So, no third recession, though who ever came up with the definition of a recession being two negative quarters deserves a long talking to. In reality we should be looking over much longer timeframes, and clearly that makes the UK’s economic performance look pretty depressing when you consider that the economy still produces less than it did at the beginning of 2008. Still, it could be worse, Spain have to cope with unemployment rates now soring above the levels they experienced in the 1970’s. Spain’s latest rate was 27.16%; maybe joining the Euro was not such a good idea, and a minimum wage twice that of Poland does not look so sensible now. Nevertheless, what is notable this week has been a real solidification of faith in Europe, in part built around the potential that Italy is forming a government. Indeed, the thing that seems to worry markets more now is not the idea that the economy is improving, but that it will improve. The fear is that when this change occurs governments around the world will start to turn off the flow of free money causing a number of asset price bubbles to burst. The dislocations of resources in the world economy and the impacts of the measures taken to deal with the first manifestations, are now huge…there is a cloud inside every silver lining eh.
For banks it seems to have been a week of restructuring. Barclays’ results (which were good, primarily because of the investment banks, especially a very powerful set of numbers for the equity business) were substantially reduced due to Project Transform, which includes cutting European retail and scaling back on some fringe business in the investment side. The money set aside to pay for this in the first three months was £514 million. HSBC was also restructuring, rolling financial advisers working in the commercial banking division into the retail bank and then getting rid of the non-advisory relationship roles in the retail banking area. The changes affect just over 3,000 staff – they will be able to apply for 2,000 new roles, the net loss of jobs will be around 1,100. Of course the branch network ended general financial advisory work a little while back and the current moves seem to be an effort to align the wealth operations in the bank. As well as the sadness around the job loses, which are always to be regretted, HSBC’s announcement was also hugely criticised for the euphemisms it used to convey bad news. With 3,000 jobs being “impacted” and talking about the “demising” of 942 relationship management roles. Maybe having reduced the head count by 40,000 (globally) in the last few years, it is becoming harder to come up with descriptions of what is happening.