View from the sea front.......

View from the sea front January 2009, Brighton




‘How’s business,’ I enquired of my friendly neighbourhood dry cleaner the other day.

‘Not bad,’ she said, glancing sceptically at the pile of crumpled suits I laid before her. ‘Come to think of it, we have not seen many suits of late…..the estate agents (there are more in my neck of the woods that baby sea gulls – well, at least there were)….they have all, um, gone,”

‘Gone?’

‘Yes, it is like the X Files. They seem to have vanished from the face of the earth,” she sighed. ‘But I guess they will be back.One day…..’

Don’t count your chickens, I thought. I know we are told that in a vicious downturn such as we are experiencing it will be the Darwinian mentalities that will survive, but the howling, relentless nature of this crash has taken out some of the biggest, longest established property selling and developing players in Brighton & Hove. Like a Panzer tank turning its 88 big gun on a machine gun nest. Blasted off the High Street.

I know it is fashionable to have a pop at estate agents – and don’t get me started on the bankers – but jobs are jobs, and when they go there is a domino effect on the other businesses that in part rely on them. My dry cleaner is an example in microcosm of what we know to be happening in the wider UK economy.

Then again, some businesses are just too, well, non-competitive. Selling properties in the boom times was easy. Any mug could do it. And make a pretty penny at it too.
Look at the example of Jon Hunt, who back in 2007 had the foresight to cash in his chips and sell his mainly London and the south east-based Foxtons estate agency chain.
Mr Hunt, who is reckoned to have a personal fortune somewhat north of £700m, cannily banked around £380m after selling the agency he founded to private equity group BC Partners.

Did the guy have a crystal ball? Because, shortly after he flogged off the chain to the hapless BC gang, the market slid inexorably towards a colossal collapse. And the men – and women – in sharp suits who had previously raked in the commission by encouraging artificially high rates, were to find that those suits were not going to need dry cleaning for too much longer.

Ultimately, I do not mourn. Perhaps the demise of the over-exposed estate agency business will encourage more properly dynamic retailers to gain a foothold in the main shopping drags of our cities, towns and villages.

A few weeks back I had occasion to visit Chertsey, a well-heeled commuter town in north Surrey. I though I would make use of the odd hour I had to kill to buy some gifts.

But could I find a single decent shop? No. What I did find were no less than eleven – yes eleven – estate agents. In a tiny market town. What possible use could there be for all that lot, each and every one of whose interior designed premises was devoid of buyers or sellers, and staffed by long-faced negotiators rapidly realising that the last bus out had long since left town.

THE carnage we are witnessing on our High Streets has, in my view, been much over-stated by our ever-dependable media. Ok, we kind of knew that the likes of Woolies and MFI were doomed – and who is honestly going to put their hands up and say that these were well run businesses?

Yet the way the likes of the Daily Mail (or Daily Hate, if you are a Guardian-reading liberal) gleefully seems to pounce on every bit of bad news coming out of the economy, you would think that everything was going to collapse around our ears.

Does the editor, Paul Dacre – a man said to be on a salary not unadjacent to £1 million a year – really want to see his green and pleasant land go broke? Because this is the nature of the kind of stories he insists his news and feature writers flush out.

Maybe it sells papers, but my own view is that the right wing press, which is let’s face it most of the media, is happy to milk this global crash and lay the blame at the feet of the Labour government. Conveniently overlooking, of course, the fact that prior to election in 1997 we had had over 17 years of inconsistent Tory policy, a period which also saw a dreadful recession and interest rates of 15 per cent.

Life does of course go on, despite what the media would have us believe. And as for Robert Peston, a man who donned a metaphorical black cap during his nightly ‘we are all going to Hell in a handcart’ bulletins, the market collapse must have appeared to be a gift from a higher power.

‘I wouldn’t mind so much,’ said my friend Paul Wilcox, chairman of fund managers The WAY Group, ‘but that man (Peston) did more damage to the fund management industry than any single aspect of the downturn. People watched the news and thought, blimey, it’s bad, better sell all my shares’.

Just as well, perhaps, that Peston was not around to report on the crash of the late 80s. we would all have thrown ourselves off of Beachy Head if he had laboured that atrocious delivery to camera back then.

Does anyone remember those catastrophically high rates? I most certainly do, as my mortgage in those dark days doubled virtually overnight. But I got through it, and the economy did settle down, and people began to buy property again, just as they will to when the dust begins to settle on today’s problems.

First of all however, we have to make sure that the lenders want to lend us the money to secure mortgages again. There has rightfully been enormous indignation about the reluctance of banks and building societies to hand over the readies. But they do not appear to be dragging their feet about paying the big bosses vast bonuses.

I do not want to get all Trotskyite here, but could those massive, multi-million bonuses ever have been justified. And did those responsible for dishing it out really, really think they had earned it?

I draw your attention to a news story which appeared in the London Evening Standard, back in August 2006.

City staff, we were informed, would be enjoying a record £21bn of bonuses. Think about it. Such a huge amount of money.

Some of the biggest deal-makers at investments banks would join the elite '£10m club’, with even the humblest mid-ranking bankers on course to receive bonuses of between £450,000 and £1.5m.

Bear in mind that the average national wage in 2006 was just £26,000. It’s not that much more than that now – for those lucky enough to still be in work.

But that did not stop the bonus brigade, with one excited jewellery firm announcing that City traders wanting to buy a £34,000 watch would have to ‘get on a waiting list because of the demand.’

I suspect some of those tickers have by now found their way into pawn broker’s shops. But I digress.

The Standard chirpily announced that ‘bumper profits at investment banks, the result of a takeover boom, are fuelling the bonuses…..Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS are among those handing out the record rewards to staff. Staff at hedge funds and private equity firms will also benefit.’ Hmm. I bet they did.

Ring any bells? Lehman Brothers has of course bitten the dust, and UBS bosses were almost lynched at a recent shareholder meeting in Geneva, with rightly outraged shareholders demanding that the fat cats give back their massive bonuses.

None have. Guess they must have spent it. Probably on Swiss watches.

While bankers are bearing the brunt of ‘ordinary peoples’ anger, special mention must be made for some of the City based lawyers which are raking in the wonga like it is going out of fashion. Much of it is on the back of a new wave of merger and acquisition activity as many firms look to consolidate losses and hook up with erstwhile rivals.

There is also a good deal of liquidation business passing through their bloated coffers. So much so that, according to Oliver Brice, who runs online legal firm Virtual Law, the so called ‘Magic Circle’ law outfits like Clifford Chance are recruiting trained legal staff from the Indian sub continent and putting them to work in giant call centres for lawyers, effectively exploiting the cheap rates available in emerging market economies.

So much for buying British then.

And what will 2009 bring? Less estate agents, clearly. But there will be light at the end of the long dark tunnel. We will emerge a stronger, more resilient economy. Businesses which deliver goods and services we actually need will adjust their profit margins, work hard at their marketing and survive.

Jobs will be lost, but new ones will come along to replace them. Who knows, we may even see more of a return to grass roots manufacturing, with less reliance on cheap imports from overseas.

And value will come back to our properties. But with realistic pricing. Homes, after all, are to be lived in.

ends