UK Economy Back In Recession

[mosaix]

The UK economy shrank by 0.2% in the first quarter of 2012, this coupled with the the economy shrinking by 0.3% in the last quarter of 2011 means the UK is back in recession.

http://www.bbc.co.uk/news/business-17836624

[Bowler1]

There will be lots more about this today and the news will no doubt proclaim the end of the UK as we know it. Yet when compared to Greece, Spain and Ireland the UK is doing well. This does not make everything rosy, but some measure against neighbouring countries would give a fairer picture of UK results. When that is done, we're doing ok, not great but better than most.

[Dozmonic]

As far as the high street goes, these past 6 months have been a desolate waste even compared to a year ago. Even when we come out of recession the high street will be a much changed place, its glory years gone.

[Dave]

There are several considerations that they cannot calculate yet and cause the figures to be adjusted later. So, it could be slightly worse than that, or, it may be slightly better, and given that the figure is so small, it may actually turn out to be positive.

Not that it really matters as an average over the last year will still come out at about zero.

[Bowler1]

Dozmonic, you may be right about the high street only time will tell. I think that when confidence returns so will the small business man opening his little shop and taking his chances. Not really possible right now as banks are not lending, when that changes we'll all forget about this difficult phase. Ups and downs, its happened before and will happen again sometime. That magic word - confidence - when that returns off we go again.

[chopper]

& in other news, HMV Rotherham, one of my own previous stores, will close next week. the staff have been told today. needless to say, my own thoughts on the matter cannot be printed on a public forum.

"We Take Care of Our Own."

hah.

[Dave]

Originally Posted by chopper

"We Take Care of Our Own."

Is that an HMV Corporate slogan Chopper?

"We are all in this together" was the one repeatedly used by David Cameron, though clearly some people are more in "this" than other people. And "this" smells pretty bad when you step in it.

Some High Streets are doing better than others but they all have exactly the same problems. There is strong competition from retail parks and the internet. High streets have high rents and high business rates which retail parks and online companies do not. Chain stores can subsidise High Street shops with profits from shopping centres; Independent retailers can not. If we want to see high streets that are not empty shops, charity shops and 99p shops then something needs to be done about rents and rates. Everyone says that they want to see independent retailers on high streets, but they do not use them. They can only survive if they give them their business. Otherwise, even the 99p stores will be succeeded by 98p stores and 97p stores until no one can make a profit any more.

[Ursa major]

I think we're all being too optimistic. Well before the Crunch, the UK, in particular, was building up huge personal (i.e. not business or government) debts, some, though far from all, built on the idea that one's home should provide collateral for all manner of borrowing.

So while I used to manage a wry smile when members of the previous government used to say the UK was best placed to deal with the Crunch (it wasn't: probably more of the UK's economy was based on the fantasy economics of the 'City' than any other country's), the real problem was always that the UK's personal debt, built up over decades, was uniquely huge. And rarely if ever mentioned. Somehow - inflation, years of personal austerity**, a miracle - this debt has to be reduced significantly. This will not be pretty.


(By the way, if I were a bank, I'd lend people no more money than to keep their debt rolling over and thus stopping them defaulting, which would turn a potential loss into a real one that would appear on the bank's books. I'd certainly not want to increase people's debts to any great extent.)


I don't like writing the above, if for no other reason than a large part of economic growth is based on people's confidence about the future, and a large part of economic failure is based on fear. However, we in the UK have spent decades enjoying economic "growth" based on asset bubbles and borrowing from elsewhere in the world (and not on supplying the rest of the world with what it wants) in a giant self-inflicted pyramid scheme. This was always going to end in tears and worse, whatever nonsense the "we don't need industry" people and the "the world will always lend to us" people have been flogging us for most of my adult life. The biggest shame is that it was allowed to go on for so long, so that the pain is far greater, and affects far more people, than should have been the case. (But, in a way, we're all to blame: who was ever going to vote for politicians telling us that we've had it too good and we have to borrow less, and so "own" less.)



** - In the main, probably not through choice but instead imposed by personal circumstances (which will only make it feel worse).

[chopper]

Originally Posted by Dave

Is that an HMV Corporate slogan Chopper?

no, just a very ironic Springsteen lyric. hmv would never take that much responsibility for their staff.

[Ursa major]

Very sorry to hear about the store closure, Chopper. I'm sure we all hope that your branch will survive and prosper.

It's particularly sad given that entertainment and its associated products are usually said to be amongst the things that the UK is good at producing and selling round the world.

[Dave]

I'd make a distinction between personal lending and business banking. There are always assets in business banking and a detailed business plan. People are always going to need food, clothes and vital stuff. High streets can compete with out of town centres if they promote their more pleasant environments and can keep their independent traders. Local councils have a responsibility not to try to balance their budgets by dumping extra business rates and car parking charges on already struggling businesses.

I fully agree about unsecured personal loans. The Government let it happen, but everyone who took out a interest only mortgage and maxed out on 10 credit cards is as equally to blame as the banks who gave them.

[chopper]

Originally Posted by Dave

Some High Streets are doing better than others but they all have exactly the same problems. There is strong competition from retail parks and the internet. High streets have high rents and high business rates which retail parks and online companies do not. Chain stores can subsidise High Street shops with profits from shopping centres; Independent retailers can not. If we want to see high streets that are not empty shops, charity shops and 99p shops then something needs to be done about rents and rates. Everyone says that they want to see independent retailers on high streets, but they do not use them. They can only survive if they give them their business. Otherwise, even the 99p stores will be succeeded by 98p stores and 97p stores until no one can make a profit any more.

the problem with Rotherham (very loosely speaking), is that the town centre is already dead. most of the shopping is done at the nearby Parkgate retail park. this is where the hmv store is located. unfortunately the presence of Morrisons, and the appearance of something called Asda Extra has cut massively into their takings. proves my personal theory that Asda etc are bad for British business & jobs.

[Bowler1]

Well said Dave, no-one makes you take out a loan. I have been one of the silly people who have not built up credit cards etc. I have a mortgage and any personal loans I have are always paid early, all affordable with my earnings which are not massive. A reality check was needed, sadly we all suffer for.

Finance is the oil of the business world without which business would not work. So finance is not the worlds evil, its individuals living for today without thinking. Were the banks guilty as well, yes to they were - are they only to blame - no, we the borrows have to take some blame.

I have a real bug bear (''Bear'') about charity shops on our high street killing off the little business man......

[Dozmonic]

To get something from HMV you have to make the trip there and know you're likely to be paying a high price while spending your time doing so than if you bought the same goods from play, amazon, iTunes, steam etc. Simply put, the market has moved on and HMV have remained stationary. The high street shops selling those goods that you're likely to find will have a lot less internal work being created through promotions intended to drive sales etc. They'll be a full on back to basics store with minimal staffing - like the shops selling second hand games and movies. With the internet's ever growing presence, there'll always be these kinds of shops, but fewer and farther between.

Book shops will struggle too, if they don't stop charging RRP on their books and relying on multibuy offers to drive sales. The bottom line is it's a market of margins and "customer service" doesn't come into the equation anymore. Very few people will shop in place A when prices are 10x higher simply because they get a smile, when place B will have what they want and get them in and out in record time at a fraction of the cost.

The internet has changed the market and retail won't be the same again. Soon we'll have little retail, little industry and be a country of accountants - unless we outsource all of that elsewhere too. In which case, we need to cut our cost of living to be able to live off worse paid work ;-)

[Ursa major]

Originally Posted by Dozmonic

Simply put, the market has moved on...

...particularly in terms of where some "retailers" are registered for tax purposes. We kid ourselves if we think that online prices are lower purely because of the consequences of scale and automation.