UK at 'serious risk' of recession

[Mary]

The UK is now "at serious risk" of recession as falling orders and rising costs tighten the squeeze on business, the British Chambers of Commerce has warned.

 

Services firms saw "alarming" declines in the second quarter of 2008, with those reporting lower orders outnumbering those recording rises for the first time since 1990, its survey of almost 5,000 firms found.

 

The BCC also warned the Government against hitting firms with more taxes in an effort to boost public revenues as the economic gloom grows.

 

Director-general David Frost said: "The temptation for the Government will be to raise business taxes because the exchequer is running out of money. This would be a catastrophe.

 

"To put more pressure on business would not only restrict growth and hit the consumer hard, it would further crush what our economy is based on - confidence."

 

Confidence among services firms - which account for almost three-quarters of the economy - is also at its lowest ebb since 1990, the survey added.

 

The BCC's economic adviser David Kern said the survey showed a "menacing deterioration" in UK prospects.

 

He added: "The outlook is grim, and we believe that the correction period is likely to be longer and nastier than anticipated."

 

Bet no one knew this yet did they?

[Paul Kennedy]

But every cloud has a silver lining it seems, this from today's Times:

 

"Begbies Traynor is another company that stands to benefit from the fallout of the credit crunch.

 

Its main area of trading is business insolvency. This may not make it popular among certain sections of the business community, but with many more companies being squeezed out of existence it does mean it has recently enjoyed a significant increase in its workload. "

 

and here is another interesting comment:

 

"While the middle classes may be tightening their belts, the super rich are not. They don?t tend to borrow, which means they have not been hit by rising interest rates, and they continue to splash out on luxury goods.

 

Ephrem Ravi, mining and steel analyst at Morgan Stanley, said: ?Anglo American reported recently that the price of diamonds has gone up overall year on year because the price of high-end diamonds has risen strongly. This has more than offset a slide in the price of lower-end stones.?

 

Meanwhile the Federation of the Swiss Watch Industry has released figures showing that, while the overall value of Swiss watch exports jumped 14.6%, the increase was driven by an almost 40% rise in take up of watches worth ?1,500 or more."

[observer]

So it begins: the ingredients for a social explosions are now coming together.

[observer]

As never before, a recession requires that the burden (in a fair and just society) falls on those with the broadest shoulders. But what are this Government doing: against a background of city spivs ecaping the country with ?millions in ill-gotten gains; unearned bonuses for industrial fat cats (latest being RailTrack execs); and MPs fiddling ?loads in expenses: who are they going to take it out of? = those on incapicity or unemployed!

[Legion]

Some muppet was on TV earlier saying that its not too bad because their hasnt been a spiraling demand for wage increases which would cause devistation to the economy..

 

in other words you working class trash give yourselves a pat on the back for helping the economy by suffering the ravages of inflation greater than your earnings increases, and us rich who pay your wages will sort it out eventualy...trust us!

[Gary]

Bet no one knew this yet did they?

 

Recession - what recession!

[Paul Kennedy]

The one that's hit the construction industry.

[Dizzy]

But every cloud has a silver lining it seems, this from today's Times:

 

"Begbies Traynor is another company that stands to benefit from the fallout of the credit crunch.

 

Its main area of trading is business insolvency. This may not make it popular among certain sections of the business community, but with many more companies being squeezed out of existence it does mean it has recently enjoyed a significant increase in its workload. "

 

Nice to see some think of business decline as being a 'silver lining' eh Vultures praying on the unfortunate stumblers if you ask me.

 

In the current economical climate it seems that small businesses, in particular, have to either have balls of steel to survive or maybe just a sense of complete and utter masochism

 

I'd personally always go for the balls of steel option if of course I had any

[observer]

As the song goes -"it's the rich who get the pleasure, and the poor who get the blame - it's the same the whole world over, ain't it all a ****** shame!"

[Geoffrey Settle]

Surely this recession is in the mind of the beholder.

 

I'm convinced that because everyone keeps harping on about it then it feeds on our insecurity.

 

Okay so it was kicked off by very bad banking practices and because of the interdependence and so called reliance that the various sectors have, so called experts just added fuel to the fire. Probably to satisfy their own interests and egos.

 

I'm sure that as soon as the markets adjust and everyone can once more earn a fast buck things will get back to 'normal' so don't fret.

[observer]

See you havn't lossed your complacency Geoff! There must be quite a few MPs in that Ivory Tower with you?!

[Geoffrey Settle]

No not complacent I'm feeling the pinch like the rest and tightening my belt but looking on the glum side is not the way forward.

 

We are in a different economic downturn and have to adjust accordingly to the changing circumstances - I know I tend to look on the positive side but that's just me - I don't like or accept the alternative.

[observer]

Time for a reality check Geoff: we've had over ten years of a speculation based boom; with both Gov and people living off credit, building up debts; with an artificially high housing inflation caused by easy credit led demand: now "the market" is finally correcting it'self and the bubble has burst - it's the hangover after the binge. Now, with most folk in difficulties, the question is, who will bear the brunt of this downturn? Not the rich it seems, they won't even notice any change; the very folk who tend to form Labour's support are going to be paying the bill.

[Paul Kennedy]

Recession is an economic term based upon two quarters of negative growth and by definition it takes six months to know that you are either in one or have had one.

 

I think the construction industry is in recession, now whether that sector is big enough in terms of our overall economy to push the UK in to recession as a whole, time will tell. The retail sector is now starting to report negative growth on a monthly basis, however the odd month of growth especially in the run up to Christmas would remove it from the two quarters definition.

 

My guess is that it will be a close run thing, and that overall we will go into recession as previously defined, for a short period of time, less than a year then followed by a longer period of very low or nil growth as people try and stabalise their personal finances.

 

The volatility of the energy market, with a sudden spike in prices....an Israeli attack on Iran for example, or further problems with the banking sector could easily hasten and deepen a recession.

[observer]

Think it's called the Economic Cycle?! Alas, what it achieves is to widen even further the wealth gap.

[Paul Kennedy]

Now, with most folk in difficulties, the question is, who will bear the brunt of this downturn? Not the rich it seems, they won't even notice any change

 

Not so sure, given the rich by definition own most assets, with the decline in property values and share prices, they will see a far greater fall in their wealth. Many so called rich people can be asset rich, i.e property, shares, businesses, cars, boats, planes, but relatively cash poor.

[observer]

The really rich don't need to borrow and thus are immune from the downturn. I believe they're investing in gold, art and rolex watches at the moment?! Assets (property), were overpriced in any case, but will never lose value in the long term. What I found amusing was Caroline Flint argueing for the 3 million new homes to be provided by these eco-towns - errm, but no mention of the fact that most folk now can't afford to buy a new home - but she still won't have it that cheap rented Council Housing is the answer.

[Paul Kennedy]

The Times:

 

The economy all but ground to a halt in the past three months, sparking warnings that over the present quarter it may shrink - for the first time since 1992 - taking it to the brink of recession.

 

Economists said that the odds on Britain sinking into recession rose sharply yesterday after official figures showed that economic growth dropped to a meagre 0.2 per cent in the second quarter (Q2), from an already lacklustre 0.3 per cent in the previous three months.

 

The sharp slowdown in growth was fuelled by a collapse in construction industry activity as the house price slump undercut homebuilding, and as the industrial sector sank into recessionary territory, with its output down for a second quarter in a row.

 

As I said in an earlier post, it now depends on what happens in other sectors which make up large parts of our economy as to whether we enter a recession, which actually and thankfully is quite difficult to do. I think I'm still sticking with my prediction of a short shallow recession, followed by a longer period of nil/ low growth. Big increases in fuel costs announced yesterday do not help.

[Paul Kennedy]

The really rich don't need to borrow and thus are immune from the downturn.

 

You would be surprised...it's called cashflow. They borrow to invest in money making opportunities. That being said and depending how you define rich, it is true to say that those with a few million tend not to borrow nor invest too much in money making opportunities but rather buy a reasonable home and some other things to make life pleasant and then live off the interest....and watch it and their income vary, occasionally shuffling their investments from one bank to another to get a better rate.

[observer]

The test of any future Governing Party will be how they share out the pain - todate, none of the main three have any intention of making the broadest shoulders bear the heaviest weght.