Financial Markets

Finance and the flow of money & assets are at the heart of global economic change. At their best the markets provide the catalyst for growth, acting as a springboard from which ordinary people can capitalise on the success of a company or economy, but at their worst they can inspire panic and create instability which can threaten the prosperity of the global economy.

In recent years, markets for commodities such as oil have increased significantly, whilst factors such as these are important, they are also an inevitable consequence of global growth and the scarcity of natural resources. The more worrying aspects the global financial markets are the restrictions in the availability of credit we have seen in recent months. Individuals rely on credit to buy homes and to generally spread their spending evenly across their entire lives and businesses require credit to invest and grow. If either of these abilities is taken away it could have serious affects on the global economy.

The so-called ‘Credit Crunch’ in the UK has occurred after a decade of steady economic growth, this period of success created its own pitfalls which the country is now in danger of falling in to. As the memory of the economic troubles in the late 80s and mid 90s became ever more distant, households altered their expectations, at first they were hopeful of continue growth but sceptical about the actual outcome, but over time the hope grew and scepticism faded and people began to take more risks with their borrowing. This has led to personal debt in the UK raising to around £1 trillion and left many borrowers vulnerable to a downturn in economic performance or rising interest rates.

From a business point of view, the strain that debt repayments have put on consumer expenditure have reduced spending on other goods, this has been accompanies by a tightening of credit as banks become more selective about who they lend to, curtailing private sector investment.

The length and severity of this economic slowdown is yet to be seen, but it does serve to highlight the dangers of complacency and the merits of a cautious approach. Even experts in the field struggle to accurately predict how the markets will respond to particular changes, but it is prudent to expect variations and to plan for how they may impact you organisation.