Uk Economy In A Downward Spiral

[pdq1]

http://www.bbc.co.uk/news/uk-england-wiltshire-20983181

Honda UK have announced 600 jobs are to go because orders from the EU are drying up at the same time as the US are expanding their sales. Just a few years ago American car manufacturers were going to the wall and had to be rescued by the US government. What could our government do to revive parts of our motor industry and save these skilled jobs.

[pdq1]

Make that 800 jobs now to go.

[Gromit]

Nothing. The drop in Honda sales is Europewide because the whole area is in recession or there is no money about because of enforced austerity measures.

The US is still trying to stimulate their economy as are Japan. We seem to only have one option, to pay our debts early regardless of that crippling the economy.

[pdq1]

More about the US bailout

http://useconomy.about.com/od/criticalssues/a/auto_bailout.htm

[Zeuhl]

I remember being told years ago by a very wily -and very successful- businessman that owing money you can't pay back isn't nearly so bad as being owed money by people who can't pay it back.

[jake-the-peg]

So what if all our industry goes to the wall - the only thing that matters is that the deficit is reduced - that's right isn't it?

It was Maragret Thatcher's approach and look at the sucess that was not wasting money supporting our manufacturing industry through the tough times.

It was a tough love message that British industry had to sink or swim

They sank!

What could the government do?

They could reintroduce the scrappage scheme

[Milvus]

It's not the UK car buying that is the problem for Honda. Their UK sales are up more than 7% here. Overall more cars were bought in the UK last year than any year since 2008. The problem as Gromit said is in Europe, Honda have dropped more than a million cars in Europe, particularly in Greece, Italy and Spain. If you don't have customers you don't make cars. I'm not sure how our government can affect that in Europe

[New Judge]

And why are Spain, Italy and Greece in particular buying fewer cars? Answers on a postcard, please. (Oh, on second thoughts, "euro" will fit on the stamp).

[Bazile]

^^^^
So , would exiting the EU , mean that Spain Italy Greece would buy more cars ?

[AB Editor]

"So , would exiting the EU , mean that Spain Italy Greece would buy more cars
?"

I think NJ is saying that the ability to borrow at an "EU (German) rate" rather than a "Greece rate" over the last decade is a problem if you're only able to pay back at the "Greece rate". The resulting debts are what's contributed a situation where no one fancies splashing out on a new Honda.

I am always very wary when people speak of government intervention in industry like this.

[DTCwordfan]

I thought that our car business was in a healthy state with the local market and overseas (outside the EU) sales...........

[Gromit]

There is not any difference between the UK and Greece other than our credit rating was better when the Economic meltdown hit. We were able to borrow cheaply to ride the storm. Greece were in no such position. So the ended up begging to the IMF with the usual disastrous consequences.

[New Judge]

"There is not any difference between the UK and Greece other than our credit rating was better when the Economic meltdown hit."

Per..lease Gromit!

There are a few differences, but I’ll mention the two most significant:

1. Greece treats its tax system rather like a church collection plate. Their workers put a few Drachmas/Euros in when their conscience pricks, but otherwise its seen as an optional spend. By contrast the tax regime in the UK is somewhat more rigorously enforced.

2. (Far more import as far as this argument goes) Greece is in the Euro, the UK is not.

Far from being unable to borrow cheap money, it is the fact that they were able to do so that effectively caused the Greeks’ current predicament and this came about directly as a result of their membership of the single currency. Prior to their ditching the Drachma and particularly before their membership of the EU Greece was a nation of peasant farmers and tourism. They muddled along, their currency devaluing steadily to attract foreign spending (mostly tourism), they put a few Drachmas in the taxman’s collection plate and not much changed. But that all altered as soon as they began using the Euro. They were encouraged to borrow vast sums of cash to spend on foreign goods and services. Germany was the principal beneficiary of this trade and in 2008 more Porsche Cayennes were sold in Greece than in Germany. Huge infrastructure projects were started (many of them now abandoned) and they lived a life way, way beyond their means. Then the excrement hit the air conditioning and they were stuck with debts that could not repay, a currency they could not afford to use and interest and exchange rates they could not control.

If anybody believes José Manuel Barroso when he says the worst of the Euro crisis is over they are sadly mistaken. It has just been shuffled out of the headlines and far far worse is yet to come as a result of this ludicrous project which has blighted the lives of millions (and caused the collapse of car sales in most of the "PIIGS" nations.

[Gromit]

New Judge

1. The tax avoided in Greece is virtually the same as here. Both counties losing about €30million is uncollected tax.

2. Greece probably were living on credit but so were we. The Financial collapse was an unexpected and unprecidented event and rather pulled the rug from under them. We were in a similar position, but were able to loan far greater amounts of money more cheaply than Greece.

[pdq1]

Honda recent statement to sack 800 staff doesn't really ring true. Just 3 months ago they were talking about massive expansion for the next 5 years and in fact took on 500 new workers last April in preparation. The situation in Europe couldn't have changed that much in so short a time.

http://www.telegraph.co.uk/finance/newsbysector/transport/9559348/Honda-plans-to-double-car-sales-in-boost-for-UK-plant.html


Could this talk of leaving the EU have affected its decisions to concentrate its operations in Britain? Could they be at a point where they may intend to do a runner and like Fords did recently move their vehicle plants to the EU or even Turkey?

[New Judge]

Yes Gromit, uncollected taxes in the two nations are about the same (I think). However:

GDP Greece: $299bn
GDP UK: $2,500bn

(UN figures for 2011)

so as a percentage of GDP, Greece's figure is worth more than 8 times that of the UK.

"...but were able to loan far greater amounts of money more cheaply than Greece. "

That's quite true. And that's because the UK had control over its currency, its interest rates and its exchange rates whilst Greece did not. The UK had a better record at collecting taxes (and so had a greater prospect of collecting revenue to repay loans). It had a far greater GDP (and thus far greater income). In short the international money markets had far greater confidence that the UK would repay its loans. That's why it had a better credit rating and much of that confidence came about precisely because we were not using the Euro.