Ten years on from the financial crisis - what lessons have we learned?

Posted by Neil Ashbridge

Fri 28th, Sep

This month is the tenth anniversary of the collapse of Lehmann Brothers and reminds us all of the long term financial, social and political impact of the 2008 financial crisis.  The anniversary has also prompted commentators to make comparisons between the current economic climate and that leading up to 2008.

Notable was the Bank of England Governor Mark Carney's warning that the impact of a no-deal Brexit could be just as catastrophic for the UK as the 2008 financial crisis, impacting on unemployment, house prices and transport links with the EU. His comments were of course welcomed by anti-Brexit campaigners, and greeted with scepticism by those on the other side.  Neither side however pointed out that this was not a prediction but a worst-case scenario.

Looking back over the last decade it hasn’t been without sizeable economic shocks.  Such shocks would include the Eurozone debt crisis, a Japanese earthquake, a US/China growth soft patch and, more recently, President Trump’s protectionist threats (some of which are turning into reality).

Despite these economic shocks meaningful and quick support from policymakers across the globe has meant that the world economy is in far better shape than it might otherwise have been.  Clearly a lesson learnt from the 2008 financial crisis when more timely and synchronised intervention, especially by the ECB, might have been more effective in kick-starting the upturn and moving on from the crisis.

A second key lesson has been the importance of fiscal stability.  Over the last decade there have been co-ordinated global efforts to ensure that banks and other financial institutions are sufficiently robust to withstand major economic shocks and to continue to support the real economy in a downturn.  The economy is only healthy if business and consumers have confidence in financial institutions, markets and infrastructure.  In the UK the 2017 stress test showed that the UK banking system is resilient to severe domestic, global and market shocks and highlighted that banks were three times stronger than they were before the financial crisis.  It was also judged that the UK banking system could support the real economy through a disorderly Brexit.

The third lesson is the need for fiscal responsibility: in short it pays to repair the roof when the sun is shining.  While growth has been patchy since 2008 and governments continue to labour under large deficits, the need to take an aggressive policy approach during the recovery period is crucial i.e. removing support to create a higher base from which to provide support again when the need rises

While lessons have been learned in the last ten years, the effects of the 2008 financial crisis will take significantly longer to overcome.  And, the impact of Brexit –- deal or no deal – adds another uncertainty for the UK and the rest of the EU. 

In my experience, however, UK businesses tend to be pretty resilient.  But, what most businesses need, to continue to thrive and support economic growth is certainty, clarity and above all, the confidence that their voice is not only being heard but also heeded.

And finally...

This year's Chamber Annual Dinner Awards will be celebrating excellence in business. Our keynote speaker is Liverpool born Mike Moran, Chief Executive of Proton Partners International whose inspirational vision to create a better future for cancer patients on an international stage, is exactly what makes our business community amongst the best in the world. We hope you will be able to join us on Thursday 1 November to hear more about Mike's fascinating story. For more information on the dinner please visit here.

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