The global recession can be traced back to the collapse of the sub-prime mortgage market in America and so it’s hardly surprising that one of the biggest sufferers of this global crisis has been the housing market. House prices in the UK had, for some months, been in apparent free-fall, but they now appear to have stabilised. Some estate agents report prices beginning to increase, but others say they’re still falling.
Whilst lower prices should be an encouraging sign for first-time-buyers, there is another obstacle in their way. Mortgage lenders have been requiring large deposits and, unsurprisingly, have become more vigilant about whom they lend to and how much. Read the articles below that look at the crisis in the housing market and consider the impact this has had on the wider economy.
Experts far more upbeat about UK house market The Herald, Ian McConnell (26/6/09)
Gloomy CIPS data shows further woes for construction firms Construction News, Nick Whitten (2/10/08)
Construction contracts at slowest pace for seven months Construction News, Nick Whitten (5/5/09)
House prices decline again in May BBC News (26/6/09)
Mortgage lending falls back again BBC News (18/6/09)
More fixed-rate mortgages go up BBC News (16/6/09)
Housing market needs ‘feel-good factor’ to recover CityWire, Nicholas Paler (26/6/09)
Housing market set for recovery Exec Digital, Ben Lobel (26/6/09)
Home-ownership ‘aspirations hit’ BBC News (15/6/09)
House prices fall 1.7 percent in April Exec Digital (6/5/09)
Spring bounce in mortgage lending BBC News (11/6/09)
Is the first rung on the property ladder broken? BBC News, Kevin Peachey (27/4/09)
Lack of affordability may slow housing sector recovery RLA News Service (25/6/09)
See the following two sites for house price data in the UK:
Halifax House Price data from the Lloyds Banking Group
Nationwide House Price data
Questions
- Why has the collapse of the housing market had much wider repercussions on the UK economy? Consider the impact on construction, solicitors, surveyors.
- Have any groups benefited from falling house prices?
- How has the UK’s monetary policy in particular helped to stimulate the UK housing market? Has it been successful?
- Why are lenders so reluctant to lend? Is this a direct result of the sub-prime crisis in America?
- What is the meaning of ‘negative equity’? How does being in a situation of negative equity affect people’s behaviour?
Walk down any street in the country, and you’re bound to see a Sky dish. With subscribers still increasing, a viewing target of 10 million by 2010 and revenue increasing to £1.4 billion, it seems that Sky TV is hardly suffering from the current ‘challenging conditions’ besetting so many firms.
Enter Ofcom, the independent regulator and competition authority for the UK’s communication industries that has been investigating the UK Pay TV industry since 2007. A consultation was published on the 26th June 2009 in which Ofcom indicated that BSkyB should be forced to make its premium sports and film channels available to rival broadcasters in a bid to ‘promote choice and innovation’. The articles below look at this conflict.
Sky may have to share TV channels BBC News (26/6/09)
Ofcom may set Sky’s wholesale prices Digital Spy, Andrew Laughlin (25/6/09)
Ofcom proposes measures to improve competition in pay TV Ofcom (26/6/09)
Pay TV Phase three document: Proposed remedies Ofcom Consultation (26/6/09)
BSkyB in war of words with Virgin Media and BT Guardian, Leigh Holmwood (24/6/09)
BSkyB keeps Premier League rights BBC Sport, Football (3/2/09)
Sky will fight Ofcom over Premium TV Tech Radar, Patrick Goss (26/6/09)
Pay TV market investigation: Consultation document Ofcom (18/12/07)
Sky asked to open up Premium sports and movies Times Online, Peter Stiff (26/6/09)
All believers in a competitive market must back Ofcom to take on Sky Telegraph, Neil Berkett (26/6/09)
Ofcom: Sky not playing fair with premium content Tech Radar, Patrick Goss (26/06/09)
Questions
- How well does BSkyB fit into a monopoly position for its premium content?
- What are the regulatory options open to Ofcom?
- How does Ofcom aim to introduce more competition and fairer prices into the Pay TV market?
- Why is it argued that competition is in the public’s best interest? Do you agree with this, or should BSkyB be allowed to carry on as it is?
- What has enabled Sky to become such a dominant force?
- How do you think the collapse of Setanta will affect this debate?
- Sky TV has seen its profits continuing to grow. Given that we’re in a recession, what does this tell us about Sky and the type of good or service that it supplies?
“As the global economic crisis forces everyone to downsize, the self-sufficient worker once again has a chance, whether as a farmer growing vegetables for local consumption or as an open-source software developer who makes a living in his basement office.” So argues the first article linked to below. Does this mean that economies of scale are over-exaggerated? Should developing countries provide more support to small-scale production as a growth and development strategy? And does small-scale production provide benefits beyond those of production and profit? Does it meet broader human and social needs? The articles explore the issues: the first two in the context of the developed world and the other four in the context of developing countries.
The Return to Yeomanry New America Foundation (22/6/09)
Entrée: Small-scale farmers on the forefront of a greens revolution The Vancouver Sun (19/6/09)
Extracts – the future of small-scale farming Oxfam International
Malawi’s fertile plan Mail & Guardian Online (25/6/09)
Development: Investment in small farmers crucial in Africa Bizcommunity.com (24/6/09)
Toward Agricultural Sustainability Philippines Business Mirror (24/6/09)
Questions
- What are the benefits of ‘a return to yeomanry’ (a) to the individuals themselves; (b) to society and the environment?
- Why might it prove a risky strategy for those embarking on small-scale production? How could governments help to reduce the risks for the producers? Should they?
- Discuss whether fostering small-scale farming is an appropriate development strategy for developing countries. What specific policy measures should governments adopt?
- Is land reform (a) a necessary condition; (b) a sufficient condition if small-scale farming is to flourish in developing countries? What pitfalls are there from a policy of land reform?
Many industries are struggling in the current climate and, in particular, car sales have been at an all time low. General Motors was the biggest car company in the world, but recently we have seen them becoming the biggest industrial bankruptcy, which will have consequences for many car manufacturers around the world. UK car sales were 25% lower in May 2009 than at the same time last year and Chrysler will sell most of their assets to Fiat when they form a strategic alliance in a bid to help them exit bankruptcy protection.
The troubles of the carmakers have passed up the production chain to automotive suppliers, component manufacturers and engineering firms, and down the chain to the dealerships at a time when consumer confidence has taken a knock. The following articles look at some of the recent developments in the car industry and consider their likely economic impact.
UK new car sales 25% lower in May BBC News (4/6/09)
Creditors cry foul at Chrysler precedent The Wall Street Journal, Ashby Jones, Mike Spector (13/6/09)
The decline and fall of General Motors The Economist (4/6/09)
GM pensioner’s fears for future BBC News (1/6/09)
Opel staff face wait for job news BBC News (2/6/09)
From biggest car maker to biggest bankruptcy BBC News (1/6/09)
GM sales executive lays out company’s direction Chicago Tribune, Bill Vidonic (14/6/09)
Chrysler and Fiat complete deal BBC News (10/6/09)
Fiat gambles on Chrysler turnaround Telegraph, Roland Gribben (1/6/09)
Obama taskforce faces Congress over car industry rescue Times Online, Christine Seib (10/6/09)
Has pledge of assistance revved up the car industry? EDP24, Paul Hill (10/6/09)
Questions
- What is a strategic alliance and how should it help Chrysler?
- What are some of the methods that governments have used to help stimulate the car industry? Consider their advantages and disadvantages.
- Think about the consequences beyond the car industry of the decline of General Motors. Who is likely to suffer? Will there be any winners?
- General Motors was established in 1908. How were they able to expand so quickly and what do you think are the main reasons for their current decline?
- The article in The Economist suggests that, despite the current problems in the car industry and the global recession, selling cars will never really be a problem. What do you think are the reasons for this?
The pound has been rising against the US dollar recently. And as the dollar has fallen, so the prices of various commodities, such as gold and silver, have been rising. So what are the reasons for these currency and commodity price movements? The simple answer is that they merely reflect changes in demand and supply. But why have demand and supply been changing? Are there changes in the underlying economic fundamentals, or do they largely reflect speculation in times of uncertainty and resulting market overcorrection? The following articles address these questions.
Sterling rises on hopes of recovery Financial Times (4/6/09)
Jeremy Warner: Dollar weakness is a sign that things are on the mend Independent (4/6/09)
Stephanie Flanders Blog: What goes down… BBC News (3/6/09)
Dollar on the rack International Business Times (1/6/09)
Sterling hits six-month high against the dollar Times Online (29/5/09)
Exchange rates: What next for the pound? This is Money (2/6/09)
Gold News BullionVault (3/6/09)
The Top 10 Reasons to Hold Gold, Bar None! The Motley Fool (2/6/09)
Questions
- Explain why the pound been rising strongly against the dollar.
- What is likely to happen to the exchange rate of the pound against the dollar and the euro over the next few months?
- If it were possible to predict the future exchange rate today, what would happen to the exchange rate today?
- Why might it be a good time to buy gold? Why might it be too late?