GUERNSEY is not immune to a recession, according to the president of the Chamber of Commerce. Paul Luxon (pictued) said islanders must not be complacent as the UK conceded it was heading for a downturn.
Official figures revealed on Friday that the UK economy had shrunk by 0.5% between July and September, the first time it had fallen into negative territory in 16 years.
Mr Luxon said Guernsey tended to follow UK trends but it was unlikely that it was going to see the severity of the impact of the credit crunch that is being experienced there.
‘The reality is most informed observers can see the UK has moved into a recession by the scale of rising unemployment,’ said Mr Luxon.
Technically, the UK is still not in recession - that comes when two successive quarters of negative growth are recorded - but both Mervyn King, the governor of the Bank of England, and Prime Minster Gordon Brown have warned it is poised to do so.
Mr Luxon said the UK was trying to kick-start itself out of economic downturn but rising unemployment, soaring prices and the banks’ reluctance to lend had all had an impact.
These were contributing factors to the contraction of the UK’s gross domestic product, which saw the biggest decline since the fourth quarter of 1990.
‘We have been quite resilient but there are the signs. Very few houses are being sold, but prices are holding, which is an encouraging sign.’
He said house prices were not driving the rise in RPI, revealed on Friday to be at 5.8%, the highest since September 1991, because there was virtually no activity in the market.
Mr Luxon added that businesses and consumers remained cautious with cash not so readily available, resulting in discretionary spending.
‘The fact is people have to put food on their tables, heat their homes and pay their rent but if times are tough, they will rein in their spending and weather the storm - which is what they are doing now,’ he said.
Article posted on 27th October, 2008 - 2.29pm
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2 Article Comments
Paul Luxon
Whilst you have got your crystal ball out could you please provide me with next weeks national lottery results?
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I would like to agree with Paul Luxon’s upbeat predictions for the Guernsey economy but I fear that it is the indirect consequences of the forthcoming UK recession that will hit us hardest.
While our own financial services industry may be robust enough to ride out the worst of the storm, the parent companies of many of our banks and other financial institutions are going to be demanding worldwide job cuts.
With a very low level of unemployment we can absorb some of these job losses but given the massive problems the banks are facing, I suspect that ‘rationalisation programmes’ are going to be severe.
The less jobs there are in the finance industry the less diposable income there will be so there will be less of us buying new cars, building new conservatories, going out for meals, doing up our homes etc, which in turn means less work for tradesmen, restauranteurs and other service providers.
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