Thursday, 18 June 2009

Being smug

(By Richard Holway 9.00am 18th June 09) I could be accused of being smug when I remind readers of the forecasts I get right (and, conveniently overlook the ones that I don’t)

This week I’ve witnessed two other examples of the genre – but at opposite ends of the spectrum. On Tuesday I attended an excellent dinner at Brooks organised by the Curzon Partnership. Jon Moulton (Alchemy) addressed a very small gathering of the top BPO CEOs. As it was under Chatham House rules, I can’t quote directly. But Jon pointed out the dire warnings he has most publicly made about the UK economy over the last year or so, have all come to pass. But Jon’s view is that the future is equally, if not more, bleak. ‘L-shaped’ (As in “When will the downturn end? “L if I know!”)

Last night a newly empowered Alistair Darling at the Mansion House pointed out that his much ridiculed prediction of a return to growth by end 2009 is now supported by many observers and perhaps he was not the ‘wide-eyed optimist’ that many painted him.

With such contrasting views, it makes life for a non-economist like me difficult. On the other hand, as they say, ‘if you put all the economists in the world in a line, they wouldn’t reach a conclusion’.

So maybe Holway’s gut-feelings are as valid as any.

I feel a change of mood. No longer do we fear that our financial institutions are at the point of meltdown. Just six months ago, the tunnel seemed to have no end. The only debate now is When? End this year? Mid 2010?

Business confidence is returning. It’s confidence, not cash, that drives the investment decisions. It’s investment decisions that ultimately drive the SITS sector that we cover. Business investment decisions taken in H2 2009 will drive the SITS up-tick we forecast by H2 2010.

However, for ‘the man in the street’, life will get very much worse over the next year before they see any improvement. Unemployment will rise – in particular youth unemployment. I fear social unrest as a result.

If it happens as I have consistently predicted, you will have to put up with my smugness. If it happens faster, quite honestly I’ll be delighted to eat a bit of humble pie.

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