The UK is ground zero in the credit crisis

Recently, I have started to shift my focus out of the U.S. and abroad as the subprime crisis has become a global credit crisis. The myth of global de-coupling (assumption that other economies could thrive without the help of the American consumer) is being dispelled daily. Countries to watch are Canada, Mexico, China, India, Spain, Ireland and the UK. But, there are many more.

I am really looking at what is happening in the mortgage industry and with UK banks and retailers because I believe that the UK is now ground zero for the next leg down in the global credit crisis. Recently, Goldman’s Chief Economist Jim O’Neill said he believes the UK will be hardest hit by the global credit crisis. UK banks are writing off lots of debt and doing rights issues left and right. The UK banks have a lot of exposure to the U.S. as well. All of this has led to layoffs in the City of London.

The real economy in the UK is suffering as a result. The mortgage and retail sectors are really hurting in particular with plunging home sales and declining retail sales. House prices in the UK are now declining.

All of this spells trouble for the UK economy and I expect to see a repeat of the U.S. housing and economic troubles in the coming months. I will keep posting on this as information becomes available.


Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.