Letter to the Financial Times - November 15th 2012

Letters to the FT

http://www.ft.com/cms/s/0/2c722cca-2e67-11e2-8f7a-00144feabdc0.html#axzz...

Sir, Chris Giles (“BoE fears zombies haunt the road to recovery”, November 14) highlights the issues arising in the UK economy from too few corporate liquidations. For an economy to be delivering strong growth over the long term, it is vital that economic resources are transferred smoothly and dynamically from inefficient users (failing or unsuccessful companies) to efficient users (successful companies).

Research from Creditreform this year, on corporate insolvencies across Europe in 2011, showed the lowest rates of insolvency per 10,000 businesses were to be found in Greece (five), Spain (18) and Italy (26), and the highest rates in Luxembourg (316), Denmark (182) and Austria (152). The differences in these numbers are as stark as the differences in their national economic growth rates in recent years. The UK (81) and Germany (84) were also above the European average of 68.

This implies that the zombie households, companies and banks of the peripheral economies are likely to be a far greater problem than those of the UK, and that any hopes for newly dynamic, peripheral economies to rise from the ashes of the current policies of austerity are woefully misplaced.
Jeremy Beckwith, Chief Investment Officer, London Wall Partners, London EC2, UK

Jeremy Beckwith, Chief Investment Officer, London Wall Partners, London EC2, UK