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FDs are split on the issue of green shoots

FDs are divided as to when the economy will blossom again

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.

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