Welcome 2014. The recession is over, let’s get on and do some deals 14 Feb 2014
Welcome to 2014. The recession is over, let’s get on and do some deals
As a recruitment business focused largely on private equity – I make this plea:
Please Private Equity investors build on this continued period of economic growth and keep ramping up your investment levels.
I have remarked before that I strongly believe recruitment to be an excellent barometer of deal activity. I think this is especially true for the Finance Director piece of our business – when a new deal gets done there is often a need to upgrade or add to the finance function – if a business is gearing up to IPO (who would have thought 2 years ago that we would again be talking about IPO so positively?) then again, perhaps they need to bring some different skills to the finance team, or recruit a Non Executive Director with previous listed experience.
So what is the real state of the economy? I am getting mixed messages from the media and from the statisticians but from where I sit, I am seeing an upturn in activity. This still has to be translated into deals completing, but surely the first stage of any real economic recovery is a return of confidence? We are certainly seeing a far greater degree of interest in investing in a wide range of sectors but with a sensible degree of prudence (ie not yet returning to the heady days of 2005/2006 where deals reached a fever pitch that led to a vast number of buyouts completing at exorbitant prices).
Enough of my conjecture, what does Robert Peston say?
In his blog: How fragile is the 2014 recovery (http://www.bbc.co.uk/news/business-25364772) dated December 13, 2013 he states:
“The economic recovery we’ve witnessed in almost all the developed and big economies this autumn will continue through most of 2014, and in some cases – including the UK – may gain momentum.”
Fantastic. I should have stopped reading there as he then goes on to balance this with his view that:
“The “stock” problem – excessive debts in Europe, Japan and (to a lesser extent) the
US – is still with us. The lack of competitiveness of many western economies, the UK, France, even the US, has not been fixed….China remains dangerously dependent on mind-bogglingly excessive, debt-fuelled investment to generate the rapid growth perceived necessary by its government.”
He talks also of the bullish attitude of the business leaders to whom he speaks and says that even though there is no real science to back it up, it does feel as though this recovery “has legs”.
This is good. Wanting to see what Robert thought of the Chancellor’s January announcement, I read a more recent blog The impact of the Chancellor’s new cuts (http://www.bbc.co.uk/news/business-25619814) (6 January, 2014).
He poses the question: “.. whether the UK’s economic recovery – at this juncture – will be helped or hindered by further shrinkage of the public sector”
To which he muses that the UK economy’s recovery is heavily dependent on interest rate levels remaining low to allow house building and general housing market activity to continue to grow and for consumers to continue to spend money they don’t have.
“All of which yields the depressing conclusion that this is a recovery built on sand…but the sand could turn to cement if businesses start to invest and if productivity were to improve, such that businesses felt able to increase wages faster than inflation.
“And when I talk to business leaders, I am minded to believe that the recovery could yet become sustainable.”
If Robert Peston is right and what will really drive a sustainable recovery is businesses starting to invest, then I repeat my plea at the beginning of this to the Private Equity investors to continue to ramp up investment. The signs are looking good.