City Comment: Weathering the storm(s)
Fri, 29 Jun 2012 | By Sue Dodd, director, Agile Intelligence
Just like the weather – it never rains but it pours when the economy is crying out for positive news.
GDP for Q4 has been revised down from -0.3% to -0.4% and although the Q1 figure remains at -0.3% evidence that government spending helped boost the figure suggests a weaker underlying picture and forecasts for the full year are now trending downwards, perhaps as low as near zero growth since Q2 output will also be affected by the extra Jubilee holiday, despite likely positive spin-offs on consumer confidence and spending.
Banking chaos also reigns – abject computer failures, an interest rate fixing scandal which could grow arms and legs and, of course, the Spanish banks’ bailout. Even if these storms abate there is still the constant dank, drizzle of Eurozone indecision and financial markets’ impatience. Not much effect from that Greek ray of sunshine then, despite their coalition temporarily at least bringing the country back in line with international budget demands. The Spanish bailout ‘saved the euro’, said the country’s prime minister; Spanish government 10-year borrowing rates reached almost 7% this week with debt servicing described as ‘unsustainable’.
This week’s Eurozone Summit confirms a €120bn (£96bn) Eurozone growth package which includes a capital boost to the European Investment Bank, releasing €60bn unused structural funds to help SMEs in vulnerable countries and a pilot in project bonds for infrastructure improvement. Yet the stresses within the single currency continue to threaten its own survival.
With long-term plans for an integrated banking union laid out, it is the euro’s shorter-term vulnerability which risks all as the key players become increasingly disparate and the clamour for Eurobonds and debt-sharing is resolutely rejected by Germany, which demands effective fiscal controls for Brussels first. Just like the football it could all end in tears, yet... there are still over 300m people in the EU representing an enormous market, growth pockets exist, Germany is slowing but still well ahead and, while global signs are now concerning, news of slower growth in some BRIC countries is partly countered by growth creation from ‘structural’ change. A more certain outcome for the euro would help to dispel some concerns and may kick-start investment again.
Furthermore, the job market in the UK remains stubbornly stable, even recording recent falls in unemployment, with labour market activity cautious but not yet stifled by the prevailing climate. While youth unemployment remains a blight, overall jobless numbers have declined in recent months.
So what about recruitment? Business activity levels are broadly flat thus far in 2012, albeit extremely sector sensitive, yet if the amount and quality of the interest being shown in this year’s forthcoming HOT 100 [a special report compiled by Agile Intelligence on behalf of Recruiter] is any guide then the industry is very much alive and kicking.
Recent announcements, which include the plan to return Morson to private ownership and the substantial stake taken in Fircroft by a major investor, confirm our view expressed last month that there could be good value available in recruitment companies. The future of the Eurozone may deter equity market investors but corporate financiers are less cautious, although their choice of candidate sector looks to be very finely honed indeed.