History suggests not. For all its drama the 1987 crash had “no appreciable impact upon economic growth”, and the main casualties of the 2001 crash were the egos (and bank balances) of dot-com millionaires. What matters is consumer confidence – whether shoppers think this is the beginning of the end, or just a bad day for the men in braces. But this time, there is an added factor – which Brown should worry about.
Behind this crash lurks the credit crunch which is already leaving real damage on the UK economy. The Council of Mortgage Lenders showed that the cost of mortgages hit a seven year high last November, its latest data. The Royal Institute of Chartered Surveyors predicts repossessions will be up by 50%. What the crash tells us is that financiers consider the credit crunch to be very severe indeed; so these indicators may grow worse. Should the crunch harden, consumers will start running scared and the real economy will be in for a battering.