A hard landing is made easier with a good pilot

I spent this morning talking downturns, job losses and economic recovery with CNBC on their ‘Strictly Money’ program*. See below and click on www.cnbc.com for more information. I was joined by Sir Andrew Cahn, Chief Executive of the Government’s Trade & Investment (or BERR).

We covered a range of topics but the speed and severity of job losses associated with the global economic downturn dominated the opening question. In the UK, during the first four days of this week, 8,000 job losses have been announced by major corporations - many still in Financial Services. The actual figure will of course be much higher, if one includes small and mid sized enterprises who don’t tend to announce. Totalling over 10,000 per week or half a million people losing their jobs in the UK alone before the end of the year feels catastrophic, which of course it is. The government’s own estimates are one million will be added to the unemployment benefit list by mid 2010.

Across the Atlantic, a total of half a million Americans were made redundant by US employers in December, and 3 million jobs have been lost during 2008. The mounting toll of job losses drove the unemployment rate in the world’s largest economy up to a 15-year peak of 7.2 per cent last month amid predictions that it will leap to 9.5 per cent or more by the second half of next year. Europe has a built in lag factor, as structurally the labour market is more inflexible therefore the real impact of the credit crunch has yet to bite. Unfortunately, if one looks back historically, that means any expected recovery in employment also lags in a global upturn. No country remains unscathed, and even the previously booming economies in Asia are shedding jobs in what has become a truly global downturn.

So the mood is certainly gloomy, but is it hopeless?

Well, yesterday’s ‘miracle on the Hudson’ - where a US airways commercial jet had to make an emergency landing in the Hudson river in New York - was a wonderfully positive story given the negative newsflow generally. Experts praised the pilot and crew, "who had done everything right." So the potential Hudson air tragedy has become the "Hudson miracle"... an unprecedented story of zero casualties in a full scale commercial air accident.

In a similar way, tremendous skill by business and political leaders will be required to handle the global economy’s hard landing this year. Let’s pray the casualty list will be relatively light, the most pessimistic of pundits proved wrong and the upturn quicker than expected. Miracles can and do happen.

Global rebalancing, lower borrowing, more sensible asset prices, lower inflation, more realistic expectations from all stakeholders are all side-benefits of the downturn. Even geopolitics can benefit as less than friendly governments and hard nosed leaders soften their tone, in the light of lower energy demand and lower oil prices.

Recently, at a dinner hosted by Harvey Nash’s Life Sciences practice, Ian Kent, a seasoned life sciences entrepreneur and founder Director of a number of successful bioscience companies spoke about the need for Government to further incentivise global companies to place high value R & D in the UK. There is tough competition from Massachusetts USA and parts of Europe. This was raised as a topic during our debate. My co-panelist on the show, Sir Andrew Cahn, made a good argument that the UK is still the overall investment destination of choice for many industries from across the globe, including professional services and the creative sectors. Britain leads the world in security and the use of technology to solve potential threats. While admitting that all firms are facing challenges, he sounded an optimistic note by concluding that the UK remains a highly entrepreneurial culture, with a focus on talent at the heart of the UK Trade Investment strategy. He was confident this will not change in the long term and even went so far as to say there would a be a strong Financial Services sector at the end of all this. I agree.

And of course there are other areas of growth. The public sector is going to benefit from greater investment as a result of Government stimulus packages, and both private firms as well as public bodies associated with healthcare, education and public transport are looking to expand and grow.

Take the green agenda. The road to a lower carbon economy means E.on (German Energy) and EDF (French Electricity) are both getting ready for the boom in building Nuclear power stations. It is no secret that President-elect Obama is placing ‘green jobs’ at the centre of his economic recovery, with a pledge to create three million new jobs within environmentally friendly industries. Whether this includes the development of green technology within automobile manufacturing or alternative energy sourcing and security remain to be seen; but investment in new energy technologies has always generated a positive knock-on effect in talent development. There is a lot more to come on this topic as new ideas are explored and Government investment flows. Technology organisations like The Symbian Foundation are hiring as convergence in the wireless sector takes hold.

So there are still pockets sectors and companies that are still hiring. They are simply not releasing announcements and the media aren’t covering it.

It’s certainly gloomy, but hopeless?

No.

To view the clip from CNBC please click here

* "Strictly Money" is a CNBC program that focuses on you and your money. It’s essential viewing for the UK business person, home owner, investor, consumer and anyone who is serious about understanding the current environment for business, the economy and how to build and protect their assets and investments. CNBC understands how the political and economic environment affects you and your business and knows what drives the British economy.

January 16, 2009 04:37 PM | Permalink