UK in recession is it really that bad?

So the UK is now technically and officially in a recession, this is not news to thousands of people in the UK who already felt that this was happening. But how bad is it really?

The economy fell by 1.5% in the last 3 months however this recession is not so far as deep or sharp as it has been within living memory.

At the end of 1980 the UK’s recession fell by 4.1% in the last quarter of the year, this is nearly 3 times as sharp as the recession now. (This was a deliberate recession caused by Thatcherism and Monetarist policy)

So why do we think that it is currently bad?

Well for some it isn’t bad, there are sectors of the economy that are still doing very well, the supermarkets for example who are still going ahead with expansion.

The businesses that are doing badly are the businesses that are the the areas of discretionary spending. An example of this is the new car market where sales are perhaps down 50% on previous years figures. Here people and businesses are just delaying their purchases, not buying a car now but perhaps doing it next year when they know how bad things are going to be for them.

So the recession is in part a self fulfilling prophecy. But there is a saying if someone has to eat someone has to sell, so sooner or later, car dealers will start to sell vehicles again.

The real reason why it seems so bad is the number of redundancies and closures of larger businesses. However if you look at the UK statistics, the UK had continued growth for the best part of 15 years. So what is happening? These larger businesses HAD geared up for this continued growth and now they are simply adjusting their plans. The ones that ARE in difficulty are the ones that previously financed their growth via debt and are not lean.

What is happening therefore is that these businesses are adjusting their activities so that they will survive.

Statistics also show that recent recessions have only lasted 3 or so quarters, perhaps the next 3 months WILL show the worst results and decline, reflecting what is happening now, however I fully expect a stabilisation in the second half of the year. ( I am not Chancellor Darling!)

So if your business can survive the next 6 months you will be in a position to take advantage of these delayed purchases.

This entry was posted on 23/01/2009 at 01:17 pm and is filed under The Economy, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.