Business Barometer reveals recession fatigue and a clear call for national economic reform

For the first time in many years this quarter's Western Morning News Business Barometer, compiled and analysed by the Business Team at Michelmores, indicates that the brakes may have been applied to the traditional Westcountry optimism the survey usually reveals, says Stephen Morse, Partner and Head of Business at Michelmores

The percentage of respondents who are optimistic about trading conditions over the next twelve months fell by 12% from the September survey, although more than 50% of respondents are still optimistic.

It is clear that respondents are concerned about the state of the economy and the measures the Government has taken to improve matters. The responses reflect a flat, inert economy with a distinct feeling that respondents are showing signs of recession fatigue and a clear disillusionment with politics.

Talk of green shoots is, at the moment, just that - talk. Recovery in the UK remains sluggish and lags behind other countries. The weak pound will eventually help UK exporters but the banking crisis is still taking its toll.

In this latest Business Barometer common themes are a lack of demand and pressure on prices, both of which are adversely affecting businesses in the South West. This applies in both the business to business and consumer markets, and right across the service and manufacturing sectors.

It is interesting that the focus of individual comments has moved from specific issues, such as the price of fuel, to more fundamental economic drivers, such as the lack of demand resulting from the global recession and the Government response to it.

The Barometer shows considerable support for some of the measures the Government has put in place to help private sector businesses, including the extension of the Enterprise Finance Guarantee Scheme, the £200m boost to the Strategic Investment Fund to support hi-tech projects, the extension of the Time To Pay scheme, and the deferring of corporate tax increases for smaller companies, but these are accompanied by a distinct feeling that these measures are simply not enough and do not address the bigger picture.

In addition there is anecdotal evidence in the market place that HM Revenue & Customs are not granting Time to Pay as readily as they were.

Uppermost in priorities is cutting public sector spending and the survey revealed a unique 100% accord for cutting the public sector pay bill.

According to The Office for National Statistics, during the ten years from 1997 private sector productivity increased by 28% whilst over the same period public sector productivity fell by 3.4% - there is a perception in the private sector that it has been shouldering the burden.

Another feature of the Business Barometer is the feeling that the Government has done nothing to reduce the burden of bureaucracy and red tape - this is coming thorugh loud and clear in the responses.

The Government's drastic intervention in the working of the economy over the past couple of years may have been necessary at the time but has left serious issues to be addressed. How does the country now reduce debt without prejudicing new sources of growth in the face of a changing balance of global economic power?

It is clear from the Barometer that questions of this magnitude are no longer the preserve of politicians, the intellectual elite and the Sunday heavyweight papers; they are being discussed in the boardrooms and workplaces of businesses who would very much like to see some economic certainty going forward so they can plan to survive and thrive. 

There does seem to be a clamour for change which goes far beyond financial self-interest. Businesses are looking for changes that are responsible and effective in bringing about the national economic reform that is required in the context of volatile global economic conditions.

We will all have to wait until the General Election to see who has the mandate to tackle this and, until then, uncertainty and market tension will remain. Whoever sits in No.10 after May will need fundamentally to change the way we think about the economy and it will be no mean feat to meet all the challenges this presents.

For more information on the Business Barometer, and to take part in the next survey, please contact Sarah Coleman at sarah.coleman@michelmores.com.