FDs are split on the issue of green shoots

Talk of the green shoots of recovery has become de rigeur, but financial directors are divided as to when the economy will blossom.

In bullish mood, 41% of senior financial professionals believed the economic upturn will come in 2010. This optimism was trumped by the 13% who thought it would happen sometime in 2009.

An FD from a financial services company said: ‘Providing no more discontinuity skeletons emerge from the marketplace cupboard, we could see the upturn starting as
early as Q3.’

The confident forecasts came from a survey by UK business management and information systems provider, COA Solutions which canvassed the views of a 100 FDs and managers across a range of UK public sector and private sector organisations.

At first sight the noises coming from the finance community are fairly positive, but drilling down deeper, the volatility of the financial climate has left others taking much more cautious positions.

A total of 27% of the respondents thought that the upturn would manifest itself in 2011 after unemployment hit 2.2m in April, the highest figure since 1996.

A further 8% believed that the recession would not loosen its stranglehold until after 2011, while 11% were so unsure of the financial turmoil that they could not put a finger on the date of the eventual upturn.

One respondent, a financial director from a media company, said, ‘It all depends when the next general election is.’

Last week Jon Moulton, managing partner of private equity firm Alchemy Partners, warned the FDs attending a COA briefing that the worst is yet to come: ‘People are mistaken if they think the upturn is around the corner and shouldn’t relax too early as trading conditions remain very unstable,’ he said. ‘The situation is the most volatile it has ever been in my working career.’

To put the situation into perspective, Moulton told Accountancy Age that even in the buyout industry, 37 of 59 recent exits had come through the companies going insolvent.

‘This is the worst I have seen it in terms of failure rates since 1992,’ he said.

‘The most optimistic scenario is that unemployment will rise throughout 2010 and peak at 3.1m with inflation rising towards 3% by the end of 2010.

‘In the worst case scenario, UK GDP will decline by 5% in 2009 and unemployment will continue to rise sharply through 2011 and soar to 3.8m,’ added Moulton.