Has the recovery really begun, or are we just fooling ourselves?

May 20th, 2009 by admin | Filed under Daily News, Recession, UK Bank Accounts, UK Small Business, UK employment.

Just as the financial community in the UK were apparently taken by surprise by the global economic turndown and the ferocity of its extent, they seem equally nonplussed by if, when and how it will end. All the indications through the FTSE and the money exchanges appear to indicate that a recovery is underway and at an impetus that will see an almost complete return to “business as usual” by the end of 2009.

Yet there are many bodies who are gathering to insist that this recovery is simply a “mirage in a desert of financial quicksand” and the economy is a long way from recovery. Particularly vocal are three of the largest supply chain insurers, Euler Hermes, Atradius and Coface. These companies, who are at the sharp end of the business community in the UK, through providing insurance services to the distribution and manufacturing industries against bad debt. When companies like these continue o report that the UK economy far from out of the woods, then what they say should be taken seriously, as these companies are currently holding insurance cover amounting to
more than £300billion in business-to-business transactions in the UK.

Those who say that recovery is imminent only need to point to the fact that the FTSE 100 has rallied nearly 30% in the last two months, along with all the other major stock markets. Yet the uncertainty remains around the following question. How much of a role will the stock exchanges play in the “new world order” after the global financial recovery? How will the UK economy look after the recovery? Is this mini-recovery about to blow over, basically because it defies financial logic?

What can be said for sure is that the sacrifices that the UK public have been forced to make, and will be paying for at least the next decade to bail out the UK banking system is what is pushing up the FTSE now on a daily basis. However the grass roots companies in the UK are still mostly in dire financial striates, and banks are still not lending money. In the long term, banks who do not take risks and lend money will not earn profits. And not only their shares, but also the companies who are stagnating due to lack of access to finance will remain in the doldrums.

One day this recession surely come to an end, probably without too much fuss. Markets will rise, yet steadily and not dramatically, as confidence grows among those who need to invest in order to move forward. There is still no concrete sign that the recent upward surge is the market getting way ahead of itself. Or not.