Hope for the bad, but pray for the worst

An excellent meeting yesterday between Scottish MPs and representatives of Scottish Chambers of Commerce. Some genuine concerns expressed by business leaders, but also a realism and determination to succeed. One warned that we’re in danger of talking ourselves into a recession.

Then today, this, by Garland, appears in The Daily Telegraph:

Most economists don’t reckon the current downturn will develop into a recession. But recession is news. Even better: it’s bad news, which, for the likes of the Telegraph means good news (are you still with me?).

The champagne corks would be popping over at Conservative Central Office were recession to arrive, with any sign of growing unemployment and house repossessions seen as “a price worth paying” for an opportunity to issue a few smug news releases.

But recession isn’t around the corner, and the word should never be used as shorthand for any economic downturn. And newspapers – even those slavishly and nauseatingly loyal to the Conservative Party – should exercise a bit more restraint. After all, recessions hit newspaper advertising hard, and we would all hate to see the Telegraph go down the plug, wouldn’t we? I said, WOULDN’T WE?!

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8 Comments

Filed under Conservative Party, Economy, Media, Politics

8 responses to “Hope for the bad, but pray for the worst

  1. Auntie Flo'

    Most of us who are old enough to remember struggling through the relentless misery of the last recession from a very exposed position will be in no doubt about how to recognise another one.

    My view: sales of just about everything except the services of liquidation practioners are dropping like stones. We’re in a recession alright.

    Something else I remember all too clearly about the last recession: endless government and giant corporate spin about how we were talking ourselves into a recession and it was really only a slow down.

    Talk does not cause recessions, catastrophically declining world trade forces and incompetent governments do.

  2. Flo – it’s understandable why those who are suffering most at the moment may feel like we’re in recession. Nevertheless, the judgment isn’t a subjective one – it’s based on measurable criteria. Recession is defined as two consecutive quarters of negative growth. We haven’t had one quarter of negative growth yet, and I’m sure you agree with me that we don’t want that to happen. Fact is, there were two Tory-made recessions and there hasn’t been a recession under Labour, however frustrating and inconvenient that fact is to our opponents.

  3. Auntie Flo'

    With great respect to you, Tom, I wonder if the government are talking up the figures.

    I can’t deny what I’m seeing with my own eyes. My industry is distribution and transport logisitics plus a few other bits and bobs, with customers ranging from several of the multinational giants (including supermarkets) to a wide range of SMEs across a broad spectrum of industries. We are all struggling for work.

    For some months we saw a horribly familiar pattern which I only ever recall from the last recession: sales sky high one week and way down the next. Up and down like a yo yo. In a slow down you get more of a steady decline. These sales patterns are pathological and worrying.

    Now they’ve suddenly got worse. In the past three weeks – during what should be a peak season period – the bottom has fallen out of the ‘high’ weeks. Sales are still rising up and down, but to a less marked extent, and the lows and highs are now lower. That won’t even register on the government’s stats yet.

    My town is having a rash of redundancies too, in one case a company that’s been here for 50 years is making all of its staff redundant because its moving overseas – to a low pay and unregulated economy. We’re going to see a lot more of that I believe.

    We are getting a higher volume of job applications from people who are out of work – and a stream of these are from applicants who have recently migrated here. My view is that the government needs to take prompt action to manage the number of people migrating here for work during this difficult period.

    The government also needs to put a zero cost ceiling on new policy measures during this period.

    You need a czar for SMEs who really understands the tough realities of life for small companies. Please don’t tell me the Small Business Service do that, they don’t have the expertise or knowledge.

    And be very wary of the information you get from chambers of commerce. Most SMEs do not belong to these because they can’t afford to. Our local COC seems to be largely comprised of and run by grant funded organisations, which are insulated from trading realities, plus solicitors and businesses of that ilk, who always do well in recessions.

    Why worry about SMEs? Because we are 99.9% of UK’s companies. Because we are the seed bed of the economy. And because we generate around 50% of GDP and employ over 50% of UK’s staff. Whereas the giant corps are progessively reducing staff levels through automation, SMEs will always rely on people to staff them.

  4. Auntie Flo'

    Also, I think we need to work towards a new definition of a recession now, Tom.

    The two quarter negative growth definition applies under normal trading conditions – during which companies are able to accumulate normal trading surpluses to tide them through recessions, slow downs and to contend with other contingencies such as slow payments from corporate giants.

    However, those normal trading conditions and normal surpluses don’t exist any longer. They have been steadily eroded during the past decade – partly as a result of the cost of complying with government’s constant policy changes, partly as a result of coping with a damaging mountain of ever changing red tape, partly, and this is a factor unique to SMEs, due to the intense margin pressure generated by giant multi-national customers who have been allowed to accumulate unhealthy market shares and an unhealthy amount of power over their markets and suppliers. Consequently, the volume of capital SMEs have to absorb recessional forces is considerably reduced.

  5. Auntie Flo'

    Tom,

    The following is from the REC/KPMG Report on Jobs which I’ve just received. The report uses a wide range of indicators including Press Advertising Index, monthly survey data from a panel of recruitment personnel, ONS data, pay pressure analysis and Purchase Managers Index.

    The report states:

    “Demand for permanent staff fell for the first time in five years in June”

    Demand for temporary staff is way below the average levels of the past decade with the exception of the 2001 -2003 slowdown.

    Demand for staff has ‘faltered’

    Candidate availability continues to increase

    Alan Nolan, Director at KMPG commented:

    “This really is a sobering set of figures proving the credit crunch has finally taken its toll and is now severely weakening the UK jobs market. Many employers now seem to be accepting the inevitable – they will have to cut costs by laying people off because their businesses won’t be growing as much as they had expected a couple of months ago.”

    The report adds that with widespread redundancy programmes in the City and among housebuilders, “there is more to come”

    The report forecasts a “stagnant jobs market and rising unemployment for the foreseeable future.”

    What is worrying about this report is that it shows that the decline of demand for permanent staff has been so pronounced and has occurred so rapidly. The graph shows the index falling very steeply throughout the last past 5 months.

    Next month’s results will almost certainly show an exacerbation of this unhealthy situation during July.

  6. Auntie Flo'

    That UK Job Report, by the way, shows that demand for permanent staff has fallen from around 64 points in June last year to 48.6 points in June this year.

    Needless to say, that’s a very steep drop in demand, one which almost exactly matches the declining ‘gradient’ of demand during late 2000 to 2001.

  7. Well, I’m a Conservative and I don’t want or wish for a recession at all. I have repeatedly said so.

    That the UK has not had a recession since the early 90’s is good news. Whether we are ‘better placed’ to meet the downturn that is currently occurring is the subject of debate and discussion – and I suspect that you and I would disagree on that.

    I sincerely hope that we are seeing a temporary slowdown rather than a recession – and I doubt that people in my party would honestly want anything worse either; after all they have jobs too and most of them feel the pinch too.

  8. Johnny Norfolk

    Tom

    I think your comments about this just prove to us how removed from peoples lives MPs now are.

    Do you not understand that the price of basics have gone through the roof. as the Labour government is broke it has not been able to provide any meaningful help to those that need it.

    Unless you are a bank based in the north of course.

    In fact with the car tax increase you are taking even more money off those who can least afford it.

    All from a Labour government.

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