IT was seven years ago last month that Gordon Brown rose to his feet to deliver what would be his eleventh and final Budget as Chancellor of the Exchequer .
To look back now at the speech he delivered on March 21, 2007, is to peer into a distant age.
“The British economy is today growing faster than all the other G7 economies,” Mr Brown told the Commons. “And after 10 years of sustained growth, Britain’s growth will continue into its 59th quarter, and then into its 60th and 61st quarter, and beyond.”
Famously, the Chancellor paused to add: “We will never return to the old boom and bust.”
Just six weeks earlier, however, HSBC had announced huge losses at its US mortgage arm. It was the first signal that all was not well in the housing market. A fortnight after Mr Brown’s speech, another US lender, New Century Financial, filed for bankruptcy. Western housing bubbles were starting to burst – leaving the world’s financial institutions exposed.
By the summer, the credit markets were in freefall, as the extent to which banks had overstretched themselves began to emerge. In September 2007, the crisis arrived on these shores in dramatic fashion with the first run on a British bank in more than a century, as savers queued to withdraw their money from an ailing Northern Rock.
House prices began to fall. Manufacturing slumped. In February 2008, Northern Rock was nationalised. Two months later, Britain slipped into recession.
Then came the meltdown of September 2008, as the collapse of Lehman Brothers triggered global panic. What were once two of Yorkshire’s proudest financial institutions, HBOS – the successor to the Halifax Building Society – and Bradford and Bingley were on their knees. Lloyds TSB stepped in to save the former, the Government had no real choice but to nationalise the latter.
Credit dried up. Firms began to fold. And it was small businesses and their employees in Yorkshire who were at the sharp end.
“I was in the mortgage market when the recession hit, and we found our income drop from £50,000 a month to £8,000 between December and January,” recalls Chris Glen, who chairs the West Yorkshire branch of the Federation of Small Businesses. “It did not recover for many years. We lost 90 per cent of our staff. Staying alive was the only objective at that stage.”
Many firms were unable to do so, as output plummeted and unemployment soared.
The election of the Coalition in May 2010 saw an abrupt shift in public spending patterns. Council budgets were one of the new Government’s main target for cut-backs. More than £1bn was wiped off Yorkshire’s 22 local authority budgets. An estimated 15,000 public sector jobs disappeared in the region. Genuine economic growth did not return to the UK until late last year.
The scale of the damage done to the local economy over the period is only now becoming clear.
According to a study by the Office for National Statistics (ONS), Yorkshire was the only region in England whose output fell every year between 2007 and 2011.
The ONS believes that in total, the region’s Gross Value Added – the standard measure for regional economic activity – fell by around 14 per cent, more than any other part of the country.
What is clear is that different parts of the region suffered far more than others. The ONS said the data shows East Yorkshire was hardest hit of all.
Hull North MP Diana Johnson argues the Government should have done more to support cities such as her own.
“There’s no doubt that the 2008 global banking crisis hit many parts of Yorkshire a lot harder than areas where most of the bankers actually live,” she said.
“The fact is the economy had actually started to recover early in 2010, but three years of flat-lining means the return to growth has been held up unnecessarily.
“This delay has been especially bad news for Hull, where we have lost thousands more jobs since the end of 2010.”
By contrast, in North Yorkshire business leaders suggest the recession had far less impact.
Suzanne Burnett, president of York and North Yorkshire Chamber of Commerce, said: “Compared to other parts of the country, the economy of York and North Yorkshire fared reasonably well through the downturn. The rise of ‘stay-cations’ has certainly benefited the tourist trade.
“York had already embarked on economic transformation resulting in substantial growth before the recession, and this helped mitigate the full effects.”