The production of automobiles in the UK plants fell by 50%. In addition, all the measures taken by the British executive are insufficient for both.