Deep or shallow?

On officially entering the recession which everybody knew had arrived already, UK economists are surveyed. If you don’t want to know the results, look away now”Not only do Q3’s GDP figures confirm that the UK has entered a recession, but the 0.5% drop (consensus 0.2%) is truly shocking.
“This figure is worse than we expectedŔ
Ӆany significant recovery currently seems unlikely before 2010, and even then growth is likely to be below trend.”
“For the services sector to shrink for the first time since 1992 marks a turning point in the economic fortunes of the UKŔ.
World wide… The sell-off in sterling and the sharp drop on European and Asian stockmarkets suggests that the troubles of rest of the world are only just beginning.”.
But it’s an ill wind.. “Go-Ahead is just the latest in a series of bus and train operators to report soaring demand in recent weeks, with ever more drivers choosing to leave their cars at home.”

  • Brian Walker,

    Interesting as such statistics are, they take no account of the particular impact of a recession in Northern Ireland. As has frequently been pointed out, a region with a small manufacturing base, but an enormous state-funded sector, like NI, is less likely to feel the pain.

    So while GDP can drop in the UK by up to 0.5%, in NI the drop is likely to be much smaller – unless Whitehall cuts its generous subsidy. And if recession means deflation (not a guarantee, of course) the net effect in NI could even be closer to zero, if prices of imports go down.

    For once, maybe, it’s better to be a ‘state on welfare’.

  • Scotsman

    Fair enough, except NI is surely very exposed to the slump in the property market? NI must surely already have by far the biggest proportion of homeowners in negative equity, following a late surge then droop in house prices.

    As Buffett, said, when the tide goes out, you can see who’s been swimming naked.

    If you work in the public sector, you’re fairly insulated, but all those in retail, construction, sandwich bars etc, are in trouble.

    Maybe unemployed migrants will go home to Poland etc, saving on dole and unemployment statistics, but that still affects overall demand in the economy, leading to a further reduction in the service sector.

    No-one is altogether safe!

  • No-one is altogether safe!

    Agreed. But a service sector workplace in a city highly dependent on public sector jobs is better placed than one in, say the City of London, or a manufacturing region. A sandwich bar in Adelaide Street is fairly insulated and is not going to suffer too badly, I suspect. Nor those near hospitals or Queens.

    The future victims in NI will include: the tourism sector (first expenditure to be chopped by most people), the industrial sector, and of course the building sector. As you pointed out, many of these employ migrants who are quite mobile. The farming sector, whose money comes largely from Brussels, is entirely safe.

    The enormous quango sector, and the myriad of ‘community’ jobs are highly dependent of Whitehall’s generosity. That’s one to watch!

  • George

    While Northern Ireland is definitely closer to recession-proof than other places because of the huge public sector, it will still feel the chill.

    With an estimated UK deficit of 64 billion I can’t see NI enjoying the same kind of largesse as in previous years.

    I assume there will be a freeze on new recruitment, cuts in overtime, rationalising of quangos etc.

    Don’t be surprised if local domestic rating raises its ugly head as the people of Northern Ireland are asked to stump up more to help plug the funding gaps.

  • Ann

    Deep is my prognosis. You cannot spend your way out of recession, this is one problem labour cannot solve by throwing money at it. With the falling pound this is about to get much worse. The economic migrants won’t all go home, and theres to be no cap on immigration due to economic circumstances, hell why bother

    I could go on but whats the point, a woman talking about the economy is as ludicrous as one talking about abortion.

    I think I’ll shut the f up, and take a hike.

    cheers.

  • Steve

    Tourism, never a big hitter in the economy of nIreland might not be hurt at all. If the mainlanders quit going abroad then a wee nip over to nIreland might be in vogue as it is both foreign and close by. And would still be a new place to go visit

    Though by jebus they need to become more tourist freindly

    Though I understand why people are inherantly suspicious of strangers.

  • Dewi

    What we call a leading indicator:

    Steel scrap prices fall 90%

  • Scotsman

    Good points, well made. I add this, for reference:

    http://www.irishtimes.com/newspaper/finance/2008/1024/1224715116603.html

    A leading Northern Ireland businessman warned yesterday that the collapse of Taggart could leave the region’s construction industry in “meltdown”. Brendan Cunnane, secretary of local lobbying organisation the Construction and Property Group (CPG), said the failure of Taggart meant the end of the road for many other building firms, and pointed out that the industry in the region was effectively in the banks’ hands.

    “I would say that over half the developers in Northern Ireland are waiting for a call,” he said.

    The CPG has been lobbying members of the Northern Ireland Assembly to support the industry, where it says jobs are being lost every week. Last month it called on members to put aside political differences for the sake of the local economy.

  • Greenflag

    George ;

    ‘While Northern Ireland is —-it will still feel the chill. ‘

    Nail on head . Save where we can . Choice between winter fuel for elderly people or ‘recession proof ‘ salaries for Assembly politicians . Let the people have a referendum on the choice 😉

    Ann

    ‘Deep is my prognosis.’

    ‘You cannot spend your way out of recession’

    You can’t but Governments have and right now Mr Bernanke is getting them dollar printing presses revved up for overtime in the coming months .

    What’s interesting about this worldwide ‘recession’is the ‘speed’ at which it has come about .While the underlying possibility has been there since 2001 and later with the sub prime mortgage build up -it took the Lehman’s fiasco to collapse the house of cards and send world stockmarkets into a tailspin and thus bring out into the open the ‘credit crunch ‘ and the negative equity mess .

    However the very ‘speed’ with which this mess has been created mainly due to the globalised interconnected economy may well be a factor in speeding up the recovery . What will be needed is a restoration of confidence in the USA followed by a turning of the corner in some of the larger industrialised economies such as Germany , France , Japan and the rest of the world will emerge faster than in previous recessions . Just an optimistic thought before the weekend :).

    A convincing victory for the Democrats in the USA will help to restore USA and other major economies ‘confidence’ and a new world financial ‘regulatory ‘ authority should help early in the new year IMO .

    So if you are out there considering bailing out I’d hold on till next summer at least :).

  • Ann

    Greenflag, I think one indicator of how deep this is getting is the fall of sterling, I read on one blog this evening that soon the pound could be on a par with the dollar.

  • Brian Walker

    I think we’re all agreed that for NI, we’re crying out for some decent forecasting and comment. This is a shocking omission and politicians, business, the banks and the economists – and the media – need to get a better handle on the post-Troubles era. The public are left without any leadership or intelligent debate on the impact of the recession. Hard answers aren’t available but on going analysis and qualitiative reporting should be.

    Without abusing the Executive too much, economic responsibility is split between them and London. London taxes, Belfast spends ( not all by any means, especially welfare and pensions). As you observe, NI is lucky to be so dependent on the public sector where immediate cuts are unlikely, unlike ROI. But the next spending round will be different, so look out for what the Chancellor has to say in the pre-Budget report in a few week’s time.

    Meanwhile you highly paid guys, let’s have some leadership and not just conferences full of vague talk of foreign direct investment (FDI) and vaulting ambition.

    Tell us more about the state of the construction industry, the impact of falling property prices, the state of bank lending to the SMEs, and the very small ones,the corner shop, the take-out,
    the other personal services and food precessing? What is happening to the former growth areas, the financial services, call centres?

  • Ann

    Brian in some ways no one could disagree, but lets examine what you say. The state of the construction industry. We’ve had reporting on that nationally, along with the impact of falling property prices and all the other things you mention. It’s been there about NI too. Only a week or two ago I read of a woman from poleglass about to lose her home, because she is unable to repay the instalments. This woman was reported to be a cancer sufferer, a young woman with children. That womans pain and situation is no different to the family reported on last nights’ bbc news who lived in England.

    We’ve had reports in the Irish news, and telegraph about the impact on small business. Infact there was reporting of a meeting of business people in the Stormont hotel, before breakfast not so long ago, while the MLA’s in stormont were absent for the day. We’ve had business leaders speak out on the policing and justice issue along with the economy. The impact of higher gas and electricity prices, the fact that they haven’t come down along with the price of oil, infact one guy from the UUP (I can’t recall exactly who) did call for it one morning on nolan. Last night the bbc looked at the victoria centre, which is about to become a white elephant, and other places around the province. So in one way it is being reported.

    The problem is what happens when those who report become part of the problem.

    Preston. Need I say more. The leaks given to him to get a story actually hit sterling hard, he talked sterling down, and that affected us all. Hence the investigation into himk. He is not an unbiased reporter, and look at the example of his reporting on George Osborne. He tried very hard to damage Osborne and the conservative party. That sort of reporting, when it becomes biased and partisian is detremential to all of us.

    I don’t think anyone can abuse the executive too much, they need more abuse. Who wants a poster campaign by SF against the RIR when the roof over their head is threatened? They all need shaming, and told by all and sundry, start doing the job you were elected to do, or face fury at the polls, which may not be all that far away.

  • Ann

    but an enormous state-funded sector, like NI, is less likely to feel the pain.

    I don’t think that is true either and in fact you go some way to destroying that argument yourself.

    But the next spending round will be different, so look out for what the Chancellor has to say in the pre-Budget report in a few week’s time