I am well aware how business and finance works in the UK and the implications.
Finance and Business Analysis
The UK is the home to the world’s largest financial centre (or Money Laundering Centre depending how you view it).Therefore you would expect that in these austerity times there should not be a shortage of money, but there is and that is why the Bank of England has had to print so much of the stuff and give it to the banks, at the same telling the gullible public we do not have enough to pay for much needed public services. How can this be, well let’s look closer at business and finance
In the real world finance should serve the needs of business and people, that is for business start ups, for business expansion, to the consumer to finance the goods and services which business provides .The problem with the UK economy is that productive parts of the economy have been abandoned because of the risk element and long term commitment of finance needed as in manufacturing, UK manufacturing languishes somewhere between 8-12% of gdp
On the other hand most of the money is lent to buy property and land, which are non productive assets which inevitably leads to asset inflation, property speculations hence the boom and bust cycle which has been the hallmark of the UK economy for the last 50 years, as when Gordon Brown the former Labour Prime Minister declared no more boom and bust under his stewardship, only to see another housing boom. So the business cycle in the UK is really a property and consumer debt cycle which is a finance cycle which is a credit cycle which is banking cycle, as it is the banks by virtue of their power to create money as debt which expands and contracts the UK economy
The misallocation of finance to business can be best understood by a simple example. Imagine you are a inventor (something which I have done and failed to get my invention to market) and you invent a really very useful educational aid for children’s learning. You get your product patented(spend money),you do market research(spend money),you get a proto type built(spend money),you show it to prospective buyers, who approve of your product(spend money),you even secure some provisional orders when you can get it manufactured(spend money).You sit down one weekend and work out the finance to get your product to market
It’s going to cost you a whopping £100,000 to get you product to market, you have personal savings of £10,000,you manage to persuade your family and friends to put a further £40,000 giving you a cash total of £50,000 leaving you with £50,000 to collect. Doing the decent thing you approach your bank with whom you have banked for over 30 years, you present your business plan only to have it rejected by Head Office by a computer which allocates points to you business proposal and rejects it because (1) you have no assets against which the bank can lend money (b) even if you have collateral your venture is seen as too risky by the banks computerised decision making system
You go home giving up your dream. A week later you approach your bank with a different proposal. You tell the bank you are thinking of buying a house the purchase being £100,000 you put down a deposit of £10,000 and the bank lends you the other £90,000 to buy your house. The bank firmly believes its money is secured against you house. The house may be real but the value is not, it can fluctuate and banks have consistently lost money on land and property
To summarise finance in the UK instead of being a facilitator in transactions has become dominant and exploitive against business by uploading fees and charges which bear no relation to everyday banking activity or risk. To remedy this situation we need to go back to traditional forms of banking and finance, the days when your local bank manager visited businesses, scrutinized accounts, checked the financial health of the business using standard financial yardsticks of measurements.
PS if you want analysis how real economics and business works in the UK then I’m your man, if you simply want a person to support the Ideology of the economics magazine then I’m not the person.
Kind regards

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