Bill Gleeson: Optimism not dented by the gloom around

Jan 23 2008 by Bill Gleeson, Liverpool Daily Post

IMAGINE the circumstances that would lead the Bank of England to cut interest rates by 0.75%. Last time it met, our MPC balked at the idea of a quarter-point drop.

Yesterday’s sharp cut in rates by the US Federal Reserve suggests someone somewhere thinks it’s time to accelerate hard.

For six months now, the world’s stockmarkets have suffered alarming falls one day, only to bounce back the next.

Indeed, yesterday morning, the FTSE dropped 4% in the first hour of trading only to be back up by 9am. By the close of play, it had even made up part of Monday’s heavy losses on the back of that hefty interest rate cut in the United States.

Market practitioners call all of these ups and downs “volatility”.

While companies whose shares are traded on the market and their investors don’t like volatility, there are plenty in the financial services industry in the City of London who see opportunities in these difficult conditions – principally, the chance to buy cheap with a view to selling high when stocks pick up again in the future.

It’s the same with the property market.

The deal to buy all of the 375 flats being developed by Neptune, at Mann Island, may be an example of such opportunism.

Around £70m was paid by Manchester-based Dylan Harvey for the apartments, valuing the flats, located just to the south of the Pier Head’s Three Graces, at an average of £200,000 each. The deal was struck just days after Liverpool Vision boss Jim Gill, responsible for regeneration in the city centre, implied the urban flats market was dead for the time being.

And then it also emerged that the developer of the £130m New World Square intended to press ahead with the ambitious scheme for Princes Dock, just to the north of Three Graces.

On top of that, Y1 Developments insists its 54-storey tower at the King Edward Pub site will proceed.

Such optimism in the face of the prevailing tough conditions is impressive. The sense of enterprise has not been dented by all the gloom around about the immediate future. Make no mistake, Mr Gill’s view that it will be a long time before you see investors coming forward to develop tall towers has to be fundamentally correct.

It is certainly in tune with most of the sentiment I’ve heard in the market place.

As for the equity markets, they’ll be back. It’s a question of when, rather than if, and my hunch is the bounce back will be sooner rather than later.

But, of much more interest than whether a few City or property types can manage to keep their lavish lifestyles afloat is how the real economy might cope in the months ahead.

On one hand, the signs don’t look good. Consumer spending has clearly dropped in recent months. All the official figures and the more reliable surveys show that Christmas was not good for retailers.

On the other hand, the British economy has been remarkably robust for a decade and a half now. It may yet prove strong enough to withstand these latest worries.

* WHEN George Gillett and Tom Hicks bought Liverpool FC almost a year ago now, they published a prospectus that included a statement that the club would not bear any of the debt used by the pair to buy it.

This undertaking, given to the shareholders who were selling their shares to the new owners, was an important point of difference with how the Glazer family acquired Manchester United.

Hopefully, Hicks and Gillett will see sense and keep their debts to themselves.