A reminder of the financial crisis

Sir Robert visits Yeadon's
Sir Robert visits Yeadon's

On Monday the British Chambers of Commerce issued a warning about the risk to the economy posed by political uncertainty saying this was more of a challenge than the state of the global economy.

With Greece back in the news we are reminded of the enormity of the financial crisis that confronted the country five years ago and of the extra costs confronting countries that were seen to be politically unable to deliver on commitments to tackle the consequences of the financial crash.

The markets have taken comfort from the way the coalition agreement brought some predictability to decision making in the UK.

It is a measure of the benefit of that stability that the markets are still lending even though the debt facing the country is still enormous.

The decision by the Government not to accelerate the deficit reduction measures has only been possible because the markets have not panicked.

A minority Government struggling to negotiate each vote in Parliament would have stood no chance as the markets took fright and investors would have had no certainty against which to judge their decisions.

Inevitably, the compromises needed to deliver a coalition mean that both parties are unable implement their manifestos in full. Given the country did not give any one party a majority no mandate existed for all the policies to be implemented.

In a sense that compromise is part of the secret behind that ability to deliver the benefits of stability. One party alone delivering its ideology undiluted would have led to more political unrest at the measures needed to save the economy.

The challenge facing the country is to realise while progress has been made we still have a long way to go to build a secure economy.

Away from the North East of Scotland, for many the fall in the price of oil will be a boost. Even then there are many businesses in the rest of the country that supply goods and services to the oil industry that will be facing a downturn.

The situation here is serious as many of the planned job cuts were announced before the drop in the price of oil.

Many people provide their services as contractors rather than employees. Even if they keep their contract they are facing major cuts in the fee they receive.

That reduction in spending power will feed through to the rest of the North-east economy as less money is spent in buying goods and services. The jobs that spending supports will, also, be at risk.

We have been here before as the industry has confronted the cycle of price collapse followed by recovery.

I remember the rows of for sale signs and the stories of people handing the keys of their house to their mortgage lender during one of the earlier downturns.

In the previous downturns the potential for major new finds and the life still left in existing platforms meant that as the price picked up we were ready to take advantage of the recovery. This time we will need to ensure incentives are in place to explore for new finds and maintain the old platforms so we maximise the gain we make from the next upturn.

On the plus side we now have a global centre of excellence in offshore oil and gas technology that has built a major export market. While the UK Government have important roles to play on tax and regulation implementing the Wood Review, the Scottish Government need to tackle the concerns of those exporting companies about the need to improve roads and other infrastructure.

Despite the challenges we face I hope everyone had a good Christmas and wish all readers the very best for 2015.