The most important is, which part of getting deposit bank uses for giving a credit. On the normal situation this rate was always lower than 100 %. For example, for years the British Westminster Bank ( today National Westminister Bank - NatWest) had 86,5 % of each of deposit for the credit. So, the bank gave the credit of 865 pounds of the credit that had from each thousand pounds transferred to the bank as the deposit. The rest, which means 135 pounds was transferred to the central banks as the obligatory reserve. Sooner or later these 865 pounds were again at the bank in the form of deposit and again the appropriate sum of money (748 pounds) was lent, and the rest reserved. The repetition over and over again would give the opportunity to making from the initial deposit of 1000 pounds the sum of 6410 pounds of new money. For the entire time the bank would increase the reserve and earn on the interest from the investment credits.
This system guaranteed that there bank was always enough cash at bank for everyone, who would withdraw deposit (if everyone comes at the same time, there will not be enough money, but this situation is unlikely). The system stood on its head. Thanks to ‘the modern financial instruments’ (like secularization, hedging, leveraging, datives etc.) banks had the possibility to lend much more money that obtained. For example, according to the report by Morgan Stanley Research, already two years ago at the British banks the proportion of the credits to the deposits was on average 137 %. That is, on the each 1000 pounds of deposits, banks gave 1370 pounds of credits. In case of Northern Rock, which on autumn 2007 was in the face of fall and after few months was taken over by the government, the proportion of credits to deposits was as much as 322 %. The banks raised loans on the ‘international markets’ and in the credits form withdrew money, which did not have, granted that would have them in the future.
Production in Great Britain
According to recently published information the British industrial production decreased about 0, 5% on May 2009, beside the last month, what makes less probable that the economy will come back to the growth phase already in the second quarter.
It was predicted early that the factory production on May would be about 0,2% higher than on April. According to the British National Statistical Office, the all industrial production (together with the mining industry and the public institutions) fell down on May beside April about 0,6 %, even that supposed its growth about 0,2 %. 17,2 % of the British national gross products falls on the industry. The industrial production was about 12,7% lower on May than the year before.
However, in the first quarter 2009 was the biggest fall of the Gross Domestic
Product in Great Britain from 1958. According to the recently calculations by the National Statistical Office, there was the fall of 2,4%, quarter to quarter, in comparison with the fall about 2,1% that was expected by analytics. Earlier the Statistical Office estimated the fall of GDP on 1, 9 %. Year by year the British GDP fell down in the first quarter 2009 on the record level of 4, 9%.
The sort-term perspective for the British economy does not fill with the optimism and the next crump can not be excluded – estimated by Organization for Economic Co-operation and Development (OECD), and also the Bank of International Settlements (BIS). According to OECD: ‘economy will slowly grow the unemployment considerably, and the finance minister should do much more to repair the public financial condition’. The results of limitation of banks business credit and the public debt growth will be higher interest rates and inflation. Two of them are harmful for the perspective of the lasting growth- by OECD.
May was the next better month on the real estate market in Great Britain … informed BBC according to the data by English Bank. The banks and the credit companies gave 43,414 mortgages and 43,191 the month before. May was the fourth month in turn, in which the situation was better on the mortgage market. According to BBC it will be the constant improvement. The sum of giving credits grew about 324 million pounds.
The representatives of credit institutions emphasize that even the situation improves- the changes are insignificant, and the situation is still considerably worst than in the last year. The market of mortgages revived as against the beginning of the year, but still is on the low level- said Adrian Coles, the director of The Building Societies Association. The average price of the property increased on May this year about 2, 6 % in Great Britain, beside the average from April, that is the highest growth month to month by the time of seven years- according to the data leading mortgages bank Halifax.
In the year data- the prices of properties on May were about 16, 3% lower than on May 2008. The average price of the property grew on May to 158.565 pounds.
Meanwhile the data from the automotive industry show the sharp fall of sale on May. In the last month were registered in generally 134.858 cars in Great Britain, about 24, 8 % less than on May 2008. - announced the Society of Motor Manufactures and Trades (SMMT).
In the last week the government announced that 35 thousand of drivers exercised the right to the extra charge of 2 thousand pounds in the case of change the old, over 10 years old car to the new one. That data are found by the government as the success of the program, which came into effect on 18 May and will cost 300 millions pounds.
The prices of houses grew again on June
The average price of houses in Great Britain grew on June about 0, 9 %. It is the third month from February, in which the prices grow- informed BBC, quoting Nationwide. The house costs about 156,442 pounds, about 15,973 pounds less than the year before but about 9 thousands more than on February. The Nationwide’s analysts say, that the stabilization of prices is the ‘positive surprise’ but worn not to interpret the latest data as certain signs of the permanent trend.
On the other hand Nationwide will again offer the credits of 125% worth buying property- inform ‘The Guardian’. The credits may help the persons, that have the properties worth less than their ‘mortgage’- because the fall of the houses’ prices- and want to buy a new property at the same time.
The Nationwide offer may allow on the release from the old property and give the opportunity to purchase the new one.The credits will be offered only to the regular bank clients. The persons who want to benefit
from the commission of Nationwide will have the right to take the credit on 95% worth of a new house or all the difference between the worth of the old one and the rest of mortgage to pay off. All credit will be protected by the new property. The other creditors already announced to follow in the Nationwide footsteps.
Britain attracts investors
Great Britain attracts more and more foreign investors. The growing count of the international projects has nothing with the proportional growth of employment- informs AFP.
In the tax year 2008/2009 in Great Britain the foreign investors drafted or developed 1744 projects. Thanks to it, Britain is, under the USA, the second and the most popular country for investors. The investments let to open or protect over 70 thousand of the work places. About 30% less than the last year, when thanks to the international projects, over 100 thousand stands were opened. - The news is good for Britain. Now is a time full of challenges. Nevertheless we have kept the position of the biggest foreign recipient of investment direct in Europe and the second, after the USA, position on the world- said Peter Mandelson, Secretary of State for Business.
United Kingdom stands on the green technology
The Nissan factories in Sunderland in northern-east England will open 350 new work places in the production of the accumulators for the electrical cars- said Gordon Brown, the Prime Minister who visited the factories. The British people have a hope that the decision about the accumulators’ production will make way for the electrical cars production on the European market. Nissan announced that the winner of the tender is the factory in Sunderland. In the period of five years the factories will be supported by the investment of 200 millions pounds.
The British government has opened the special found for support the car industry. It means that the sum of 2, 3 milliards pounds will attract the companies to change for the new technologists. The found, opened at the beginning of the year, has not been touched yet. The British government want England to be the main European producer of so-called green cars. It will be the reduction of CO2 emission or keeping the industrial production base and the work places. At the and of the last week, Toyota- the competitor of Nissan announced that with the beginning of 2010 in the factories in Burnaston (Derbshire) will start the production of the hybrid car- that will work on both the fuel and the electric current.
Source: Property Jornal Polska Giełda Nieruchomości 08-09/09