Whatever the technical definition of a recession , the statistics do not lie . As many as 600 estate agents could lose their jobs this year. Builders such as Barratts are shedding nearly a fifth of their workforces and the National Association of Estate Agents believes that house sales have generally fallen by 50 per cent across the UK since last year and by up to 80 per cent in certain pockets where newbuild units are the majority stock, such as inner city areas of Manchester and Leeds.
Throw in a depressed FTSE 100 figure and the June HPI figure from HBOS and it completes a morose picture but one which few of us could genuinely have argued was not inevitable as little as six months ago once most of the country’s mortgage lenders had begun to ration their capital.
My own philosophy over bad news is that once it is irreversible it should be delivered punctually and candidly. In some ways, the quicker and steeper the fall into recession, the quicker we can emerge from it. Ostriches with their heads in the sand eventually get washed away by the tide .
Three things now need to happen.
First, the Bank of England needs to admit that while defeating inflation is a noble aim , it has become an over-obsessed objective. Given that the time lag to high-street spending patterns arising out of a rate cut can be as much as six months, deferring positive action any longer will cost thousands of people their jobs. The financial markets still believe the chances of a rate increase before the end of the year are 50 per cent.
Second , the FSA has been predictably occupied with lenders’ solvency ratios this past six months. The extent of that circumspection needs to be moderated because while learning the lessons from the Northern Rock saga is sensible, every penny being mothballed in a lender’s vault is one penny less finding its way in to the pay packets of bricklayers, plumbers, plasterers or mortgage brokers.
Third, the Treasury needs to act swiftly once James Crosby’s report on the wholesale funding market is delivered. Senior figures from the biggest banks have expressed dismay at the narrow terms contained within April’s special liquidity scheme which has had a negligible impact on Libor rates.
I accept that there remains a moral hazard issue in the BoE widening the terms of the SLS but surely the civil servants at the Treasury advising on this matter can see that lenders have dramatically enhanced their risk and credit controls over the past six months and that the quality of their mortgage assets, even despite house price deflation, is far removed from 2006/07 standards.
My final thought is a political one. Whether it is a firm policy on knife crime, fuel duty, car tax or the 10p tax band, what disillusions the electorate more than anything else is procrastination. As was once remarked of Margaret Thatcher, it is sometimes better to be decisive, proved wrong and considered to be a fool than to dally and to remove all doubt.
Right now, we need decisive leadership from all the relevant authorities, even if that means taking calculated risks.
Kevin Duffy is chief operating officer of Mortgageforce