One size fits all approach is no answer

Dec 2 2008 by Neil Warwick, The Journal

I WAS recently out for dinner with a couple of friends and inevitably the conversation led on to a discussion about the effect the recession could have on the economy. The representatives from the private and public sector in the North East were far more optimistic than those from London about the chance of recovery within the North East marketplace and could see signs of the recovery starting in early 2009 in certain sectors.

The basic conclusion everybody came to was that, yes there is a global recession and yes this could be damaging to all businesses of every shape and size.

However, a “one size fits all” approach to how the recession will affect each marketplace or each geographic location does not work. Inevitably there will be some industry sectors which are counter-cyclical and could, hopefully, do reasonably well in hard times. The point that was being made by the North East representatives at dinner is that the North East is different to London. We do not necessarily reach the highs that the London markets reach, so conversely it would seem logical that we might not reach the lows or, if we do reach the lows, our recovery rate may be slightly quicker.

Later that week I received a detailed, well thought out email from NatWest announcing it was important to let clients know they were still open for business. This mirrors comments made by representatives of Alliance and Leicester, Lloyds and Barclays.

What is certain is that banks in this region naturally have to be more cautious. It would be foolhardy for them to take anything less than a prudent view about future lending.

However, the message does seem to be coming out that the banks in this region are still happy to and able to invest in good business propositions.

Again, it is probably correct to look at the macro economy and say that it is vital that banks start lending to each other in order to stimulate growth.

But provided that banks are still open for business in the North East, there is no reason why North East businesses should not take advantage of this and try to grow and trade out of the recessionary market.

Neil Warwick is a partner and head of the Kudos department at Dickinson Dees LLP