A Forex View From Afar

From Banking to Auto's

After nationalizing most of the banking sector, the U.K. government has shifted its attention to the auto industry. The lifeline would be offered for producers developing low-emission vehicles and training programs for some workers.

However, almost none of the major U.K. car manufacturers target such a market, yet. U.K. cars are usually stylish cars, with big petrol engines like the Bentleys, Range Rovers and Jaguars, all of which burn lots of petrol, some more than others, such as the Bentley.

This decision shows the strong determination of the U.K. government to save the country for a prolonged recession. Estimates are now running as low as -2% for the 2009 GDP and this number will probably be revised lower, if the situation from the financial sector and the labor market continues to weaken.

The British authorities have already committed to shore up most of the financial sector, buying the three biggest U.K. banks. Just last week, the Royal Bank of Scotland had gave up a 70% stake to the U.K. government. In the long run, the recent actions taken might help the U.K. economy recover faster than expected, or at least show some signs of vigor ahead of the other major economies, which would be reflected in the pound’s strength. However, at this point these are just speculations…

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