Let's not talk ourselves into recession
Graham Robb's article from the Journal newspaper
In the second world war the BBC broadcast a popular radio comedy sketch show called ‘It’s That Man Again’, starring Tommy Handley. One of its many characters was called Mona Lott, whose ironic catchphrase was: "It's being so cheerful that keeps me going." That sentiment is echoed by newspapers and broadcasters throughout the land as they have made their mind up about economy and prospects; there is a cost-of-living crisis and things are going to get worse. Every week new surveys or research designed to grab the headlines are published on the basis that gloom sells. From the Bank of England to the Social Market foundation; the consensus of opinion is that things can only get worse.
Running a small business in Darlington, this tide of opinion could be very disconcerting, if I hadn’t heard it all before. It is certainly true that the cost-of-living increases are worrying and in some cases overwhelming for the least well off in our community. It is also true that the Government has not yet provided all the solutions people want. But it is also worth pausing and asking if we are not talking ourselves into even worse trouble by knocking confidence. There is some evidence that things will improve.
First, thanks to the furlough programme and the early stages of levelling up and infrastructure spending, unemployment is not the affliction it once was. There are still more vacancies than there are people unemployed. As an employer wanting to recruit, I find this frustrating, especially as the employment market is so strong potential staff are almost in a position of setting their own terms and conditions.
Then there are the possibilities that some of the forecasts will have differential outcomes. Will the price of oil stay at around $110 per barrel? It has already fallen since the Russian invasion of Ukraine.
Will the Government maintain its current tax and spend policies? The Prime Minister and Chancellor are dropping hints of more stimulus.
Will interest rates actually reach the predicted peak of 2.5%?
Most forecasts assume all these things, but experience teaches us that forecasts often get it wrong. Especially in the case of the Bank of England. I run the North East Shadow MPC with accountants Clive Owen LLP, some members were saying the Bank should have raised interest rates long before it actually did. If it had followed our view, inflation might not have risen so high and when the market does tighten up in a few months there would be greater scope for reductions.
Then there is the very determined and optimistic cohort of North East business owners who are ready to adapt to thrive. Since Easter the business community has been having more ‘in person’ events and it's been a great pleasure to attend many of them. The Rycroft Glenton 120th anniversary drinks last week was attended by over 200 people and made me realise just how resilient and positive the business community in the North East really is. Everybody I talked to had something positive to say about their business and their plans for growth. Take Charlie Hoult, who I was chatting with, his Opencast Software company is celebrating 10 years in business and recruiting 240 new staff! Look at the investments announced at the Newcastle Helix, with another HQ and a further 200 jobs from Scott Logic announced last week. The good news continues with long-standing North East firms like Sage, which has just reported revenue growth of 8%.
It is not just in the digital and science sectors that the region can demonstrate growth and opportunity. Last week I was talking to the respected entrepreneur Nigel Mills CBE, he used to chair the Entrepreneurs’ Forum and knows all about the challenges of founding and growing a business. He was one of a group of investors who founded the Lakes Distillery in 2011. Distilling whisky requires investors with patience and confidence. It has paid off for the Lakes Distillery, the company has been awarded one of the world’s most prestigious industry prizes: The World’s Best Single Malt Whisky for its Whiskymaker’s Reserve No.4 - unheard of for a distillery based in England! This business is based in Newcastle and operational in Cumbria, it has turned £35million of private capital from small investors (full disclosure, I bought shares) into an award winning visitor centre and has stock worth £100m at retail.
The evidence is abundant that the worst predictions of the economic doomsayers can be confounded. On Monday Tees Valley Mayor Ben Houchen, the most active and effective politician in the North East, launched a third Mayoral Development Corporation (MDC). This one is based in Middlesbrough and has one crucial difference to his others; the local council has vested it with planning authority over the town centre. It will turbo charge the centre of Middlesbrough and attract investment with creative thinking and speedy planning consents. The Development Corporation model is also being used by Mayors in London and Manchester, why have other Mayors in the North East not gone for this approach?
The surveys and opinion pieces we read so often are bleating about the past and present rather than leading for the future. Unlike Mona Lott, who was always sad and dismal, my own father used to sum up his situation with two words: “mustn’t grumble!” With the pandemic delivering 2020’s sharp decline in GDP and greatest threat to jobs in our post-war history, and now a new war in Eastern Europe, the situation we are in is much better than those predicting the worst would have envisaged in May 2020 and it is within our ability to turn around for the better tomorrow.back to blog