Recession – A business survival guide (Part 5: The economy – realism please)

Reviewing many business plans and corporate statements over the last eight weeks or so brings me to one conclusion.  Business leaders may be adopting a far too optimistic view of the direction of the global economy when setting out their business plans for 2009 and beyond.

The general consensus is one that points to a short correction – a period of possibly 12 months of very slow or zero growth followed by an upturn.  Possibly this is what business leaders and managers want to see and believe in but that does not necessarily form a firm foundation for business planning.

The generally accepted view apparently in the City of London is that we will see growth of around 1% in GDP next year here in the UK.  However, Capital Economics is one of the first to break ranks and forecast a decline in GDP of 0.2% in 2009.  This consultancy is also reported as saying “There is a growing danger that the downturn will be exacerbated by by a contraction in bank lending to households and companies” and “… it is becoming clear that the possibility of another full-blown slump like that in the early 1990s cannot be dismissed out of hand”.  Other observers are also taking the view that we may have not factored in the possibility of a deeper recession.

So please do not set you plan solely on a period of modest economic growth followed by, in 12 months, a pleasant upturn.  Do consider now what you will do if we are faced with a longer period, say 24 months, of zero or negative economic growth.

Information Sources:
Duncan, G. (2008) Deepening recession may push Britain to first full-year fall in GDP since 1991. The Times. August 28.
Elliott, E. (2008) Economists forecast year of recession in 2009. The Guardian. August 28


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