The latest rumblings of discontent around the financial community have been centred around the issues that beset Dubai, the land where dreams have been built, quite literally, in the sand.

Unfortunately, the sand seems to be capricious ground at best, and another wave of banking losses have been predicted, with reports of anything around the $40 to $50 billion level being the amount that European banks are exposed to. Then again what’s this piddly amount between friends after the recent figures we have seen bandied around?

The question being bandied around is not so much will this issue on its own be enough to cause another sharp financial issue, these losses should be nothing more than a “sideshow” as Stephanie Flanders’ blog describes this far more eloquently than I can here, but really if this is just an example that there are still various other bad news scenarios still to come out that could cause a double dip.

There are some who believe that the gradual recovery we have seen, or believe we have been seeing, is nothing more than a mirage and that more chickens will come home to roost in the second half of 2010.

Some even talk not of U, V or W shaped recession but a double stair, a sharp drop – a period of calm – then another sharp drop. It is true that there is still much to be concerned about, for example will the UK itself be downgraded from its’ AAA rating? If so, though I still believe this will not happen, there could be some nasty side effects.

Also, although unemployment is not quite as bad as predicted, there are no new jobs being created. So whilst some can live on savings and redundancy cheques for while, especially when mortgage rates are low, this cannot go on indefinitely. When rates do start to increase, if lenders have not relaxed criteria to allow those who cannot move the protection of fixed rates then they are storing up some serious issues.

We also have to wean the financial system off the aid it has received and start to pay it back, so any new Government may not be able to avoid a hard period of tax rises amongst other things.

It’s not about painting a depressing picture, but it is important to be realistic.

In the meantime the positive signs of a recovery in mortgage lending still abound. Reportedly more and more applications are in the system for institutions to become banks and lenders, whilst Paragon and Kensington’s’ tentative return to the lending party is welcome.

Mortgage products are increasing all the time, with competition set to increase again next year, and a general election could produce a customary “feel good” factor, as could a decent World Cup run! Two years of issues is a long time, and the growing public hunger for good news could produce the sentiment required for a sustainable, if slow, recovery.

For businesses, especially in our market, the first few months of 2010 will be key to establish a solid core base to take advantage of the early opportunities and ride out future bumps. There is a fine line between being optimistic and just plain naive.

The clever, adaptable companies will continue to weather the storm and be there to reap the rich rewards that will eventually come.

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