Gordon Clown .Com

It has been a few months since the last time we checked on Gordon’s prospects in the Betfair markets, so lets see how he’s doing now. Then we will gauge reaction to his Budget speech in a few weeks time by checking on the odds again afterwards.
In the “Next Labour Leader” market, we can see that Gordon’s odds are now 1.29, significantly shorter than September’s odds of 1.45. Things are starting to shake out in the leadership race, and it is also a lot clearer now that Blair is likely to stand down soon, so Brown has less time to make any “cock ups” and therefore a better chance of winning. There are, however, two more interesting things to note in the market. Firstly the odds of Brown’s nearest challenger David Milliband have come in significantly to only 11.0. Betfair are good enough to provide charts of how the odds have changed over time and these are displayed below:

The second, and perhaps more important, market to monitor is the “Next General Election - Most Seats” market. This shows how well Brown is doing against Cameron, and it does not make for good news for Gordon. When we last checked in September, the odds on Labour vs. the Conservatives were 2.22 to 1.83. This has now shifted even more in favour of Cameron, and now stands at 2.28 to 1.77. Combine this with the poll results, and things are not looking too good for Gordon.

Not been the best week for Mr. Brown. Approximately 6 months after Project Gordon disasterously failed to “put a more human face on the Iron Chancellor”, Blair has come out and said that he will remain in office for “at least another year”. UBS have predicted that CPI is about to hit 2.8%, which means more rate hikes are on the way, which is unlikely to impress Britain’s over-indebted population of Labour Voters, as they see their mortgage repayments hit heights they never expected. The economics editor of the Guardian summed up the situation nicely today, reiterating the fears that people appear to be facing, after one tiny measly 0.25% rate rise:

We will see in the coming months just how many individuals in Britain are living on the edge, with only modest increases in rates enough to tip them over the edge. My guess is that the economy is far more sensitive to a quarter-point rise in borrowing costs than it was, especially if there is a threat of further moves from the Bank. The fact that insolvencies were 66% higher in the second quarter of 2006 than in the second quarter of 2005 is a sign of just how tough many people are finding it to meet their financial commitments; add in spiralling energy costs, rising unemployment and higher interest rates and you have the recipe for extreme difficulties for many households.

So, despite being listed in Time Magazine’s 100 most influential people in the world (Blair was excluded) last year, things are not looking too good for Gordon. He may not be facing serious competition for the succession (John McDonnel notwithstanding), but the real question is: if and when Gordon hits Number Ten, how long is he expecting to remain?

Betfair Odds for Gordon as Next Labour Leader: 1.42
Betfair Odds for Next General Election: Labour 2.1, Conservatives 1.93

As a nation of borrowers awaits the interest rate decision announcement from the Bank of England’s Monetary Policy Committee tomorrow, not one but two of the big four high street banks in the UK have announced that they can no longer afford to wait for interest rates to curb borrowing and are about to tackle the situation themselves. First HSBC and now Lloyd’s have announced that the rocketing levels of bad debts in the form of Bankruptcies and Individual Voluntary Arrangements are costing them too much, and that they will be forced to tighten their lending criteria to control the situation.

The effect of this, similar to interest rate rises, will be to curb borrowing amongst consumers, as high street banks will begin to offer less loans and overdrafts to people, slowing the vast supply of cheap money that has fuelled consumer spending in recent times. The banks simply can no longer afford to risk their profits by lending money out so easily. Considering that HSBC in particular has seen costs due to bad debts increase by 36% in the first 6 months of 2006, it’s not hard to see why this move has been made. Effectively the banks are taking matters into their own hands and doing the MPC’s job for it.

Further evidence of high inflation has been reported today by the British Retail Consortium, who have announced that shop prices rose at their fastest rate for two years in July. Some might say that this could tip the MPC into raising rates tomorrow, although they have ignored bigger problems in the past. Odds on a rate rise briefly hit 4-1 on Betfair today, although a rate freeze is still seen as the most likely outcome. It really is anyones guess.