IT WILL have come as a shock to anyone trying to keep their business afloat in these desperate times, or indeed anyone fighting to keep their job, but it will be a welcome piece of news for Gordon Brown. If an influential think tank has got it right, "the recession has ended".
That was the surprise message last week from the National Institute of Economic and Social Research (NIESR), which claimed the UK economy had stopped shrinking. However, it is easy to find conflicting evidence that the worst is far from over. The Ban
k of England quickly put a damper on any euphoria by warning householders of the growing danger of negative equity, and retailers Tesco and Argos said unemployment remained a big concern.
The NIESR's optimistic outlook is that "the evidence from the last few months is that we may well have reached the bottom of the depression". It stated the economy had hit rock bottom in March, before starting to grow in April and May. It calculated that the economy grew by 0.2 per cent in March and 0.1 per cent last month. The report credited quantitative easing and unprecedented cuts in interest rates in the UK for helping get the economy back on track.
On the same day as NIESR's projections were published, the Office of National Statistics said manufacturing output increased in March, April and May. The price of oil also appears to be emerging from its low of $30 dollars a barrel of four months ago and is now hovering around $70. Alexei Miller, chairman of the Russian energy group Gazprom, even went as far as to claim it could hit $250 if momentum is maintained.
On the back of the good news, the value of sterling rose against the dollar and the euro, reflecting confidence in the UK economy. However, experts are warning that while markets may have bottomed out, the worst is not over for the "real economy".
Even Alistair Darling, the Chancellor, talked down the prospect of early recovery, saying he was "confident but cautious". He accused some European countries of failing to take Britain's lead in cleaning up their banks and removing toxic assets.
Tesco chief executive Sir Terry Leahy warned the Government that taxes and regulation must be reduced to help retailers survive the recession. He told the British Retail Consortium annual conference last week: "Confidence is slowly seeping back, helped by lower interest rates, energy and food deflation and falling food prices. But clouds remain, the darkest of course being unemployment."
His view supports evidence from the latest Ernst & Young Scottish ITEM club report which warned "the patient is still a long way from recovery and there is more pain to come in the form of significant job losses".
Bleak news also emerged from the Committee of Scottish Clearing Banks, which revealed that Scottish business start-ups were down 25 per cent on last year.
Alastair McCaig, senior derivatives brokers with World Spreads, says: "I don't think we're out of the woods yet. We're likely to see more redundancies and more pressure on the retail sector in particular."
He adds that there is still uncertainty around the banks. He is concerned Lloyds Banking Group may be trying to repay the Government's stake at an earlier stage than they can afford to regain their independence and start paying dividends again to shareholders.
Commentators are warning that the recent rally in stock markets could be a short term-bounce rather than a sustained recovery. Paul Niven, head of asset allocation at F&C Investments, emphasises that caution is needed. "The question for markets, in fundamental terms, is just how sustainable this economic upturn will prove to be," he said.
Even so, with talk of the R-word turning from recession to recovery, questions are now focusing on the shape of that recovery and who among the country's corporate body will help lead it.
Scotland's last growth spurt was a result of Government-backed support and a determined effort to create an entrepreneurial culture. This time, entrepreneurs have been slow to emerge and Government support, particularly through Scottish Enterprise, appears far more low key. Questions put to a variety of Government organisations, advisers and sundry other bodies produced a fairly muted response. On that evidence it would appear that the country may be slow to produce another generation of enterprising individuals that took the country by storm in the 1990s and early part of this decade.
Peter Shakeshaft, chairman of business angel umbrella organisation LINC, says the country will have to be patient in waiting for the next generation of entrepreneurs to break through. "In my view there are some terrific role models, such as Jim McColl, Tom Hunter and Ian Wood. There are people wanting to emulate them but it takes time. You don't get instant success." He points to a network of angel investors offering support to entrepreneurs and is optimistic that money is starting to flow from banks.
Graham Bell, a spokesman for Edinburgh Chamber of Commerce, says: "It's not down to one individual. Very few people in business are fortunate enough to be in the right place at the right time."
He says Scotland's growth relies on a broad base of businesses being profitable. "There are plenty of people out there having a go."
• Additional reporting and research by Terry Murden
The full article contains 903 words and appears in Scotland On Sunday newspaper.
