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September 2009
 Nick Saalfeld founded MoneyWorld (now MoneyExtra), the UK’s first personal finance website; and was Business Editor for AOL for three years. He now runs a media consultancy, Wells Park Communications, and is a director of two further companies. He blogs at www.truebusiness.co.uk
What will the recovery look like?
Whilst I have written about business issues for over 15 years, I have always tried to follow my own advice – which is why I run my own businesses, too. So, when the team at Interregna asked me to produce my first article, I thought it might be interesting to really go out on a limb – and make some real predictions about the end of the recession. Feel free to assess my performance each quarter!
My first piece of advice is to separate long-term judgement from short-term opinion. There’s no shortage of opinion: the media have to sell newspapers and politicians have to sell policies; so both have a vested interest in looking no further than the near horizon.
We know what happens to short-termist speculators on the stockmarket: they’re called daytraders, and very few of them are successful. The smart money seeks to normalize the spikes and spot the underlying trends.
I do believe that the spike of the recession is over – the “V” of collapse, if you like. However, I think that the true shape of recession and recovery is a “U”- much longer lasting, and requiring fundamental change of the sort that is far wider ranging than the curbing of a banker’s bonus here and a trillion pound deficit there.
As I write, the FTSE has topped 5000 for the first time in almost a year; but a very small number of companies are responsible for this event. Mobile Telco Orange has announced its takeover of T-Mobile; and this has given the markets some optimism that further M&A activity is in the pipeline. Consumers have reined in borrowing in line with expectations, which also gives the markets confidence. But, again, these are short-term viewpoints.
There will always be positive case studies like these; but what of the fundamentals? Lending is still problematic (never mind the money – UK plc desperately needs a banking system with managers who understand small businesses and can therefore lend prudently). Manufacturing is still decimated; and even a weakening pound isn’t stimulating enough long-term growth to balance our service-weighted economy.
The effects of unemployment, too, need another two quarters in my opinion to fully unveil their misery.
Despite the above points, I’m not a pessimist. But I am a pragmatist; and I think that green shoots can be found on any scrapheap if you look hard enough. The deep-rooted oaks of a solid recovery take longer to sprout, and demand firmer foundations.
What might those foundations be like? I believe that the fluid structure of today’s employment market and corporate structures have a huge role to play. In my blog, some seven months ago, I compared the current recession with that of the late 1970s. In those days, there was no such thing as a portfolio career; consultancy was a minuscule corner of the market; interim management did not exist and reskilling was a pipe-dream.
On the corporate side, businesses were hamstrung by slow communications, minimal IT and labour arrangements which, irrespective of the financial or union regime, reined in agility. Change was slow and desperately painful.
Today, professionals take cross-skilling as a given. Businesses treat their human capital – rightly – in as fluid a fashion as their physical capital. Sure, there’s sometimes less loyalty on both sides; but there is also a commitment among top performers to do what they do best; in order to provide maximum value to owners and shareholders. The secret to recovery will be business agility.
As I write, the Recruitment and Employment Confederation has reported a slight upturn in the availability and placement of jobs. As you would expect, I’m not getting excited just yet; but it’s a powerfully positive talisman. I hope that some of those new jobs are being offered by companies trying new strategies; examining new business models; penetrating new markets and bumping up against new competitors. Interims, non-execs and agency relationships all have a vital role to play in helping large organisations to turn on a sixpence in order to root out these new opportunities in the long slog back to profitability.
Look out for Nick’s regular column in the next issue.
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