Yes we all know that interest rates have never been this low in the UK since men wore tights and long floppy wigs (actually I may have forgotten the 1970’s), but the truth is that interest rates as far as the real world is concerned, have already started to rise quite significantly. Unfortunately cash savers need not pay attention here as, so far, there has been no sign of any respite for the truly abysmal rates of interest income on cash deposits.

It can however be seen quite clearly in the rates now being levied on many prospective borrowers. It has been a common theme for many businesses to comment and complain about not just the reduction or withdrawal of facilities but far more about the increase in the lending margins and the rates themselves. This has now spread much further as we see retail lending rates increasing quite significantly. Whole ranges of fixed rate mortgages have been withdrawn - and the interest rate numbers replacing them seem to be generally quite a bit higher.

With this widening of bank margins, this is obviously enabling the banks to become really very profitable in the short term, at least on an operational basis (we will still have to wait and see what write downs and provisions they are still going to have to make under the recession). From this one can surmise that this is probably direct government policy and intention, after all they have stated that they want to see a strong and steady banking system being re-established as quickly as possible. Such a need is laudable, but at a price.

The capitalist system needs an efficient banking system and the British economy needs a strong and robust one and so rebuilding their strength through profitability is perfectly sound, but it can become a dangerous policy if left too long. If we allow the banks to be introverted enough to focus primarily on margins and profitability, we will be running the risk of stifling other potential lending. The economy now needs more liquidity of banking to help the blood flowing again through the economic body and to get the velocity of the blood to be pumped at a greater pace. More money at greater speed through the economy will be a key element to helping to break the logjam of the recession and especially to help ease the transactions of houses and thus assist in their more effective price formation and, eventually, solidity.

The alternative to this is to see continued constrained investment and cashflow, both of which will harm the repair and recovery of the economy. It’s more banking, not just profitable banking.

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The internecine bickering over the structure and future of Formula 1 seems to an outsider to be a perfect example of rich men playing games with boys’ toys. Whether it is Mr Moseley’s inability to whip either the teams, or even himself for that matter, into shape, or the diminutive divorcee to keep control of the events, is, in my mind less important than the businesses behind the sport itself. We often say how poor we are at recognising, supporting and celebrating our successes but here, surely, is one. I don’t mean F1 itself but the cutting edge of engineering behind it. We often laud and praise the Germans quite rightly for their engineering prowess, a country where engineers are respected as industry leaders and fulcrum points of their economy; how that compares with the UK, where engineers are merely associated with an oily rag and a spanner.

If you look at most of the leading teams in this global car chase, most of the expertise and capability are right here in the UK and mostly in and around the Thames Valley and Silverstone. At present all we seem to do is praise the drivers, especially if they are from Blighty, and admire the cars, but really we should be recognising the fantastic feat of British engineering that produces such global winners month after month. This at a time when LDV vans is seemingly doomed! If ever there was a case for national support for this high tech industry and all its spin off and associated work, it is now. Just a pity we couldn’t do that when we had a world leading motorcycle industry. Anyway motorcycle races are more interesting – at least they make the effort to overtake each other quite often, but sadly none of the bikes are British.

***

And finally......... A Coventry bishop has given his backing to a charity's scheme to raise funds for better sanitation in Burundi, Africa - loo twinning. The Right Reverend Christopher Cocksworth paid £60 to twin his smallest room with one in Rutana Province.

Leamington Spa-based charity Cord has introduced the scheme, with the money going to families returning to Burundi. A spokesman said the money was needed to improve hygiene.

The idea is people can twin their home or office loo with one in Rutana Province, and can track it down to its exact location via Google Earth. Bishop Colin said the scheme was a "brilliant idea". "

It's a way in which we can have some fun while making a difference to a lot of people's lives," he said. I suppose they have nothing two loos.....(sorry!)

Have a good week.

 

Justin A. Urquhart Stewart

Director

Seven Investment Management Limited

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The views in the Justin's View section of the website are the views of Justin A. Urquhart Stewart alone. That's why we call it Justin's View!