RBS boss fears ‘lost decade’

| September 13, 2009 | 0 Comments

Stephen Hester, chief executive of Royal Bank of Scotland (RBS), has warned that Britain faces a “Japanese-style lost decade” if it returns to its old ways of the boom years (where consumers and businesses adopted a spend not save approach).

The bank boss, who was appointed in November 2008 (when the bank had to be saved from collapse), said a slow recovery from recession would be more beneficial than a rapid bounce.

A so called “lost decade“ is “where the economy is highly unstable, or, worst case, we actually have another down period - a so-called W-recession,” said Hester.

There have been suggestions of late that Britain is emerging from recession after increases were reported in house prices, consumer confidence, manufacturing output and exports.

In addition, last week London’s FTSE 100 index closed above 5,000 - the first time since October 2008.

However, in an interview with the BBC, Mr Hester comments: “Arguably what we need as an economy is a gradual emergence from recession where the economy can complete the rebalancing that has not in any way been completed.

“It’s possible that we actually enjoy a rather faster recovery where people are tempted to say ‘that was a bad nightmare behind us but don’t worry it’s gone and we can go back to where we were before’.

“That might happen, and if it does happen it will be dangerous because we won’t have fixed the problems that have just recently exploded in our face. Until we fix them the world is an unstable place and our economy is unstable,” concludes Hester.

In related news, the TUC’s general secretary, Brendan Barber, has warned that Britain could be faced with a “double-quick, double-dip” recession if the Government try to cut public sector jobs.

The TUC leader described the outlook as “very precarious” and cuts in public spending could result in over four million people unemployed.

Speaking prior to the TUC Congress in Liverpool, which starts tomorrow, Mr Barber said a 10% reduction in the public sector workforce would mean 700,000 more unemployed and would send Britain back into recession.

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