Sharpe's Opinion

Andrew Lilico thinks Britain is bust

An excellent explanation of the problems the financial sector (which accounts for a significant portion of our economy) by Andrew Lilico on CentreRight today. Key passage:

I believe that, in fact, for the UK financial services sector as a whole, we face a future profitability crisis.  The sector must shrink, so that the remaining players can be restored to adequate profitability.  With fewer, more profitable players, the equity value of the remaining players will increase and their capital will prove adequate.  The attempt to recapitalise the UK’s banks is an exercise in denial – it is an attempt to convince us that the sector can carry on, much the size that it was before, without radical shrinkage.

To put it another way, the financial sector is bust. Really bust. And the efforts the government are making to save it will, in his words, “simply throw good money after bad”.