In a TV interview on Sky News, Michael Geoghegan, Chief Executive of HSBC said the new 50 percent tax rate in the UK was “strange” and was causing many bankers to leave the UK to set up in Switzerland and other countries. He himself is moving his office to Hong Kong next week, although the banks HQ will remain in the City of London.

“I think when you start moving taxation for political reasons, the trouble is that it is an industry that can move,” he told Jeff Randall Live. Asked if damage was being done, he replied: “Yes.”

Hethought people in the UK had been given an easy ride because interest rates had been slashed close to zero, but he predicted pain ahead as inflation rises. “As interest rates come back up, that’s going to start squeezing and that does need to happen.”

Mr Geoghegan will, however, still spend up to a third of his time in the UK. He believes Britain needs to wean itself off debt and rein in its fiscal stimulus “sooner rather than later. How we finance our lives does need to change and I think, as the Governor of the Bank of England came out and said, we’ve got to start with our shopping list, we’ve got to cut our costs and I think that needs to start, not just in the UK but in other places, to stimulate all the economies.”

He said UK moves to toughen up regulation risked making the City unattractive. “The UK is leading it and it has been doing some very sensible things but the rest of the world hasn’t come forward so in a way I think maybe the UK is moving too fast.”

The Governor of the Bank of England, Mervyn King, has lost his attempt to extend quantitative easing (QE) to £200 billion.

The minutes of the Bank’s monetary Policy Committee for this month illustrate the gaping divide between the deflationists and their opposite numbers, the inflationists.

Quantitative easing is a term covering the Bank buying up Treasury bonds (gilts), issued by the Government to fund its borrowing requirement. Mre simply, it’s “printing money”.

The process is a bit like a snake eating its own tail, with one part of the government process buying up the debt of the Government. In normal times, it’s widely regarded as national suicide. Not now, apparently.

King’s move has already spooked the markets, with the pound sinking against the dollar. Stock markets around the world are also retreating on a general wave of disbelief that all the talk of green shoots can be sustained. The reality of the world’s huge over-capacity will bite in the autumn on the back of more massive job losses.

The Governor’s pessimism arises because the risk of “another large stimulus might be less than the possible costs of acting too cautiously.”

New figures show that the UK economy shrank by 2.4pc in the first quarter of this year. This is a revised number down from the 1.9pc previously reported.

It shows that the UK is in a much worse downturn than many expected and so-called green shoots of recovery are isolated statistical blips.

Many forecasters are now turning away from the much-hyped V-shaped recovery pattern, and even a more leisurely U-shape, to a wobbly “W”, or double-dip delayed type of recovery.

It’s clear the British economy is still in freefall. As in the 1980s, the biggest decline has been in manufacturing. While the public sector has continued to grow, the makers of things have taken blow after blow.

The weakest sectors have been new housebuilding and car making.

This is beginning to look very serious indeed for UK industry and any company in the private sector.

Mervyn King, Governor of the Bank of England has suggested more British banks may have to be nationalized in order to get them lending normally again. The alternative is many years of sub-trend growth.

Here’s the statement:

“The measures taken over the past six months were designed to stabilise the banking system and prevent failure. What’s become apparent is that nobody knows what level of capital they need to hold in order to be willing to make judgements about lending on the same criteria as you would regard as normal… In the long run, the only way to overcome this is for banks to get back to a position where they’re sufficiently well-capitalised that the degree of risk aversion that they exhibit towards their lending practices returns to a more normal level of risk aversion and not the extreme risk aversion which is being exhibited today.

“Higher capital would resolve that. How much capital, we simply don’t know. There was an interesting contribution from Alan Greenspan which suggested that several percentage points extra capital would be needed in American banks over and above the levels that regulators are pushing them to to get them to a more normal lending state.

“What’s very important to distinguish between and to my mind this is the big lesson of the last three, four five months, is that there is quite a big difference in practice between the levels of capital that banks need to be stabilised – in the sense that the creditors are reassured that the banks can continue as viable entities – and the levels required to persuade banks to exhibit normal levels of risk aversion. How big that gap is is absolutely impossible to say. I know of no scientific basis on which you can set that figure, but it looks as if it will be quite big.

“And what that means is that it will take time for the banks to get that extra capital. They are bound to be cautious about the rate at which they expand lending. It is a difficult problem to deal with. If the banks are going to continue as private sector entities they will naturally behave in a risk averse way for a while. That’s one of the lessons of history in terms of balance sheet problems.

“They could put in more public sector capital if they decided to do so but that has to be a judgement for government, and it does have ramifications for the Government’s shareholdings in banks because the amount you’d need to put in would undoubtedly be significant relative to the size of privately owned capital at present, and that does raise a whole series of awkward questions – but that is a matter for the Government.”

Not a nice prognosis and signs that the recent “bull” market and green shoots could all be in vain.

John Evans