Economic crisis: four stories for Sir Mervyn

The young unemployed

Elbert Fenton (above) is 23 and keen to work, writes Channel 4 News Economics Producer Neil MacDonald. After college, he had a job for a while – but then the recession arrived and his post went in the cutbacks. Now he’s finding it hard to get back into the jobs market.

Like many young people, he’s found it tough being out of work. But he’s joined a course run by the Prince’s Trust that’s helped to boost his confidence and help him decide what he wants to do in the future.

Isoke Bright-Davies (below), 24, is also on the course. She worked for a shoe shop that didn’t survive the recession. She turned to agency work but found it difficult that she never knew how many hours she would be working or how much she would earn from one week to the next.

The course has certainly helped her – she’s going to start work with a major pub chain in the next few days. But at the moment there are another 1 million young people who are still out of work.

The Bank of England has cut interest rates to try and keep the economy moving, and the wider labour market has held up in the face of the economic slowdown.

The small businesswoman

Simone Schehtman’s (below) go-karting company has made it through the recession – but she says the state of Britain’s banks is holding back her plans for growth.

She’d love to open more race tracks to go with the five she already runs, and that would mean more jobs and more work for local suppliers.

But like many small and medium sized companies, she feels the banks are either unwilling or unable to lend on reasonable terms.

She says the banks are terrified of any sort of risk – so they expect companies to put up their most valuable assets to guarantee any loans. And that makes the cost of borrowing prohibitive.

Bank lending to British companies has been falling since the recession. The banks say that because of the economic crisis firms don’t want to expand their output so that’s why lending is down.

But whether it’s the banks that don’t want to lend or companies that don’t want to borrow, the result is the same – a major obstacle to a rapid improvement in the economy.

The saver

Like many pensioners, Denise Watson (below) has been boosting her basic state pension with a lump sum she’s amassed over the years. But she’s been hit hard by the drop in interest rates.

Five years ago, her nest egg could earn 6 per cent a year in interest. She remembers a friend who was getting 7 per cent. Now, many accounts that she looks at will pay just 2 per cent.

She can get a higher rate but only by tying up her money for years – something she’s not keen on in case she needs to get hold of it quickly. The result is that she has lost hundreds of pounds a year in income.

Those low interest rates haven’t come about by accident. The Bank of England has cut the bank rate to an historic low of just nought point five percent in an effort to boost the economy. Unfortunately, the main beneficiaries of that policy have been people with mortgages. Those with savings have lost out.

And the problems for Denise Watson have been compounded by the jump in inflation over the last few years. She’s increasingly anxious about the steep rise in the price of basics and wonders whether things are ever going to change.