Just back (10 Oct) from wonderful and inspiring INURA meeting in Athens inura08.wordpress.com. (To see some photos, click the picture.) All through the conference the world financial knitting was unravelling. Somehow this unravelling of the financial sector (though in NO WAY a political basis for any major change) seems like an opportunity for us to say something. I can’t resist it. Richard Sennett published an article in the FT on Wednesday 8th which was good in many ways, calling for governments to intervene to restore the quantity and quality of jobs…. It was a bit crass in places and that provoked me to write a letter (see below)
Then came an email from Joshua at the London Evening Standard, whose job is to drum up letters. He asked me to comment on an article about London’s extreme vulnerability to banking collapse and another on the possible death of Crossrail, which I did.
I don’t know whether either of these letters will be published but here they are. [Later: the FT one appeared Monday 13th.] What shall we do? There needs to be some more concerted left response.
Letter to FT: Richard Sennett makes a compelling case for state support to wider sections of our economies and his programme as a whole could certainly be a sort of socialism (“Extend state ownership to save jobs” 8 October) but he’s surely wrong to say that the government bail-outs we see today are ‘…financial socialism.’ The events of recent weeks on both sides of the Atlantic are clear examples of what sociologists call the capitalist state at work: the state coming to the aid of capital in a crisis. All the signs are that governments hope to get back to ‘normal’ , even though ‘normal’ has lost its credibility. There are no signs of a shift towards a fairer or more emancipatory or even a more stable society. Sennett’s article is a stirring call to re-think society but it does no good to fool ourselves by imagining that the re-think is already under way. Michael Edwards, UCL
and then to the Evening Standard in London (a local paper): Your report on CEBR’s pessimistic view for London jobs (London faces recession “worse than Nineties”, News, 10 October) is certainly right, even if they claim too much precision about future unemployment.
But the surprising thing about this crisis is that people are surprised: it has been clear for years that the current version of global capitalism was fragile and likely to collapse. It has also been clear that London’s economy gets ever more volatile as it depends more and more on finance, business services and real estate. This has been borne out by research in the GLA and the Corporation of London time and again.
At three successive public hearings on Ken Livingstone’s London Plan some of us have hammered away to try and get a debate about this – arguing that London should minimise its exposure to these sectors and foster its remaining manufacturing, repair and maintenance, culture and public service sectors. The floods of money pouring into the finance, housing and property markets drove values up, impoverishing half of us and enriching the other half. It truly was madness, and Ken Livingstone – a great Mayor in other respects – was totally wrong to go along with it. (He has almost admitted this recently, but that’s another story.)
Governments are now busy trying to get back to ‘normal’. But the ‘normal’ of the last decade was a thoroughly bad kind of city, a bad kind of society, and now we have a good opportunity to think again from first principles (just as we are supposed to do about global warming).
What do we have to do? I suggest the following
(i) diversify the economy of London away from finance and property investment
(ii) use the tax system to encourage people to save and invest in productive activity, not in chasing asset (and house) prices
(iii) separate the pension system from the volatility of asset values
(iv) make London’s suburbs and localities more self-sufficient so more people can work near home. That would mean scrapping Crossrail, the main benefit of which was to further pump up the valuation of central London offices and development sites. TfL has hundreds of transport schemes in its bottom drawer which would be of far greater benefit to London than this £17bn monster.
Now is the moment to change direction. Is anyone out there willing to do it?
Michael Edwards, School of Planning, University College London
On 10 Oct 2008, at 11:31, firstname.lastname@example.org wrote:
This is Josh Neicho from Letters at the Evening Standard – hope all has
been well with you since we last spoke.
I wanted to send you our report today about the CEBR’s predictions of a
deeper recession in London than elsewhere in the country. Would you be
interested in commenting on the accuracy of its assessment and on how
central and London government should plan for the downturn, particularly in
terms of infrastructure improvements such as Crossrail? I include our
report from earlier in the week on possible delays to or even shelving of
the Crossrail project. Please let me know if you might like to contribute
Evening Standard Letters
020 7938 7596
London faces recession “worse than Nineties”, News, 10 October
London is at the start of an 18 month recession that will be longer and
deeper than the downturn in the rest of the country, a leading forecaster
The capital’s dependence on the City will drag the entire Lon
down into a recession that could be worse than the early Nineties,
according to think-tank CEBR.
By the end of next year more than 120,000 London workers will have lost
their jobs, many in high paid professions such as advertising, accountancy
and the law, as well as banking, it says.
The shakeout of London’s wealthy elite will have a huge knock-on effect for
restaurants, bars and high streets across the capital. There is already
growing evidence of pain with many restaurants in the City empty at
The new forecast from the CEBR suggests that London’s £300 billion economy
started to shrink this summer and will contract by 1 per cent in 2009.
Painfully slow growth of 1.6 per cent will only resume in 2010 with the
recovery picking up pace as the Olympics approaches in 2012.
The financial services industry is set to be hit much harder than the
general London economy, shrinking by 5 per this year and 9 per cent in
Ben Read, managing economist at CEBR, said:”The London economy has enjoyed
the fruits of the boom in financial services, but it wil lnow suffer a
painful setback in the wake of the banking crisis. For those thinking the
worst is already over 2009 is likely to come as a rude surprise, as
London’s core sectors – media and advertising, legal services, accounting
and property follow financial services into recession.
“Londoners need to be prepared for a return to early 1990s recession.
Economic growth in 2009 is set to be weaker than either 1991 or 1992 in the
capital, house prices are set to fall by £50,000 from their peak and
unemployment will rise by 120,000.”
The London recession will end 17 years of continuous and often rapid growth
which saw the capital briefly claim the mantle of the world’s pre-eminent
financial centre from New York and made it the world’s leading
international centre for billionaires.
In 2007 the capital’s GDP grew by 3 per cent, the City by 10 per cent and
unemployment stood at 143,000. The CEBR’s figures suggest that will almost
double to 265,000 in two years.
The CEBR had previously been forecasting that London would narrowly avoid
outright recession but the extraordinary turmoil of the past month has
forced its economists to rewrite its figures.
Property sales down by 75 per cent with 50 viewings to get a deal
THE LONDON property market has virtually ground to a halt over the past
month threatening the jobs of thousands of estate agents.
Agents said phones had been eerily quiet since the middle of September
when Lehamn Brothers collapsed.
Of the few viewings that are being booked, hardly any are converting into
One leading London agent described the market as “constipated” and there is
a growing fear that without a pickup soon, hundreds of high street branches
will have to close.
Foxtons, London’s biggest and highest profile chain, has already started
to shed staff and cut back on advertising.
Even before the events of the past months property sales in London were
down by more than half on last year. Now the fall is thought closer to 75
Liam Bailey, head of residential sales at Knight Frank, said: “It’s been
very bad since April, but it did seem to be picking up slightly in
September. There was a sense that people felt things had got as bad as they
were going to.
“But since Lehmans collapsed it’s got worse than ever due to all the
uncertainty. People are less willing to commit to something as huge as
buying a house in the current climate.”
Lindsay Cuthill, director of Savills, said: “A few weeks ago one got a
sense that people were feeling that enough dust had settled that they were
willing to dip their toes back in the market but the shocks of the last two
weeks have meant they’ve pulled those toes straight back out again now.
“We’re still getting viewings but it’s harder to turn those into sales.
Some of our offices say they need 50 viewings before they get a deal.”
Anne Currell, managing director of Currell Residential, which covers north
east London, said: “We agreed a good number of deals last month, but then
in the past couple of weeks with the fallout from Icesave and the bank
bailout, it’s gone very quiet. Wave after wave of bad headlines has really
sent shockwaves through people.
“I think we’ll probably start to see more people pulling out of deals at
the last minute.”
The stagnation comes as Britain’s biggest mortgage lender announced the
faster rate of decline in house prices in Britain in 50 years.
A survey yesterday from Halifax revealed that the average price of a home
has dropped 13.4% over the past year. But Marsh & Parsons managing director
Peter Rollings said in London real prices were down 20 per cent on the
peak. His firm sold a west London flat for £260,000 last week for a buyer
who paid £360,000 for it last year but has stuggled to keep up the interest
Stephen Smith, chair of the south London branch of the National Association
of Estate Agents, said it was taking time for people to adjust to falling
He said: “The turmoil of the last couple of weeks means many people are
still sitting on their hands, waiting to see what happens. Buyers are being
cautious, excessively so in my opinion, and fear paying too much if the
market continues to fall. A lot of sellers are still not quite ready to
accept that they’ve missed the peak of the market and they have to drop
their prices considerably.
He said fewer properties were coming on to the market because estate agents
were refusing to take on homes people wanted to sell at unrealistically
“Agents don’t want to waste their time marketing properties that will never
sell,” he explained. “They’re telling sellers to lower their expectations
or forget it.
“But it’s slowly sinking in and hopefully this week’s bail-out announcement
will help people face up to the property slump.”
The credit crunch has forced estate agents to work harder, Mr Smith added.
“Gone are the days were we just reeled in the orders and people became
complacent and lazy,” he said. “Now the 11-year boom is over, we’re seeing
a return to old-fashioned marketing where you have to work hard to match
the buyer to the right property.”
City Spy, 8 October
ANXIOUS times for those involved in the Crossrail project, where key
funding documents remain unsigned and the downturn and falling property
values have put major question marks against some of the calculations.
There are doubts about the predicted profits from the redevelopment of
land at the bottom end of Tottenham Court Road belonging to Transport for
Meanwhile, airports operator BAA and the City Corporation have yet to
finally sign off their contributions towards the £17 billion bill.
TfL is also to raise a £2.7 billion contingency fund, secured against
future fares — something that looks precarious in the current climate.
Then there is the planned £3.5 billion levy from London businesses. It
seems hardly the right moment to be asking small shops and firms for cash
when they are struggling in the credit crunch.
Over and above all that, there is the suspicion that Gordon Brown may wish
to delay the development.
Building a new express-link for City banks, which are hardly popular in
the country at present, could be the last thing he needs as he copes with
public finances that are shot to bits.
The counter-argument says that the Prime Minister would not dare to lose
face with the City by backtracking on Crossrail, and that a further
postponement of the long-fought-for scheme would send a terrible signal
about London’s claim to be the world’s leading financial centre. The last
few weeks have shown, if nothing else, just how vital a dynamic City is to
the economy and that therefore he will push ahead.
But Brown has also got an Olympic Games to contend with, which just happen
to be in the same part of the UK as Crossrail. That too is suffering, with
the financing of the 2012 Olympic Village provoking alarm in Whitehall.
City Spy would not be surprised at all if Crossrail was to slow….