Worldwide: The Financial Puzzle

As we approach the middle of the final quarter of 2012, one has to say that the economic outlook is still a gloomy one – even for a born optimist such as myself. In fact as far back as July 2009, my Gibraltar Magazine column article was titled Green Shoots. Had I known three years ago what we all know now, maybe I wouldn't have been so keen to call time on the crisis, but life seldom turns out quite as we expect, does it? And in the financial world, that has never been truer than today.

But given my "glass is half full, not half empty" sense of optimism, are there any signs of recovery one can point to as 2012 races towards 2013? Firstly, I should acknowledge that for many, including here in Gibraltar, the year could end badly as more jobs losses are announced and companies continue to struggle or even fail altogether. This is especially true across the border in Spain where many Gibraltarians have been left nursing hefty mortgage payments on property worth considerably less than when purchased.

Sad to report, negative equity – once a peculiarly British phenomenon – has become far too common in Spain. The new government is struggling with an ever deepening recession and chronic unemployment. It ends 2012 faced with providing financial aid not just to its heavily indebted banking sector but to the autonomous regions themselves. The second half of the year has been dominated by talk of an EU bailout and we have seen some civil disorder in the streets.

But away from Spain, are there genuine reasons to be hopeful? I suggest that there are – in certain specific areas – and the hope has to be that these early signs will prove to be long lasting and will manifest themselves in other parts of the economy, leading to an overall change of mood and ultimately recovery.

Consider the situation in the place where it all started to go wrong – the US. There are some real signs of progress and not just anecdotal ones or hyperbole in advance of November's presidential election. The overall unemployment numbers, whilst still far too high, have recently stabilised. More and more listed companies have been reporting good year-end figures and, as a result, some elements of the stock market are testing levels not seen for several years.

All well and good but the US is such a vast economy and is still the only true global superpower in financial terms. What happens across the Atlantic certainly affects us here but we must face the fact that it's the situation in Europe that should concern us most. It is upon Europe's recovery, or at least partial recovery, that we all depend.

Of course in Gibraltar we rely on the financial health of two entirely separate economies for our well-being. I touched on the situation in Spain earlier, but let's now turn to the UK because, for many Gibraltarians, the state of the British economy has a more significant effect on their daily lives. As part of the sterling area, we are dependent on Britain when considering the all-important exchange rate, especially against the euro. Price rises on imported goods such as fuel and, of course, food, are all largely out of our control.

UK government policy is currently focused on reducing the eye-popping deficit while at the same time attempting to stimulate growth and keep inflation under control. It is a very tricky balancing act. The deficit is still huge but is moving on a positive track.

Inflation is now line with expectations and whilst GDP, my favourite measure, is still negative (i.e. in recession), it is marginal and in fact the figure was recently revised in the right direction. All this is somewhat academic but the hope is that by stimulating growth, more jobs will be created leading to higher tax receipts and eventually a permanent reduction to the huge deficit.

In the real economy, companies are still laying off staff and stories of this or that high profile corporate failure still appear in the news with gruesome regularity. At the same time however, others are taking on staff. The motor and retail industries are prime examples recently. There are also real signs that banks are starting to lend again, even if very selectively, which is long overdue given the lengths to which the government has gone to persuade or cajole banks to lend – from quantitative easing and maintaining interest rates at very low levels through to threats of punitive action.

It's in the UK property market that we can see real, tangible, signs of recovery – fragile though any upturn may be. The truth is that some property sectors are booming; the smarter areas in central London are still doing as well as ever but most British people don't live in Knightsbridge or Mayfair. What about the rest of the country?

Several major house building firms have recently announced good year-end figures. Considering the reasons why, leads us to one of the easiest comparisons one can make between the UK and Spain – one of great interest to us here in Gibraltar. The two countries differ markedly when considering residential property. Put simply, in the UK there are just not enough houses to go round. Net immigration and constantly increasing demand from the young and first-time buyers mean that this sector is relatively buoyant. Moreover, a number of the house builders are sitting on undeveloped land. Given the chance of increasing bank lending – both to the developers to build houses and to the individuals who want to buy them, the position is likely to become ever more sustainable. And this leads to other forms of spending such as expenditure on white goods, furniture and so on.

In Spain – and indeed many other countries in Europe – the opposite applies. There is chronic over supply combined with no appetite from the banks to lend to the property market. Hence demand is drying up. The situation in both countries could hardly be more different but of course Britain is a nation of home owners – certainly there has been a massive jolt in the last few years but has the national psyche really be changed for ever? I doubt it.

Some consider it a pity then that the UK government is planning such sweeping changes from next year relating to British residential properties that are owned by offshore companies. Aimed at clamping down on what they see as abuse of favourable tax treatment, increased stamp duty has been announced where property is valued at £2m or more and for the first time capital gains tax will apply to properties owned by such companies. We await final details but anyone in this position should seek advice urgently to see whether they are affected.

These new changes may impact negatively on foreign purchasers of UK property who might now think again if the previous fiscal benefits attached to such investment will no longer apply. I suggest though that looking at the wider picture, UK residential property for domestic use – that is where individuals are UK resident and looking to occupy the property themselves or for letting out to others – could well be one of the lynchpins of the putative economic recovery for which we are all so desperate.

Perhaps I might be allowed to misquote Winston Churchill. Are we seeing the end of the financial crisis? No. Not even the beginning of the end. But we might, just might, be witnessing the end of the beginning – at least in the UK. Let's hope so for our all sakes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.