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/ 2008-12-09 16:14
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Uznany gracz - weteran 93/94
In 2007, Britain was the world’s fifth-biggest economy in dollar terms. In 2009, the Centre for Economic and Business Research says it could be reduced to seventh place, behind France and Italy.
In a way, this doesn’t mean that much. After all, few people would describe Italy as a model economy, so your ranking on the list isn’t necessarily any indicator of quality. But it does give quite a graphic picture of Britain’s reliance on the financial sector. Without the finance boom, we’ll lose a lot of clout in the world. And the downturn means we can’t rely on consumption to keep our economy propped up.
Something will take its place eventually. But right now it’s hard to see what.
The FTSE 100 is detached from the British economy
So why were stock markets so buoyant? Well, they’ve been looking for an excuse for a Christmas rally, and Mr Obama gave them it. And apart from anything else, it just shows how detached the FTSE 100 actually is from the British economy. A hefty chunk of the profits in the index are accounted for in dollars, so the fall in sterling is no great disaster, particularly for sterling shareholders receiving dollar-denominated dividends. The importance of the British economy to multinationals such as BP, GlaxoSmithKline and BHP Billiton is negligible. Their main problem is that this is a global slowdown, not just a local one.