Telling the truth about SME life today

When will the recession end

Q. If conditions don’t get dramatically worse, I think my business can survive the next six to nine months. What should I do in the meantime and where do I look for ‘green shoots'”

A. The world economy is depressed, our banks are in disarray and for the last six months, we have been told that this is going to be a painful time but, having prepared for economic winter, we are now in the disconcerting position of not knowing how long it will last or what more we can do.  For some managers, we are now entering into a dangerous period of impatience. News of the recession has become boring and the only rational activity seems to be worrying about whether the measures already taken are sufficient and when we can start thinking about recovery rather than survival.  For those not fighting for survival, this phase is frustrating, tedious and dangerous. The great danger is the inability to resist the temptation to launch some significant initiative. It seems counter intuitive to be operating in such turbulent times and not to be actively striving for some goal that is challenging. But in all recessions there is a period when just coping is the best strategy. It is not quite the calm eye of the storm but the period when the conditions of turbulence are constant. They are neither growing worse nor getting better. Of course the economic statistics will still get progressively worse as they lag the reality in which we operate.  No one knows how long it will take for the green shoots to emerge. The early signs will be the media’s inability to reveal any further bad news and, rather than repeat the recent gloomy stories, they turn to searching for signs of recovery. Each competes with the others to identify the first signs. The ‘early callers’ may be premature but they will begin a process that will gradually modify general sentiment from unremitting endurance of difficulties to the anticipation of recovery.  Historically recovery from recession, the end of misery, has been driven by a general belief that the cathartic process has run its course and that those who will be healthy survivors are now detoxified, fit and ready to progress. However, the disfunctionality of the financial system makes this recession rather different. This raises the possibility that the underlying negative sentiment that suppresses business confidence may dissipate sooner than the financial sector’s self-correcting capability takes to provide the volume of funding necessary to support recovery. All the measures being taken by the government are designed to address this and are targeted at ensuring that the return to optimism is not starved in its vulnerable infancy by the absence of finance. Do not expect this economic thaw to begin until the autumn. Between times there is undoubtedly more bad news to be digested. Large companies always begin to fail in the later stages of a recession, but if media comment about the green shoots of recovery has not started by the fourth quarter of this year then we are encountering a negative economic event of truly unprecedented proportions. So for those who now feel comfortable with their prospects of survival I am afraid you’ll have to endure a dull few months. For those not so fortunate life is going to remain a struggle for the foreseeable future.

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