For example, their capacity to cushion the impact of another downturn, were one to occur in six or seven years’ time, would be limited. The developments in the world economy over the past year have had a significant effect on our economy. One key channel has been the impact on commodity markets, where prices fell sharply in the second half of last year.
It has been apparent for some time from developments in markets for coal and iron ore that there would be large downward adjustments to the contract prices for those commodities when they were renegotiated this year. Those falls have now largely been realised, broadly in line with what was expected. Compared with last year, there will be a lot less revenue coming in.