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Wednesday, August 26, 2009

Is the recession over?

Increasingly in recent days there has been more and more items in the media about the recession being over, or nearly so? It's almost as though talking the economy down is boring now and they need to talk it up.

But is there any substance to it?

The most recent one I have seen is an item on the BBC news website this week based on an index of business confidence run by the Institute of Chartered Accountants in England and Wales (ICAEW) saying the recession is at an end and we will see 0.5% growth in the third quarter in the UK!

Then you have news that countries like France and Germany are out of recession and various other indicators showing increases in demand - even in the motor industry!

This also leads to thoughts about the shape of the recession perhaps? There was much talk about "U" shape, "L" shape and even a dead cat bounce which always makes me smile! Will we get a double fall? Will the economy ever recover to where it was? And how long will it take? It certainly needs to grow substantially if we are ever going to get the national debt down!

I can't say I'm convinced by all this talk of being out of the woods. Personally I feel we are a long way from being out of trouble. I do not want to be the merchant of doom, far from it, but we must be realistic! However, that said, if we can get some feel good factor back into peoples thinking then it can only be positive and will in itself bring good news!

From what we see at Insight Associates many smaller businesses (which are after all the bulk of the UK employers!) are still suffering, and in some cases suffering badly. Unemployment is still rising (a strong lag indicator) and will probably still do so for some considerable time yet - with all it's knock on effects, and credit is still in very short supply.

Someone mentioned to me the other day that in the last true recession of the early nineties, unemployment did not peak until 1995!! I have not checked that out - but that is some lag!

To my mind we will not see any sustainable improvement in the fortunes of smaller businesses in the UK until banks and other lending institutions get sensible with their lending criteria again (because they are far from it at the moment) and credit insurance also sorts itself out. In the meanwhile businesses need to get much better at managing their scare cash resources and focus on this critical area which so many are still failing to do!

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