The shape of things to come

New figures suggest the recession might be over, but consultancies shouldn’t break out the Bollinger just yet, says Angus Montgomery

Although it now seems the recession might have officially ended back in May, it will be at least another 12 months before the positive effects start to filter through to the design industry, experts predict.

The National Institute of Economic and Social Research think tank last week suggested that not only was the recession over in the UK, but that it had, in fact, come to an end three-and-a-half months ago.

A recession is officially defined as the economy shrinking for two or more successive quarters, and the NIESR based its statement on a 0.2 per cent growth in GDP in the three months leading up to August. The media leapt on the think tank’s optimistic statement that the figure ‘reinforces our view that the recession ended in May of this year’. Banner headlines proclaiming ‘Mergers back, factories busy – recession officially over’ (The Guardian), and ‘Britain climbing out of recession’ (The Daily Telegraph) duly followed.

Few seemed to pick up on the next, and rather more gloomy, sentence in the NIESR report, which read, ‘There may well be a period of stagnation now, with output rising in some months and falling in others; the end of the recession should not be confused with a return to normal economic conditions.’

And design industry experts concur with this rather more cautious line. ‘Recessions are obviously defined on an economic basis,’ says Ian Cochrane, chairman of management consultancy Tice Group. ‘The economists tell us when we go into recession and they tell us when we come out of it. For those of us in business, it’s irrelevant – it’s still very tough out there.’ He adds, ‘If you asked me, “Has the recession ended for design businesses?” I’d say, “No!”.’

His viewpoint is shared by Amanda Merron, a partner at accountant Kingston Smith W1. She says, ‘I’d love to think that we are beginning to emerge from recession, but I suspect that what will happen is that confidence will take a long time to recover. I think people are still very tentative about spending money. Clients are holding long, drawn-out pitches and are still taking ages to come to a decision.’

And while both Cochrane and Merron say the current media optimism proclaiming the end of the recession is undoubtedly a good thing (with Merron noting that this wave of positivity comes just as clients are starting to set their January budgets), both suggest that it could be a good 12 months before this attitude filters through to any concrete improvement in the design industry.

Cochrane says, ‘The fourth quarter of this year will be tough, as will the first quarter of next year. I believe there will be some pickup next year, but I think it will be about 12 months before it becomes noticeable.’

Merron concurs, but also predicts a small fillip towards the end of this year, as clients aim to use up any cash they may have left over from the previous 12 months. This fits in with predictions she made at the start of the year that the fourth quarter could see the start of an upturn, which would fully manifest itself in 2010.

Merron also suggests that the build-up to the London 2012 Olympic Games could stimulate the economy next year – as could the progress of the England football team in the World Cup in South Africa, for which they qualified last week. This quadrennial-event theory is one enthusiastically espoused by WPP chief executive Sir Martin Sorrell, whose utterances on the economy are closely monitored and pored over.

Ever since his famous 2001 declaration that the then-recession would be ‘bathtub-shaped’, a popular game among hacks has been to try to provoke Sorrell into predicting the shape of this downturn. When Design Week had a go earlier this year (News, DW 11 March), a clearly unamused Sir Martin responded, ‘I don’t know – you will have to get one of your creative contacts to come up with a shape.’

Sorrell finally cracked last month, when, after unveiling WPP’s second-quarter results, he baffled commentators by predicting a recession shaped like ‘an italicised L’.

Although he declined to draw the shape when challenged by The Times, he did later explain that it represented a gradual upturn following a sharp decline.

Merron says, ‘When I’m asked what shape the recession will be, I always say that I don’t mind what letter it looks like, as long as it isn’t an L – that suggests we will never recover.’

As for her prediction, Merron suggests ‘a backwards tick’.

downturn

Reasons to be cheerful

  • The FTSE 100 climbed above 5000 points for the first time in 11 months last week
  • A potential takeover bid for Cadbury by Kraft and the deal between Orange and T-Mobile show the mergers and acquisitions market is stirring
  • The Office for National Statistics says the manufacturing sector grew by 0.9% in July
  • Last month, Nationwide’s consumer confidence index rose to its highest level since May 2008

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