Lehman, five years on
Five years ago on Sunday, the American investment bank, Lehman Brothers, was declared bankrupt. Here we take a quick look at some of the economic and social changes since 2008,
First, some context. By 15th September 2008, although we didn’t know it at the time, the UK was already in recession. The collapse of Lehman was not responsible for the fact that the economy stopped growing. Moreover, the UK had already seen banks of its own collapse – the run on Northern Rock was the previous summer. So the financial crisis and ensuing recession was as much home-grown as imported. The importance of Lehman is therefore partly symbolic – we can take it to mean the point at which the global financial crisis went full blown.
The graph below sets out a few statistics that look at the UK before and after Lehman. They are the macro level statistics that are often used to point out the scale of change – GDP growth, for instance. We’ve also included some measures of the social impacts – household income, pay and unemployment. The pay and income measures are adjusted for inflation, and we include a line for the consumer prices index as well. The household income estimates only go up to 2012 at the moment, all of the other data covers at least some of 2013.
By clicking on the categories you can show and hide the lines. The line for unemployment is showing currently. Clicking on the unemployment button will hide this line.
There are a couple of things to highlight from this. Firstly, not all of the social and economic problems we face came along at the same time – GDP fell sharply in 2009 and unemployment rose. But the fall in median incomes did not begin to fall in earnest until a year later, when median pay also began falling more sharply. There are implications for the recovery here. As GDP improves, incomes and pay may still lag behind.
Secondly, despite the better recent figures on unemployment, the overall level is still very high, and in terms of raw numbers still above the 2009 figure.
We wanted to put in something about the deficit or national debt levels. But the increases have been so vast – more than doubling in both cases – that they don’t fit on the graph without distorting the other lines. Compared to a 100 per cent increase in the national debt, an 8 per cent fall in incomes is hard to see. But both are important, and if the last five years have seen a political focus on the first figure, the next five need to focus on the second.
So five years on, everything is different. Yet somehow the news this morning suggested some things don’t change. Alongside reports warning of another house price boom (for that authentic mid 2000s retro feel) Robert Peston spoke on Radio 4 this morning of the remnants of Lehman, still, somehow operating in London, “enriching investors who bought its debts”. The more things change …