Breakfast with Bankers

We went off to a breakfast with Clydesdale Bank in Richmond last week to hear the views of Tom Vosa, who is the National Australia Banking (NAB) Group's Head of Market Economics, Europe. As NAB is one of the few remaining AA rated banks in the world, clearly they have been doing some things right, and it was a good opportunity to hear what one of their senior economists had to say, as well as renew acquaintances with our Clydesdale contacts, and meet other local business people.

Tom has a refreshing approach to all matters economic, and it is testimony to his communication skills that not only did a 72 slide presentation packed with detailed economic statistics and analysis seem to fly by, but we were all able to leave the room fully understanding what his views were for the economy in 2010 and beyond, and how they might affect our businesses and those of our clients.

In essence he believed that the recovery in 2010 would be patchy and would most likely resemble a W in shape than any of the other letters or symbols that have bandied about. While each quarter would show some growth, it would not feel like a recovery. There was still a significant wholesale funding gap, which along with the regulatory tightening that was taking place, would continue to limit the availability of finance. Unemployment and earnings would hold back any real increase in consumer spending, and the need to close the gap in the public sector deficit, through spending cuts and tax increases, would also be a dampener on recovery. Nonetheless, there would be a recovery in 2010, mainly led by the public sector activities currently in force, with the real economy taking up the slack in 2011.

In short the deepest recession since the 1930s, would be followed by the weakest of recoveries. London itself would remain the engine room for national recovery, not least because of the Olympics in 2012, although as with most Olympic cities, there will be a negative reaction in the following year.

Clydesdale very kindly makes available much of its research, which you can look at by clicking here . However, the presentation reinforced our view that businesses will have to create their own recovery stories rather than wait for any pick up in the economy.

What do you mean you’ve never had it so bad?

Just come back from an excellent breakfast presentation at Clydesdale Bank given by NAB (their parent company) head of markets strategy Nick Parsons, a man well known to Sky News viewers.

Nick is someone who seems to have developed a habit of getting it right when it comes to economic forecasting, so when he says that 2009 is going to be horrible and that recovery won’t start until 2010 you tend to take a bit of notice. He sees the UK economy declining by about 2.6% in 2009, with growth returning in 2010 at about 1.4%. His long term view is that the normal annual growth trend will settle at about 2%. Not brilliant but still enough encouragement for businesses, while still remaining cautious, to start focusing on how to get the best of the upturn when it arrives.

By the way, if you think it is bad for us over borrowed consumption obsessed Brits, have a glance at the poor Germans and Japanese, those nations that actually still make things (as opposed to money) and still put their euros and yen aside for a rainy day. Their export driven economies have fallen off a cliff over the past few months and their pain in 2009 is likely to be greater than that of the UK. Maybe there is a moral there somewhere, although it gets confused when you look at the two economies that are going to expand more that 5% in 2009, China and India. Learning to export may still have its advantages so UK companies should take note and start looking at how they can.

Antony Doggwiler