There was welcome news at the start of the week as business secretary Lord Mandelson, announced a £350 aid package for small and medium sized businesses in the United Kingdom. The announcement followed warnings by the leading independent business organisation, the CBI ("Confederation of British Industry") that confidence in the manufacturing industry had deteriorated sharply – in fact, as sharply as it has done since 1980 – in the middle quarter of 2008. The similarly independent ITEM Club, sponsored by Ernst & Young, had already made a statement to the effect that the British economy was already in recession. Mr. Mandelson quoted on the BBC website, told the Business and Enterprise Committee in the House of Commons, "We want to help smaller businesses to plan for the difficult times ahead." The Deputy Director-General of the CBI John Cridland, welcomed the announcement saying "Small businesses will be glad that the government is now taking action to help them through these exceptional economic times, through a range of short, medium and long-term measures," according to the CBI website. For its own part, the Government has pledged to pay its own bills within 10 days rather than the current 30 days.
The feeling of foreboding which has never been far from the financial world in recent months, returned on Tuesday, although there was some better news for Iceland which was reported to be close to agreeing a £3.5 billion (€4.3 billion) with the IMF ("International Monetary Fund"). The Icelandic Central Bank, Seðlabanki Íslands, also reported that it was in negotiations with overseas banks in an effort to encourage payments into the country despite the current economic instability. Denmark, Norway and Sweden have contributed £1.2 billion (€1.5 billion) to a reciprocal currency arrangement, or swap facility, from which the Central Bank has already drawn €400 million.
Elsewhere, BAA, the world's largest airport company; announced that the number of passengers passing through its seven airports in the United Kingdom in September 2008 fell by 5% compared with the same month the previous year. For the year to date, numbers were down by 1.4% compared to the first nine months of 2007. Even the Secretary General of the United Nations, Ban Ki-moon referred to the global financial crisis during a speech at Harvard University. The former South Korean foreign minister was quoted on the Reuters website saying "While recently we have heard much in this country about how problems on Wall Street are affecting innocent people on the Main Street, we need to think more about those people around the world with no streets." The Governor of the Bank of England, Mervyn King, had the last word on the day's proceedings however, when he said during a speech in Leeds that the British economy was "probably" entering its first recession since the early 1990s.
Wednesday morning saw the FTSE 100 leading share index lose 1.2% on Tuesday with 40 minutes of opening, in response to weaknesses bank and commodity stocks in the United States and Asia. Crude oil also traded at less than $70 a barrel as fears that reductions in output capacity by OPEC ("Organisation of Petroleum Exporting Countries") may still be insufficient to offset weakening energy demand mounted. Later in the day it was revealed that the decision to cut interest rates by 0.5% to 4.5% earlier this month was approved unanimously by the Bank of England committee, following a briefing by Governor Mervyn King, regarding a proposed coordinated move with other central banks including the Central European Bank and the US Federal Reserve. The last word on Wednesday must however be reserved for British Prime Minster Gordon Brown. Picking up on the comments made by Mervyn King, the previous evening, Mr. Brown too, admitted that recession was imminent; he said, "Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany and Japan, and because no country can insulate itself from it, from Britain too," according to the Channel 4 website.
Plummeting share values, a falling pound, and worse than anticipated GDP ("Gross Domestic Product") figures, dominated the remainder of another uncomfortable week in economic terms. Chinese growth rates for example, were reported as standing at 9%, lower than anticipated, and 2% or 3% lower than last year; lack of confidence resulted in heavy losses on the money markets in Asia and the United States, and this was reflected by the FTSE 100 Index, which fell by 20 points early on Thursday. The pound, too, fell by fully 6.25 cents on the same day – the biggest fall since "Black Wednesday", in 1992 – following the comments by Mervyn King and Gordon Brown, earlier in the week.
Attention on Friday centred on the UK GDP figure, which you may remember, remained flat during the second quarter of 2008, but fell by 0.5% during the third quarter – the first time a fall has been recorded in that quarter since 1992 – bringing the UK economy ever closer to the technical definition of "recession". Stock values – perhaps not altogether unsurprisingly – plumbed new depths, with the FTSE 100 falling 270 points, or 6.7%, to 3,819.24, and even steeper falls, of around 9%, being recorded in other European markets, such as those in France and Germany. In fact, trading in Moscow was suspended for an hour after the market dropped by over 7% within two hours of opening. The pound again fared badly, falling to just $1.52, in anticipation of further interest rate cuts by the Bank of England.
By way of a sideshow on Friday, OPEC decided to cut oil production by 1.5 million barrels per day – speculation had placed a proposed cut at anywhere between 750,000 and 2 million barrels per day – in an effort to counteract what it referred to as the "dramatic collapse" of crude oil prices. This measure only served to highlight the impotency of even OPEC in the current economic climate, as the price of crude oil plunged by 5%, regardless, in another day of turmoil across the world's financial markets.