Britain is as safe as houses

Investment in British companies, currency and commodities used to be as safe as houses. Years of lax Labour tax on the super-rich made the City of London a haven for foreign billionaires, all eager to cash in on the square mile’s burgeoning profit margins.

As the Russians poured in, the Brits poured out, moving abroad and living the dream with a robust pound to back up their marble-pillared purchases.

No more. The Oxford Economics consultancy will publish results of a survey this week the recent sharp plunge in Britain’s economic performance, compared with a list of other national economies.

Last year, before the financial storm broke, Britons were better off than residents of the US, France, Germany, Italy and Japan. At the end of one of the most cataclysmic economic years ever seen, we are poorer on average than Americans, Germans and Frenchies. The pound now buys fewer dollars, as it does euros, as it does Argentinian pesos. I imagine.

Oxford Economics predict that in 2009, GDP per capita in Britain will be “24% lower than in America and will be over 15% lower than in Japan”. These two economies have virtually zero interest rates in common, compared with the 2% current in Britain.

Britain will fall below even Italy, an economy which has struggled heavily in recent years.

Economic performance and the strength of a currency are symbiotic, just ask the prime minister. Investors are shunning the pound as, in all likelihood, the economy and currency will slip further as we see public debt being ratcheted up. If 2008 was the year where people stopped bandying about the metaphor “safe as houses”, 2009 will likely see the death of that punning epigram, “sound as a pound”.

The fall in sterling should encourage exporters to expand their output, but this will not benefit a country heavily reliant on imports. Goods from within the Eurozone will become relatively more expensive as the pound heads for parity with the single currency.

Britain can no longer hold claim to being a world leader in economic activity or quality of life. The City can no longer wax lyrical about being the world’s financial services hub. And Britons will no longer be the richest on the beach. We look set for a chastening 2009.