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COMMUNITY UPDATE

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News of France, Germany and, more recently, Japan's, return to growth should provide the UK with some hope that the end of recession is in sight. Indeed, last week's reports of recovery in these European markets prompted a rise in the FTSE 100 Index with traders anticipating that improvements in the French and German economies would have a positive impact on the UK market. However, not a week later and the markets are, as the papers say, 'gripped with fear' over the sustainability of rapidly rising share prices. It raises the question of when the UK will see a solid and sustainable return to growth. And why Britain's european counterparts seem to be creeping ahead when it comes to economic recovery.   

As many leaders have suggested, moving out of recession is going to be a bumpy ride. Mike Lewis, former Member of the Group Executive (Management Board), Allied Irish Banks and Associate, Criticaleye explains: "My intuition tells me that this is going to be a long, slow recovery. The French and German pick-ups (and the Japanese one) are all due, I suspect, to government stimulus packages, so it is too early to say that the recession is over. House prices continued to fall in the UK in August, according to Rightmove. US consumer sentiment (the Michigan data) was, last Friday, weaker than expected. Even when the recession is over, governments will have to put their finances in order, with higher taxes and reduced spending. At best this will lengthen the recovery time; at worst, and if mis-timed, such action will deepen the recession."

But why, if growth in the european markets is down to government stimulus packages, have we not seen the same upturn in the UK? Stephen Catling, CEO, ABF Ingredients believes: "The UK recovery is facing a more fragile, slower recovery  than France and Germany due to its huge dependence on the financial sector which was hardest hit in the crisis. Recovery in France and Germany can only help Britain as a key trading partner. A stronger focus on restoring consumer confidence can help us catch up. Recovery will come. It's a question of when and at what speed."

Some might say that talking about recovery in individual markets is a moot point. Although news of recovery in specific economies is encouraging, globalisation and the interconnectvitiy of markets suggests that we should be taking a macro approach to ending the current recession. As Ian Wright, Corporate Relations Director, Diageo explains: "For global businesses, it's far too simplistic to argue that the recession is over in some places and not in others. The profusion of interdependencies in the marketplace means that unless you can say it's over in the US, China and half a dozen other markets, it isn't over."

Equally, we need to look at specific sectors, where recovery is most needed and what is most sustainable. Clive Ansell, Senior Advisor to the Board, Royal Mail reiterates: "At the moment, the question of the nominal performance of the macro-economy is less relevant. Sectoral issues are more in play and more unaligned than usual. So banking may be on the rise and e-business more stable, but unemployment will continue to rise for some time, we will see different effects for firms within retailing, hospitality and food, and smaller firms are still under pressure. There are also still surprises in store on interest rates and quantitative easing. So hold on to your hats, stay liquid, concentrate on business fundamentals and above all, focus on your own enterprise and market without getting distracted by the broader economic mood music."

As you would expect, we have a number of upcoming events focusing on economic recovery and what organisations should be doing to survive the downturn. Part two of 2009 And The Decisions You Should Take is on 8 September and our CEO breakfasts throughout September and beyond will discuss the economic climate and when businesses might expect to see a return to growth. 

We also have a number of articles and papers looking at issues around the recession for business leaders. Specifically, I would urge you to look at the Write-up of our first event on decision-making in 2009 from 13 January 2009 and an article by Accenture, Effective Decision Making for Uncertain Times.

Please let me know if you have any comments about the issues raised in today's update.

I look forward to seeing you at our events in the coming weeks.

Matthew