LISA BUCKINGHAM: Climate still too harsh for green shoots

By LISA BUCKINGHAM, MAIL ON SUNDAY FINANCIAL EDITOR
Updated:

There comes a moment in every downturn when people simply get fed up with being gloomy --particularly those who still have jobs, who can enjoy the High Street bargains and whose mortgage repayments are a shadow of what they once were.

Where the optimists had been squinting to find the odd green shoot, the results from our major banks last week sparked sightings of verdant pastures.

This was, if not the end, then the beginning of the end of what had been billed as the greatest recession since the Thirties. Phew. It had been pretty uncomfortable for a few months. But less than a year since we officially went into recession, all in the garden looks rosy.

Hang on, though. Not only should this exuberance have been deflated when the Bank of England kept the base rate at a record low of 0.5 per cent and decided to pump another £50 billion into the economy, but the underlying message from the banks' figures was gloomy.

Is the talk of green shoots premature?

Is the talk of green shoots premature?

Certainly there appears less chance of more UK or American banks failing, and their investment banking arms are experiencing good business, if from nothing else but ensuring the flow of the bonds and gilts that the Bank of England is busy buying with its newlyprinted cash.

But the underlying figures in the retail arms were dismal. In the case of Lloyds they were gruesome, with bad debts from business banking expected to soar by 50 per cent this year.

What is more worrying is that Financial Mail has been picking up indications that the banks are, for one reason or another, prevaricating and failing to recognise bad debts.

Some suggest it is because their attention is dominated by getting their own houses in order. Others suggest that since a goodly part of the banking industry is now Stateowned it would be politically unacceptable to rampage around shutting down small businesses. There is even more reluctance to put individuals into the bankruptcy courts over credit card debts or turf families out of their homes because of mortgage defaults.

Workers in some branches of Citizens Advice have flagged up that they are warning banks of individuals on the slipway to insolvency, but the banks are unwilling to act.

This may not be boardroom diktat - more likely it is a form of self-censorship operating to keep the show on the road. For whatever reason, there are clear signs that non-performing debt is building lava-like ahead of an eruption and the green shoots so many now see in the banking sector will be buried under the ashes.

As a commuter on probably the most overcrowded and erratic train service in the country, I regarded last week's suggestion that Royal Mail should emulate Network Rail as a not-for-profit organisation as laughable. Particularly as it has emerged that Network Rail has only just got the system back to the punctuality record of British Rail.

But those of us condemned to travel in an environment where life as a battery hen looks positively gracious can at least start to gloat at the travellers' revenge.

Though it is clear that National Express overbid on an heroic scale in 2007 to win the East Coast rail franchise, and is now having a hissy fit, wanting to hand back the keys unless the Government lets it reduce its payments, part of the problem is that travellers are proving too canny.

Clearly schooled in passenger abuse from his time at the nowdefunct Strategic Rail Authority, National Express boss Richard Bowker is not only furious that there is a regulatory limit on how much he can push up fares, but is also fuming that so many customers are using the internet to buy cheaper tickets.

Practised in bagging-cheapie deals on no-frills carriers such as easyJet or Ryanair, travellers are transferring their skills to the railways.

This is one of a number of problems that Bowker and his crew have imposed upon themselves, and no amount of moaning about overly optimistic Government traffic projections can disguise the fact.

National Express is, like Ferrovial, the Spanish group that bid sky-high to buy airports operator BAA, caught between the constraints of a regulatory charging regime and extraordinarily misplaced optimism about traffic growth.

But where airport traffic is sharply down, rail passenger numbers are tacking gently sideways.

Certainly the world was very different when rail operators bid for what they thought would be lucrative franchises. But surely all those noughts on the end of their pay should indicate an ability to imagine a future in which change can happen.

Most watched Money videos