Finance
Although there are several tentative signs of a moderation in the rate of decline in UK output, with very modest growth expected in 2010, companies will continue to face a hard grind in 2009. Locally, the South East is enduring the recession better than other areas of the country. Whilst no region is immune, and there is little escaping the fact that the services industry has been badly affected, the South East has seen some of the smallest rises in unemployment rates over the past year. We are also starting to see a slight increase in activity. Consumer and business confidence is becoming less negative and there is indication of a modest upturn in the services sector and less steep declines in manufacturing and construction. The housing market has also shown some tentative signs of stabilising, albeit at a low level.
These signs that the economy is beginning to stabilise coupled with more liquidity in the market means that there is cautious optimism for the second half of the year. Contrary to some reports, debt finance is available but you need to know where to look. Although credit availability remains limited, credit conditions have improved to some degree and there are indications that certain banks are beginning to lend to new borrowers. As the UK emerges from the global economic downturn there is likely to be a re-adjustment of the economic and business landscape. Some industries will fare better and recover sooner than others and the shape of eventual recovery may be quite different from the business environment we’ve witnessed in recent years.
In the PwC Upturn index, which charts the sectors that will be first to benefit from the recovery, the sectors identified as front runners are significant to the South East, which is encouraging. Financial indicators suggest that business services (including real estate management, legal, computing, accountancy and advertising businesses) are likely to be among the first to benefit, followed closely by telecoms, post and engineering sectors. The cyclical nature and long term - and relatively strong - growth of business services puts the sector in a strong position for accelerated growth when UK economic recovery begins. It has the highest price earnings ratio out of the 15 sectors analysed, suggesting that investors are relatively confident about this industry’s potential for a fast recovery.
However, the extent of good news shouldn’t be exaggerated and we are still facing one of the worst recessions in recent history. Much will depend on the ability of both monetary and fiscal policies to lift growth, as well as on how the situation evolves in the economies of the UK’s main trading partners. But the reality is that the climate will improve and there are encouraging indicators for what the local economic landscape will look like when recovery does come. The types of businesses that will be best placed to take advantage of the upturn will be those that have continued to invest in the right areas and taken steps to effectively plan through the recession.
Source: Alistair Rose is South East Regional Chairman at PricewaterhouseCoopers
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These signs that the economy is beginning to stabilise coupled with more liquidity in the market means that there is cautious optimism for the second half of the year. Contrary to some reports, debt finance is available but you need to know where to look. Although credit availability remains limited, credit conditions have improved to some degree and there are indications that certain banks are beginning to lend to new borrowers. As the UK emerges from the global economic downturn there is likely to be a re-adjustment of the economic and business landscape. Some industries will fare better and recover sooner than others and the shape of eventual recovery may be quite different from the business environment we’ve witnessed in recent years.
In the PwC Upturn index, which charts the sectors that will be first to benefit from the recovery, the sectors identified as front runners are significant to the South East, which is encouraging. Financial indicators suggest that business services (including real estate management, legal, computing, accountancy and advertising businesses) are likely to be among the first to benefit, followed closely by telecoms, post and engineering sectors. The cyclical nature and long term - and relatively strong - growth of business services puts the sector in a strong position for accelerated growth when UK economic recovery begins. It has the highest price earnings ratio out of the 15 sectors analysed, suggesting that investors are relatively confident about this industry’s potential for a fast recovery.
However, the extent of good news shouldn’t be exaggerated and we are still facing one of the worst recessions in recent history. Much will depend on the ability of both monetary and fiscal policies to lift growth, as well as on how the situation evolves in the economies of the UK’s main trading partners. But the reality is that the climate will improve and there are encouraging indicators for what the local economic landscape will look like when recovery does come. The types of businesses that will be best placed to take advantage of the upturn will be those that have continued to invest in the right areas and taken steps to effectively plan through the recession.
Source: Alistair Rose is South East Regional Chairman at PricewaterhouseCoopers
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