The phrase that dare not mention its name Published on 18 November, 2009 by Douglas Macdonald

You’ve heard it before. Some Government official says it, and a media storm ensues. Are there? Aren’t there? What is the Government’s official position? What do the Treasury and the Bank of England say? The phrase that causes all the consternation and that is all but banned in the Cabinet is "the green shoots of recovery". Some people were tempted to suggest that a recovery was underway a few months ago as the UK showed some GDP growth, but then last quarter it dipped again, neatly dousing the fragile lift in economic mood. We are always slow to recognise a recession (two consecutive quarters of GDP decline) but quick to assume it’s all over (any positive GDP movement is seen as an end to recession). If we are being consistent, we should wait to see two at least consecutive quarters of GDP growth before declaring the recession is over.

However, only the other day, Mervyn King, Governor of the Bank of England, declared that the economy was now recovering, but that it had only just started. It also seems that there is a glimmer of good news not just from politicians, but also from people on the ground. Last week, the CBI, together with Harvey Nash, a large UK recruitment firm, released the results of a survey of employers which said that although pay was being kept rigidly under control, there was some evidence of a relaxation in recruitment freezes and in other cost-control measures such as overtime restrictions. Although the survey results show that the number of firms operating a freeze dropped from 61% about 6 months ago to 37% now, there has been much less of a reduction in freezing in businesses where the freeze was company-wide, rather than in certain departments. This suggests to us that companies with better resources and a viable underlying business are able to open up a bit more now, whereas those businesses or sectors that have been worst affected by the recession (possibly house builders, banks etc) may be some way from reinvesting in talent to reignite their growth.

In the press release from Harvey Nash (which can be found at http://media.harveynash.com/uk/mediacentre/press_releases_group/tough_pay_restraint_ahead_but.htm), John Cridland, CBI Deputy Director-General, says "The worst of the recession may be over but firms remain ultra cautious about increasing pay. Market conditions continue to be very tough and growth in 2010 will be feeble, so pay is going to be squeezed for some time to come." He balances this by saying that "The new spirit of cooperation between employers and workers will be a real fillip for UK competitiveness as we return to growth, delivering more flexible working and a welcome improvement in the work-life balance."

At Dekasu, we believe the UK economy is, on balance, returning to growth, but it will take longer than many people are hoping. This is largely due, in our opinion, to the head-on collision in the UK of the global credit crisis and unsustainable consumer debt. The only other large economy that has faced similar challenges is the US, which is showing signs of turning around more quickly than the UK, we believe, because of a huge cultural and political upheaval with the election of Barack Obama as President.

What this implies for all of us is the need to get ready to embrace the opportunities as they open up. We need to be prepared for new challenges. Take the opportunity we have at the moment to develop new skills, identify what our next career move should be, and capture the valuable experiences we have gained during the recession. When economic growth returns in full flow, those that are prepared will most likely be the biggest gainers.

© Dekasu 2009