Tough times around the corner warns Moulton
VETERAN investor Jon Moulton warned last night that the sovereign debt crisis in the Eurozone could push the Western economies into a second credit crunch.
The founder of Better Capital, and the former head of private equity firm Alchemy Partners told 50 of the region’s leading entrepreneurs in Liverpool that our country is being run by “PR men”, who are not taking tough enough action to balance income with expenditure.
Moulton said: “I think the next few weeks could see something quite dramatic with Greece. I think the situation is very, very severe in that if Greece defaults, then Ireland will go too, and that would have a serious impact on banks such as Lloyds and RBS.”
This situation would affect international money markets, he claimed, meaning the cost of borrowing would soar, causing major problems for both businesses and consumers, particularly people on variable rate mortgages.
He said the record low interest rates meant that banks were not having to put underperforming businesses under, because they were unable to recognise losses.
Firm action by strong political leaders is needed to rebalance the economy he said, – but questioned the Coalition’s ability to do this, particularly in the wake of recent U-turns, such as that on NHS reform.
“What did the Prime Minister and Deputy Prime Minister do before politics? They were PR men – and what do PR men do? They look for headlines.”
The civil service should be cut and spending on the NHS and public sector pension reined-in as a first step, because: “We can’t afford it.”
“We are entering a period of great uncertainty, it is difficult to call the timing and the severity of what will happen when interest rates start to go up.”
He said it would be better, although unpopular, for interest rates to rise now, rather than for rises to be “forced down our throats by the capital markets” – a situation which would follow a sovereign debt crisis.
Opportunities in the tough times ahead would be there for “the wise, the brave, the clever”, but when asked where to invest, he answered: “China, Cananda, India, Brazil and Singapore.”
The event organised by corporate finance groups Acceleris and Seneca Partners was attended by investors and entrepreneurs including Pets At Home founder Anthony Preston, Richard O’Sullivan of Boost Juice Bars UK and former Hollands Pies boss Neil Court-Johnson.
