Recession over?

The British Chamber of Commerce survey this morning contains the good news that confidence levels have risen sharply from the lows of recent quarters. It would be unwise to break open champagne, as we still cannot afford the imports.

The survey also shows that “almost all the key balances remain in negative territory, and most balances are still weak by historical standards”. The net balance for home sales for manufacturing did rise by 18 points, but it is still at a heavily negative minus 37%. Worse still, the balance for manufacturers home orders, what matters for future turnover, rose 15 points to rest at an equally heavily negative minus 37%.

Businesses need to generate cash to survive, and to have money to invest in the future. One of the worst figures in the survey was the one for manufactuuring cashflow. At minus 32% it is at “the lowest level since records are available”.

This survey shows that prospects and confidence levels have moved from dire to very worrying. After a long period of sharp downturn figures start to look better by comparison to very weak figures. That is not the same as a strong recovery.

The BCC are saying that unemployment goes on rising, hitting future demand. They report what their members see, which is too few orders and too little cash coming into their businesses. It is good they also report what their members feel, and they are feeling a bit more optimistic. We need that optimism to translate into more orders.

This entry was posted in Blog. Bookmark the permalink. Both comments and trackbacks are currently closed.

18 Comments

  1. Posted July 7, 2009 at 7:30 am | Permalink

    During Brown’s boom consumer growth in the economy rested on steadily rising house prices predicated on cheap and plentiful credit. In six years from 2001 average mortgage debt rose by almost 100% while net disposable income rose by just 29%. The difference between these two went in his panoply of stealth taxes which in turn disappeared into the public sector’s black hole.

    That cheap and plentiful credit has now gone however, perhaps for good. As a result sales volumes and profit margins have been hit while financial support from the banks has not been forthcoming. This means that cashflow planning has become more an exercise in survival than innovation and growth and the jobs that go with these. For small business this is even more difficult than would otherwise have been the case thanks to Brown’s 2005 budget which in effect raised corporation tax on them by quite astonishing levels. All this adds up to many more failures and job losses to come.

    Saddled as we are with colossal national debts and a with a return to the madness of the last few years completely out of the question there is only one option left open to recover the economy in the long run. This must be a massive restructuring of public expenditure so that it takes far less of wealth creation in this country. A 10% cut may be a start but if we are going to turn things round in the long run it will take a lot more than that to do the job properly.

  2. Waramess
    Posted July 7, 2009 at 7:41 am | Permalink

    These are people who desperately want the recession to end and so make the statistics work in their favour.

    The first signs of a recovery will almost certainly come when house prices have fallen back to a point where the average first time buyer can buy 85 percent of a two or three bed house on a multiple of three and a bit times salary.

    Gordon Brown is doing his best to ensure that day is a long way off.

    In the meantime those industries that depend on the house market to recover, and they are disperate, will have to survive the recession a bit longer and hope that the combination of their core salaries and wages costs and their risk averse bank will allow them to see the other side of the recession

  3. Brian Tomkinson
    Posted July 7, 2009 at 7:57 am | Permalink

    Sounds more like an exercise in wishful thinking than a serious analysis.

  4. Alfred T Mahan
    Posted July 7, 2009 at 7:58 am | Permalink

    I would love to agree with you but I think it is still “dire” and not just “very worrying”.

    The key figure, as you point out, is the level of cash burn in business. You can survive a long period of negative cash flow if you have the necessary reserves to begin with, but once they’ve run out your options are very limited indeed. If manufacturing cash flow is indeed the lowest level since “records are available”, and thus getting worse, that is a far more important signal than some nebulous level of confidence and may be a harbinger of dramatic levels of insolvencies yet to come as reserves run out.

    I see no sign whatsoever of a recovery sufficient to lift manufacturing cash flow into positive territory for a while yet. It is only when that happens that the situation can begin to be regarded as stabilised. At the moment many, many businesses are still moving towards the cliff edge – and, according to these figures, at an accelerating rate.

    • jean baker
      Posted July 7, 2009 at 9:02 am | Permalink

      ‘Open Europe’ reported in June on the controversial EU plans to create three new EU authorities with the power to override national regulators in areas of banking, securities and insurance.

      John reports “One of the worst figures in the (BCC) survey …. minus 32% … the lowest level since records began”.

      In whose best interests will the EU be acting if it achieves it’s aims for ‘financial control’ of Britain’s finances ? Many believe it favours ‘socialist totalitariasm’ over and above (non political) private, free enterprise and manufacturing.

      Meantime, Nulabor continues to borrow against taxpayers in it’s transfer of money and privileges to vested interests liable to identify with the Labour political Brand – whilst Blair pursues his aim of next EU Presidency, Brown reportedly offered Northern Rock (wrecked by Nulabor policies) to Tesco – identifiable with the Labour political Brand. Private investors, shareholders and British taxpayers are the losers in the Northern Rock fiasco – unsurprisingly, the (reportedly) misinformed shareholders lost their case for compensation.

  5. Andrew Duffin
    Posted July 7, 2009 at 8:17 am | Permalink

    To what extent have these figures been manipulated by or at the behest of “Lord” Mandelson or someone working on his behalf?

  6. Posted July 7, 2009 at 8:32 am | Permalink

    Odd I’m sure I heard the BBC (radio’s 5 and 4) trumpeting the economic recovery this morning…

    • jean baker
      Posted July 7, 2009 at 12:58 pm | Permalink

      Increasingly referred to as Brown’s Broadcasting Corporation and, therefore, not be taken seriously.

  7. Javelin
    Posted July 7, 2009 at 9:08 am | Permalink

    Let me translate the management speak …

    BCC – We’ve been in a recession.
    Translation – The engines have cut out.

    BCC – The rate of decline had slowed down
    Translation – We’ve pulled out the nose dive.

    BCC – There was an improvement.
    Translation – We’re not going to crash land out of control.

    BCC – There has been an “increase in confidence.”
    Translation – The women have stopped screaming.

    BCC – We’re at a low compared with 2 years ago
    Translation – We are at 10,000 feet and gliding

    BCC – Business was very worried about Government Debt.
    Translation – Petrol is flowing out the tank fast

    BCC – Our members don’t want a 0.5% increase NI
    Tranlsation – Air Control has misdirected us and we may still crash

    BCC – We are talking to Gordon Brown.
    Translation – There’s nothing we can do and we’re all going to die.

    • Freddy
      Posted July 7, 2009 at 2:48 pm | Permalink

      “BCC – The rate of decline had slowed down”

      We had to go to the third derivative to find any good news …

  8. JonathanD
    Posted July 7, 2009 at 9:47 am | Permalink

    And a few hours later we see Industrial Output down 0.6% for May against forecasts of up 0.2% – http://news.bbc.co.uk/1/hi/business/8137424.stm

    Most of the good numbers seem to relate to confidence indicators whereas whenever actual hard numbers come out they are all negative. Confidence was only going up in anticipation of good results, if those results turn bad confidence will tank again.

    Labour have no idea how to grow an economy, except through accumulation of debt. They have no idea how to cut waste, improve productivity, add value in education and infrastructure and introduce better regulation and competition. All they can do is spend. The Tories are going to have to come in, spend 10 years making the difficult decisions and then when things have recovered be kicked out and see Labour come in and muck things up again.

  9. Rare Breed
    Posted July 7, 2009 at 12:19 pm | Permalink

    Have you seen the chart with all the re-negotiation dates for Mortgages in the US????

    It’s not much fun.

    Eye of the storm comes to mind!

  10. Posted July 7, 2009 at 1:12 pm | Permalink

    The CBI is part of the Propaganda Wing of The Labour Party and mouthpiece of Mandy. How can they deliver this drivel on the same day manufacturing figures are so woeful. Those figures mask; job losses, export losses, bankruptcies, tax revenue losses and benefit increases. The shocking fact released recently that our income tax receipts of £145 billion are £20 billion shy of the £165 billion of benefit payments is truly horrific. The answer? More printing presses dragooned into action. Utter madness.

    Reply: This was the BCC, not the CBI, and their survey was not the same as the BBC spin

  11. Johnny Norfolk
    Posted July 7, 2009 at 1:36 pm | Permalink

    No way is it over. It is just wishful thinking. It may not be as bad as it was but it is not over. It is over when unemployment starts to go down in numbers.

  12. Michael Lewis
    Posted July 7, 2009 at 3:16 pm | Permalink

    I think the recession is still alive and kicking both sides of the Atlantic at least. What I found interesting is news reports that the US commodities regulator is gearing up some legislation: position limits (wouldn’t suprise me if we follow suit). This is a laughable theory that ‘speculators’ are driving up commodities and therefore destabalising economies.

    Of course goverment printing presses are the real culprits. A bit like US gold controls in the great depression, laws like this achive nothing. Maybe China and sovereign wealth funds will use the opportunity to stockpile even more commodities. Given that Asia has the money, it makes no odds what some idiot in Washington or Whitehall dreams up, foreign buyers can carry on as normal.

    Recessions for most people don’t end when cooper bottoms out in price. They end where are plenty of jobs, that is getting worse.
    The UK and US could do us all a favour, stop priting money, don’t bail out fail institutions (protect depositors to a degree) and let this be a normal corrective recession instead of a depression. Both US and UK government seem intent on creating a depression, just so that they can be see to ‘do something good’. Telling people they should save some of their income, not borrow 6 times their salary would have been a start….

  13. Adrian Peirson
    Posted July 7, 2009 at 3:30 pm | Permalink

    They’re lowering us down into third world cesspit status gently so we don’t riot and string them all up.
    All totalitarian despots know that to have complete control over the masses you need to bring them to their knees through starvationand bankruptcy so they ( we ) are literally forced to depend on governement.
    Any attempt at self sufficiency is to be curtailed.

    I’d really like to know what went on in their childhoods, what ever it was it can’t have been very nice and their revenge, taken out on us is going to be equally nasty.

    • Adrian Peirson
      Posted July 7, 2009 at 3:33 pm | Permalink

      Every time they see us panic they will issue soothing words to say no it’s ok, it’s ok, look there is some recovery over ther, look.

      Once we’ve calmed down a bit they will continue lowering us into their Totalitarian Control and Dependancy Gulag.

  14. Jon
    Posted July 7, 2009 at 7:18 pm | Permalink

    It was an acedemic point when we entered recession though we knew it long before. It’s academic when officially we come out. Our recovery is hindered by debt and huge future liabilities.

    The banks are not really lending to each other and have growing debt problems, add to that another million unemployed and a high charge policy. Sustained recovery? Where’s Merlin.

    It’s estimated that 41% of our population will run out of all wealth to sustain them by the time they are 85. A mere 3 to 4 % GDP is savings, In Australia with cheaper living costs its 11%.

    We need to pay off something like 18% of entire World External debt AND save more AND prepare for an aged population in 10 years time.

    Forget about green shoots, it’s hard graft, more taxes, less public spending and more savings.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page