by Dan McCurry
We now have an explanation for why unemployment hasn’t soared in the worst recession since the first World War.
It seems that the banks are keeping failing companies afloat rather than calling in their loans, for fear of damaging their capital base and failing to comply with regulations. It is this priority of the regulators that has had the perverse effect of bunging up the unemployment market and creating a million zombie jobs.
Before you think this is a good thing, recognise that productivity is supposed to improve during a recession, instead it has slumped, causing long term damage. Meanwhile the unemployment has only been delayed. Sooner or later the banks will be forced to call in their loans. At that point, the zombie companies fold, and the workers become unemployed.
When I was working for a retail chain called Wilding Office Machines in the early ‘90s recession, the board decided to start, and then lose, a price war with Dixons. A man called Charles Wigador had built a fleet of salesmen selling mobile phones to businesses. Phones were changing from being bricks to pocket sized devices that consumers could buy, but there were no retail shops to supply them. When we were about to go bust Charles bought us out, all 120 shops, staff and head office, for a mere £100k.
For us, overnight the recession ended and we were on the cutting edge of a new business, and Britain was at the cutting edge of mobile phones. Within a couple of years, Charles sold out to a small company called Vodafone for £17 million.
If George Osborne was in charge at the time, Wildings would have been kept alive as a zombie company and Vodafone would not today exist as the largest phone company in the world. George Osborne promised the “march of the makers”, but the British economy today can best be described as the march of the zombies.
