A story for those who think the credit crunch is over. We’ve just bought another new car. It’s a double-cab pick-up truck (not, I’m guessing, the kind of car you think of me as driving). It isn’t perfect. It’s white and seems to be made almost entirely of cheap moulded plastic. But it’s brand new; you can sit five people and many sheep in it; it has more gears than I think we’re ever likely to need; and it comes with a handsome cover for the open bit at the back.
Better still, thanks to the desperate attempts by the car industry to clear out inventories, we got it for 35% off the list price, making its end price similar to that of the second-hand version. It also works for us tax-wise. We’ve bought it as a commercial vehicle, and the government’s attempts to alleviate the effects of the recession mean we can depreciate it in full this tax year.
You may think all this sounds pretty good – one of Britain’s most pessimistic families is out spending to the benefit of both the UK and the US economies (our pick-up is a Ford). But look closer and it tells you all you need to know about the fragile state of confidence in the UK.
We bought it from a Pendragon dealer. A few months ago Pendragon was a mess – falling car sales and a high debt load saw its share price fall to 1.4p in April. Since then there’s been a refinancing (£530m in a three-year package) and the shares have rebounded to 33p.
Still, recent history suggests the firm isn’t without risk, so we weren’t sure we wanted to just transfer the cash for the car to the dealership and then go and pick it up, as is the usual way. What if something went horribly wrong for Pendragon in the intervening few days? We’d be down £13,000 and a white double-cab pick-up truck. So my husband rang and said he’d get a banker’s draft and bring it with him. No go.
Why? Because, explained the dealer, what with general worries about bank insolvency, they no longer accept banker’s drafts as a cash substitute (what if the bank goes bust before they swap it for cash?). Instead they treat them like cheques and they take eight days to clear.
Economies need a certain amount of trust to function: companies and people must be able to provide services and products with a reasonable expectation of getting paid. That means working on the assumption that all banks are solvent and that most companies are also solvent.
But this little story of the ordinary purchase of an ordinary truck shows that, in the UK at least, we don’t have that trust. We are suspicious of Pendragon. Pendragon is suspicious of us. And we’re all suspicious of the banks (our banker’s draft was to have come from HBOS).
Not exactly a storming starting point for economic recovery, is it?