It’s the Economy Stupid! - Part 2
The whole world seems to think that their job is the next to go and maybe it will, but people need to keep in mind that a company shedding 25% of its staff would be big news indeed, however 75% are still in a job.
It’s also worth noting that the headlines in the Daily Mail, what I refer to as the ‘Daily Outrage’ that xyz bank is shedding half its staff does hide the fact that a good number of those will work for business unit abc which is being spun off or sold to another bank, so strictly speaking the Daily Outrage is correct the payroll will shrink by 50% but not all those 50% will be walking away clutching a redundancy cheque and a P45.
In the ‘Great Depression’ between 1929 and 1935 things were about as bad as they could get but only 10% of business folded, when the economy recovered the 90% of businesses that survived doubtless divved up the trade from the failed 10% between them. In a similar vein Matalan, Primark and Game are seeing increased trade from the demise of dear old Woolies.
This period of non stop bad economic news will, like all things pass and we’ll move on to better times, perhaps we’ll all be better people for the experience. But everybody should get this into perspective it’s not the end of the world or even the beginning of the end of the world. Things have been far worse than this; 1974 Britain had a government enforced 3 day working week. Power cuts and shortage of commodities particularly sugar I seem to remember were the order of the day. The recession of the early 80’s when I was starting my working life wasn’t a particularly rosy time either, that soon gave way to the boom years of the mid 80’s and the rise of the yuppie. Early 90’s another biggie which gave way to the longest continuous period of economic expansion Britain had ever seen, you remember that – the one that has just come to an end.
In a world of instant this and instant that, people’s expectation of action and effect has become distorted; an interest rate cut on Thursday lunchtime will not lead to the end of the recession in the following month. Petrol prices have plummeted in the past 3 months, mortgage costs will be following them down, remember many people have mortgages that the payment level is set on an annual basis. These will start to fall typically from the February payment. Gas and Electricity prices will start to come down in the spring.
All these factors will lead to people having more cash in their pockets. However, what they need is the confidence to spend it rather save it. Mervyn King and Alastair Darling cannot give people confidence it’s something that will come from within!
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