Recovery and a blast from the past

Oct 13 2009 by Neil Warwick , The Journal

TO begin with, the recovery in the economy is almost universally regarded as fragile. It is too early to predict how recent personal tax increases might affect consumer demand but some particularly cautious economists take the view that even this development could be enough to kill the recovery.

If a quiz was run to see where this quotation came from it could be attributed to any number of recent surveys and predictions about the economy. What would be more interesting would be a quiz as to when this comment was made.

The answer is that this is a direct quotation from the Newsco North East Corporate Finance Directory of 1994/1995. With little or no alteration the words could apply to 2009/2010.

In 1994/1995 we were coming out of the recession of the early 1990s, we had just not recognised that it was the start of the recovery. The article in the Newsco Directory makes reference to a lack of venture capital market, lack of lending in the property sector and even states “the banks are back”. There is also reference in other articles in the directory to the exuberance of the late 1980s followed by the nervousness of the early 1990s and then a return to a more healthy and balanced economy.

Last week, HSBC ran a question and answer session on international trade at Ramside Hall, where the comment was made by their economist that recessions happen every 15 years or so. Oddly the Newsco articles were written 15 years ago.

Whether parallels with the start of the recovery in 1995 can be drawn with the current recession remains to be seen. However, parallels can be drawn in terms of the causes for the recession and the behaviours during and towards the end of a recession.

Saying that the markets of 2006/2007 were exuberant is an understatement. In 2009 there have been a few signs of recovery but it is true to say that the private equity market has been cautious and that while the banks are open for business again, prudence is the by-word on lending at present, particularly in the property sector.

In some ways it is comforting to see that some of the key traits of earlier recessions are present in the current recession. It is incredibly disappointing that we do not seem to learn from previous recessions and the mistakes made. What would be even more disappointing would be if someone was writing an article in 2024 drawing parallels to the recession of 2007/2008.

For how Dickinson Dees can help SMEs, contact Neil Warwick on 0191 279 9375 or at neil.warwick@dickinson-dees.com