This month we look at the outlook for businesses as we enter the final quarter of 2011 and finalise planning for 2012. I think we can safely say that we live in ‘interesting times’. It might be better to live in more predictable times but it is not our fate to do so. We need to play with the cards we have been dealt and make the most of that hand if we are to survive and to thrive into 2012 and beyond.
Laurence J Peter (of the Peter Principle) once said “An economist is an expert who will know tomorrow why things he predicted yesterday didn’t happen today.” You may be excused showing some sympathy for those views at present. For anyone trying to make sense of where the UK (and World) economy is going, there is no shortage of opinion and little of it matches.
However, the Academy’s own Roger Martin-Fagg is one economist we rate highly and his assessment of the economic outlook is included in this newsletter. His comment that “We will experience a mild double-dip at the end of this year, the economy will shrink about 0.7% in real terms” may vindicate those who have been of this opinion for some time. He also believes, however, that “Many will not even notice it” however, “the political impact could be considerable with the opposition claiming it could have been avoided. This isn’t true, but the point will be made ad nauseam.”
Consumer confidence, a measure that we should take note of, remains low and falling. It dropped in July to minus 30 and for August was minus 31, the third drop in three months. GfK NOP who produce the index say that confidence has only been as low on two other occasions – in the downturn of 2008/9 and in the early months of 1990 – and on both occasions it mirrored a move into recession.
The GfK NOP index uses five measures to reach their overall score. All are lower than they were a year ago and all are indicative of an economy that may take time to move off the floor (if, indeed, that is where it is). They are
- Personal financial situation over the last 12 months – minus 24 now vs minus 12 in August 2010
- Personal financial situation over the next 12 months – minus 11 now vs minus 3 in August 2010
- General economic situation over last 12 months – minus 57 now vs minus 43 in August 2010
- General economic situation over the next 12 months – minus 31 now vs minus 14 in August 2010
- Climate for major purchases – minus 31 now vs minus 20 in August 2010
So where does this leave hard-pressed Chief Executives? If consumers are not confident, then they don’t buy and that ultimately affects all of us, whether we are in the direct supply chain or not. We have to face the fact that growth over the short term (even with stimulus) will be low, flat or indeed, as Roger suggests, that we may go back into recession for a while. We can do nothing about this at a macroeconomic level but we can all ensure that we are performing to our optimum levels. We can only affect our part of the economy but the effect of many businesses all performing strongly should not be underestimated. That will be where growth will come from in this economic cycle.
Chief Executives need to be honest in their assessment whilst keeping a positive atmosphere in the workplace. Motivated teams can outperform the market and that is what you’ll need to do in your own businesses. The Chief Executive sets the tone, so be sure you are setting the right one.
In an article in this newsletter, Vince Tickel makes the case for increasing emphasis on customers, making sure that we surpass their expectations, keeping their loyalty and building a reputation in our markets that may attract other customers from our competitors, especially if they adopt a cost cutting approach to customer service.
As we make our business plans for the coming year, we will need to prepare for the worst case whilst being ready to take advantage of any better opportunities that come our way.
We’ve been flexible this far and survived. We will need more of the same and we may need to dig just a bit deeper into our reserves of belief and resilience. In any time of difficulty there are opportunities, so be open to them when they arise. Be ready for the upturn which will come.
About the Author
Andrew has been a leading figure in the media and events industry for over 20 years. He launched the innovative Business Design Centre in Islington and was CEO of the National Exhibition Centre (NEC) in Birmingham where he transformed the culture from ‘council’ to ‘commercial’ through a transformative leadership development programme. Today, he is Non Executive Chairman of Brand Events, the international consumer festival organiser, and the annual World Photography Awards in Cannes sponsored by Sony. However, his primary focus is as Chief Executive of the Academy for Chief Executives, which he acquired in January 2011. Find out more about Andrew’s London-based Chief Executive Forum >>