The UK is now back in recession it is official

[sten_super]

Let's say that every UK company slashed their prices by 50% then we would have massive growth.

Er, what? You do realise that the 'growth' talked about in the original article is GDP? How do you figure that slashing prices by 50% would lead to rapid growth in GDP?

For what it's worth, I still believe that the economy will probably avoid a technical recession (i.e. there will be growth in 2012Q1). Output will then fall in Q2 thanks to the extra bank holiday. The major problem we have at the moment is that, at a time of national austerity, our major trading partners (in the Eurozone) are also struggling, so there's insufficient external demand to pick up any of the slack from the public sector.

The US case is interesting, because while output growth has resumed pretty strongly there employment is still growing slowly - there is insufficient demand for low-productivity goods/services (i.e. those that require a relatively high amount of labour) and the vast majority of the output growth is in low-employment sectors.

 

[Barnham Seagull]

I'm with you on this one Simster. A country without growth is screwed. It is growth that will get us out of the poo ultimately.

100% Agree

The huge cuts which came almost overnight destroyed many a company and there are many more just waiting to fall.

The Conservatives got this wrong big time, they should have stimulated the economy not kicked it in the bollocks.

 

[Barnham Seagull]

This blind focus on growth is baloney.

Let's say that every UK company slashed their prices by 50% then we would have massive growth.

But virtually none of the companies would make a profit and without profit a company collapses.

What help is growth then?

Companies all over the world make the same mistake, they chase after growth when what they should be doing is to chase after profits.

There are only three things you can do to increase profits - sell more stuff, cut your costs or get better prices.

And the most effective of these three is to get better prices, certainly NOT to sell more.

Up to a couple of years ago I ran seminars on this very subject for big companies all over the world.

Cut costs = Buy componenmts from China or outsource production to China = sod all jobs in the UK

 

[Wozza]

US absolutely ADORES these doom-laden threads. I have the horrible mental image of him playing with himself whilst creating the opening post.

Yeah, desperately trying to stimulate growth.

 

[Guy Fawkes]

So 0.4% negative growth over the last 12 months. The slash and burn austerity measures have not worked and will not much work as much as it grieves me to agree with Ed Balls on this. Obama did the opposite and invested heavily when the shit hit the fan and they are looking at a 2.9% growth in the USA in the first quarter. More growth in one quarter than the UK has had in the last 5 years. Discuss.

Most of the US trade isn't with Europe whereas the UK relies more heavily on European exports. The disasters in the Euro zone, in particular the Greece crisis would therefore have inflicted far more damage to our economy than that of the US, which can go a long way to explain why the US economy has grown and ours has shrunk.

The crisis in Greece also affected several other European countries like France (downgrading of the rates at which they can borrow money due to their country's credit rating being cut whereas ours has remained the same (for now)) and coupled with several European countries struggling to repay its debts like Italy, Spain, Ireland and so on its hardly a surprise our exporting ability has fallen and therefore our economy hasn't recovered as well due to market conditions.

It could be argued that it may have been far worse if we hadn't made these cuts and instead invested like the US did, it could well be that those cuts have actually lessened the damage to our economy.

 

[User removed 4]

I've no idea. But clearly someone thinks so. Why would you lend $1.2 trillion dollars if you didn't think there was a GOOD chance of getting it back?

They've borrowed most of it off the Chinese, who have a vested interest in the US not defaulting.

 

[Basil Fawlty]

We're not officially in Recession yet. They're waiting for the results for this Quarter on the 25th April. Then that will tell us, if we're in a double dip recession or not.

 

[brakespear]

US absolutely ADORES these doom-laden threads. I have the horrible mental image of him playing with himself whilst creating the opening post.

I do wish you hadn't posted that

Yeah, desperately trying to stimulate growth.

Oh OK then.

 

[Albion Rob]

Er, what? You do realise that the 'growth' talked about in the original article is GDP? How do you figure that slashing prices by 50% would lead to rapid growth in GDP?

For what it's worth, I still believe that the economy will probably avoid a technical recession (i.e. there will be growth in 2012Q1). Output will then fall in Q2 thanks to the extra bank holiday. The major problem we have at the moment is that, at a time of national austerity, our major trading partners (in the Eurozone) are also struggling, so there's insufficient external demand to pick up any of the slack from the public sector.

The US case is interesting, because while output growth has resumed pretty strongly there employment is still growing slowly - there is insufficient demand for low-productivity goods/services (i.e. those that require a relatively high amount of labour) and the vast majority of the output growth is in low-employment sectors.

I don't know this for sure but would one way of narrowly avoiding a contraction in Q1 be to get everybody panic buying something that is taxed quite heavily in the final few days of the quarter? If so, I'd imagine what we'll see in the next few hours is ministers taking to the airwaves and telling people not to panic but to 'ssya topped up' because, of course, people would not panic buy in that situation, would they?

Presumably come late June we'll be informed of a looming shortage of cigarettes.

Or am I being too paranoid/giving the Govt too much Machiavellian credit?

 

[Cadiz Seagull]

That is a critical point in this argument i think. If you have the time or the inclination look at the financial reports of the some of the major retailers that have gone under in recent times - and discount the ones that were financially crippled before the recession.

Blacks Leisure is a case in point - from 2003-07 their revenue tripled - or something very close to that. They were driving increased footfall, shifting more items than in previous financial years - but the key was that they were fundamentally selling £10 notes for £5.

Top line revenue up - profitability through the floor with increasing coast base. It's inevitable that the end comes in that type of business model.

Ain't that the truth.

I've seen it in so many companies. In order to make more money we need to sell more, so let's take every piece of business we can, regardless of whether we make any money out of it.

They chase after volume and take their eye off the costs and, critically, the prices.

Result? They end up working harder than before but make less money.

Most companies would be more profitable with a few less sales, a few less customers and yes, a few less people.

 

[Uncle Spielberg]

Yeah, desperately trying to stimulate growth.

I will give you that one Wozza, it made me laugh

 

[Pavilionaire]

Even accountants are now investing heavily in software and technology to outsource basic auditing and filing / tagging. I guess one can either fight the irresistable winds of change or find a new way to work your market or find a new one.

Spot on DT. I've just invested c. £3,500 in a Document Management System with portal that will enable our practice to send out docs securely and electronically. No paper required, 6 filing cabinets to disappear, a desk with productive employee in the space vacated.

I laughed at the news re the postage increases this week. We would have been looking at another £400 - £500 per year, but because we're going paperless that's a cost I won't have to bear.

 

[beorhthelm]

though policy has not done anything to encourage growth and the economy is clearly flat at best, can we please wait until the actual numbers are released before we start saying what is and isnt "official"? most economist ive read and their analysis of underlying indicators reckon it should be up ok Q1 and Q2, theres plenty of money and confidence in the business sector, just a lack of confidence in the buying public. I blame the politicians, all of them, who have talked us in to fearing a far worse outlook than we would have.

 

[Guy Fawkes]

I've no idea. But clearly someone thinks so. Why would you lend $1.2 trillion dollars if you didn't think there was a GOOD chance of getting it back?

Why did so many Governments and banks lend to Greece a few months ago before they had to cut a new deal and wipe out some of those debts (basically putting them onto the balance sheets of other Governments and banks)

They knew that it was likely to be a bad investment in terms of recovering their money and getting a profit from the deals, so why did so many take the risk?

Because it was needed to prevent further economic problems elsewhere, the same as in the US. Had China not financed their extra debt, then the US would not have been able to pay large numbers of their public workers or pay pensions, they would have had to cut spending on public works to the bone in order to save money to use to pay wages, etc

If that happened, then their ecomony would freefall and countries like China would suddenly find that demand for their exports would crash too, therefore they have a vested interest in ensuring the US could still import goods from China, making money for their economy and fuelling their continued growth or just to sustain what they already have.

 

[Cadiz Seagull]

Cut costs = Buy componenmts from China or outsource production to China = sod all jobs in the UK

Not necessarilly. There are plenty of other ways that companies can cut costs rather than outsourcing. If they do it correctly they will be more profitable, enabling them to create more jobs in UK.

Plenty of companies who jumped on the outsourcing bandwagon are regretting it, it doesn't work for all companies.

 

[Kuipers Supporters Club]

If you think BORROWING an additional $1.2 trillion has 'turned the USA around' you have a strange and rather short term view of economics.

So very much this.

 

[Uncle Spielberg]

The Tories with Cameron and Osborne come out with all the right soundbites but its all just bullshit really. Osborne has royally f***ed up. He has killed the patient off and we are now looking at a Japan type scenario with zero growth for a decade. There had to be a halfway house rather than the shock and awe, slash and burn, you bastards will all suffer policies. I am very sad to say they are a crushing dissapointment as I brought their shit and even sorrier to say Ed Balls is being proved right.

 

[Pavilionaire]

January is always a shit month. The Sales have now shifted to December so people go mad in the last week of that month instead of January. Therefore, it's no surprise the December sales figures weren't as bad as predicted, and it's no surprise Q1 is worse than predicted.

The self-employed also have to pay the bulk of their self-assessment tax in Jan, plus credit card bills with Xmas expenditure. Then people feel shit in February because they've got no cash and they've bought f*** all.

Trying to keep the politics out of it I can't see that the Coalition could do anything that different to try and tackle the situation, OTHER THAN getting a bit more creative on the removal of red tape and fast tracking some tax simplification (particularly with National Insurance).

At a time when they are supposed to be taking people out of tax and making life easier I read this wek that an extra 500,000 people are likely to be brought INTO Self-Assessment because of the way in which tax will be recovered on those whose salaries exceed £50K and will have to repay some / all of the child benefit money. Surely this could have been avoided?

 

[Pot noodles for everyone]

The Tories with Cameron and Osborne come out with all the right soundbites but its all just bullshit really. Osborne has royally f***ed up. He has killed the patient off and we are now looking at a Japan type scenario with zero growth for a decade. There had to be a halfway house rather than the shock and awe, slash and burn, you bastards will all suffer policies. I am very sad to say they are a crushing dissapointment as I brought their shit and even sorrier to say Ed Balls is being proved right.

And this is you having a sensible debate, is it?

 

[Beach Hut]

Here we go again