News of a slight economic upturn fails to dispel fears among business of a drop back into recession. Peter Elson reports

MERSEYSIDE business leaders remained cautious last night despite the news that the UK is now officially out of recession.

Although keen to welcome the news from the Office for National Statistics (ONS), the 0.1% growth figure in the last quarter of 2009 has cooled most reactions.

There is widespread concern about a “double dip”, warns Jack Stopforth, chief executive of Liverpool Chamber of Commerce.

A double dip, or W-shaped recession, can occur when a temporary improvement in output is followed by a slide back into recession.

Carl Cross, investment director at Liverpool-based investment managers Rensburg Sheppards, said: “This is a very narrow growth. We’ve got 0.1% growth, against the hoped-for 0.4%.

“The figures have not yet been revised and there’s always the risk that we could slip back like in early 1990s.

“The margin for error is so tiny that figures could tip in the other direction so easily.

“Although a positive number, the lowest possible one, it should be seen against an unprecedented contraction of 6%.

“The market tends to lead from an economic perspective, with a bad 2008 and a low-point in 2009.

“So, perversely in 2009, equity markets had recovered in anticipation of growth in 2010, event though it’s pretty anaemic.”

Mark Chadwick, chief executive of Professional Liverpool, representing the city’s top bankers, accountants and lawyers, agrees.

“These figures are a first cut and cautious optimism is more appropriate than dancing in the streets.

“It will continue to be a difficult year as historically more businesses tend to go to the wall during this part of the cycle.

“Although our members are reporting improvements in activity that suggest signs of recovery, there is no real indication that a step change is imminent as markets remain fragile.

“What has been notable is how well Liverpool has coped, so far, with the consequences of the global economic downturn.

“The economic imperative for either leading party, post-election, means that there will be aftershocks.

“We must make every effort to minimise the impact on our public services locally.”

Like his business counterparts, Alan Manning, TUC North West regional secretary, gave a cautious welcome to recovery.

“All the evidence is that unemployment will persist for some time,” he said. “But the big message is we must ensure our efforts to keep the economy moving and creating employment. Any cuts will damage a move out of recession and start a double dip.

“Surveys indicate we have bottomed out, but the evidence is that recovery is weak and it’s not time to say the recession is over.

“Wild talk over cutting public expenditure is very dangerous.”

Leading economist Peter Stoney, of Liverpool University’s management school, is upbeat about the Merseyside economy.

Mr Stoney, also a director of the Liverpool Research Group in Macroeconomics, said: “We expect growth will continue all this year.

“Our model is for 1.5% to 2% for the whole year.

“Yes, 0.1% growth indicates very small degrees of recovery, which could go up or down in revision.

“It’s still significant and expect the trend to increase over 2010.

“There is low inflation and low interest rates (which may rise mid-year) and low unemployment.

“We have a large budget deficit, but the Macro group’s view is there’s no need for drastic cuts in public expenditure in the short term. We need to sustain the growth trend for more than a year.

“The prospects are auspicious overall, as the banking system is poised to settle down and sort out the wheat from the chaff in it.

“The Government’s handling of the budget deficit issue is wiser than the Opposition would like.

“Cuts in the public sector will be at the expense of jobs, but I believe the growth over the next year will compensate for this.

“We should look to pay this off long term, rather than shorter.

“If we pay it off too quickly, we will have negative effects in employment.

“Employment will suffer over this coming year as we’ve seen in some areas, but we expect it will remain low.

“The unemployment claimant count is less than 2m, and we don’t expect that to change very much.”

Alan Bevan, director of estate agent City Residential, believes the statistics are about right.

“Yes, we’re swinging just out of recession, but to say we’ll stay in positive growth all year isn’t definite,” he said.

“You never come out of recession in a straight line.

“There will probably be a fall-off and my expectation is there will be a double dip with a downturn, but not a drop as bad as before.

“Obviously, we’ll be very happy if it’s a bit better than that. We’re in more serious trouble as a nation having built our economy on financial services, thereby taking a bigger hit than Germany with its massive industrial base.”

Interestingly, sales for the UK’s surviving manufacturing base is improving. Ian Higby, Atlantic Container Line managing director, said: “We’re starting to export more Land Rover Freelanders from Halewood.”

Lee Hopley, the Engineers Employers’ Federation chief economist, said: “Today’s data confirms manufacturing is now out of recession.

“But the 0.1% growth figure also raises questions over the health of the wider economy.

“The trajectory for the recovery in the next six months is uncertain. The best prospects remain an export-driven turnaround.”

The latest quarterly survey of more than 1,000 businesses, by Clifton Asset Management, reveals most believe the downturn is far from over.

In the North-West, 52% of businesses believe the economy will remain in the doldrums for at least another 12 months. Just 13% of respondents forecast the UK will be out of recession within six months.

Members of Liverpool Business Improvement District, which comprise the traditional city centre area, are not so gloomy.

“Retailers wonder if the downturn will plateau out, or rise more quickly,” said Ged Gibbons, BID chief executive.

“Generally, we feel more upbeat than downbeat, having moved on significantly from widespread doom and gloom six months ago.

“A lot of businesses say they’ve been caught up in global recession, but some did significantly better than others.

“Liverpool One added such an additional volume of retail in city and its benefited some outside.

“Marks & Spencer and Primark had a phenomenal Christmas. We’re about bringing people in and making Liverpool a retail destination.

“Our members report Liverpool is as strong a retail destination as ever. Our footfall is not dropping, but we must convert that into retail spend, as it’s not reflected in tills.”

Smaller companies can find coming out of a recession trickier than coping with being in.

David Birne, a licensed insolvency practitioner at HW Fisher Chartered Accountants, said this was a very delicate time.

“For many companies, the technical end of the recession will be the trigger that puts them out of business,” said Mr Birne.

“While banks and trade creditors sit tight during a recession for their own financial security, once economic recovery begins they start recovering their debts.

“It's this process that tips many companies over the edge. The increased bullishness of creditors and lenders translates into increased financial stress for already struggling companies.

“In the early 1990s, far more companies folded after the recession had ended than during it.

“More companies will fail over the next 18 months than failed over the last 18 months. For many, the technical end to the recession will be a bitter sweet pill.”

Philip Griffiths, a partner at Mitchell Charlesworth, a North West chartered accountants, said: “It will take a significant time to get back to full economic health.

“Many businesses which scaled back during the recession will find growth difficult. This is because of lost customers and suppliers, cash flow issues and a lack of finance and caution in their approach.

“With Government spending cuts likely to follow the general election and the high level of unemployment, which will continue to depress consumer spending, together these could put a real strain on the recovery.

“However, businesses should try and keep positive, with plans to manage their growth, as the recovery in 2010 and beyond is likely to be a long and difficult one.”

Phil Orford, chief executive of small business support group the Forum of Private Business, said the reality was economic stagnation.

“Economists and politicians got it wrong in the quarter three of 2009.

“Their predictions for quarter four were, again, wide of the mark with growth well below forecast.

“Why does it require two quarters of economic decline to enter a recession, and only one quarter of growth to exit it? At 0.1% growth in quarter four, that doesn’t say we’ve turned the corner. The risk of a double dip remains.”

MARKET COMMENT: PAGE 13;

BILL GLEESON: PAGE 8;

OPINION – MAIN PAPER: PAGE 8

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